City Holding Company Announces Third Quarter Results

City Holding Company ("Company" or "City") (NASDAQ:CHCO), a $3.9 billion bank holding company headquartered in Charleston, West Virginia, today announced quarterly net income of $13.2 million and diluted earnings of $0.88 per share.

Highlights of the Company's third quarter performance and results include the following:
  • Return on assets and return on tangible equity of 1.38% and 14.9%, respectively.
  • Reported net interest income increased $1.9 million from the quarter ended September 30, 2015, while net interest income exclusive of accretion from fair value adjustments increased $2.3 million from the quarter ended September 30, 2015.
  • Total gross loan growth of $54.5 million from June 30, 2016 to September 30, 2016.
  • Asset quality continues to remain strong with nonperforming assets declining to $20.6 million, or 0.69% 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, President and Chief Executive Officer of City Holding Company, commented: "City's third quarter results once again were very solid despite sluggish economic conditions and a stagnant interest rate environment. Although net interest margin dropped slightly from the second quarter of 2016, our net interest income increased slightly despite $0.4 million less accretion income from fair value adjustments on recent acquisitions. The increase in net interest income was fueled by growth in both loan and investment balances during the third quarter of 2016. Total loans grew $54.5 million from June 30, 2016, or 7.5% on an annualized basis, and our credit quality remains very strong."

"During the third quarter of 2016, City realized investment gains of $2.7 million from the sale of pooled trust preferred securities. The gains from these sales represent partial recoveries of impairment charges recognized in prior years. City also incurred legal settlement costs of $0.3 million in the third quarter of 2016. This expense is related to the sales of loans to a third party that were originated in the late 1990s. In addition, during the third quarter of 2016 the Company recognized an expense of $0.4 million in connection with a decrease in the estimated fair market value related to a facility that formerly housed certain bank operations. The Company has vacated the building and continues to market the building for sale."

"In our June 30, 2016 earnings release, we reported that portions of our West Virginia market area suffered devastating flooding in June 2016. As a result of this flooding, City recognized $0.3 million of loan charge-offs in the third quarter of 2016 and our quarterly provision for loan losses has been adjusted to recognize these losses. We do not expect to incur any further significant losses as a result of this flooding."

Net Interest Income

The Company's tax equivalent net interest income increased $0.1 million, or 0.5%, from $29.9 million during the second quarter of 2016 to $30.0 million during the third quarter of 2016. This increase was due to higher average residential and commercial loan balances (up $30.1 million from the second quarter of 2016) that increased net interest income by $0.3 million and higher average investment security balances (up $35.2 million from the second quarter of 2016) that increased net interest income by $0.3 million. These increases were partially offset by lower accretion from fair value adjustments on recent acquisitions that decreased net interest income $0.4 million ($0.6 million for the quarter ended September 30, 2016 compared to $1.0 million for the quarter ended June 30, 2016). The Company's reported net interest margin decreased from 3.56% for the second quarter of 2016 to 3.48% for the third quarter of 2016. Excluding the favorable impact of the accretion from the fair value adjustments, the net interest margin would have been 3.40% for the quarter ended September 30, 2016 and 3.44% for the quarter ended June 30, 2016.

Credit Quality

The Company's ratio of nonperforming assets to total loans and other real estate owned improved from 0.73% at June 30, 2016 to 0.69% at September 30, 2016. Total nonperforming assets decreased from $21.3 million at June 30, 2016 to $20.6 million at September 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 increased modestly from $8.6 million, or 0.30% of total loans outstanding, at June 30, 2016 to $9.0 million, or 0.30% of total loans outstanding, at September 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 $1.4 million in the third quarter of 2016, compared to $0.5 million for the comparable period in 2015 and $1.1 million for the second quarter of 2016. The provision for loan losses recorded in the third quarter of 2016 reflects the growth in the loan portfolio, losses attributable to West Virginia flooding experienced in June 2016 ($0.3 million), and 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

During the third quarter of 2016, the Company realized investment gains of $2.7 million. 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 $13.7 million for the third quarter of 2015 to $14.1 million for the third quarter of 2016. This increase was mainly due to an increase in bankcard revenues of $0.3 million, or 8.2%, from the third quarter of 2015 to $4.2 million and an increase in trust and investment management fee income of $0.2 million, or 13.0%, to $1.3 million.

Non-interest Expenses

During the third quarter of 2015, the Company realized a $1.4 million expense associated with the write down of an investment in Mountaineer Capital LP and $0.2 million of merger related expenses in connection with the Company's acquisition of three Lexington, Kentucky branches from American Founders Bank, Inc. ("AFB"). Exclusive of these expenses during the third quarter of 2015, non-interest expenses increased $1.5 million, from $23.8 million in the third quarter of 2015 to $25.3 million in the third quarter of 2016. This increase was due to an increase in salaries and employee benefits of $0.6 million, the acquisition of the AFB branches ($0.5 million) in November 2015, an increase in legal and professional fees of $0.4 million, and an increase in bankcard expenses of $0.3 million. The increase in salaries and employee benefits is due to salary adjustments and increased health insurance costs while the increase in legal and professional fees is related to the settlement of a legal dispute associated with the sales of loans to a third party in the late 1990s. These increases were partially offset by a decrease in realized losses on sales of repossessed assets of $0.2 million from the third quarter of 2015.

Balance Sheet Trends

Loans have increased $95.4 million (3.3%) from December 31, 2015 to $2.96 billion at September 30, 2016. Residential real estate loans increased $62.1 million (4.4%) and commercial loans increased $41.6 million (3.2%) from December 31, 2015 to September 30, 2016. These increases were partially offset by decreases in home equity junior lien loans ($5.4 million) and consumer loans ($2.5 million).

Total average depository balances decreased $10.1 million, or 0.3%, from the quarter ended June 30, 2016 to the quarter ended September 30, 2016. Decreases in noninterest-bearing demand deposits ($6.6 million) and savings deposits ($5.0 million) were partially offset by increases in interest-bearing deposits ($1.1 million) and time deposits ($0.4 million).

Income Tax Expense

The Company's effective income tax rate for the third quarter of 2016 was 33.2% compared to 34.4% for the year ended December 31, 2015, and 32.6% for the quarter ended September 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 93.0% and the loan to asset ratio was 76.5% at September 30, 2016. The Company maintained investment securities totaling 13.6% of assets as of the same date. Further, the Company's deposit mix is weighted heavily toward checking and saving accounts that fund 55.6% of assets at September 30, 2016. Time deposits fund 26.7% of assets at September 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 September 30, 2016. At September 30, 2016, City National Bank's Leverage Ratio is 8.55%, its Common Equity Tier I ratio is 11.14%, its Tier I Capital ratio is 11.73%, and its Total Risk-Based Capital ratio is 12.45%. These regulatory capital ratios are significantly above levels required to be considered "well capitalized," which is the highest possible regulatory designation.

On September 28, 2016, the Board approved a quarterly cash dividend of $0.43 cents per share payable October 31, 2016, to shareholders of record as of October 14, 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 September 30, 2016 Form 10-Q. The Company will continue to evaluate the impact of any subsequent events on the preliminary September 30, 2016 results and will adjust the amounts if necessary.
CITY HOLDING COMPANY AND SUBSIDIARIES                          
Financial Highlights
(Unaudited)
 
Three Months Ended Nine Months Ended

September 30, 2016
    June 30, 2016     March 31, 2016     December 31, 2015     September 30, 2015 September 30, 2016     September 30, 2015
 
Earnings
Net Interest Income (FTE) $ 30,002 $ 29,863 $ 29,312 $ 29,391 $ 28,005 $ 89,179 $ 86,464
Net Income available to common shareholders 13,232 12,541 11,702 13,515 10,607 37,476 40,582
 
Per Share Data
Earnings per share available to common shareholders:
Basic $ 0.88 $ 0.83 $ 0.78 $ 0.88 $ 0.69 $ 2.48 $ 2.66
Diluted 0.88 0.83 0.78 0.88 0.69 2.48 2.65
Weighted average number of shares (in thousands):
Basic 14,899 14,889 14,916 15,158 15,178 14,902 15,111
Diluted 14,909 14,902 14,927 15,174 15,198 14,913 15,132
Period-end number of shares 15,007 15,005 14,971 15,180 15,319 15,007 15,319
Cash dividends declared $ 0.43 $ 0.43 $ 0.43 $ 0.42 $ 0.42 $ 1.29 $ 1.26
Book value per share (period-end) 28.97 28.60 27.93 27.62 27.34 28.97 27.59
Tangible book value per share (period-end) 23.69 23.30 22.61 22.36 22.72 23.69 22.93
Market data:
High closing price $ 50.60 $ 50.14 $ 47.78 $ 51.12 $ 51.73 $ 50.60 $ 51.73
Low closing price 44.53 43.06 40.82 43.85 45.56 40.82 41.76
Period-end closing price 50.29 45.47 47.78 45.64 49.30 50.29 49.30
Average daily volume (in thousands) 61 63 71 55 58 65 53
Treasury share activity:
Treasury shares repurchased (in thousands) - 2 229 150 - 231 -
Average treasury share repurchase price $ - $ 46.65 $ 43.31 $ 46.91 $ - $ 43.34 $ -
 
Key Ratios (percent)
Return on average assets 1.38% 1.31% 1.25% 1.48% 1.21% 1.31% 1.53%
Return on average tangible equity 14.9% 14.5% 13.8% 15.5% 12.2% 14.4% 15.9%
Yield on interest earning assets 3.85% 3.95% 3.91% 3.99% 3.99% 3.91% 4.19%
Cost of interest bearing liabilities 0.49% 0.49% 0.48% 0.46% 0.47% 0.49% 0.47%
Net Interest Margin 3.48% 3.56% 3.53% 3.62% 3.62% 3.52% 3.81%
Non-interest income as a percent of total revenue 32.1% 31.6% 31.1% 32.5% 33.0% 31.6% 37.2%
Efficiency Ratio (a) 56.3% 55.6% 56.8% 48.5% 57.3% 56.6% 55.4%
Price/Earnings Ratio (b) 14.33 13.66 15.40 12.94 17.84 15.18 13.92
 
Capital (period-end)
Average Shareholders' Equity to Average Assets 11.35% 11.13% 11.23% 11.65% 11.90%
Tangible equity to tangible assets 9.39% 9.38% 9.03% 9.34% 10.14%
Consolidated risk based capital ratios (c):
CET I 13.00% 13.21% 13.38% 13.65% 14.42%
Tier I 13.59% 13.82% 14.00% 14.28% 15.08%
Total 14.33% 14.57% 14.78% 15.10% 15.95%
Leverage 9.92% 9.74% 9.78% 10.15% 10.71%
 
Other
Branches 85 85 85 85 82
FTE 834 852 854 853 828
 
Assets per FTE $ 4,636 $ 4,468 $ 4,484 $ 4,354 $ 4,233
Deposits per FTE 3,812 3,688 3,732 3,615 3,461
 
 
(a) The September 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) September 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 Nine Months Ended
September 30, 2016     June 30, 2016     March 31, 2016     December 31, 2015     September 30, 2015 September 30, 2016     September 30, 2015
 
Interest Income
Interest and fees on loans $ 29,444 $ 29,640 $ 28,927 $ 29,032 $ 27,875 $ 88,011 $ 86,075
Interest on investment securities:
Taxable 3,183 2,927 3,005 2,856 2,621 9,115 7,974
Tax-exempt   419       365       357       334       272   1,141       803
Total Interest Income 33,046 32,932 32,289 32,222 30,768 98,267 94,852
 
Interest Expense
Interest on deposits 3,006 3,011 2,898 2,760 2,686 8,915 8,126
Interest on short-term borrowings 90 86 107 91 69 283 236
Interest on long-term debt   172       167       164       159       155   503       458
Total Interest Expense   3,268       3,264       3,169       3,010       2,910   9,701       8,820
Net Interest Income 29,778 29,668 29,120 29,212 27,858 88,566 86,032
Provision for loan losses   1,432       1,122       539       2,813       451   3,093       4,175
Net Interest Income After Provision for Loan Losses 28,346 28,546 28,581 26,399 27,407 85,473 81,857
 
Non-Interest Income
Net gains on sale of investment securities 2,668 845 - - - 3,513 2,130
Service charges 6,842 6,564 6,303 6,893 6,907 19,709 19,423
Bankcard revenue 4,216 4,190 3,967 3,923 3,895 12,373 11,971
Trust and investment management fee income 1,329 1,371 1,276 1,547 1,176 3,976 3,577
Bank owned life insurance 846 768 760 898 929 2,374 2,476
Gain on sale of insurance division - - - - - - 11,084
Other income   846       843       821       813       799   2,510       2,471
Total Non-Interest Income 16,747 14,581 13,127 14,074 13,706 44,455 53,132
 
Non-Interest Expense
Salaries and employee benefits 12,993 12,790 12,673 11,296 12,179 38,456 36,551
Occupancy and equipment 2,759 2,708 2,836 2,583 2,575 8,303 7,694
Depreciation 1,585 1,567 1,567 1,539 1,522 4,719 4,549
FDIC insurance expense 508 512 465 443 456 1,485 1,351
Advertising 667 778 716 264 777 2,161 2,182
Bankcard expenses 1,081 925 833 778 785 2,839 2,485
Postage, delivery, and statement mailings 517 506 565 532 523 1,588 1,591
Office supplies 325 366 353 273 384 1,044 1,077
Legal and professional fees 976 528 471 662 620 1,975 1,729
Telecommunications 459 431 428 409 418 1,318 1,356
Repossessed asset losses, net of expenses 305 53 288 217 492 646 1,047
Merger related expenses - - - 315 175 - 283
Other expenses   3,109       3,119       2,945       1,854       4,471   9,173       9,891
Total Non-Interest Expense   25,284       24,283       24,140       21,165       25,377   73,707       71,786
Income Before Income Taxes 19,809 18,844 17,568 19,308 15,736 56,221 63,203
Income tax expense   6,577       6,303       5,866       5,793       5,129   18,745       22,621
Net Income Available to Common Shareholders $ 13,232     $ 12,541     $ 11,702     $ 13,515     $ 10,607 $ 37,476     $ 40,582
 
Distributed earnings allocated to common shareholders $ 6,376 $ 6,375 $ 6,365 $ 6,303 $ 6,362 $ 19,128 $ 19,086
Undistributed earnings allocated to common shareholders   6,699       6,016       5,206       7,059       4,125   17,901       21,040
Net earnings allocated to common shareholders $ 13,075     $ 12,391     $ 11,571     $ 13,362     $ 10,487 $ 37,029     $ 40,126
 
Average common shares outstanding 14,899 14,889 14,916 15,158 15,178 14,902 15,111
Shares for diluted earnings per share 14,909 14,902 14,927 15,175 15,198 14,913 15,132
 
Basic earnings per common share $ 0.88 $ 0.83 $ 0.78 $ 0.88 $ 0.69 $ 2.48 $ 2.66
Diluted earnings per common share $ 0.88 $ 0.83 $ 0.78 $ 0.88 $ 0.69 $ 2.48 $ 2.65
 
CITY HOLDING COMPANY AND SUBSIDIARIES                
Consolidated Balance Sheets
($ in 000s)
(Unaudited) (Unaudited) (Unaudited) (Unaudited)

September 30, 2016
    June 30, 2016     March 31, 2016     December 31, 2015     September 30, 2015
 
Assets
Cash and due from banks $ 57,233 $ 69,933 $ 165,134 $ 58,829 $ 109,627
Interest-bearing deposits in depository institutions   7,576       8,643       10,031       11,284       9,081
Cash and cash equivalents 64,809 78,576 175,165 70,113 118,708
 
Investment securities available-for-sale, at fair value 434,717 409,039 362,282 369,466 300,865
Investment securities held-to-maturity, at amortized cost 79,499 83,208 86,518 88,937 81,095
Other securities   11,895       10,203       9,960       12,915       9,926
Total investment securities 526,111 502,450 458,760 471,318 391,886
 
Gross loans 2,957,912 2,903,398 2,877,117 2,862,534 2,695,645
Allowance for loan losses   (19,550)       (19,139)       (19,315)       (19,251)       (20,148)
Net loans 2,938,362 2,884,259 2,857,802 2,843,283 2,675,497
 
Bank owned life insurance 100,293 99,446 98,679 97,919 97,157
Premises and equipment, net 75,589 75,040 75,965 77,271 73,419
Accrued interest receivable 7,986 8,428 8,517 7,432 7,690
Net deferred tax assets 23,179 23,995 27,541 29,974 33,342
Intangible assets 79,284 79,433 79,581 79,792 70,653
Other assets   50,748       55,234       47,656       36,957       36,266
Total Assets $ 3,866,361     $ 3,806,861     $ 3,829,666     $ 3,714,059     $ 3,504,618
 
Liabilities
Deposits:
Noninterest-bearing $ 669,865 $ 651,867 $ 666,523 $ 621,073 $ 542,177
Interest-bearing:
Demand deposits 713,642 701,248 711,366 679,735 647,792
Savings deposits 765,195 758,323 780,982 765,611 693,184
Time deposits   1,030,584       1,030,841       1,028,400       1,017,556       982,349
Total deposits 3,179,286 3,142,279 3,187,271 3,083,975 2,865,502
Short-term borrowings
Federal Funds purchased 6,000 - - 13,000 -
Customer repurchase agreements 173,384 153,674 156,714 141,869 147,036
Long-term debt 16,495 16,495 16,495 16,495 16,495
Other liabilities   56,412       66,054       51,068       39,448       56,818
Total Liabilities 3,431,577 3,378,502 3,411,548 3,294,787 3,085,851
 
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 105,996 105,648 106,137 106,269 106,108
Retained earnings 408,823 402,044 395,963 390,690 383,551
Cost of common stock in treasury (127,538) (127,619) (129,142) (120,104) (113,581)
Accumulated other comprehensive loss:
Unrealized gain on securities available-for-sale 6,013 6,796 3,670 927 1,789
Underfunded pension liability   (4,759)       (4,759)       (4,759)       (4,759)       (5,349)
Total Accumulated Other Comprehensive Loss   1,254       2,037       (1,089)       (3,832)       (3,560)
Total Stockholders' Equity   434,784       428,359       418,118       419,272       418,767
Total Liabilities and Stockholders' Equity $ 3,866,361     $ 3,806,861     $ 3,829,666     $ 3,714,059     $ 3,504,618
 
Regulatory Capital
Total CET 1 capital $ 355,934 $ 349,100 $ 341,165 $ 345,620 $ 353,224
Total tier 1 capital 371,934 365,100 357,165 361,620 369,224
Total risk-based capital 392,258 384,855 377,003 382,180 389,819
Total risk-weighted assets 2,737,721 2,642,040 2,550,739 2,531,525 2,449,191
 
CITY HOLDING COMPANY AND SUBSIDIARIES                
Loan Portfolio
(Unaudited) ($ in 000s)
 
 
September 30, 2016     June 30, 2016     March 31, 2016     December 31, 2015     September 30, 2015
 
Residential real estate (1) $ 1,445,242 $ 1,417,137 $ 1,395,670 $ 1,383,133 $ 1,358,083
Home equity - junior liens 141,616 142,827 142,694 147,036 144,748
Commercial and industrial 176,387 171,362 165,549 165,340 123,948
Commercial real estate (2) 1,158,088 1,135,493 1,135,625 1,127,581 1,028,857
Consumer 33,614 33,799 34,754 36,083 36,751
DDA overdrafts   2,965       2,780       2,825       3,361       3,258
Gross Loans $ 2,957,912     $ 2,903,398     $ 2,877,117     $ 2,862,534     $ 2,695,645
 
Construction loans included in:
(1) - Residential real estate loans $ 12,284 $ 12,344 $ 13,966 $ 13,135 $ 14,765
(2) - Commercial real estate loans 7,309 2,237 15,172 12,599 11,970
 
 
Secondary Mortgage Loan Activity
Mortgage loans originated $ 5,624 $ 3,103 $ 2,809 $ 3,855 $ 4,803
Mortgage loans sold 5,836 3,183 3,073 4,135 4,206
Mortgage loans gain on loans sold 129 80 24 88 112
 
CITY HOLDING COMPANY AND SUBSIDIARIES                          
Asset Quality Information
(Unaudited) ($ in 000s)
 
Three Months Ended Nine Months Ended
September 30, 2016     June 30, 2016     March 31, 2016     December 31, 2015     September 30, 2015 September 30, 2016     September 30, 2015
Allowance for Loan Losses
Balance at beginning of period $ 19,139 $ 19,315 $ 19,251 $ 20,148 $ 20,187 $ 19,251 $ 20,074
 
Charge-offs:
Commercial and industrial (103) (44) (1) (3,148) (82) (148) (2,620)
Commercial real estate (142) (769) (302) (303) (1) (1,213) (277)
Residential real estate (539) (337) (405) (386) (229) (1,281) (758)
Home equity (125) (69) (106) (76) (128) (300) (236)
Consumer (20) (44) (38) (39) (28) (102) (171)
DDA overdrafts   (378)       (321)       (318)       (376)       (414)   (1,017)       (1,038)
Total charge-offs (1,307) (1,584) (1,170) (4,328) (882) (4,061) (5,100)
 
Recoveries:
Commercial and industrial 9 3 1 2 45 13 72
Commercial real estate 43 20 384 317 18 447 49
Residential real estate 23 51 39 69 66 113 130
Home equity - - - - - - -
Consumer 28 52 29 32 76 109 155
DDA overdrafts   183       160       242       198       187   585       593
Total recoveries 286 286 695 618 392 1,267 999
                                 
Net charge-offs (1,021) (1,298) (475) (3,710) (490) (2,794) (4,101)
Provision for (recovery of) acquired loans (4) 128 40 32 (24) 164 521
Provision for loan losses   1,436       994       499       2,781       475   2,929       3,654
Balance at end of period $ 19,550     $ 19,139     $ 19,315     $ 19,251     $ 20,148 $ 19,550     $ 20,148
 
Loans outstanding $ 2,957,912 $ 2,903,398 $ 2,877,117 $ 2,862,534 $ 2,695,645
Allowance as a percent of loans outstanding 0.66% 0.66% 0.67% 0.67% 0.75%
Allowance as a percent of non-performing loans 129.0% 124.0% 120.4% 110.4% 92.2%
 
Average loans outstanding $ 2,919,756 $ 2,891,292 $ 2,864,943 $ 2,789,354 $ 2,679,429 $ 2,892,098 $ 2,658,262
Net charge-offs (annualized) as a percent of average loans outstanding 0.14% 0.18% 0.07% 0.53% 0.07% 0.13% 0.21%
 
CITY HOLDING COMPANY AND SUBSIDIARIES
Asset Quality Information, continued
(Unaudited) ($ in 000s)
 
September 30, 2016     June 30, 2016     June 30, 2016     March 31, 2016     December 31, 2015
Nonaccrual Loans
Residential real estate $ 3,919 $ 2,531 $ 2,977 $ 2,918 $ 3,012
Home equity 154 165 152 136 159
Commercial and industrial 2,441 2,724 2,967 2,745 6,430
Commercial real estate 8,077 9,779 9,718 11,149 11,806
Consumer   -       -       -       -       -
Total nonaccrual loans 14,591 15,199 15,814 16,948 21,407
Accruing loans past due 90 days or more   569       241       225       495       449
Total non-performing loans 15,160 15,440 16,039 17,443 21,856
Other real estate owned   5,435       5,868       6,054       6,519       6,026
Total non-performing assets $ 20,595     $ 21,308     $ 22,093     $ 23,962     $ 27,882
 
Non-performing assets as a percent of loans and other real estate owned 0.69% 0.73% 0.77% 0.84% 1.03%
 
Past Due Loans
Residential real estate $ 5,713 $ 5,490 $ 5,045 $ 6,610 $ 5,522
Home equity 925 595 595 406 558
Commercial and industrial 399 304 343 159 355
Commercial real estate 1,275 1,746 2,138 1,480 3,622
Consumer 104 150 82 196 218
DDA overdrafts   554       290       514       313       330
Total past due loans $ 8,970     $ 8,575     $ 8,717     $ 9,164     $ 10,605
 
Total past due loans as a percent of loans outstanding 0.30% 0.30% 0.30% 0.32% 0.39%
 
Troubled Debt Restructurings ("TDRs")
Accruing:
Residential real estate $ 20,162 $ 19,685 $ 18,306 $ 17,796 $ 18,154
Home equity 3,181 2,873 2,878 2,659 2,730
Commercial and industrial 46 50 54 58 62
Commercial real estate 2,718 2,743 523 1,746 1,921
Consumer   -       -       -       -       -
Total accruing TDRs $ 26,107     $ 25,351     $ 21,761     $ 22,259     $ 22,867
 
Non-Accruing
Residential real estate $ 213 $ 390 $ 36 $ 191 $ -
Home equity 85 44 - 34 16
Commercial and industrial - - - - -
Commercial real estate - - - - -
Consumer   -       -       -       -       -
Total non-accruing TDRs $ 298     $ 434     $ 36     $ 225     $ 16
 
Total TDRs $ 26,405     $ 25,785     $ 21,797     $ 22,484     $ 22,883
 
CITY HOLDING COMPANY AND SUBSIDIARIES                            
Consolidated Average Balance Sheets, Yields, and Rates    
(Unaudited) ($ in 000s)
 
Three Months Ended
September 30, 2016 June 30, 2016 September 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) $ 1,570,787 $ 15,309 3.88% $ 1,545,550 $ 15,038 3.91% $ 1,482,445 $ 14,469 3.87%
Commercial, financial, and agriculture (2) 1,311,819 13,066 3.96% 1,306,931 13,310 4.10% 1,156,264 12,174 4.18%
Installment loans to individuals (2), (3) 37,150 690 7.39% 38,811 809 8.38% 40,720 875 8.53%
Previously securitized loans (4) ***       378     ***     ***       483     ***     ***       357     ***
Total loans 2,919,756 29,443 4.01% 2,891,292 29,640 4.12% 2,679,429 27,875 4.13%
Securities:
Taxable 449,977 3,183 2.81% 425,450 2,927 2.77% 352,567 2,621 2.95%
Tax-exempt (5)   54,317       644     4.72%       43,637       561     5.17%       29,675       419     5.60%
Total securities 504,294 3,827 3.02% 469,087 3,488 2.99% 382,242 3,040 3.16%
Deposits in depository institutions   9,623       -     -       9,186       -     -       9,924       -     -
Total interest-earning assets 3,433,673 33,270 3.85% 3,369,565 33,128 3.95% 3,071,595 30,915 3.99%
Cash and due from banks 87,219 144,260 156,575
Premises and equipment, net 75,743 75,798 74,543
Other assets 263,258 261,271 237,803
Less: Allowance for loan losses   (19,517)                   (19,686)                   (21,425)            
Total assets $ 3,840,376                 $ 3,831,208                 $ 3,519,091            
 
Liabilities:
Interest-bearing demand deposits $ 687,487 $ 138 0.08% $ 686,403 $ 176 0.10% $ 644,375 $ 122 0.08%
Savings deposits 761,734 234 0.12% 766,708 238 0.12% 691,600 165 0.09%
Time deposits (2) 1,030,731 2,634 1.02% 1,030,346 2,598 1.01% 989,149 2,399 0.96%
Short-term borrowings 154,585 90 0.23% 154,047 86 0.22% 135,274 69 0.20%
Long-term debt   16,495       172     4.15%       16,495       167     4.07%       16,495       155     3.73%
Total interest-bearing liabilities 2,651,032 3,268 0.49% 2,653,999 3,265 0.49% 2,476,893 2,910 0.47%
Noninterest-bearing demand deposits 700,932 707,501 594,821
Other liabilities 52,641 43,435 28,583
Stockholders' equity   435,771                   426,273                   418,794            
Total liabilities and
stockholders' equity $ 3,840,376                 $ 3,831,208                 $ 3,519,091            
Net interest income       $ 30,002                 $ 29,863                 $ 28,005      
Net yield on earning assets             3.48%                 3.56%                 3.62%
 
(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 $ 166 $ 190 $ 257
Commercial, financial, and agriculture 311 656 576
Installment loans to individuals 16 29 54
Time deposits   148   148   169
$ 641 $ 1,023 $ 1,056
 
(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, 2016 September 30, 2015
Average Yield/ Average Yield/
Balance     Interest     Rate     Balance     Interest     Rate
 
Assets:
Loan portfolio (1):
Residential real estate (2) $ 1,549,466 $ 45,267 3.90% $ 1,459,247 $ 42,797 3.92%
Commercial, financial, and agriculture (2) 1,304,467 39,294 4.02% 1,157,677 38,759 4.48%
Installment loans to individuals (2), (3) 38,166 2,220 7.77% 41,338 3,209 10.38%
Previously securitized loans (4) ***     1,230     ***     ***     1,310     ***
Total loans 2,892,098 88,011 4.06% 2,658,262 86,075 4.33%
Securities:
Taxable 432,303 9,115 2.82% 340,585 7,974 3.13%
Tax-exempt (5) 46,646     1,754     5.02%     29,222     1,235     5.65%
Total securities 478,949 10,869 3.03% 369,807 9,209 3.33%
Deposits in depository institutions 9,779     -     -     9,790     -     -
Total interest-earning assets 3,380,826 98,880 3.91% 3,037,859 95,284 4.19%
Cash and due from banks 104,287 202,423
Premises and equipment, net 76,161 76,273
Other assets 260,297 242,294
Less: Allowance for loan losses (19,930)                 (20,960)            
Total assets $ 3,801,641                 $ 3,537,889            
 
Liabilities:
Interest-bearing demand deposits $ 683,926 $ 458 0.09% $ 643,086 $ 379 0.08%
Savings deposits 765,222 699 0.12% 698,433 520 0.10%
Time deposits (2) 1,026,845 7,757 1.01% 1,005,548 7,227 0.96%
Short-term borrowings 156,884 283 0.24% 138,192 236 0.23%
Long-term debt 16,495     504     4.08%     16,495     458     3.71%
Total interest-bearing liabilities 2,649,372 9,701 0.49% 2,501,754 8,820 0.47%
Noninterest-bearing demand deposits 679,730 584,046
Other liabilities 45,452 40,207
Stockholders' equity 427,087                 411,882            
Total liabilities and
stockholders' equity $ 3,801,641                 $ 3,537,889            
Net interest income       $ 89,179                 $ 86,464      
Net yield on earning assets             3.52%                 3.81%
 
(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 $ 538 $ 697
Commercial, financial, and agriculture 1,360 3,683
Installment loans to individuals 98 226
Time deposits 444 507
$ 2,440 $ 5,113
 
(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
September 30, 2016     June 30, 2016     March 31, 2016     December 31, 2015     September 30, 2015
Purchased Credit Impaired Loans
Virginia Savings Acquisition
Contractual required principal and interest $ 1,908 $ 1,924 $ 1,942 $ 1,965 $ 2,149
Carrying value 1,707 1,714 1,715 1,707 1,861
 
Community Acquisition
Contractual required principal and interest $ 12,091 $ 14,042 $ 14,415 $ 16,362 $ 17,834
Carrying value 9,712 11,160 11,219 12,899 13,400
 
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 Acquistion
Loans $ 65 $ 67 $ 104 $ 138 $ 245
Certificates of deposit   124       124       124       129       129
$ 189     $ 191     $ 228     $ 267     $ 374
 
Community Acquisition
Loans $ 261 $ 699 $ 408 $ 1,226 $ 642
Certificates of deposit   11       11       11       40       40
$ 273     $ 710     $ 419     $ 1,266     $ 682
 
AFB Acquisition
Loans $ 167 $ 109 $ 117 $ 28 $ -
Certificates of deposit   13       13       13       11       -
$ 180     $ 122     $ 130     $ 39     $ -
 
All Acquisitions
Loans $ 493 $ 875 $ 629 $ 1,392 $ 887
Certificates of deposit   148       148       148       180       169
$ 641     $ 1,023     $ 777     $ 1,572     $ 1,056
 
Accretion Forecast
Remainder of 2016 $ 525
Year Ended December 31, 2017 1,314
Year Ended December 31, 2018 990
 
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 Nine Months Ended
September 30, 2016     June 30, 2016     March 31, 2016     December 31, 2015     September 30, 2015 September 30, 2016     September 30, 2015
Net Interest Income/Margin
 
Net interest income, fully taxable equivalent $ 30,002 $ 29,863 $ 29,312 $ 29,391 $ 28,005 $ 89,179 $ 86,465
Taxable equivalent adjustment   (224)       (195)       (192)       (179)       (147)   (613)       (433)
Net interest income ("GAAP")   29,778       29,668       29,120       29,212       27,858   88,566       86,032
 
Average interest earning assets 3,433,673 3,369,565 3,338,659 3,223,782 3,071,595 3,380,826 3,037,859
Net Interest Margin 3.48% 3.56% 3.53% 3.62% 3.62% 3.52% 3.81%
 
Net interest income, fully taxable equivalent, excluding accretion $ 29,361 $ 28,840 $ 28,535 $ 27,819 $ 26,949 $ 86,738 $ 81,352
Taxable equivalent adjustment (224) (195) (192) (179) (147) (613) (433)
Accretion related to fair value adjustments   641       1,023       777       1,572       1,056   2,441       5,113
Net interest income ("GAAP") $ 29,778     $ 29,668     $ 29,120     $ 29,212     $ 27,858   88,566       86,032
 
Average interest earning assets $ 3,433,673 $ 3,369,565 $ 3,338,659 $ 3,223,782 $ 3,071,595 3,380,826 3,037,859
Net Interest Margin (excluding accretion) 3.40% 3.44% 3.44% 3.42% 3.48% 3.43% 3.58%
 
Tangible Equity Ratio (period end)
Tangible common equity to tangible assets 9.39% 9.38% 9.03% 9.34% 10.14%
Effect of goodwill and other intangibles, net   1.86%       1.89%       1.89%       1.95%       1.81%
Equity to assets ("GAAP")   11.25%       11.27%       10.92%       11.29%       11.95%

View source version on businesswire.com: http://www.businesswire.com/news/home/20161024005177/en/

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