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Section 1: 8-K (8-K, CHCO 4Q2017 EARNINGS)

Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
 
 
FORM 8-K
 
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
 
Date of Report (Date of Earliest Event Reported)
January 24, 2018

391873308_chcologoa20.jpg

CITY HOLDING COMPANY
(Exact Name of Registrant as Specified in its Charter)

Commission File Number: 0-11733

West Virginia
55-0619957
(State or Other Jurisdiction of
(I.R.S. Employer
Incorporation or Organization)
Identification No.)
 
25 Gatewater Road, Cross Lanes, WV 25313
(Address of Principal Executive Offices, Including Zip Code)
 
304-769-1100
(Registrant’s Telephone Number, Including Area Code)

 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12(b) under the Exchange Act (17 CFR 240.14a-12(b))
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17CFR240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ¨





 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨






Section 2 - Financial Information

Item 2.02 Results of Operations and Financial Condition.

On January 23, 2018, City Holding Company (“the Company”) issued a news release, attached as Exhibit 99.1, announcing the Company’s earnings results for the fourth quarter ended December 31, 2017. Furnished as Exhibit 99.1 and incorporated herein by reference is the news release issued by the Company.

Section 9 - Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

(c) Exhibits

99.1News Release issued January 23, 2018

Signatures

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the Undersigned hereunto duly authorized.


 
City Holding Company
 
 
 
 
By: 
/s/ David L. Bumgarner
 
David L. Bumgarner
 
Chief Financial Officer

Date: January 24, 2018


(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1, PRESS RELEASE CHCO 4Q2017 EARNINGS)

Exhibit


NEWS RELEASE

For Immediate Release
January 23, 2018

For Further Information Contact:
Charles R. Hageboeck, Chief Executive Officer and President
(304) 769-1102

City Holding Company Announces Annual Earnings

Charleston, West Virginia - City Holding Company (“Company” or “City”) (NASDAQ:CHCO), a $4.1 billion bank holding company headquartered in Charleston, West Virginia, today announced net income of $54.3 million and diluted earnings of $3.48 per share for the year ended December 31, 2017. The results for the year ended December 31, 2017 include a charge of $7.1 million, or $0.46 per diluted share, to revalue the Company’s net deferred tax assets as a result of the Tax Cuts and Jobs Act (“TCJA”), which was enacted on December 22, 2017.

Highlights of the Company’s performance and results for the year ended December 31, 2017 include the following:

Return on assets and return on tangible equity of 1.33% and 13.1%, respectively. Excluding the impact of the revaluation of the Company’s net deferred tax assets, return on assets and return on tangible equity would have been 1.50% and 14.8%, respectively.
Reported net interest income increased $7.2 million (6.0%) from the year ended December 31, 2016, while net interest income exclusive of accretion from fair value adjustments on recent acquisitions increased $8.7 million (7.5%) from the year ended December 31, 2016.
Realized $4.5 million of investment gains from the sales of pooled trust preferred securities during the year ended December 31, 2017.
Total loan growth of $81.2 million (2.7%) from December 31, 2016 to December 31, 2017.
During 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.
Asset quality continues to remain strong with nonperforming assets declining from $18.7 million, or 0.61% of total loans and other real estate owned at December 31, 2016 to $14.1 million, or 0.45%, at December 31, 2017.

Highlights of the Company’s fourth quarter performance include the following:

Return on assets and return on tangible equity of 0.94% and 9.0%, respectively. Excluding the impact of the revaluation of the Company’s net deferred tax assets, return on assets and return on tangible equity would have been 1.62% and 15.6%, respectively.
Reported net interest income increased $0.4 million from the quarter ended September 30, 2017, while net interest income exclusive of accretion from fair value adjustments increased $0.1 million from the quarter ended September 30, 2017.
Total loan growth of $21.5 million (2.8% annualized) from September 30, 2017 to December 31, 2017.


Net Interest Income






The Company’s net interest income increased from $118.9 million for the year ended December 31, 2016 to $126.1 million for the year ended December 31, 2017. The Company’s tax equivalent net interest income increased $7.8 million, or 6.5%, from $119.8 million for the year ended December 31, 2016 to $127.6 million for the year ended December 31, 2017. This increase was due primarily to higher average balances on commercial loans ($132.0 million) which increased interest income by $5.1 million, and residential real estate loans ($33.5 million) which increased interest income by $1.3 million as compared to the year ended December 31, 2016. Increased interest yields on residential real estate loans also increased net interest income by $1.8 million compared to the year ended December 31, 2016. In addition, higher average investment balances ($86.9 million) increased investment income by $3.2 million. These increases were partially offset by increased interest expense on interest bearing deposits ($3.0 million), primarily due to an increase in the cost of funds, and lower accretion from fair value adjustments on recent acquisitions ($1.0 million). The Company’s reported net interest margin decreased from 3.50% for the year ended December 31, 2016 to 3.46% for the year ended December 31, 2017. Excluding the favorable impact of the accretion from the fair value adjustments, the net interest margin would have been 3.41% for the year ended December 31, 2016 and 3.40% for the year ended December 31, 2017.

The Company’s net interest income increased from $32.0 million during the third quarter of 2017 to $32.4 million during the fourth quarter of 2017. During the fourth quarter of 2017, the Company’s tax equivalent net interest income increased $0.4 million, or 1.2%, to $32.8 million from $32.4 million during the third quarter of 2017. Higher accretion from fair value adjustments from recent acquisitions increased net interest income $0.2 million from the quarter ended September 30, 2017. In addition, higher average loan balances ($20.3 million) and higher average investment balances ($20.1 million) increased net interest income by $0.2 million and $0.1 million, respectively. These increases were partially offset by increased interest expense of $0.2 million as a result of higher interest rates on interest bearing liabilities. The Company’s reported net interest margin increased modestly from 3.45% for the third quarter of 2017 to 3.46% for the fourth quarter of 2017. Excluding the favorable impact of the accretion from the fair value adjustments, the net interest margin would have been 3.39% for the quarter ended December 31, 2017 and 3.42% for the quarter ended September 30, 2017.

Credit Quality

The Company’s ratio of nonperforming assets to total loans and other real estate owned improved from 0.61% at December 31, 2016 to 0.45% at December 31, 2017. Total nonperforming assets decreased from $18.7 million at December 31, 2016 to $14.1 million at December 31, 2017. 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 from $8.6 million, or 0.28% of total loans outstanding, at December 31, 2016 to $11.0 million, or 0.35% of total loans outstanding, at December 31, 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 $0.4 million in the fourth quarter of 2017 and $3.0 million for the year ended December 31, 2017, compared to $1.3 million and $4.4 million for the comparable periods in 2016. The provision for loan losses recorded in 2017 reflects revisions to the regulatory rating of a shared national credit ("SNC") in which the Company is a participant, changes in the quality of the portfolio and general improvement in the Company's historical loss rates used to compute the allowance not specifically allocated to individual credits. SNCs are credit facilities greater than $20 million that are shared by three or more federally supervised financial institutions and are reviewed annually by regulatory authorities at the agent bank level. The SNC that the Company is a participant is for a local customer that outgrew the lending limit of the Company and involves three local





banks. The reserve recorded in 2017 of $1.1 million related to this SNC reflects the loss factors associated with the rating assigned to this SNC as a result of the current year review by the Office of the Comptroller of the Currency (“OCC”). The Company’s balance outstanding at December 31, 2017 associated with this SNC is $27.7 million, with an additional commitment of $6.2 million related to a line of credit to the borrower. As of December 31, 2017, the SNC is performing in accordance with terms and debt service coverage ratios are acceptable. Changes in the amount of the allowance and related provision 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 $63.6 million for 2017 as compared to $58.8 million for 2016. During 2017, the Company realized $4.5 million of investment gains compared to $3.5 million during 2016. 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 $55.3 million for the year ended December 31, 2016 to $59.1 million for the year ended December 31, 2017. This increase was primarily attributable to an increase of $1.9 million, or 7.0%, in service charges; an increase of $0.9 million, or 26.6%, in bank owned life insurance revenues due to death benefit proceeds; an increase of $0.7 million, or 12.5%, in trust and investment management fee income; and an increase of $0.6 million, or 3.7%, in bankcard revenues.

Non-interest income was $15.6 million during the quarter ended December 31, 2017. During the fourth quarter of 2017, the Company realized $0.2 million of investment gains. These gains represented partial recoveries of impairment charges previously recognized on pools of trust preferred securities. Exclusive of this gain, non-interest income increased from $14.4 million for the fourth quarter of 2016 to $15.4 million for the fourth quarter of 2017. This increase was mainly due to an increase of $0.4 million, or 5.1%, in service charges; an increase of $0.3 million, or 30.4%, in bank owned life insurance revenues due to death benefit proceeds; an increase of $0.2 million, or 12.7%, in trust and investment management fee income; and an increase of $0.2 million, or 4.2%, in bankcard revenues from the fourth quarter of 2016.
  
Non-interest Expenses

Non-interest expenses remained stable from 2016 to 2017 at $96.1 million and $96.0 million, respectively. The Company experienced decreases in bankcard expenses of $0.5 million, depreciation expense of $0.4 million, and FDIC insurance expenses of $0.3 million. However, these decreases were essentially offset by increases in occupancy and equipment expenses of $0.3 million, advertising expenses of $0.3 million, salaries and employee benefits of $0.2 million, telecommunication expenses of $0.2 million and repossessed asset losses, net of expenses, of $0.2 million.

Non-interest expenses increased $0.4 million from $22.5 million in the quarter ended December 31, 2016 to $22.9 million in the quarter ended December 31, 2017. This increase was due to an increase in other expenses of $0.5 million, advertising expenses of $0.3 million, and FDIC insurance expense of $0.2 million. These increases were partially offset by a decrease in salaries and employee benefits of $0.3 million due primarily to lower health insurance expenses, depreciation expense of $0.1 million, and occupancy and equipment expenses of $0.1 million.
 
Balance Sheet Trends






For the year ending December 31, 2017, period end loan balances increased $81.2 million (2.7%) to $3.13 billion. Commercial loans increased $70.9 million (5.0%) and residential real estate loans increased $16.8 million (1.2%) from December 31, 2016 to December 31, 2017.

Total average depository balances increased $131.6 million, or 4.2%, from the year ended December 31, 2016 to the year ended December 31, 2017. The Company had increases in savings deposits ($60.2 million), time deposits ($38.0 million), interest bearing deposits ($20.0 million) and noninterest deposits ($13.3 million).

Income Tax Expense

The Company’s effective income tax rate for the quarter and year ended December 31, 2017 was 60.8% and 40.2%, respectively, compared to 30.2% and 32.5% for the comparable periods in 2016. On December 22, 2017, the President signed the TCJA into law. Among other things, the TCJA reduced the corporate income tax rate from 35% to 21%, effective January 1, 2018. As a result of this decrease in the corporate income tax rate, the Company reassessed its deferred tax assets and liabilities, which resulted in a charge to earnings in the fourth quarter of 2017 of $7.1 million. In addition, during the years ended December 31, 2017 and December 31, 2016, the Company reduced income tax expense by $0.3 million and $0.5 million, respectively, due to the recognition of previously unrecognized tax positions subsequent to the close of the statute of limitations for previous tax years. Exclusive of these items, the Company’s tax rate from operations was 33.4% and 32.7% for the quarter and year ended December 31, 2017, respectively, compared to 32.8% and 33.2% for the comparable periods in 2016.

The TCJA also revamps the tax code to expand Section 162(m) limits to other proxy officers, reduces the dividends received deduction (“DRD”) from 70% to 50%, eliminates the deduction of entertainment expenses and various other changes. The Company does not anticipate any of these changes will significantly impact its 2018 and subsequent years’ tax provisions. Overall, the Company anticipates that the effects of the TCJA will be favorable in 2018 due to a reduction in the corporation federal income tax rate from 35% to 21%.

Capitalization and Liquidity

The Company’s loan to deposit ratio was 94.3% and the loan to asset ratio was 75.7% at December 31, 2017. The Company maintained investment securities totaling 15.2% of assets as of the same date. The Company’s deposit mix is weighted toward checking and saving accounts that fund 54.0% of assets at December 31, 2017. Time deposits fund 26.2% of assets at December 31, 2017, with time deposits of more than $250,000 funding only 2.8% of assets, reflecting the core retail orientation of the Company.

The Company is also strongly capitalized. The Company’s tangible equity ratio increased from 9.3% at December 31, 2016 to 10.5% at December 31, 2017. In 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. At December 31, 2017, City National Bank’s Leverage Ratio was 8.43%, its Common Equity Tier I ratio was 11.93%, its Tier I Capital ratio was 11.93%, and its Total Risk-Based Capital ratio was 12.61%. These regulatory capital ratios are significantly above levels required to be considered “well capitalized,” which is the highest possible regulatory designation.

On December 13, 2017, the Board approved a quarterly cash dividend of $0.46 cents per share payable January 31, 2018, to shareholders of record as of January 15, 2018. This increase represented a 4.5% increase from the $0.46 cents per share dividend paid in the third quarter of 2017.






City Holding Company is the parent company of City National Bank of West Virginia. City National Bank operates 86 branches across West Virginia, Virginia, Kentucky and Ohio.

Forward-Looking Information

This news release contains certain forward-looking statements that are included pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Such information involves risks and uncertainties that could result in the Company's actual results differing materially from those projected in the forward-looking statements. Important factors that could cause actual results to differ materially from those discussed in such forward-looking statements include, but are not limited to, (1) the Company may incur additional loan loss provision due to negative credit quality trends in the future that may lead to a deterioration of asset quality; (2) the Company may incur increased charge-offs in the future; (3) the Company could have adverse legal actions of a material nature; (4) the Company may face competitive loss of customers; (5) the Company may be unable to manage its expense levels; (6) the Company may have difficulty retaining key employees; (7) changes in the interest rate environment may have results on the Company’s operations materially different from those anticipated by the Company’s market risk management functions; (8) changes in general economic conditions and increased competition could adversely affect the Company’s operating results; (9) changes in other regulations and government policies affecting bank holding companies and their subsidiaries, including changes in monetary policies, could negatively impact the Company’s operating results; (10) the Company may experience difficulties growing loan and deposit balances; (11) 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; (12) 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; (13) the impact of new minimum capital thresholds established as a part of the implementation of Basel III; and (14) 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 Form 10-K for the fiscal year ended December 31, 2017. The Company will continue to evaluate the impact of any subsequent events on the preliminary December 31, 2017 results and will adjust the amounts if necessary.










CITY HOLDING COMPANY AND SUBSIDIARIES
Financial Highlights
(Unaudited)
 
Three Months Ended
 
Twelve Months Ended
 
December 31,
September 30,
June 30,
March 31,
December 31,
 
December 31,
December 31,
 
2017
2017
2017
2017
2016
 
2017
2016
 
 
 
 
 
 
 
 
 
Earnings
 
 
 
 
 
 
 
 
Net Interest Income (FTE)
$
32,760

$
32,384

$
31,632

$
30,804

$
30,638

 
$
127,582

$
119,817

Net Income available to common shareholders
9,669

13,932

14,688

16,026

14,656

 
54,310

52,128

 
 
 
 
 
 
 
 
 
Per Share Data
 
 
 
 
 
 
 
 
Earnings per share available to common shareholders:
 
 
 
 
 
 
 
 
   Basic
$
0.62

$
0.89

$
0.94

$
1.04

$
0.97

 
$
3.49

$
3.46

   Diluted
0.62

0.89

0.94

1.04

0.97

 
3.48

3.45

Weighted average number of shares:
 
 
 
 
 
 
 
 
   Basic
15,472

15,485

15,462

15,252

14,894

 
15,412

14,900

   Diluted
15,497

15,505

15,487

15,277

14,914

 
15,436

14,913

Period-end number of shares
15,618

15,618

15,617

15,586

15,128

 
15,618

15,128

Cash dividends declared
$
0.46

$
0.44

$
0.44

$
0.44

$
0.43

 
$
1.78

$
1.72

Book value per share (period-end)
32.17

32.03

31.54

30.90

29.25

 
32.17

29.25

Tangible book value per share (period-end)
27.14

26.99

26.49

25.83

24.01

 
27.14

24.01

Market data:
 
 
 
 
 
 
 
 
   High closing price
$
73.98

$
71.91

$
72.78

$
67.93

$
68.29

 
$
73.98

$
68.29

   Low closing price
65.5

59.94

61.34

60.86

48.49

 
59.94

40.82

   Period-end closing price
67.47

71.91

65.87

64.48

67.6

 
67.47

67.6

   Average daily volume
66

54

56

57

57

 
58

63

Treasury share activity:
 
 
 
 
 
 
 
 
      Treasury shares repurchased





 

231

      Average treasury share repurchase price
$

$

$

$

$

 
$

$
43.34

Common share issuance:
 
 
 
 
 
 
 
 
      Common shares issued (in thousands)



441

108

 
441

108

      Average common share issue price (a)
$

$

$

$
64.48

$
66.21

 
$
64.48

$
66.21

 
 
 
 
 
 
 
 
 
Key Ratios (percent)
 
 
 
 
 
 
 
 
Return on average assets
0.94
%
1.37
%
1.43
%
1.60
%
1.49
%
 
1.33
%
1.36
%
Return on average tangible equity
9.00
%
13.20
%
14.20
%
16.50
%
16.10
%
 
13.10
%
14.80
%
Yield on interest earning assets
3.95
%
3.92
%
3.90
%
3.88
%
3.81
%
 
3.91
%
3.88
%
Cost of interest bearing liabilities
0.64
%
0.61
%
0.56
%
0.54
%
0.50
%
 
0.59
%
0.49
%
Net Interest Margin
3.46
%
3.45
%
3.46
%
3.45
%
3.42
%
 
3.46
%
3.50
%
Non-interest income as a percent of total revenue
32.20
%
31.30
%
32.30
%
31.90
%
32.10
%
 
31.90
%
31.70
%
Efficiency Ratio (b)
47.70
%
51.80
%
52.00
%
53.80
%
48.90
%
 
51.50
%
54.80
%





Price/Earnings Ratio (c)
27.30

20.20

17.52

15.51

17.38

 
19.36

19.56

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Capital (period-end)
 
 
 
 
 
 
 
 
Average Shareholders' Equity to Average Assets
12.34
%
12.29
%
11.99
%
11.66
%
11.25
%
 
 
 
Tangible equity to tangible assets
10.45
%
10.49
%
10.40
%
9.95
%
9.30
%
 
 
 
Consolidated City Holding Company risk based capital ratios (c):
 
 
 
 
 
 
 
 
   CET I
15.10
%
15.08
%
14.88
%
14.61
%
13.41
%
 
 
 
   Tier I
15.66
%
15.65
%
15.45
%
15.18
%
13.98
%
 
 
 
   Total
16.34
%
16.40
%
16.17
%
15.91
%
14.73
%
 
 
 
   Leverage
11.00
%
11.05
%
10.79
%
10.83
%
10.08
%
 
 
 
City National Bank risk based capital ratios (c):
 
 
 
 
 
 
 
 
   CET I
11.93
%
12.74
%
12.27
%
11.74
%
11.23
%
 
 
 
   Tier I
11.93
%
12.74
%
12.27
%
11.74
%
11.52
%
 
 
 
   Total
12.61
%
13.44
%
12.96
%
12.44
%
12.24
%
 
 
 
   Leverage
8.43
%
9.04
%
8.62
%
8.40
%
8.33
%
 
 
 
 
 
 
 
 
 
 
 
 
Other
 
 
 
 
 
 
 
 
Branches
86

86

85

85

85

 
 
 
FTE
839

835

839

833

847

 
 
 
 
 
 
 
 
 
 
 
 
   Assets per FTE
$
4,925

$
4,910

$
4,836

$
4,951

$
4,704

 
 
 
   Deposits per FTE
3,952

3,900

3,907

4,073

3,815

 
 
 
 
 
 
 
 
 
 
 
 
(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) December 31, 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
 
Twelve Months Ended
 
December 31,
September 30,
June 30,
March 31,
December 31,
 
December 31,
December 31,
 
2017
2017
2017
2017
2016
 
2017
2016
Interest Income
 
 
 
 
 
 
 
 
   Interest and fees on loans
$
32,529

$
32,004

$
31,115

$
30,104

$
30,126

 
$
125,752

$
118,138

   Interest on investment securities:
 
 
 
 
 
 
 
 
     Taxable
3,797

3,666

3,480

3,444

3,277

 
14,387

12,392

     Tax-exempt
692

665

686

663

481

 
2,706

1,622

   Interest on deposits in depository institutions
35

31

17

3


 
85


Total Interest Income
37,053

36,366

35,298

34,214

33,884

 
142,930

132,152

 
 
 
 
 
 
 
 
 
Interest Expense
 
 
 
 
 
 
 
 
   Interest on deposits
3,941

3,796

3,660

3,429

3,137

 
14,826

12,052

   Interest on short-term borrowings
522

349

187

157

188

 
1,214

472

   Interest on long-term debt
201

195

189

181

179

 
765

683

Total Interest Expense
4,664

4,340

4,036

3,767

3,504

 
16,805

13,207

Net Interest Income
32,389

32,026

31,262

30,447

30,380

 
126,125

118,945

   Provision for loan losses
422

1,393

510

681

1,301

 
3,006

4,395

Net Interest Income After Provision for Loan Losses
31,967

30,633

30,752

29,766

29,079

 
123,119

114,550

 
 
 
 
 
 
 
 
 
Non-Interest Income
 
 
 
 
 
 
 
 
   Gains on sale of investment securities
200



4,276


 
4,476

3,513

   Service charges
7,355

7,415

7,074

6,730

6,995

 
28,574

26,703

   Bankcard revenue
4,316

4,291

4,372

4,140

4,142

 
17,120

16,515

   Trust and investment management fee income
1,800

1,471

1,612

1,386

1,597

 
6,269

5,573

   Bank owned life insurance
1,241

774

968

1,229

952

 
4,212

3,326

   Other income
655

660

895

746

685

 
2,956

3,195

Total Non-Interest Income
15,567

14,611

14,921

18,507

14,371

 
63,607

58,825

 
 
 
 
 
 
 
 
 
Non-Interest Expense
 
 
 
 
 
 
 
 
   Salaries and employee benefits
12,158

12,876

12,945

13,078

12,427

 
51,057

50,883

   Occupancy and equipment
2,695

2,916

2,956

2,838

2,792

 
11,405

11,095

   Depreciation
1,397

1,450

1,510

1,525

1,516

 
5,884

6,235

   FDIC insurance expense
318

328

328

375

137

 
1,348

1,622

   Advertising
711

689

781

733

445

 
2,914

2,606

   Bankcard expenses
960

1,051

970

943

1,011

 
3,924

4,458

   Postage, delivery, and statement mailings
518

517

504

555

492

 
2,094

2,080

   Office supplies
355

377

345

361

320

 
1,437

1,364

   Legal and professional fees
563

504

440

449

515

 
1,956

1,882






   Telecommunications
517

494

492

484

494

 
1,988

1,813

   Repossessed asset losses, net of expenses
145

107

147

336

244

 
735

890

   Other expenses
2,556

3,000

2,755

2,923

2,063

 
11,239

11,236

Total Non-Interest Expense
22,893

24,309

24,173

24,600

22,456

 
95,981

96,164

Income Before Income Taxes
24,641

20,935

21,500

23,673

20,994

 
90,745

77,211

   Income tax expense
14,972

7,003

6,812

7,647

6,338

 
36,435

25,083

Net Income Available to Common Shareholders
$
9,669

$
13,932

$
14,688

$
16,026

$
14,656

 
$
54,310

$
52,128

 
 
 
 
 
 
 
 
 
Distributed earnings allocated to common shareholders
$
7,106

$
6,797

$
6,797

$
6,782

$
6,428

 
$
27,497

$
25,710

Undistributed earnings allocated to common shareholders
2,454

6,981

7,733

9,067

8,051

 
26,222

25,795

Net earnings allocated to common shareholders
$
9,560

$
13,778

$
14,530

$
15,849

$
14,479

 
$
53,719

$
51,505

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average common shares outstanding
15,472

15,485

15,462

15,252

14,894

 
15,412

14,900

Shares for diluted earnings per share
15,497

15,505

15,487

15,277

14,914

 
15,436

14,913

 
 
 
 
 
 
 
 
 
Basic earnings per common share
$
0.62

$
0.89

$
0.94

$
1.04

$
0.97

 
$
3.49

$
3.46

Diluted earnings per common share
$
0.62

$
0.89

$
0.94

$
1.04

$
0.97

 
$
3.48

$
3.45







CITY HOLDING COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
($ in 000s)
 
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
 
 
December 31,
September 30,
June 30,
March 31,
December 31,
 
2017
2017
2017
2017
2016
Assets
 
 
 
 
 
Cash and due from banks
$
54,450

$
54,281

$
54,577

$
164,887

$
62,263

Interest-bearing deposits in depository institutions
28,058

28,884

27,783

25,925

25,876

Cash and cash equivalents
82,508

83,165

82,360

190,812

88,139

 
 
 
 
 
 
Investment securities available-for-sale, at fair value
550,389

525,633

504,660

470,098

450,083

Investment securities held-to-maturity, at amortized cost
64,449

66,989

69,798

72,308

75,169

Other securities
14,147

15,988

16,039

10,240

14,352

Total investment securities
628,985

608,610

590,497

552,646

539,604

 
 
 
 
 
 
Gross loans
3,127,410

3,105,912

3,083,767

3,074,173

3,046,226

Allowance for loan losses
(18,836
)
(19,554
)
(19,063
)
(19,209
)
(19,730
)
Net loans
3,108,574

3,086,358

3,064,704

3,054,964

3,026,496

 
 
 
 
 
 
Bank owned life insurance
103,440

102,706

101,960

101,481

100,732

Premises and equipment, net
72,682

72,334

72,809

73,805

75,165

Accrued interest receivable
9,223

9,236

8,122

8,644

8,408

Net deferred tax assets
11,981

22,355

22,944

24,606

28,043

Intangible assets
78,595

78,730

78,865

79,000

79,135

Other assets
36,361

36,060

35,138

38,029

38,681

Total Assets
$
4,132,349

$
4,099,554

$
4,057,399

$
4,123,987

$
3,984,403

 
 
 
 
 
 
Liabilities
 
 
 
 
 
Deposits:
 
 
 
 
 
   Noninterest-bearing
$
666,639

$
669,876

$
688,223

$
714,791

$
672,286

   Interest-bearing:
 
 
 
 
 
   Demand deposits
769,245

711,121

722,440

743,246

695,891

   Savings deposits
796,275

799,592

797,552

874,031

822,057

   Time deposits
1,083,475

1,075,945

1,069,932

1,060,690

1,041,419

Total deposits
3,315,634

3,256,534

3,278,147

3,392,758

3,231,653

Short-term borrowings
 
 
 
 
 
Federal Funds purchased
54,000

79,800

46,400


64,100

Customer repurchase agreements
198,219

201,664

177,904

186,686

184,205

Long-term debt
16,495

16,495

16,495

16,495

16,495

Other liabilities
45,610

44,746

45,946

46,402

45,512

Total Liabilities
3,629,958

3,599,239

3,564,892

3,642,341

3,541,965

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 





Stockholders' Equity
 
 
 
 
 
Preferred stock





Common stock
47,619

47,619

47,619

47,619

46,518

Capital surplus
140,960

140,381

139,972

140,305

112,873

Retained earnings
443,482

441,001

433,944

426,126

417,017

Cost of common stock in treasury
(124,909
)
(124,909
)
(124,943
)
(126,265
)
(126,958
)
Accumulated other comprehensive loss:
 
 
 
 
 
   Unrealized gain on securities available-for-sale
(513
)
883

575

(1,479
)
(2,352
)
   Underfunded pension liability
(4,248
)
(4,660
)
(4,660
)
(4,660
)
(4,660
)
Total Accumulated Other Comprehensive Loss
(4,761
)
(3,777
)
(4,085
)
(6,139
)
(7,012
)
Total Stockholders' Equity
502,391

500,315

492,507

481,646

442,438

Total Liabilities and Stockholders' Equity
$
4,132,349

$
4,099,554

$
4,057,399

$
4,123,987

$
3,984,403

 
 
 
 
 
 
Regulatory Capital
 
 
 
 
 
Total CET 1 capital
$
429,155

$
426,057

$
418,449

$
409,533

$
371,677

Total tier 1 capital
445,155

442,057

434,449

425,533

387,677

Total risk-based capital
464,293

463,198

454,832

445,938

408,406

Total risk-weighted assets
2,841,969

2,824,751

2,812,443

2,807,347

2,772,456








CITY HOLDING COMPANY AND SUBSIDIARIES
Loan Portfolio
(Unaudited) ($ in 000s)
 
December 31,
September 30,
June 30,
March 31,
December 31,
 
2017
2017
2017
2017
2016
 
 
 
 
 
 
Residential real estate (1)
$
1,468,278

$
1,465,942

$
1,455,578

$
1,444,795

$
1,451,462

Home equity - junior liens
139,499

139,702

139,534

139,165

141,965

Commercial and industrial
208,484

204,722

197,429

205,011

185,667

Commercial real estate (2)
1,277,576

1,260,906

1,256,736

1,250,106

1,229,516

Consumer
29,162

30,323

30,860

32,043

32,545

DDA overdrafts
4,411

4,317

3,630

3,053

5,071

Gross Loans
$
3,127,410

$
3,105,912

$
3,083,767

$
3,074,173

$
3,046,226

 
 
 
 
 
 
Construction loans included in:
 
 
 
 
 
(1) - Residential real estate loans
$
25,270

$
19,849

$
12,056

$
9,777

$
14,182

(2) - Commercial real estate loans
28,871

24,318

20,204

18,499

12,840

 
 
 
 
 
 
 
 
 
 
 
 
Secondary Mortgage Loan Activity
 
 
 
 
 
Mortgage loans originated
$
2,593

$
4,474

$
5,433

$
3,951

$
6,444

Mortgage loans sold
2,975

4,732

5,465

6,118

4,936

Mortgage loans gain on loans sold
79

128

142

167

107







CITY HOLDING COMPANY AND SUBSIDIARIES
Asset Quality Information
(Unaudited) ($ in 000s)

 
Three Months Ended
 
Twelve Months Ended
 
December 31,
September 30,
June 30,
March 31,
December 31,
 
December 31,
December 31,
 
2017
2017
2017
2017
2016
 
2017
2016
Allowance for Loan Losses
 
 
 
 
 
 
 
 
Balance at beginning of period
$
19,554

$
19,063

$
19,209

$
19,730

$
19,550

 
$
19,730

$
19,251

 
 
 
 
 
 
 
 
 
Charge-offs:
 
 
 
 
 
 
 
 
Commercial and industrial
(250
)
(40
)
(57
)
(53
)

 
(400
)
(148
)
Commercial real estate
(156
)
(282
)
(102
)
(180
)
(463
)
 
(720
)
(1,676
)
Residential real estate
(342
)
(411
)
(258
)
(626
)
(453
)
 
(1,637
)
(1,734
)
Home equity
(147
)
(17
)
(118
)
(121
)
(90
)
 
(403
)
(390
)
Consumer
(13
)
(18
)
(23
)
(6
)
(24
)
 
(60
)
(126
)
DDA overdrafts
(725
)
(718
)
(635
)
(636
)
(395
)
 
(2,714
)
(1,412
)
Total charge-offs
(1,633
)
(1,486
)
(1,193
)
(1,622
)
(1,425
)
 
(5,934
)
(5,486
)
 
 
 
 
 
 
 
 
 
Recoveries:
 
 
 
 
 
 
 
 
Commercial and industrial
1

2

53

2

1

 
58

14

Commercial real estate
20

60

21

11

40

 
112

487

Residential real estate
8

130

131

25

74

 
294

187

Home equity

45




 
45


Consumer
17

21

14

11

9

 
63

118

DDA overdrafts
447

326

319

371

180

 
1,463

764

Total recoveries
493

584

538

420

304

 
2,035

1,570

 
 
 
 
 
 
 
 
 
Net charge-offs
(1,140
)
(903
)
(655
)
(1,202
)
(1,121
)
 
(3,900
)
(3,916
)
Provision for (recovery of) acquired loans
122


58

(19
)
(1
)
 
161

163

Provision for loan losses
300

1,393

451

700

1,302

 
2,845

4,232

Balance at end of period
$
18,836

$
19,554

$
19,063

$
19,209

$
19,730

 
$
18,836

$
19,730

 
 
 
 
 
 
 
 
 
Loans outstanding
$
3,127,410

$
3,105,912

$
3,083,767

$
3,074,173

$
3,046,226

 
 
 
Allowance as a percent of loans outstanding
0.6
%
0.63
%
0.62
%
0.62
%
0.65
%
 
 
 
Allowance as a percent of non-performing loans
178.4
%
182.8
%
177.6
%
167.7
%
140.1
%
 
 
 
 
 
 
 
 
 
 
 
 
Average loans outstanding
$
3,110,084

$
3,089,793

$
3,073,255

$
3,055,979

$
3,006,426

 
$
3,082,448

$
2,920,837

Net charge-offs (annualized) as a percent of average loans outstanding
0.15
%
0.12
%
0.09
%
0.16
%
0.15
%
 
0.13
%
0.13
%









CITY HOLDING COMPANY AND SUBSIDIARIES
Asset Quality Information, Continued
(Unaudited) ($ in 000s)
 
December 31,
September 30,
June 30,
March 31,
December 31,
 
2017
2017
2017
2017
2016
Nonaccrual Loans
 
 
 
 
 
Residential real estate
$
2,814

$
2,556

$
1,608

$
2,810

$
4,302

Home equity
168

92

153

114

100

Commercial and industrial
1,345

1,325

1,571

1,353

1,958

Commercial real estate
5,970

6,700

7,250

7,141

7,341

Consumer





   Total nonaccrual loans
10,297

10,673

10,582

11,418

13,701

Accruing loans past due 90 days or more
262

22

150

35

382

   Total non-performing loans
10,559

10,695

10,732

11,453

14,083

Other real estate owned
3,585

3,995

4,204

4,405

4,588

   Total non-performing assets
$
14,144

$
14,690

$
14,936

$
15,858

$
18,671

 
 
 
 
 
 
Non-performing assets as a percent of loans and other real estate owned
0.45
%
0.47
%
0.48
%
0.52
%
0.61
%
 
 
 
 
 
 
Past Due Loans
 
 
 
 
 
Residential real estate
$
6,718

$
5,295

$
5,648

$
3,876

$
6,074

Home equity
851

873

628

301

673

Commercial and industrial
692

304

259

611

94

Commercial real estate
2,086

520

819

1,014

1,115

Consumer
42

26

70

38

39

DDA overdrafts
575

551

527

330

599

   Total past due loans
$
10,964

$
7,569

$
7,951

$
6,170

$
8,594

 
 
 
 
 
 
Total past due loans as a percent of loans outstanding
0.35
%
0.24
%
0.26
%
0.20
%
0.28
%
 
 
 
 
 
 
Troubled Debt Restructurings ("TDRs") (period-end)
 
 
 
 
 
Accruing:
 
 
 
 
 
   Residential real estate
$
21,005

$
20,741

$
20,647

$
20,294

$
20,643

   Home equity
3,047

2,947

3,146

3,104

3,105

   Commercial and industrial
135

31

35

38

42

   Commercial real estate
8,381

8,427

8,483

8,513

5,525

   Consumer





     Total accruing TDRs
$
32,568

$
32,146

$
32,311

$
31,949

$
29,315







Non-Accruing
 
 
 
 
 
   Residential real estate
$
84

$
47

154

$
100

$
172

   Home equity
50



30

30

   Commercial and industrial





   Commercial real estate





   Consumer





     Total non-accruing TDRs
$
134

$
47

$
154

$
130

$
202

 
 
 
 
 
 
Total TDRs
$
32,702

$
32,193

$
32,465

$
32,079

$
29,517

 
 
 
 
 
 







CITY HOLDING COMPANY AND SUBSIDIARIES
Consolidated Average Balance Sheets, Yields, and Rates
(Unaudited) ($ in 000s)

 
Three Months Ended
 
December 31, 2017
September 30, 2017
December 31, 2016
 
Average
 
Yield/
Average
 
Yield/
Average
 
Yield/
 
Balance
Interest
Rate
Balance
Interest
Rate
Balance
Interest
Rate
Assets:
 
 
 
 
 
 
 
 
 
Loan portfolio (1):
 
 
 
 
 
 
 
 
 
Residential real estate (2)
$
1,608,509

$
16,321

4.03
%
$
1,598,037

$
16,117

4.00
%
$
1,597,711

$
15,469

3.85
%
Commercial, financial, and agriculture (2)
1,468,701

15,269

4.12
%
1,457,821

14,903

4.06
%
1,372,197

13,518

3.92
%
Installment loans to individuals (2), (3)
32,874

679

8.19
%
33,935

630

7.37
%
36,518

696

7.59
%
Previously securitized loans (4)
 ***
260

 ***
 ***
353

 ***
 ***
443

 ***
Total loans
3,110,084

32,529

4.15
%
3,089,793

32,003

4.11
%
3,006,426

30,126

3.99
%
Securities:
 
 
 
 
 
 
 
 
 
Taxable
526,645

3,797

2.86
%
507,106

3,666

2.87
%
479,272

3,277

2.72
%
Tax-exempt (5)
91,886

1,064

4.59
%
91,276

1,024

4.45
%
64,351

739

4.57
%
Total securities
618,531

4,861

3.12
%
598,382

4,690

3.11
%
543,623

4,016

2.94
%
Deposits in depository institutions
31,060

35

0.45
%
31,517

31

0.39
%
11,117



Total interest-earning assets
3,759,675

37,425

3.95
%
3,719,692

36,724

3.92
%
3,561,166

34,142

3.81
%
Cash and due from banks
65,636

 
 
62,723

 
 
68,514

 
 
Premises and equipment, net
73,109

 
 
72,756

 
 
75,744

 
 
Other assets
247,688

 
 
247,076

 
 
249,271

 
 
Less: Allowance for loan losses
(20,981
)
 
 
(20,038
)
 
 
(20,024
)
 
 
       Total assets
$
4,125,127

 
 
$
4,082,209

 
 
$
3,934,671

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
Interest-bearing demand deposits
$
702,614

$
167

0.09
%
$
700,625

$
159

0.09
%
$
689,784

$
157

0.09
%
Savings deposits
797,311

313

0.16
%
821,949

321

0.15
%
793,362

276

0.14
%
Time deposits (2)
1,079,179

3,462

1.27
%
1,070,941

3,316

1.23
%
1,036,103

2,704

1.04
%
Short-term borrowings
296,139

522

0.70
%
230,030

349

0.60
%
233,192

188

0.32
%
Long-term debt
16,495

201

4.83
%
16,495

195

4.69
%
16,495

179

4.32
%
   Total interest-bearing liabilities
2,891,738

4,665

0.64
%
2,840,040

4,340

0.61
%
2,768,936

3,504

0.50
%
Noninterest-bearing demand deposits
681,554

 
 
698,106

 
 
680,604

 
 
Other liabilities
42,899

 
 
42,202

 
 
42,354

 
 
Stockholders' equity
508,936

 
 
501,861

 
 
442,777

 
 
Total liabilities and
 
 
 
 
 
 
 
 
 
stockholders' equity
$
4,125,127

 
 
$
4,082,209

 
 
$
3,934,671

 
 
Net interest income
 
$
32,760

 
 
$
32,384

 
 
$
30,638

 
Net yield on earning assets
 
 
3.46
%
 
 
3.45
%
 
 
3.42
%
 
 
 
 
 
 
 
 
 
 
(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
 
$
126

 
 
$
122

 
 
$
160

 
Commercial, financial, and agriculture
 
438

 
 
235

 
 
145

 
Installment loans to individuals
 
27

 
 
3

 
 
13

 
Time deposits
 

 
 

 
 
148

 
 
 
$
591

 
 
$
360

 
 
$
466

 
 
 
 
 
 
 
 
 
 
 
(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
 
December 31, 2017
December 31, 2016
 
Average
 
Yield/
Average
 
Yield/
 
Balance
Interest
Rate
Balance
Interest
Rate
Assets:
 
 
 
 
 
 
Loan portfolio (1):
 
 
 
 
 
 
Residential real estate (2)
$
1,598,579

$
63,649

3.98
%
$
1,565,079

$
60,736

3.88
%
Commercial, financial, and agriculture (2)
1,450,144

58,243

4.02
%
1,318,094

52,812

4.01
%
Installment loans to individuals (2), (3)
33,725

2,514

7.45
%
37,664

2,917

7.75
%
Previously securitized loans (4)
 ***
1,346

 ***
 ***
1,673

 ***
Total loans
3,082,448

125,752

4.08
%
2,920,837

118,138

4.04
%
Securities:
 
 
 
 
 
 
Taxable
492,783

14,387

2.92
%
444,110

12,392

2.79
%
Tax-exempt (5)
89,341

4,163

4.66
%
51,096

2,494

4.88
%
Total securities
582,124

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