City Holding Company (“Company” or “City”) (NASDAQ:CHCO), a $3.6
billion bank holding company headquartered in Charleston, today
announced record quarterly diluted earnings of $1.17 per share and
record quarterly net income of $18.0 million. Effective January 1,
2015, the Company sold its insurance operations, “CityInsurance”,
and recognized a one-time after tax gain of $5.8 million, or $0.37
per diluted share, in the first quarter of 2015.
Net Interest Income
The Company’s tax equivalent net interest income increased $0.1
million, or 0.4%, from $29.4 million during the fourth quarter of
2014 to $29.5 million during the first quarter of 2015. This
increase is due to additional accretion from fair value adjustments
related to the acquisitions of Virginia Savings Bank and Community
Bank ($2.5 million for the quarter ended March 31, 2015 compared to
$1.3 million for the quarter ended December 31, 2014). This
increase was partially offset by a decrease in interest income from
commercial loans of $0.6 million due to lower yields as a result of
a continued competitive commercial lending environment. The
Company’s reported net interest margin increased from 3.89% for the
fourth quarter of 2014 to 3.99% for the first quarter of 2015.
Excluding the favorable impact of the accretion from the fair value
adjustments, the net interest margin would have been 3.66% for the
quarter ended March 31, 2015 and 3.71% for the quarter ended
December 31, 2014.
Credit Quality
The Company’s ratio of nonperforming assets to total loans and
other real estate owned increased slightly from 0.90% at December
31, 2014 to 0.96% at March 31, 2015. 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 decreased modestly
from $10.7 million, or 0.40% of total loans outstanding, at
December 31, 2014 to $10.2 million, or 0.39% of total loans
outstanding, at March 31, 2015. Acquired past due loans represent
approximately 45% of total past due loans and have declined $11.9
million, or 72%, since March 31, 2013.
As a result of the Company’s quarterly analysis of the adequacy
of the ALLL, the Company recorded a provision for loan losses of
$0.9 million in the first quarter of 2015, compared to $1.4 for the
comparable period in 2014 and $0.4 million for the fourth quarter
of 2014. The provision for loan losses recorded in the first
quarter of 2015 reflects difficulties of certain commercial
borrowers of the Company during the quarter, the downgrade of their
related credits and management’s assessment of the impact of these
difficulties on the ultimate collectability of the loans.
Additionally, the first quarter of 2015 includes $0.25 million of
provision expense related to purchased credit impaired loans.
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
Effective January 1, 2015, the Company sold its insurance
operations, CityInsurance, which resulted in a pre-tax gain of
$11.1 million. Exclusive of this gain, non-interest income declined
from $14.2 million for the first quarter of 2014 to $12.9 million
for the first quarter of 2015. The primary reason for this decline
was the sale of CityInsurance which had insurance commission
revenues of $2.0 million in the first quarter of 2014. In addition,
service charges decreased $0.2 million, or 3.8%, from the first
quarter of 2014 to $5.9 million. These decreases were partially
offset by increases in bankcard revenues of $0.4 million (10.6%),
other income of $0.4 million, and trust and investment management
fee income of $0.2 million (15.7%).
Non-interest Expenses
Non-interest expenses decreased $0.2 million, from $23.4 million
in the first quarter of 2014 to $23.2 million in the first quarter
of 2015. This drop was largely due to a decline in salaries and
employee benefit expense of $1.0 million, or 7.3%, to $12.2
million. This decrease was due to a reduction in the Company’s
salary expense as a result of the sale of CityInsurance. This
decrease was partially offset by an increase in other expenses of
$0.8 million to $2.7 million. During the first quarter of 2014, the
Company’s non-income based taxes decreased due to the recognition
of a previously unrecognized tax position due to the close of the
statute of limitations for a previous tax year and was discrete to
the first quarter of 2014.
Balance Sheet Trends
Loans decreased $19.6 million (0.7%) from December 31, 2014 to
$2.63 billion at March 31, 2015. Commercial real estate loans
decreased $17.2 million (1.7%), commercial and industrial
(“C&I”) loans decreased $8.3 million (6.3%), home equity junior
lien loans fell $1.9 million (1.3%), and consumer loans declined
$1.3 million (3.2%). These decreases were partially offset by an
increase in residential real estate loans of $8.7 million
(0.7%).
Total average depository balances increased $74.7 million, or
2.6%, from the quarter ended December 31, 2014 to the quarter ended
March 31, 2015. Increases in savings deposits ($51.8 million),
interest-bearing deposits ($17.1 million), and noninterest-bearing
demand deposits ($14.4 million) were partially offset by a decrease
in time deposits ($8.5 million).
Income Tax Expense
The Company’s effective income tax rate for the first quarter of
2015 was 38.7% compared to 31.4% for the year ended December 31,
2014, and 29.6% for the quarter ended March 31, 2014. As noted
previously, the Company sold CityInsurance in the first quarter of
2015. As a result of differences between the book and tax basis of
the assets that were sold, the Company’s income tax expense
increased by $1.1 million. During the first quarter of 2014, the
Company reduced income tax expense by $0.8 million due to the
recognition of previously unrecognized tax position resulting from
the close of the statute of limitations for a previous tax year.
Exclusive of the sale of CityInsurance in the first quarter of 2015
and the discrete item recognized in the first quarter of 2014, the
Company’s tax rate from operations was 33.3% and 33.6%, for the
quarters ended March 31, 2015 and March 31, 2014, respectively.
Capitalization and Liquidity
The Company’s loan to deposit ratio was 89.5% and the loan to
asset ratio was 74.1% at March 31, 2015. The Company maintained
investment securities totaling 10.4% of assets as of this date.
Further, the Company’s deposit mix is weighted heavily toward
checking and saving accounts that fund 54.3% of assets at March 31,
2015. Time deposits fund 28.5% of assets at March 31, 2015, 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 9.4% at December 31, 2014 to 9.6% at
March 31, 2015. At March 31, 2015, City National Bank’s Leverage
Ratio is 9.07%, its Common Equity Tier I ratio is 11.87%, its Tier
I Capital ratio is 13.04%, and its Total Risk-Based Capital ratio
is 13.89%. These regulatory capital ratios are significantly above
levels required to be considered “well capitalized,” which is the
highest possible regulatory designation.
On March 26, 2015, the Board approved a quarterly cash dividend
of $0.42 cents per share payable April 30, 2015, to shareholders of
record as of April 15, 2015.
City Holding Company is the parent company of City National Bank
of West Virginia. City National operates 82 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, 2014.
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
March 31, 2015 Form 10-Q. The Company will continue to evaluate the
impact of any subsequent events on the preliminary March 31, 2015
results and will adjust the amounts if necessary.
CITY HOLDING COMPANY AND
SUBSIDIARIES
Financial Highlights
(Unaudited)
Three Months Ended March 31,
Percent 2015
2014
Change Earnings ($000s, except per share
data): Net Interest Income (FTE) $ 29,533 $ 30,193 (2.19)% Net
Income available to common shareholders 17,992 13,803 30.35%
Earnings per Basic Share 1.18 0.87 35.04% Earnings per Diluted
Share 1.17 0.86 35.72%
Key Ratios (percent): Return on Average Assets 2.04% 1.63% 25.18%
Return on Average Tangible Equity 21.58% 17.32% 24.60% Net Interest
Margin 3.99% 4.15% (3.75)% Efficiency Ratio (a) 54.24% 52.28% 3.75%
Average Shareholders' Equity to Average Assets 11.48% 11.64%
(1.34)% Consolidated Risk Based Capital Ratios (b): CET I
14.04% * N/A Tier I 14.70% 13.58% 8.25% Total 15.57% 14.47% 7.60%
Tangible Equity to Tangible Assets 9.60% 9.60% (0.01)%
Common Stock Data: Cash
Dividends Declared per Share $ 0.42 $ 0.40 5.00% Book Value per
Share 26.63 25.05 6.30% Tangible Book Value per Share 21.96 20.28
8.28% Market Value per Share: High 48.09 46.69 3.00% Low 41.76
42.15 (0.93)% End of Period 47.03 44.86 4.84% Price/Earnings
Ratio (c) 9.96 12.83 (22.36)%
(a) The March 31, 2015 efficiency ratio
calculation excludes the gain on sale of insurance division.
(b) March 31, 2015 risk-based capital
ratios are estimated.
(c) March 31, 2015 price/earnings ratio
computed based on annualized first quarter 2015 earnings.
(*) Basel III CET 1 ratio requirements are
effective beginning January 1, 2015 and are not required for prior
periods.
CITY HOLDING COMPANY AND
SUBSIDIARIES
Financial Highlights
(Unaudited)
Book Value and Market Price Range per
Share Market Price Book Value per Share Range
per Share March 31 June 30
September 30 December 31
Low High 2011 20.39 20.58 20.86
21.05 26.06 37.22 2012 21.46 21.63 22.14 22.47 30.96 37.16 2013
23.36 23.52 24.03 24.61 36.07 49.21 2014 25.05 25.45 25.52 25.85
41.20 46.95 2015 26.63 41.76 48.09
Earnings per Basic Share Quarter
Ended March 31 June 30 September
30 December 31 Year-to-Date
2011 0.62 0.65 0.77 0.65 2.68 2012 0.68 0.50 0.71 0.73 2.63
2013 0.51 0.83 0.89 0.84 3.07 2014 0.87 0.81 0.76 0.95 3.40 2015
1.18 1.18
Earnings per
Diluted Share Quarter Ended March 31
June 30 September 30 December
31 Year-to-Date 2011 0.62 0.64 0.76
0.65 2.67 2012 0.67 0.50 0.71 0.73 2.61 2013 0.51 0.82 0.88 0.83
3.04 2014 0.86 0.80 0.76 0.95 3.38 2015 1.17 1.17
CITY HOLDING COMPANY AND
SUBSIDIARIES
Consolidated Statements of
Income
(Unaudited) ($ in 000s, except per
share data)
Three Months Ended March 31, 2015
2014 Interest Income Interest and fees
on loans $ 29,388 $ 29,734 Interest on investment securities:
Taxable 2,712 3,003 Tax-exempt 264 281
Total Interest Income
32,364 33,018
Interest Expense Interest on deposits
2,741 2,753 Interest on short-term borrowings 82 75 Interest on
long-term debt 150 150
Total Interest Expense
2,973 2,978
Net Interest Income 29,391 30,040
Provision for loan losses 888 1,363
Net Interest
Income After Provision for Loan Losses 28,503 28,677
Non-Interest Income Gains on sale of investment securities
14 83 Service charges 5,927 6,160 Bankcard revenue 4,074 3,685
Insurance commissions - 2,025 Trust and investment management fee
income 1,200 1,037 Bank owned life insurance 764 756 Gain on sale
of insurance division 11,084 - Other income 958 559
Total Non-Interest Income 24,021 14,305
Non-Interest Expense Salaries and employee benefits 12,179
13,139 Occupancy and equipment 2,590 2,615 Depreciation 1,511 1,478
FDIC insurance expense 450 410 Advertising 704 824 Bankcard
expenses 818 806 Postage, delivery, and statement mailings 561 575
Office supplies 346 410 Legal and professional fees 567 409
Telecommunications 475 338 Repossessed asset losses, net of
expenses 220 379 Other expenses 2,744 1,993
Total
Non-Interest Expense 23,165 23,376
Income
Before Income Taxes 29,359 19,606 Income tax expense
11,367 5,803
Net Income Available to Common
Shareholders $ 17,992 $ 13,803 Distributed earnings
allocated to common shareholders $ 6,315 $ 6,224 Undistributed
earnings allocated to common shareholders 11,468
7,438 Net earnings allocated to common shareholders $ 17,783 $
13,662 Average common shares outstanding 15,067 15,631
Effect of dilutive securities: Employee stock options and warrants
82 165 Shares for diluted earnings per share
15,149 15,796 Basic earnings per common share $ 1.18
$ 0.87 Diluted earnings per common share $ 1.17 $ 0.86 Dividends
declared per common share $ 0.42 $ 0.40 Comprehensive Income
$ 18,898 $ 14,579
CITY HOLDING COMPANY AND
SUBSIDIARIES
Consolidated Statements of Changes in
Stockholders' Equity
(Unaudited) ($ in 000s)
Three Months Ended March 31, 2015
March 31, 2014 Balance at January 1 $ 390,853
$ 387,623 Net income 17,992 13,803 Other comprehensive
income: Change in unrealized (loss) gainon securities
available-for-sale 906 776 Cash dividends declared ($0.42/share)
and ($0.40/share), respectively (6,389 ) (6,287 ) Issuance of stock
award shares, net 740 572 Exercise of 28,500 stock options 973 -
Exercise of 7,000 stock options - 199 Purchase of 68,145 common
shares of treasury - (2,936 )
Balance at March
31 $ 405,075 $ 393,750
CITY HOLDING COMPANY AND
SUBSIDIARIES
Condensed Consolidated Quarterly
Statements of Income
(Unaudited) ($ in 000s, except per
share data)
Quarter Ended March
31 December 31 September 30 June 30
March 31
2015 2014 2014
2014 2014
Interest income $ 32,364 $ 32,282 $ 32,438 $ 31,828 $ 33,018
Taxable equivalent adjustment 142 164
152 151 153 Interest income
(FTE) 32,506 32,446 32,590 31,979 33,171 Interest expense
2,973 3,041 2,968 2,973
2,978 Net interest income 29,533 29,405 29,622 29,006
30,193 Provision for loan losses 888 384
1,872 435 1,363 Net
interest income after provision for loan losses 28,645 29,021
27,750 28,571 28,830 Noninterest income 24,021 14,669 14,609
15,139 14,305 Noninterest expense 23,165
23,035 24,325 24,305
23,376 Income before income taxes 29,501 20,655 18,034 19,405
19,759 Income tax expense 11,367 5,961 6,010 6,497 5,803 Taxable
equivalent adjustment 142 164
152 151 153 Net income $ 17,992
$ 14,530 $ 11,872 $ 12,757 $ 13,803
Distributed earnings allocated to common
shareholders $ 6,315 $ 5,996 $ 6,073 $ 6,178 $ 6,224 Undistributed
earnings allocated to common shareholders 11,468
8,378 5,673 6,448
7,439 Net earnings allocated to common shareholders $ 17,783
$ 14,374 $ 11,746 $ 12,626 $ 13,663
Average common shares outstanding 15,067 15,096 15,363 15,556
15,631 Effect of dilutive securities: Employee stock options
and warrants 82 86 82
150 165 Shares for diluted earnings per
share 15,149 15,182 15,445
15,706 15,796 Basic earnings per
common share $ 1.18 $ 0.95 $ 0.76 $ 0.81 $ 0.87 Diluted earnings
per common share 1.17 0.95 0.76 0.80 0.86 Cash dividends
declared per share 0.42 0.40 0.40 0.40 0.40
Net
Interest Margin 3.99% 3.89% 3.95% 3.95% 4.15% Interest
Income from Accretion Related to Fair Value Adjustments Recorded as
a Result of Acquisition $ 2,450 $ 1,307 $ 1,836 $ 1,494 $ 2,151
Net Interest Margin (excluding accretion) 3.66% 3.71% 3.71%
3.75% 3.85%
CITY HOLDING COMPANY AND
SUBSIDIARIES
Non-Interest Income and Non-Interest
Expense
(Unaudited) ($ in 000s)
Quarter Ended March
31 December 31 September 30 June 30
March 31 2015 2014 2014
2014 2014 Non-Interest
Income: Service charges $ 5,927 $ 6,750 $ 6,934 $ 6,739 $ 6,160
Bankcard revenue 4,074 3,744 3,796 3,838 3,685 Insurance
commissions - 1,238 1,396 1,319 2,025 Trust and investment
management fee income 1,200 1,363 1,103 1,111 1,037 Bank owned life
insurance 764 778 771 765 756 Gain on sale of insurance division
11,084 - - - - Other income 958 612
538 549 559
Subtotal
24,007 14,485 14,538 14,321 14,222 Gain (loss) on sale of
investment securities 14 184 71
818 83
Total Non-Interest Income
$ 24,021 $ 14,669 $ 14,609 $ 15,139 $
14,305
Non-Interest Expense: Salaries and employee
benefits $ 12,179 $ 12,489 $ 13,144 $ 12,977 $ 13,139 Occupancy and
equipment 2,590 2,449 2,531 2,395 2,615 Depreciation 1,511 1,534
1,542 1,533 1,478 FDIC insurance expense 450 448 432 357 410
Advertising 704 726 799 925 824 Bankcard expenses 818 891 843 833
806 Postage, delivery and statement mailings 561 549 557 530 575
Office supplies 346 360 405 420 410 Legal and professional fees 567
552 476 612 409 Telecommunications 475 522 510 506 338 Repossessed
asset (gains) losses, net of expenses 220 27 31 142 379 Other
expenses 2,744 2,488 3,055
3,075 1,993
Total Non-Interest
Expense $ 23,165 $ 23,035 $ 24,325 $
24,305 $ 23,376
Employees
(Full Time Equivalent) 845 889 908 912 925 Branch Locations 82 82
82 82 82
CITY HOLDING COMPANY AND
SUBSIDIARIES
Consolidated Balance Sheets
($ in 000s)
March 31, 2015 December 31, 2014
(Unaudited) Assets Cash and due from banks $ 235,004
$ 138,503 Interest-bearing deposits in depository institutions
10,106 9,725 Federal funds sold - -
Cash and cash equivalents 245,110 148,228
Investment securities available-for-sale, at fair value 273,856
254,043 Investment securities held-to-maturity, at amortized cost
87,455 90,786 Other securities 9,857
9,857
Total investment securities 371,168 354,686
Gross loans 2,632,471 2,652,066 Allowance for loan losses
(20,179 ) (20,150 )
Net loans 2,612,292
2,631,916 Bank owned life insurance 95,880 95,116 Premises
and equipment, net 76,910 77,988 Accrued interest receivable 7,752
6,826 Net deferred tax assets 35,335 36,766 Intangible assets
70,964 74,198 Other assets 37,674
35,909
Total Assets $ 3,553,085 $
3,461,633
Liabilities Deposits:
Noninterest-bearing $ 551,596 $ 545,465 Interest-bearing: Demand
deposits 654,832 639,932 Savings deposits 722,324 660,727 Time
deposits 1,013,630 1,026,663
Total deposits 2,942,382 2,872,787 Short-term borrowings
Customer repurchase agreements 132,588 134,931 Long-term debt
16,495 16,495 Other liabilities 56,545
46,567
Total Liabilities 3,148,010 3,070,780
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; 18,499,282
shares issued at March 31, 2015 and December 31, 2014 less
3,285,958 and 3,345,590 shares in treasury, respectively 46,249
46,249 Capital surplus 106,397 107,370 Retained earnings 373,812
362,211 Cost of common stock in treasury (118,130 ) (120,818 )
Accumulated other comprehensive loss: Unrealized gain on securities
available-for-sale 2,096 1,190 Underfunded pension liability
(5,349 ) (5,349 )
Total Accumulated Other
Comprehensive Loss (3,253 ) (4,159 )
Total Stockholders' Equity 405,075
390,853
Total Liabilities and Stockholders'
Equity $ 3,553,085 $ 3,461,633
CITY HOLDING COMPANY AND
SUBSIDIARIES
Investment Portfolio
(Unaudited) ($ in 000s)
Original Cost
Credit-RelatedNet
InvestmentImpairmentLosses through March 31,
2015
Unrealized Gains(Losses)
Carrying Value US Government Agencies $ 1,713 $ - $ 2
$ 1,715 Mortgage Backed Securities 292,831 - 2,463 295,294
Municipal Bonds 38,147 - 767 38,914 Pooled Bank Trust Preferreds
20,664 (20,171 ) 1,167 1,660 Single Issuer Bank Trust Preferreds,
Subdebt of Financial Institutions, and Bank Holding Company
Preferred Stocks 22,040 (1,015 ) (2,350 ) 18,675 Money Markets and
Mutual Funds 1,525 - 10 1,535 Federal Reserve Bank and FHLB stock
9,857 - - 9,857 Community Bank Equity Positions 3,715
(1,584 ) 1,387 3,518
Total Investments
$ 390,492 $ (22,770 ) $ 3,446 $ 371,168
CITY HOLDING COMPANY AND
SUBSIDIARIES
Loan Portfolio
(Unaudited) ($ in 000s)
March 31 December
31 September 30 June 30 March 31
2015 2014 2014
2014 2014
Residential real estate (1) $ 1,303,258 $ 1,294,576 $ 1,274,062 $
1,242,972 $ 1,212,232 Home equity - junior liens
143,670 145,604 146,965 145,452 144,482 Commercial and industrial
124,342 132,641 130,462 131,627 126,569 Commercial real estate (2)
1,019,562 1,036,738 1,034,593 1,011,367 1,027,431 Consumer
38,436 39,705 41,042 42,858 42,320 DDA overdrafts
3,203 2,802 3,618 3,501
4,001
Gross Loans $ 2,632,471 $
2,652,066 $ 2,630,742 $ 2,577,777 $ 2,557,035
Construction loans included in: (1) - Residential real
estate loans $ 17,459 $ 22,992 $ 22,426 $ 20,078 $ 17,697 (2) -
Commercial real estate loans $ 30,554 $ 28,652 $ 24,875 $ 24,608 $
28,894
CITY HOLDING COMPANY AND
SUBSIDIARIES
Acquisition Activity -
Accretion
(Unaudited) ($ in 000s)
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") and Community Financial Corporation
("Community") acquisitions.
Virginia
Savings Community Loan
Certificates of Loan Certificates of
Year Ended: Accretion(a)
Deposit(a) Accretion(a)
Deposit(a) Total 1Q 2015 $ 123 $ 129 $
2,158 $ 40 $ 2,450 Remainder 2015 336 388 1,734 120 2,578 2016 276
497 1,480 48 2,301 2017 154 - 1,070 - 1,224 a - 1Q 2015 amounts are
based on actual results. Remainder 2015, 2016 and 2017 amounts are
based on estimated amounts. Note: The amounts
reflected in the table 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
Consolidated Average Balance Sheets,
Yields, and Rates
(Unaudited) ($ in 000s)
Three Months Ended March 31,
2015 2014 Average Yield/
Average Yield/ Balance Interest
Rate Balance Interest
Rate Assets: Loan portfolio (1):
Residential real estate (2) $ 1,436,720 $ 14,201 4.01 % $ 1,350,556
$ 13,746 4.13 % Commercial, financial, and agriculture (2)
1,149,798 13,586 4.79 % 1,167,606 14,236 4.94 % Installment loans
to individuals (2), (3) 49,882 1,150 9.35 % 52,557 1,179 9.10 %
Previously securitized loans (4) *** 451 ***
*** 574 *** Total loans 2,636,400 29,388 4.52 %
2,570,719 29,735 4.69 % Securities: Taxable 327,185 2,712 3.36 %
345,982 3,003 3.52 % Tax-exempt (5) 28,477 406
5.78 % 27,506 433 6.38 %
Total securities
355,662 3,118 3.56 % 373,488 3,436 3.73 % Deposits in depository
institutions 8,968 - - 8,831 - - Federal funds sold -
- - - - 0.00 %
Total
interest-earning assets 3,001,030 32,506 4.39 % 2,953,038
33,171 4.56 % Cash and due from banks 222,409 125,221 Bank premises
and equipment 77,638 82,214 Other assets 244,686 246,091 Less:
Allowance for loan losses (20,658 )
(21,221 )
Total assets $
3,525,105 $ 3,385,343
Liabilities:
Interest-bearing demand deposits 636,810 132 0.08 % 611,797 176
0.12 % Savings deposits 694,700 181 0.11 % 618,412 207 0.14 % Time
deposits (2) 1,021,474 2,428 0.96 % 1,070,065 2,370 0.90 %
Short-term borrowings 129,647 82 0.26 % 118,771 75 0.26 % Long-term
debt 16,495 150 3.69 % 16,495
150 3.69 %
Total interest-bearing liabilities
2,499,126 2,973 0.48 % 2,435,540 2,978 0.50 % Noninterest-bearing
demand deposits 571,340 517,207 Other liabilities 49,996 38,705
Stockholders' equity 404,643
393,891
Total
liabilities and stockholders' equity $ 3,525,105
$ 3,385,343
Net interest income $ 29,533
$ 30,193
Net
yield on earning assets 3.99 %
4.15 % (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") and Community Financial Corporation ("Community"):
Three Months Ended March 31, 2015
Three Months Ended March 31, 2014 Virginia
Savings Community Total
Virginia Savings Community Total Residential real
estate $ 64 $ 133 $ 197 $ 151 $ 115 $
266 Commercial, financial, and agriculture 29 1,959 1,988 114 1,324
1,438 Installment loans to individuals 30 66 96 34 189 223 Time
deposits 129 40 169
131 93 224
$ 252 $ 2,198 $ 2,450 $
430 $ 1,721 $ 2,151 (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 $0. (5) Computed on a fully federal
tax-equivalent basis assuming a tax rate of approximately 35%.
CITY HOLDING COMPANY AND
SUBSIDIARIES
Analysis of Risk-Based Capital
(Unaudited) ($ in 000s)
March 31
December 31 September 30 June 30 March
31 2015 (a) 2014 2014
2014 2014
Tier I Capital: Stockholders' equity $ 405,075 $ 390,853 $ 391,673
$ 397,231 $ 393,750 Goodwill and other intangibles (69,227 )
(74,011 ) (74,247 ) (74,483 ) (74,719 ) Accumulated other
comprehensive loss 3,253 4,159 2,921 2,509 4,214 Qualifying trust
preferred stock 16,000 16,000 16,000 16,000 16,000 Excess deferred
tax assets (1,564 ) (3,838 )
(3,131 ) (4,019 ) (6,508 ) Total tier I
capital $ 353,537 $ 333,163 $ 333,216 $ 337,238 $ 332,737
Qualifying trust preferred stock
(16,000 ) * * * * Total CET I capital $
337,537 * * * *
Total Risk-Based Capital: Tier I capital $ 353,537 $
333,163 $ 333,216 $ 337,238 $ 332,737 Qualifying allowance for loan
losses 20,179 20,150 20,487 20,536 21,044 Unrealized gain on
securities 704 560
630 605 786 Total
risk-based capital $ 374,420 $ 353,873
$ 354,333 $ 358,379 $ 354,567
Net risk-weighted assets $ 2,404,331 $ 2,493,078 $ 2,493,938
$ 2,464,081 $ 2,450,949
Ratios:
Average stockholders' equity to average assets 11.48 % 11.40 %
11.78 % 11.71 % 11.64 % Tangible capital ratio 9.60 % 9.35 % 9.58 %
9.80 % 9.60 % Risk-based capital ratios: CET 1 capital 14.04 % * *
* * Tier I capital 14.70 % 13.36 % 13.36 % 13.69 % 13.58 % Total
risk-based capital 15.57 % 14.19 % 14.21 % 14.54 % 14.47 % Leverage
capital 10.23 % 9.89 % 10.07 % 10.15 % 10.07 %
(a) March 31, 2015 risk-based capital
ratios are estimated.
(*) Basel III CET 1 ratio requirements are effective beginning
January 1, 2015 and are not required for prior periods.
CITY HOLDING COMPANY AND
SUBSIDIARIES
Intangibles
(Unaudited) ($ in 000s)
As of and for the Quarter Ended
March 31 December 31 September
30 June 30 March 31 2015
2014 2014 2014
2014 Intangibles, net $ 70,964 $ 74,198 $ 74,434 $
74,670 $ 74,906 Intangibles amortization expense 214 236 236 236
236
CITY HOLDING COMPANY AND
SUBSIDIARIES
Summary of Loan Loss Experience
(Unaudited) ($ in 000s)
Quarter Ended March
31 December 31 September 30 June 30
March 31 2015 2014
2014 2014 2014
Balance at beginning of period $ 20,150 $ 20,487 $
20,536 $ 21,044 $ 20,575
Charge-offs: Commercial and
industrial 94 (7 ) 325 1 4 Commercial real estate 337 260 696 587
382 Residential real estate 257 414 605 316 427 Home equity 91 21
142 38 108 Consumer 74 17 49 38 84 DDA overdrafts 311
363 390 321
341
Total charge-offs
1,164 1,068 2,207 1,301 1,346
Recoveries: Commercial
and industrial 18 4 4 18 63 Commercial real estate 8 19 11 53 30
Residential real estate 10 96 28 39 24 Home equity - - - - -
Consumer 28 32 43 53 76 DDA overdrafts 241
196 200 195
259
Total recoveries 305 347 286 358
452
Net charge-offs 859 721 1,921 943 894 Provision for
(recovery of) acquired loans 246 148 (3 ) 150 (12 ) Provision for
loan losses 642 236
1,875 285 1,375
Balance at end of period $ 20,179 $
20,150 $ 20,487 $ 20,536
$ 21,044 Loans outstanding $ 2,632,471
$ 2,652,066 $ 2,630,742 $ 2,577,777
$ 2,557,035 Average loans outstanding
2,636,400 2,639,106
2,600,142 2,563,601
2,570,719 Allowance as a percent of loans outstanding
0.77 % 0.76 % 0.78 % 0.80
% 0.82 % Allowance as a percent of non-performing
loans 121.81 % 128.10 % 112.61 %
106.86 % 100.09 % Net charge-offs
(annualized) as a percent of average loans outstanding 0.13
% 0.11 % 0.30 % 0.15 %
0.14 % Net charge-offs, excluding overdraft deposit
accounts, (annualized) as a percent of average loans outstanding
0.12 % 0.08 % 0.27 %
0.13 % 0.13 %
CITY HOLDING COMPANY AND
SUBSIDIARIES
Summary of Non-Performing
Assets
(Unaudited) ($ in 000s)
March 31
December 31 September 30 June 30 March
31 2015 2014 2014
2014 2014 Nonaccrual loans $ 16,182 $
15,307 $ 17,384 $ 18,423 $ 20,593 Accruing loans past due 90 days
or more 384 423 809
794 432
Total non-performing loans
16,566 15,730 18,193 19,217 21,025
Other real estate owned
8,771 8,180 9,162
9,129 9,538
Total non-performing assets $
25,337 $ 23,910 $ 27,355 $ 28,346 $
30,563 Non-performing assets as a percent of loans and other
real estate owned 0.96% 0.90% 1.04% 1.10% 1.19%
CITY HOLDING COMPANY AND
SUBSIDIARIES
Summary of Total Past Due Loans
(Unaudited) ($ in 000s)
Originated March 31 December
31 September 30 June 30
March 31 2015 2014 2014
2014 2014 Residential real
estate $ 4,326 $ 5,164 $ 5,276 $ 5,794 $ 4,118 Home equity - junior
liens 543 746 751 926 638 Commercial and industrial 113 310 188 25
77 Commercial real estate 299 479 938 443 789 Consumer 122 197 58
80 63 DDA overdrafts 215 318 592
281 196
Total past due loans $
5,618 $ 7,214 $ 7,803 $ 7,549 $ 5,881
Acquired March 31 December 31
September 30 June 30 March 31 2015
2014 2014 2014
2014 Residential real estate $ 1,792 $ 714 $ 500 $
873 $ 813 Home equity - junior liens 86 2 16 3 21 Commercial and
industrial 490 143 96 58 127 Commercial real estate 2,018 2,372
2,972 2,110 3,789 Consumer 150 221 162 374 397 DDA overdrafts
- - - -
-
Total past due loans $ 4,536 $ 3,452
$ 3,746 $ 3,418 $ 5,147
Total March
31 December 31 September 30 June 30
March 31 2015 2014 2014
2014 2014 Residential real
estate $ 6,118 $ 5,878 $ 5,776 $ 6,667 $ 4,931 Home equity - junior
liens 629 748 767 929 659 Commercial and industrial 603 453 284 83
204 Commercial real estate 2,317 2,851 3,910 2,553 4,578 Consumer
272 418 220 454 460 DDA overdrafts 215 318
592 281 196
Total past
due loans $ 10,154 $ 10,666 $ 11,549 $
10,967 $ 11,028 Total past due loans as a percent of
loans outstanding 0.39% 0.40% 0.44% 0.43% 0.43%
CITY HOLDING COMPANY AND
SUBSIDIARIES
Summary of Troubled Debt
Restructurings
(Unaudited) ($ in 000s)
March 31
December 31 September 30 June 30 March
31 2015 2014 2014 2014 2014
Residential real estate $ 19,067 $ 18,492 $ 18,040 $ 19,212
$ 18,940 Home equity - junior liens 2,741 2,688 2,821 2,858 2,866
Commercial and industrial 70 73 77 86 84 Commercial real estate
1,894 2,263 2,270 2,281 1,854 Consumer - - -
- -
Total $ 23,772 $ 23,516 $ 23,208 $ 24,437
$ 23,744
CITY HOLDING COMPANY AND
SUBSIDIARIES
Summary of Purchased Credit Impaired
Loans
(Unaudited) ($ in 000s)
Virginia Savings
Acquisition March 31 December 31
September 30 June 30 March 31 2015
2014 2014 2014
2014 Contractual required principal and interest
2,419 2,407 3,481 3,735 3,821 Carrying value 1,979 1,964 2,987
3,098 3,102
Community Acquisition March 31
December 31 September 30 June 30 March
31 2015 2014 2014
2014 2014 Contractual required
principal and interest 20,189 23,277 24,147 27,394 30,476 Carrying
value 14,627 15,365 15,518 17,902 19,986
City Holding CompanyCharles R. Hageboeck, Chief Executive
Officer and President304-769-1102
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