City Holding Company Announces Second Quarter Results

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 $14.7 million and diluted earnings of $0.94 per share.

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

  • Return on assets and return on tangible equity of 1.43% and 14.2%, respectively.
  • Reported net interest income increased $1.6 million from the quarter ended June 30, 2016, while net interest income exclusive of accretion from fair value adjustments increased $2.0 million from the quarter ended June 30, 2016.
  • Total loan growth of $37.5 million from December 31, 2016 to June 30, 2017.
  • Asset quality continues to remain strong with nonperforming assets declining to $14.9 million or 0.48% of total loans and other real estate owned. Past due loans remained steady at just 0.26% of total loans outstanding.

Net Interest Income

The Company’s net interest income increased from $30.4 million during the first quarter of 2017 to $31.3 million during the second quarter of 2017. The Company’s tax equivalent net interest income increased $0.8 million, or 2.7%, from $30.8 million during the first quarter of 2017 to $31.6 million during the second quarter of 2017. Higher yields on commercial and residential real estate loans increased net interest income $1.0 million from the quarter ended March 31, 2017. This increase was partially offset by increased interest expense as a result of higher interest rates on interest bearing liabilities of $0.2 million. The Company’s reported net interest margin remained stable at 3.46% for the second quarter of 2017 compared to 3.45% for the first quarter of 2017. Excluding the favorable impact of the accretion from the fair value adjustments, the net interest margin would have been 3.42% for the quarter ended March 31, 2017 and 3.39% for the quarter ended June 30, 2017.

Credit Quality

The Company’s ratio of nonperforming assets to total loans and other real estate owned improved from 0.52% at March 31, 2017 to 0.48% at June 30, 2017. Total nonperforming assets decreased from $15.9 million at March 31, 2017 to $14.9 million at June 30, 2017. Total past due loans increased from $6.2 million, or 0.20% of total loans outstanding, at March 31, 2017 to $8.0 million, or 0.26% of total loans outstanding, at June 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 $0.5 million in the second quarter of 2017, compared to $1.1 million for the comparable period in 2016 and $0.7 million for the first quarter of 2017. The provision for loan losses recorded in the second quarter of 2017 reflects 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

Non-interest income was $14.9 million during the second quarter of 2017. During the second quarter of 2016, the Company realized investment gains of $0.85 million. This gain represented partial recoveries of impairment charges previously recognized on pools of trust preferred securities. Exclusive of this gain, non-interest income increased from $13.7 million for the second quarter of 2016 to $14.9 million for the second quarter of 2017. This increase was mainly due to an increase in service charges of $0.5 million, or 7.8%, from the second quarter of 2016, an increase in trust and investment management fee income of $0.2 million, or 17.6%, an increase in bank owned life insurance revenues of $0.2 million, or 26.0%, and an increase in bankcard revenues of $0.2 million, or 4.3%.

Non-interest Expenses

Non-interest expenses decreased $0.1 million, from $24.3 million in the second quarter of 2016 to $24.2 million in the second quarter of 2017. This decrease was primarily due to a decrease in other expenses of $0.4 million (due to a fair value adjustment for a $5 million notional interest rate swap and a loss on a fixed asset disposal incurred in the quarter ended June 30, 2016) and a decrease in FDIC insurance expense of $0.2 million. These decreases were partially offset by an increase in occupancy and equipment expenses ($0.2 million) and salaries and employee benefits ($0.2 million).

Balance Sheet Trends

Loan balances have increased $37.5 million (1.2%) from December 31, 2016 to $3.08 billion at June 30, 2017. Commercial real estate loans increased $27.2 million (2.2%), commercial and industrial loans increased $11.8 million (6.3%) and residential real estate loans increased $4.1 million (0.3%). These increases were partially offset by a decrease in home equity junior lien loans ($2.4 million).

Total average depository balances increased $76.5 million, or 2.3%, from the quarter ended March 31, 2017 to the quarter ended June 30, 2017. The Company experienced increases in savings deposits ($48.0 million), time deposits ($13.8 million), noninterest-bearing demand deposits ($13.0 million), and interest-bearing deposits ($1.7 million). Total deposit balances decreased $114.6 million from March 31, 2017 to June 30, 2017, primarily in savings deposit balances ($76.5 million). Over the last year, one of the Company’s customers accumulated over $100 million in deposits. During the quarter ended June 30, 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 second quarter of 2017 was 31.7% compared to 32.5% for the year ended December 31, 2016, and 33.4% for the quarter ended June 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 94.1% and the loan to asset ratio was 76.0% at June 30, 2017. The Company maintained investment securities totaling 14.6% of assets as of the same date. The Company’s deposit mix is weighted toward checking and saving accounts that fund 54.4% of assets at June 30, 2017. Time deposits fund 26.4% of assets at June 30, 2017, with time deposits of more than $250,000 funding only 2.7% 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 10.4% at June 30, 2017. During the quarter ended March 31, 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 were sold during the quarter ended June 30, 2017. At June 30, 2017, City National Bank’s Leverage Ratio was 8.62%, its Common Equity Tier I ratio was 12.27%, its Tier I Capital ratio was 12.27%, and its Total Risk-Based Capital ratio was 12.96%. These regulatory capital ratios are significantly above levels required to be considered “well capitalized,” which is the highest possible regulatory designation.

On June 28, 2017, the Board approved a quarterly cash dividend of $0.44 cents per share payable July 31, 2017, to shareholders of record as of July 14, 2017.

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

               
CITY HOLDING COMPANY AND SUBSIDIARIES
Financial Highlights
(Unaudited)
 
Three Months Ended Six Months Ended
June 30, 2017   March 31, 2017   December 31, 2016   September 30, 2016   June 30, 2016 June 30, 2017   June 30, 2016
 
Earnings
Net Interest Income (FTE) $ 31,632 $ 30,804 $ 30,638 $ 30,002 $ 29,863 $ 62,436 $ 59,177
Net Income available to common shareholders 14,688 16,026 14,656 13,232 12,541 30,714 24,244
 
Per Share Data
Earnings per share available to common shareholders:
Basic $ 0.94 $ 1.04 $ 0.97 $ 0.88 $ 0.83 $ 1.98 $ 1.61
Diluted 0.94 1.04 0.97 0.88 0.83 1.98 1.61
Weighted average number of shares (in thousands):
Basic 15,462 15,252 14,894 14,899 14,889 15,344 14,903
Diluted 15,487 15,277 14,914 14,909 14,902 15,369 14,915
Period-end number of shares (in thousands) 15,617 15,586 15,128 15,007 15,005 15,617 15,005
Cash dividends declared $ 0.44 $ 0.44 $ 0.43 $ 0.43 $ 0.43 $ 0.88 $ 0.86
Book value per share (period-end) $ 31.54 $ 30.90 $ 29.25 $ 28.97 $ 28.60 $ 31.54 $ 28.60
Tangible book value per share (period-end) 26.49 25.83 24.01 23.69 23.30 26.49 23.30
Market data:
High closing price $ 72.78 $ 67.93 $ 68.29 $ 50.60 $ 50.14 $ 72.78 $ 50.14
Low closing price 61.34 60.86 48.49 44.53 43.06 60.86 40.82
Period-end closing price 65.87 64.48 67.60 50.29 45.47 65.87 45.47
Average daily volume (in thousands) 56 57 57 61 63 56 67
Treasury share activity:
Treasury shares repurchased (in thousands) - - - - 2 - 231
Average treasury share repurchase price $ - $ - $ - $ - $ 46.65 $ - $ 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 1.43 % 1.60 % 1.49 % 1.38 % 1.31 % 1.51 % 1.28 %
Return on average tangible equity 14.2 % 16.5 % 16.1 % 14.9 % 14.5 % 15.3 % 14.1 %
Yield on interest earning assets 3.90 % 3.88 % 3.81 % 3.85 % 3.95 % 3.89 % 3.93 %
Cost of interest bearing liabilities 0.56 % 0.54 % 0.50 % 0.49 % 0.49 % 0.55 % 0.49 %
Net Interest Margin 3.46 % 3.45 % 3.42 % 3.48 % 3.56 % 3.46 % 3.55 %
Non-interest income as a percent of total revenue 32.3 % 31.9 % 32.1 % 32.1 % 31.6 % 32.1 % 31.4 %
Efficiency Ratio 52.0 % 53.8 % 48.9 % 56.3 % 55.6 % 53.4 % 56.2 %
Price/Earnings Ratio (b) 17.52 15.51 17.38 14.33 13.66 16.63 14.15
 
Capital (period-end)
Average Shareholders' Equity to Average Assets 11.99 % 11.66 % 11.25 % 11.35 % 11.13 %
Tangible equity to tangible assets 10.40 % 9.95 % 9.30 % 9.39 % 9.38 %
Consolidated City Holding Company risk based capital ratios (c):
CET I 14.88 % 14.61 % 13.41 % 13.00 % 13.21 %
Tier I 15.45 % 15.18 % 13.98 % 13.59 % 13.82 %
Total 16.17 % 15.91 % 14.73 % 14.33 % 14.57 %
Leverage 10.94 % 10.83 % 10.08 % 9.92 % 9.74 %
City National Bank risk based capital ratios (c):
CET I 12.27 % 11.74 % 11.23 % 11.14 % 10.99 %
Tier I 12.27 % 11.74 % 11.52 % 11.73 % 11.59 %
Total 12.96 % 12.44 % 12.24 % 12.45 % 12.32 %
Leverage 8.62 % 8.40 % 8.33 % 8.55 % 8.16 %
 
Other
Branches 85 85 85 85 85
FTE 839 833 847 834 852
 
Assets per FTE (in thousands) $ 4,836 $ 4,951 $ 4,704 $ 4,636 $ 4,468
Deposits per FTE (in thousands) 3,907 4,073 3,815 3,812 3,688
 
 

(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)

June 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 Six Months Ended
June 30, 2017   March 31, 2017   December 31, 2016   September 30, 2016   June 30, 2016 June 30, 2017   June 30, 2016
 
Interest Income
Interest and fees on loans $ 31,115 $ 30,104 $ 30,126 $ 29,444 $ 29,640 $ 61,219 $ 58,567
Interest on investment securities:
Taxable 3,480 3,444 3,277 3,183 2,927 6,924 5,933
Tax-exempt 686 663 481 419 365 1,349 722
Interest on deposits in depository institutions   17     3     -     -     -   20     -
Total Interest Income 35,298 34,214 33,884 33,046 32,932 69,512 65,222
 
Interest Expense
Interest on deposits 3,660 3,429 3,137 3,006 3,011 7,088 5,909
Interest on short-term borrowings 187 157 188 90 86 344 193
Interest on long-term debt   189     181     179     172     167   370     331
Total Interest Expense   4,036     3,767     3,504     3,268     3,264   7,802     6,433
Net Interest Income 31,262 30,447 30,380 29,778 29,668 61,710 58,789
Provision for loan losses   510     681     1,301     1,432     1,122   1,191     1,661
Net Interest Income After Provision for Loan Losses 30,752 29,766 29,079 28,346 28,546 60,519 57,128
 
Non-Interest Income
Net gains on sale of investment securities - 4,276 - 2,668 845 4,276 845
Service charges 7,074 6,730 6,995 6,842 6,564 13,805 12,867
Bankcard revenue 4,372 4,140 4,142 4,216 4,190 8,512 8,157
Trust and investment management fee income 1,612 1,386 1,597 1,329 1,371 2,998 2,647
Bank owned life insurance 968 1,229 952 846 768 2,197 1,528
Other income   895     746     685     846     843   1,642     1,664
Total Non-Interest Income 14,921 18,507 14,371 16,747 14,581 33,430 27,708
 
Non-Interest Expense
Salaries and employee benefits 12,945 13,078 12,427 12,993 12,790 26,023 25,463
Occupancy and equipment 2,956 2,838 2,792 2,759 2,708 5,794 5,544
Depreciation 1,510 1,525 1,516 1,585 1,567 3,036 3,134
FDIC insurance expense 328 375 137 508 512 703 977
Advertising 781 733 445 667 778 1,514 1,494
Bankcard expenses 970 943 1,011 1,188 1,016 1,913 1,955
Postage, delivery, and statement mailings 504 555 492 517 506 1,059 1,071
Office supplies 345 361 320 325 366 706 719
Legal and professional fees 440 449 515 869 437 889 802
Telecommunications 492 484 494 459 431 976 859
Repossessed asset losses, net of expenses 147 336 244 305 53 482 341
Other expenses   2,755     2,923     2,063     3,109     3,119   5,681     6,064
Total Non-Interest Expense   24,173     24,600     22,456     25,284     24,283   48,776     48,423
Income Before Income Taxes 21,500 23,673 20,994 19,809 18,844 45,173 36,413
Income tax expense   6,812     7,647     6,338     6,577     6,303   14,459     12,169
Net Income Available to Common Shareholders $ 14,688   $ 16,026   $ 14,656   $ 13,232   $ 12,541 $ 30,714   $ 24,244
 
Distributed earnings allocated to common shareholders $ 6,797 $ 6,782 $ 6,428 $ 6,376 $ 6,375 $ 13,594 $ 12,750
Undistributed earnings allocated to common shareholders   7,733   9,067   8,051   6,699   6,016   16,787   11,202
Net earnings allocated to common shareholders $ 14,530 $ 15,849 $ 14,479 $ 13,075 $ 12,391 $ 30,381 $ 23,952
 
Average common shares outstanding 15,462 15,252 14,894 14,899 14,889 15,344 14,903
Shares for diluted earnings per share 15,487 15,277 14,914 14,909 14,902 15,369 14,915
 
Basic earnings per common share $ 0.94 $ 1.04 $ 0.97 $ 0.88 $ 0.83 $ 1.98 $ 1.61
Diluted earnings per common share $ 0.94 $ 1.04 $ 0.97 $ 0.88 $ 0.83 $ 1.98 $ 1.61
 
           
CITY HOLDING COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
($ in 000s)
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
June 30, 2017   March 31, 2017   December 31, 2016   September 30, 2016   June 30, 2016
 
Assets
Cash and due from banks $ 54,577 $ 164,887 $ 62,263 $ 57,233 $ 69,933
Interest-bearing deposits in depository institutions   27,783       25,925       25,876       7,576       8,643  
Cash and cash equivalents 82,360 190,812 88,139 64,809 78,576
 
Investment securities available-for-sale, at fair value 504,660 470,098 450,083 434,717 409,039
Investment securities held-to-maturity, at amortized cost 69,798 72,308 75,169 79,499 83,208
Other securities   16,039       10,240       14,352       11,895       10,203  
Total investment securities 590,497 552,646 539,604 526,111 502,450
 
Gross loans 3,083,767 3,074,173 3,046,226 2,957,912 2,903,398
Allowance for loan losses   (19,063 )     (19,209 )     (19,730 )     (19,550 )     (19,139 )
Net loans 3,064,704 3,054,964 3,026,496 2,938,362 2,884,259
 
Bank owned life insurance 101,960 101,481 100,732 100,293 99,446
Premises and equipment, net 72,809 73,805 75,165 75,589 75,040
Accrued interest receivable 8,122 8,644 8,408 7,986 8,428
Net deferred tax assets 22,944 24,606 28,043 23,179 23,995
Intangible assets 78,865 79,000 79,135 79,284 79,433
Other assets   35,138       38,029       38,681       50,748       55,234  
Total Assets $ 4,057,399     $ 4,123,987     $ 3,984,403     $ 3,866,361     $ 3,806,861  
 
Liabilities
Deposits:
Noninterest-bearing $ 688,223 $ 714,791 $ 672,286 $ 669,865 $ 651,867
Interest-bearing:
Demand deposits 722,440 743,246 695,891 713,642 701,248
Savings deposits 797,552 874,031 822,057 765,195 758,323
Time deposits   1,069,932       1,060,690       1,041,419       1,030,584       1,030,841  
Total deposits 3,278,147 3,392,758 3,231,653 3,179,286 3,142,279
Short-term borrowings
Federal Funds purchased 46,400 - 64,100 6,000 -
Customer repurchase agreements 177,904 186,686 184,205 173,384 153,674
Long-term debt 16,495 16,495 16,495 16,495 16,495
Other liabilities   45,946       46,402       45,512       56,412       66,054  
Total Liabilities 3,564,892 3,642,341 3,541,965 3,431,577 3,378,502
 
Stockholders' Equity
Preferred stock - - - - -
Common stock 47,619 47,619 46,518 46,249 46,249
Capital surplus 139,972 140,305 112,873 105,996 105,648
Retained earnings 433,944 426,126 417,017 408,823 402,044
Cost of common stock in treasury (124,943 ) (126,265 ) (126,958 ) (127,538 ) (127,619 )
Accumulated other comprehensive loss:
Unrealized gain (loss) on securities available-for-sale 575 (1,479 ) (2,352 ) 6,013 6,796
Underfunded pension liability   (4,660 )     (4,660 )     (4,660 )     (4,759 )     (4,759 )
Total Accumulated Other Comprehensive Loss   (4,085 )     (6,139 )     (7,012 )     1,254       2,037  
Total Stockholders' Equity   492,507       481,646       442,438       434,784       428,359  
Total Liabilities and Stockholders' Equity $ 4,057,399     $ 4,123,987     $ 3,984,403     $ 3,866,361     $ 3,806,861  
 
Regulatory Capital
Total CET 1 capital $ 418,449 $ 409,533 $ 371,677 $ 355,934 $ 349,100
Total tier 1 capital 434,449 425,533 387,677 371,934 365,100
Total risk-based capital 454,832 445,938 408,406 392,258 384,855
Total risk-weighted assets 2,812,443 2,807,347 2,772,456 2,737,721 2,642,040
 
           
CITY HOLDING COMPANY AND SUBSIDIARIES
Loan Portfolio
(Unaudited) ($ in 000s)
 
 
June 30, 2017   March 31, 2017   December 31, 2016   September 30, 2016   June 30, 2016
 
Residential real estate (1) $ 1,455,578 $ 1,444,795 $ 1,451,462 $ 1,445,242 $ 1,417,137
Home equity - junior liens 139,534 139,165 141,965 141,616 142,827
Commercial and industrial 197,429 205,011 185,667 176,387 171,362
Commercial real estate (2) 1,256,736 1,250,106 1,229,516 1,158,088 1,135,493
Consumer 30,860 32,043 32,545 33,614 33,799
DDA overdrafts   3,630     3,053     5,071     2,965     2,780
Gross Loans $ 3,083,767   $ 3,074,173   $ 3,046,226   $ 2,957,912   $ 2,903,398
 
Construction loans included in:
(1) - Residential real estate loans $ 12,056 $ 9,777 $ 14,182 $ 12,284 $ 12,344
(2) - Commercial real estate loans 20,204 18,499 12,840 7,309 2,237
 
 
Secondary Mortgage Loan Activity
Mortgage loans originated $ 5,433 $ 3,951 $ 6,444 $ 5,624 $ 3,103
Mortgage loans sold 5,465 6,118 4,936 5,836 3,183
Mortgage loans gain on loans sold 142 167 107 129 80
 
               
CITY HOLDING COMPANY AND SUBSIDIARIES
Asset Quality Information
(Unaudited) ($ in 000s)
 
Three Months Ended Six Months Ended
June 30, 2017   March 31, 2017   December 31, 2016   September 30, 2016   June 30, 2016 June 30, 2017   June 30, 2016
Allowance for Loan Losses
Balance at beginning of period $ 19,209 $ 19,730 $ 19,550 $ 19,139 $ 19,315 $ 19,730 $ 19,251
 
Charge-offs:
Commercial and industrial (57 ) (53 ) - (103 ) (44 ) (110 ) (45 )
Commercial real estate (102 ) (180 ) (463 ) (142 ) (769 ) (282 ) (1,071 )
Residential real estate (258 ) (626 ) (453 ) (539 ) (337 ) (884 ) (742 )
Home equity (118 ) (121 ) (90 ) (125 ) (69 ) (239 ) (175 )
Consumer (23 ) (6 ) (24 ) (20 ) (44 ) (29 ) (82 )
DDA overdrafts   (635 )     (636 )     (395 )     (378 )     (321 )   (1,271 )     (639 )
Total charge-offs (1,193 ) (1,622 ) (1,425 ) (1,307 ) (1,584 ) (2,815 ) (2,754 )
 
Recoveries:
Commercial and industrial 53 2 1 9 3 55 4
Commercial real estate 21 11 40 43 20 32 404
Residential real estate 131 25 74 23 51 156 90
Home equity - - - - - - -
Consumer 14 11 9 28 52 25 81
DDA overdrafts   319       371       180       183       160     690       402  
Total recoveries 538 420 304 286 286 958 981
                       
Net charge-offs (655 ) (1,202 ) (1,121 ) (1,021 ) (1,298 ) (1,857 ) (1,773 )
Provision for (recovery of) acquired loans 58 (19 ) (1 ) (4 ) 128 39 168
Provision for loan losses   451       700       1,302       1,436       994     1,151       1,493  
Balance at end of period $ 19,063     $ 19,209     $ 19,730     $ 19,550     $ 19,139   $ 19,063     $ 19,139  
 
Loans outstanding $ 3,083,767 $ 3,074,173 $ 3,046,226 $ 2,957,912 $ 2,903,398
Allowance as a percent of loans outstanding 0.62 % 0.62 % 0.65 % 0.66 % 0.66 %
Allowance as a percent of non-performing loans 177.6 % 167.7 % 140.1 % 129.0 % 124.0 %
 
Average loans outstanding $ 3,073,255 $ 3,055,979 $ 3,006,426 $ 2,919,756 $ 2,891,292 $ 3,064,665 $ 2,878,119
Net charge-offs (annualized) as a percent of average loans outstanding 0.09 % 0.16 % 0.15 % 0.14 % 0.18 % 0.12 % 0.12 %
 
 
CITY HOLDING COMPANY AND SUBSIDIARIES
Asset Quality Information, continued
(Unaudited) ($ in 000s)
 
June 30, 2017   March 31, 2017   December 31, 2016   September 30, 2016   June 30, 2016
Nonaccrual Loans
Residential real estate $ 1,608 $ 2,810 $ 4,302 $ 3,919 $ 2,531
Home equity 153 114 100 154 165
Commercial and industrial 1,571 1,353 1,958 2,441 2,724
Commercial real estate 7,250 7,141 7,341 8,077 9,779
Consumer   -       -       -       -       -  
Total nonaccrual loans 10,582 11,418 13,701 14,591 15,199
Accruing loans past due 90 days or more   150       35       382       569       241  
Total non-performing loans 10,732 11,453 14,083 15,160 15,440
Other real estate owned   4,204       4,405       4,588       5,435       5,868  
Total non-performing assets $ 14,936     $ 15,858     $ 18,671     $ 20,595     $ 21,308  
 
Non-performing assets as a percent of loans and other real estate owned 0.48 % 0.52 % 0.61 % 0.69 % 0.73 %
 
Past Due Loans
Residential real estate $ 5,648 $ 3,876 $ 6,074 $ 5,713 $ 5,490
Home equity 628 301 673 925 595
Commercial and industrial 259 611 94 399 304
Commercial real estate 819 1,014 1,115 1,275 1,746
Consumer 70 38 39 104 150
DDA overdrafts   527       330       599       554       290  
Total past due loans $ 7,951     $ 6,170     $ 8,594     $ 8,970     $ 8,575  
 
Total past due loans as a percent of loans outstanding 0.26 % 0.20 % 0.28 % 0.30 % 0.30 %
 
Troubled Debt Restructurings ("TDRs")
Accruing:
Residential real estate $ 20,647 $ 20,294 $ 20,643 $ 19,944 $ 19,685
Home equity 3,146 3,104 3,105 3,159 2,873
Commercial and industrial 35 38 42 46 50
Commercial real estate 8,483 8,513 5,525 2,718 2,743
Consumer   -       -       -       -       -  
Total accruing TDRs $ 32,311     $ 31,949     $ 29,315     $ 25,867     $ 25,351  
 
Non-Accruing
Residential real estate $ 154 $ 100 $ 172 $ 452 $ 390
Home equity - 30 30 85 44
Commercial and industrial - - - - -
Commercial real estate - - - - -
Consumer   -       -       -       -       -  
Total non-accruing TDRs $ 154     $ 130     $ 202     $ 537     $ 434  
 
Total TDRs $ 32,465     $ 32,079     $ 29,517     $ 26,404     $ 25,785  
 
                   
CITY HOLDING COMPANY AND SUBSIDIARIES
Consolidated Average Balance Sheets, Yields, and Rates
(Unaudited) ($ in 000s)
 
Three Months Ended
June 30, 2017 March 31, 2017 June 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) $ 1,589,748 $ 15,732 3.97 % $ 1,591,255 $ 15,479 3.95 % $ 1,545,550 $ 15,038 3.91 %
Commercial, financial, and agriculture (2) 1,448,535 14,473 4.01 % 1,429,075 13,598 3.86 % 1,306,931 13,310 4.10 %
Installment loans to individuals (2), (3) 34,972 624 7.16 % 35,650 581 6.61 % 38,811 809 8.38 %
Previously securitized loans (4) ***     285   ***   ***     447   ***   ***     483   ***
Total loans 3,073,255 31,114 4.06 % 3,055,979 30,105 4.00 % 2,891,292 29,640 4.12 %
Securities:
Taxable 478,179 3,480 2.92 % 458,295 3,444 3.05 % 425,450 2,927 2.77 %
Tax-exempt (5)   89,320       1,056   4.74 %     84,784       1,019   4.87 %     43,637       561   5.17 %
Total securities 567,499 4,536 3.21 % 543,079 4,463 3.33 % 469,087 3,488 2.99 %
Deposits in depository institutions   28,961       17   0.24 %     16,826       3   0.07 %     9,186       -   -  
Total interest-earning assets 3,669,715 35,667 3.90 % 3,615,884 34,571 3.88 % 3,369,565 33,128 3.95 %
Cash and due from banks 132,331 81,629 144,260
Premises and equipment, net 73,555 74,768 75,798
Other assets 248,716 253,378 261,271
Less: Allowance for loan losses   (19,809 )             (20,150 )             (19,686 )        
Total assets $ 4,104,508             $ 4,005,509             $ 3,831,208          
 
Liabilities:
Interest-bearing demand deposits $ 710,091 $ 160 0.09 % $ 708,434 $ 157 0.09 % $ 686,403 $ 176 0.10 %
Savings deposits 879,643 352 0.16 % 831,639 324 0.16 % 766,708 238 0.12 %
Time deposits (2) 1,066,047 3,147 1.18 % 1,052,218 2,948 1.14 % 1,030,346 2,598 1.01 %
Short-term borrowings 199,224 187 0.38 % 195,626 157 0.33 % 154,047 86 0.22 %
Long-term debt   16,495       189   4.60 %     16,495       181   4.45 %     16,495       167   4.07 %
Total interest-bearing liabilities 2,871,500 4,035 0.56 % 2,804,412 3,767 0.54 % 2,653,999 3,265 0.49 %
Noninterest-bearing demand deposits 703,259 690,243 707,501
Other liabilities 37,633 43,655 43,435
Stockholders' equity   492,116               467,199               426,273          

Total liabilities and stockholders' equity

$ 4,104,508             $ 4,005,509             $ 3,831,208          
Net interest income     $ 31,632           $ 30,804           $ 29,863    
Net yield on earning assets         3.46 %           3.45 %           3.56 %
 

(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 $ 144 $ 138 $ 190
Commercial, financial, and agriculture 464 176 656
Installment loans to individuals 5 9 29
Time deposits   -   17   148
$ 614 $ 338 $ 1,023
 

(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, 2017 June 30, 2016
Average Yield/ Average Yield/
Balance   Interest   Rate   Balance   Interest   Rate
 
Assets:
Loan portfolio (1):
Residential real estate (2) $ 1,590,528 $ 31,211 3.96 % $ 1,538,095 $ 29,957 3.92 %
Commercial, financial, and agriculture (2) 1,438,764 28,071 3.93 % 1,301,380 26,228 4.05 %
Installment loans to individuals (2), (3) 35,374 1,205 6.87 % 38,644 1,530 7.96 %
Previously securitized loans (4) ***     732   ***   ***     852   ***
Total loans 3,064,665 61,219 4.03 % 2,878,119 58,567 4.09 %
Securities:
Taxable 468,292 6,924 2.98 % 423,369 5,933 2.82 %
Tax-exempt (5)   87,065       2,075   4.81 %     42,768       1,110   5.22 %
Total securities 555,357 8,999 3.27 % 466,137 7,043 3.04 %
Deposits in depository institutions   22,927       20   0.18 %     9,858       -   -  
Total interest-earning assets 3,642,949 70,238 3.89 % 3,354,114 65,610 3.93 %
Cash and due from banks 107,120 112,915
Premises and equipment, net 74,159 76,372
Other assets 251,034 258,800
Less: Allowance for loan losses   (19,979 )             (20,138 )        
Total assets $ 4,055,283             $ 3,782,063          
 
Liabilities:
Interest-bearing demand deposits $ 709,267 $ 317 0.09 % $ 682,126 $ 321 0.09 %
Savings deposits 855,774 676 0.16 % 766,985 465 0.12 %
Time deposits (2) 1,059,171 6,095 1.16 % 1,024,881 5,123 1.01 %
Short-term borrowings 197,435 344 0.35 % 158,046 193 0.25 %
Long-term debt   16,495       370   4.52 %     16,495       331   4.04 %
Total interest-bearing liabilities 2,838,142 7,802 0.55 % 2,648,533 6,433 0.49 %
Noninterest-bearing demand deposits 696,787 669,013
Other liabilities 40,628 41,820
Stockholders' equity   479,726               422,697          

Total liabilities and stockholders' equity

$ 4,055,283             $ 3,782,063          
Net interest income     $ 62,436           $ 59,177    
Net yield on earning assets         3.46 %           3.55 %
 

(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 $ 282 $ 371
Commercial, financial, and agriculture 640 1,050
Installment loans to individuals 14 82
Time deposits   16   296
$ 952 $ 1,799
 

(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 Six Months Ended
June 30, 2017   March 31, 2017   December 31, 2016   September 30, 2016   June 30, 2016 June 30, 2017   June 30, 2016
Net Interest Income/Margin
 
Net interest income ("GAAP") $ 31,262 $ 30,447 $ 30,380 $ 29,778 $ 29,668 $ 61,710 $ 58,789
Taxable equivalent adjustment   370       357       258       224       195     726       388  
Net interest income, fully taxable equivalent $ 31,632     $ 30,804     $ 30,638     $ 30,002     $ 29,863   $ 62,436     $ 59,177  
 
Average interest earning assets $ 3,669,715 $ 3,615,884 $ 3,561,166 $ 3,433,673 $ 3,369,565 $ 3,642,949 $ 3,354,114
Net Interest Margin 3.46 % 3.45 % 3.42 % 3.48 % 3.56 % 3.46 % 3.55 %
 
Net interest income ("GAAP") $ 31,262 $ 30,447 $ 30,380 $ 29,778 $ 29,668 $ 61,710 $ 58,789
Taxable equivalent adjustment 370 357 258 224 195 726 388
Accretion related to fair value adjustments   (614 )     (338 )     (466 )     (641 )     (1,023 )   (950 )     (1,799 )
Net interest income, fully taxable equivalent, excluding accretion $ 31,018     $ 30,466     $ 30,172     $ 29,361     $ 28,840   $ 61,486     $ 57,378  
 
Average interest earning assets $ 3,669,715 $ 3,615,884 $ 3,561,166 $ 3,433,673 $ 3,369,565 $ 3,642,949 $ 3,354,114
Net Interest Margin (excluding accretion) 3.39 % 3.42 % 3.37 % 3.40 % 3.44 % 3.40 % 3.44 %
 
Tangible Equity Ratio (period end)
Tangible common equity to tangible assets 10.40 % 9.95 % 9.30 % 9.39 % 9.38 %
Effect of goodwill and other intangibles, net   1.74 %     1.72 %     1.80 %     1.86 %     1.89 %
Equity to assets ("GAAP")   12.14 %     11.68 %     11.10 %     11.25 %     11.27 %
 
Income tax expense ("GAAP") $ 6,812 $ 7,647 $ 6,338 $ 6,577 $ 6,303 $ 14,459 $ 12,169
FIN 48   -       -       554       -       -     -       -  
Income tax expense, excluding FIN 48 $ 6,812     $ 7,647     $ 6,892     $ 6,577     $ 6,303   $ 14,459     $ 12,169  
 
Income before income taxes $ 21,500 $ 23,673 $ 20,994 $ 19,809 $ 18,844 $ 45,173 $ 36,413
 
Effective tax rate, excluding FIN 48 31.7 % 32.3 % 32.8 % 33.2 % 33.4 % 32.0 % 33.4 %
Effective tax rate ("GAAP") 31.7 % 32.3 % 30.2 % 33.2 % 33.4 % 32.0 % 33.4 %
 

Contacts

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

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City Holding Company announces second quarter earnings

City Holding Company