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Section 1: 8-K (8-K, CHCO 2Q2018 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)
July 19, 2018

394286518_chcologoa23.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):
 
x
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 July 19, 2018, City Holding Company (“the Company”) issued a news release, attached as Exhibit 99.1, announcing the Company’s earnings results for the second quarter ended June 30, 2018. 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 July 19, 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: July 19, 2018


(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1, PRESS RELEASE CHCO 2Q2018 EARNINGS)

Exhibit



Filed by City Holding Company
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Subject Company: Poage Bankshares, Inc.
Commission File No.: 001-35295
NEWS RELEASE

For Immediate Release
July 19, 2018

For Further Information Contact:
David L Bumgarner, Chief Financial Officer and Senior Vice President
(304) 769-1169

City Holding Company Announces Record Quarterly Results

Charleston, West Virginia - City Holding Company (“Company” or “City”) (NASDAQ:CHCO), a $4.4 billion bank holding company headquartered in Charleston, today announced record quarterly net income of $21.0 million and diluted earnings of $1.35 per share.

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

Return on assets and return on tangible equity of 2.00% and 19.9%, respectively.
Reported net interest income increased $2.3 million from the quarter ended June 30, 2017, while net interest income exclusive of accretion from fair value adjustments increased $2.6 million from the quarter ended June 30, 2017.
Reported a recovery of loan loss provision of $2.1 million.
Received the highest ranking in customer satisfaction in the north central region in J.D. Power’s 2018 U.S. Retail Banking Satisfaction Study.

Net Interest Income

The Company’s net interest income increased from $32.6 million during the first quarter of 2018 to $33.6 million during the second quarter of 2018. The Company’s tax equivalent net interest income increased $0.9 million, or 2.8%, from $32.8 million during the first quarter of 2018 to $33.7 million during the second quarter of 2018. Higher yields on commercial and residential real estate loans increased net interest income $1.3 million from the quarter ended March 31, 2018. This increase was partially offset by increased interest expense as a result of higher interest rates on interest bearing liabilities of $0.5 million. The Company’s reported net interest margin improved from 3.51% for the first quarter of 2018 to 3.56% for the second quarter of 2018. Excluding the favorable impact of the accretion from the fair value adjustments, the net interest margin would have been 3.48% for the quarter ended March 31, 2018 and 3.52% for the quarter ended June 30, 2018.

Credit Quality

The Company’s ratio of nonperforming assets to total loans and other real estate owned increased from 0.43% at March 31, 2018 to 0.53% at June 30, 2018. Total nonperforming assets increased from $13.6 million at March 31, 2018 to $16.9 million at June 30, 2018. Nonperforming assets increased during the second quarter





of 2018 as a direct result of two specific credits that are each secured by high value residential real estate properties. We anticipate no losses on these two credits. Total past due loans remained flat at $8.2 million, or 0.26% of total loans outstanding, at June 30, 2018.

As a result of the Company’s quarterly analysis of the adequacy of the Allowance for Loan Losses (“ALLL”), the Company recorded a recovery of loan losses of $2.1 million in the second quarter of 2018, compared to a provision for loan losses of $0.5 million for the comparable period in 2017 and a provision for loan losses of $0.2 million for the first quarter of 2018. During the second quarter of 2018, City National Bank of WV (“City National”), a subsidiary of the Company, liquidated repossessed assets associated with the Kentucky Fuels Corporation credit. As a result of the proceeds from this liquidation, City National recovered $1.3 million related to this credit. As of June 30, 2018, Kentucky Fuels Corporation’s remaining contractual balance with City National Bank is $1.3 million, but there is no recorded book balance associated with this loan. Additionally, as a result of this recovery, the historical loss rate used to compute the allowance not specifically allocated to individual credits in the Company’s commercial and industrial mining and energy sector (per North American Industry Classification System (NAICS)) improved and an additional release of reserve of $1.7 million was recognized in the second quarter of 2018. Exclusive of these events, the Company recorded a provision for loan losses of $0.9 million in the second quarter of 2018 which reflects changes in the quality of the portfolio. Changes in the amount of the provision and related allowance are based on the Company’s detailed systematic methodology and are directionally consistent with changes in the composition and quality of the Company’s loan portfolio. The Company believes its methodology for determining the adequacy of its ALLL adequately provides for probable losses inherent in the loan portfolio and produces a provision and allowance for loan losses that is directionally consistent with changes in asset quality and loss experience.

Non-interest Income

Non-interest income increased from $14.9 million for the second quarter of 2017 to $15.6 million for the second quarter of 2018. This increase was mainly due to an increase in other income of $0.5 million due to unrealized fair market value gains in equity securities, increased service charges of $0.2 million, or 3.5%, and an increase in bankcard revenues of $0.2 million, or 3.7%. These increases were partially offset by a decrease in bank owned life insurance of $0.2 million.

Non-interest Expenses

Non-interest expenses increased $0.7 million, from $24.2 million in the second quarter of 2017 to $24.9 million in the second quarter of 2018. This increase was primarily due to an increase in salaries and employee benefits of $0.8 million which was largely due to annual salary adjustments, including an adjustment to wages for approximately 50% of the Company’s employees late in the first quarter of 2018 to make salaries more competitive in today’s employment environment. This increase was partially offset by a decrease in occupancy expense of $0.1 million and equipment and software related expenses of $0.1 million.
 
Balance Sheet Trends

Loan balances have increased $28.1 million (0.9%) from December 31, 2017 to $3.16 billion at June 30, 2018. Commercial real estate loans increased $16.9 million (1.3%), commercial and industrial loans increased $5.2 million (2.5%) and residential real estate loans increased $4.6 million (0.3%).

Total average depository balances increased $71.2 million, or 2.1%, from the quarter ended March 31, 2018 to the quarter ended June 30, 2018. The Company experienced increases in time deposits ($27.1 million),





noninterest-bearing demand deposits ($23.4 million), savings deposits ($15.7 million), and interest-bearing deposits ($5.1 million).

Income Tax Expense

The Company’s effective income tax rate for the second quarter of 2018 was 20.3% compared to 40.2% for the year ended December 31, 2017, and 31.7% for the quarter ended June 30, 2017. On December 22, 2017, the President signed the Tax Cuts and Jobs Act (“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. Exclusive of this item, the Company’s tax rate from operations was 32.7% for the year ended December 31, 2017. The effective rate for the second quarter of 2018 is based upon the Company’s expected tax rate for the year ended December 31, 2018.

Capitalization and Liquidity

The Company’s loan to deposit ratio was 92.2% and the loan to asset ratio was 72.1% at June 30, 2018. The Company maintained investment securities totaling 14.7% of assets as of the same date. The Company’s deposit mix is weighted toward checking and saving accounts that fund 52.3% of assets at June 30, 2018. Time deposits fund 25.9% of assets at June 30, 2018, 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 decreased from 10.5% at December 31, 2017 to 9.9% at June 30, 2018. At June 30, 2018, City National Bank’s Leverage Ratio was 9.24%, its Common Equity Tier I ratio was 13.26%, its Tier I Capital ratio was 13.26%, and its Total Risk-Based Capital ratio was 13.87%. These regulatory capital ratios are significantly above levels required to be considered “well capitalized,” which is the highest possible regulatory designation.

On June 27, 2018, the Board approved a quarterly cash dividend of $0.46 cents per share payable July 31, 2018, to shareholders of record as of July 13, 2018. During the quarter ended June 30, 2018, the Company repurchased 10,000 common shares at a weighted average price of $69.26 per share as part of a one million share repurchase plan authorized by the Board of Directors in September 2014. As of June 30, 2018, the Company could repurchase approximately 188,000 shares under the current plan.

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.

On July 11, 2018 the Company announced that it had concurrently executed two separate definitive agreements to acquire Poage Bankshares, Inc., (“Poage”), of Ashland, Kentucky and its principal banking subsidiary, Towne Square Bank and Farmers Deposit Bancorp, Inc., (“Farmers Deposit”), of Cynthiana, Kentucky and its principal banking subsidiary, Farmers Deposit Bank. The proposed mergers are expected to close in the fourth quarter of 2018 and the core data system conversions are also targeted to occur in the fourth quarter of 2018. Consummation of the respective mergers is subject to receipt of required regulatory approvals, the approval by the shareholders of Poage and Farmers Deposit, and the completion of other customary closing conditions. Merger expenses are estimated at $18 million (pre-tax) for the Poage transaction and a $6 million (pre-tax) for the Farmers Deposit transaction, while core deposit intangibles are estimated at $4 million for Poage and $1.5 million for Farmers Deposit. Each of the Poage and Farmers Deposit transactions are not conditional upon each other.






During the second quarter of 2018, City National Bank received the highest ranking in customer satisfaction in the north central region in J.D. Power’s 2018 U.S. Retail Banking Satisfaction Study. City National Bank outscored all banks in the north central region, which includes West Virginia, Kentucky, Ohio, Indiana, and Michigan.

Important Information for Investors and Poage Shareholders:
 
This press release does not constitute an offer to sell or the solicitation of an offer to buy securities of City or a solicitation of any vote or approval. City will file a registration statement on Form S-4 and other documents regarding the proposed transaction referenced in this press release related to the Poage transaction with the Securities and Exchange Commission (“SEC”) to register the shares of City’s common stock to be issued to the shareholders of Poage. The registration statement will include a proxy statement/prospectus, which will be sent to the shareholders of Poage in advance of its special meetings of shareholders to be held to consider the proposed Poage merger. Before making any voting or investment decision investors and security holders are urged to read the proxy statement/prospectus and any other relevant documents to be filed with the SEC in connection with the proposed Poage transaction because they contain important information about the City, Poage and the proposed transaction. Shareholders are also urged to carefully review and consider each of City’s and Poage’s public filings with the SEC, including, but not limited to, their Annual Reports or Form 10-K, their Quarterly Reports or Form 10-Q, their Current Reports or Form 8-K and their proxy statements. Investors and security holders may obtain a free copy of these documents (when available) through the website maintained by the SEC at www.sec.gov. These documents may also be obtained, without charge, from City at www.bankatcity.com under the tab “Investors” or by directing a request to City Holding Company, 25 Gatewater Road P.O. Box 7520, Charleston, West Virginia 25356, Attn.: Investor Relations, or from Poage at www.townswquarebank.com under the tab “Investor Relations” or by directing a request to Poage Bankshares, Inc., 1500 Carter Avenue, Ashland, Kentucky 41101, Attn.: Investor Relations.

Poage and certain of its directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of Poage in connection with the proposed Poage merger. Information about the directors and executive officers of Poage is set forth in the proxy statement for Poage’s 2018 annual meeting of shareholders, as filed with the SEC on a Schedule 14A on April 13, 2018. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the proxy statement/prospectus regarding the proposed Poage merger when it becomes available. Free copies of this document may be obtained as described in the preceding paragraph.

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, 2017.  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, 2018 Form 10-Q. The Company will continue to evaluate the impact of any subsequent events on the preliminary June 30, 2018 results and will adjust the amounts if necessary.











CITY HOLDING COMPANY AND SUBSIDIARIES
Financial Highlights
(Unaudited)
 
Three Months Ended
 
Six Months Ended
 
June 30,
March 31,
December 31,
September 30,
June 30,
 
June 30,
June 30,
 
2018
2018
2017
2017
2017
 
2018
2017
 
 
 
 
 
 
 
 
 
Earnings
 
 
 
 
 
 
 
 
Net Interest Income (FTE)
$
33,760

$
32,834

$
32,760

$
32,384

$
31,632

 
$
66,594

$
62,436

Net Income available to common shareholders
20,979

17,616

9,669

13,932

14,688

 
38,590

30,714

 
 
 
 
 
 
 
 
 
Per Share Data
 
 
 
 
 
 
 
 
Earnings per share available to common shareholders:
 
 
 
 
 
 
 
 
   Basic
$
1.36

$
1.13

$
0.62

$
0.89

$
0.94

 
$
2.49

$
1.98

   Diluted
1.35

1.13

0.62

0.89

0.94

 
2.48

1.98

Weighted average number of shares:
 
 
 
 
 
 
 
 
   Basic
15,326

15,414

15,472

15,485

15,462

 
15,370

15,344

   Diluted
15,345

15,436

15,497

15,505

15,487

 
15,390

15,369

Period-end number of shares
15,452

15,439

15,618

15,618

15,617

 
15,452

15,617

Cash dividends declared
$
0.46

$
0.46

$
0.46

$
0.44

$
0.44

 
$
0.92

$
0.88

Book value per share (period-end)
32.60

31.86

32.17

32.03

31.54

 
32.6

31.54

Tangible book value per share (period-end)
27.53

26.78

27.14

26.99

26.49

 
27.53

26.49

Market data:
 
 
 
 
 
 
 
 
   High closing price
$
78.44

$
72.87

$
73.98

$
71.91

$
72.78

 
$
78.44

$
72.78

   Low closing price
67.95

65.03

65.5

59.94

61.34

 
65.03

60.86

   Period-end closing price
75.23

68.56

67.47

71.91

65.87

 
75.23

65.87

   Average daily volume
60

56

66

54

56

 
58

56

Treasury share activity:
 
 
 
 
 
 
 
 
      Treasury shares repurchased
10

204




 
214


      Average treasury share repurchase price
$
69.26

$
68.50

$

$

$

 
$
68.54

$

Common share issuance:
 
 
 
 
 
 
 
 
      Common shares issued (in thousands)





 

441

      Average common share issue price (a)
$

$

$

$

$

 
$

$
64.48

 
 
 
 
 
 
 
 
 
Key Ratios (percent)
 
 
 
 
 
 
 
 
Return on average assets
2.00
%
1.69
%
0.94
%
1.37
%
1.43
%
 
1.85
%
1.51
%
Return on average tangible equity
19.90
%
16.70
%
9.00
%
13.20
%
14.20
%
 
18.30
%
15.30
%
Yield on interest earning assets
4.15
%
4.05
%
3.95
%
3.92
%
3.90
%
 
4.10
%
3.89
%
Cost of interest bearing liabilities
0.76
%
0.69
%
0.64
%
0.61
%
0.56
%
 
0.73
%
0.55
%
Net Interest Margin
3.56
%
3.51
%
3.46
%
3.45
%
3.46
%
 
3.54
%
3.46
%
Non-interest income as a percent of total revenue
31.70
%
30.70
%
32.20
%
31.30
%
32.30
%
 
31.30
%
32.10
%
Efficiency Ratio (a)
50.40
%
52.60
%
47.70
%
51.80
%
52.00
%
 
51.50
%
53.40
%





Price/Earnings Ratio (b)
13.88

15.17

27.3

20.2

17.52

 
15.13

16.63

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Capital (period-end)
 
 
 
 
 
 
 
 
Average Shareholders' Equity to Average Assets
11.88
%
12.05
%
12.34
%
12.29
%
11.99
%
 
 
 
Tangible equity to tangible assets
9.90
%
10.03
%
10.45
%
10.49
%
10.40
%
 
 
 
Consolidated City Holding Company risk based capital ratios (c):
 
 
 
 
 
 
 
 
   CET I
15.49
%
15.08
%
15.10
%
15.08
%
14.88
%
 
 
 
   Tier I
16.05
%
15.64
%
15.66
%
15.65
%
15.45
%
 
 
 
   Total
16.65
%
16.31
%
16.34
%
16.40
%
16.17
%
 
 
 
   Leverage
11.13
%
10.90
%
11.00
%
11.05
%
10.79
%
 
 
 
City National Bank risk based capital ratios (c):
 
 
 
 
 
 
 
 
   CET I
13.26
%
12.59
%
11.93
%
12.74
%
12.27
%
 
 
 
   Tier I
13.26
%
12.59
%
11.93
%
12.74
%
12.27
%
 
 
 
   Total
13.87
%
13.25
%
12.61
%
13.44
%
12.96
%
 
 
 
   Leverage
9.24
%
8.81
%
8.43
%
9.04
%
8.62
%
 
 
 
 
 
 
 
 
 
 
 
 
Other
 
 
 
 
 
 
 
 
Branches
86

86

86

86

85

 
 
 
FTE
849

832

839

835

839

 
 
 
 
 
 
 
 
 
 
 
 
   Assets per FTE
$
5,152

$
5,048

$
4,925

$
4,910

$
4,836

 
 
 
   Deposits per FTE
4,030

4,143

3,952

3,900

3,907

 
 
 
 
 
 
 
 
 
 
 
 
(a) The common share issue price is presented net of commissions and excludes one-time offering costs.
(b) The price/earnings ratio is computed based on annualized quarterly earnings.
(c) June 30, 2018 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,
March 31,
December 31,
September 30,
June 30,
 
June 30,
June 30,
 
2018
2018
2017
2017
2017
 
2018
2017
Interest Income
 
 
 
 
 
 
 
 
   Interest and fees on loans
$
34,292

$
32,918

$
32,529

$
32,004

$
31,115

 
$
67,210

$
61,219

   Interest on investment securities:
 
 
 
 
 
 
 
 
     Taxable
4,117

3,981

3,797

3,666

3,480

 
8,098

6,924

     Tax-exempt
710

703

692

665

686

 
1,413

1,349

   Interest on deposits in depository institutions
61

42

35

31

17

 
103

20

Total Interest Income
39,180

37,644

37,053

36,366

35,298

 
76,824

69,512

 
 
 
 
 
 
 
 
 
Interest Expense
 
 
 
 
 
 
 
 
   Interest on deposits
4,918

4,326

3,941

3,796

3,660

 
9,244

7,088

   Interest on short-term borrowings
459

460

522

349

187

 
919

344

   Interest on long-term debt
230

211

201

195

189

 
441

370

Total Interest Expense
5,607

4,997

4,664

4,340

4,036

 
10,604

7,802

Net Interest Income
33,573

32,647

32,389

32,026

31,262

 
66,220

61,710

   Provision for loan losses
(2,064
)
181

422

1,393

510

 
(1,882
)
1,191

Net Interest Income After Provision for Loan Losses
35,637

32,466

31,967

30,633

30,752

 
68,102

60,519

 
 
 
 
 
 
 
 
 
Non-Interest Income
 
 
 
 
 
 
 
 
   Gains on sale of investment securities


200



 

4,276

   Service charges
7,323

6,862

7,355

7,415

7,074

 
14,185

13,805

   Bankcard revenue
4,532

4,334

4,316

4,291

4,372

 
8,866

8,512

   Trust and investment management fee income
1,645

1,568

1,800

1,471

1,612

 
3,214

2,998

   Bank owned life insurance
722

821

1,241

774

968

 
1,543

2,197

   Other income
1,389

907

655

660

895

 
2,297

1,642

Total Non-Interest Income
15,611

14,492

15,567

14,611

14,921

 
30,105

33,430

 
 
 
 
 
 
 
 
 
Non-Interest Expense
 
 
 
 
 
 
 
 
   Salaries and employee benefits
13,551

13,241

11,845

12,580

12,780

 
26,792

25,948

   Occupancy related expense
2,346

2,404

2,195

2,426

2,462

 
4,750

4,935

   Equipment and software related expense
1,895

1,831

1,897

1,940

2,004

 
3,727

3,895

   FDIC insurance expense
313

315

318

328

328

 
627

703

   Advertising
849

787

711

689

781

 
1,636

1,514

   Bankcard expenses
1,064

1,076

960

1,051

970

 
2,139

1,913

   Postage, delivery, and statement mailings
515

578

518

517

504

 
1,093

1,059

   Office supplies
329

313

355

377

345

 
643

706






   Legal and professional fees
475

450

563

504

440

 
925

889

   Telecommunications
441

500

517

494

492

 
941

976

   Repossessed asset losses, net of expenses
112

370

145

107

147

 
482

482

   Other expenses
3,021

3,072

2,869

3,296

2,920

 
6,099

5,756

Total Non-Interest Expense
24,911

24,937

22,893

24,309

24,173

 
49,854

48,776

Income Before Income Taxes
26,337

22,021

24,641

20,935

21,500

 
48,353

45,173

   Income tax expense
5,358

4,405

14,972

7,003

6,812

 
9,763

14,459

Net Income Available to Common Shareholders
$
20,979

$
17,616

$
9,669

$
13,932

$
14,688

 
$
38,590

$
30,714

 
 
 
 
 
 
 
 
 
Distributed earnings allocated to common shareholders
$
7,039

$
7,023

$
7,106

$
6,797

$
6,797

 
$
14,077

$
13,594

Undistributed earnings allocated to common shareholders
13,729

10,398

2,454

6,981

7,733

 
24,136

16,787

Net earnings allocated to common shareholders
$
20,768

$
17,421

$
9,560

$
13,778

$
14,530

 
$
38,213

$
30,381

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average common shares outstanding
15,326

15,414

15,472

15,485

15,462

 
15,370

15,344

Shares for diluted earnings per share
15,345

15,436

15,497

15,505

15,487

 
15,390

15,369

 
 
 
 
 
 
 
 
 
Basic earnings per common share
$
1.36

$
1.13

$
0.62

$
0.89

$
0.94

 
$
2.49

$
1.98

Diluted earnings per common share
$
1.35

$
1.13

$
0.62

$
0.89

$
0.94

 
$
2.48

$
1.98







CITY HOLDING COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
($ in 000s)
 
(Unaudited)
(Unaudited)
 
(Unaudited)
(Unaudited)
 
June 30,
March 31,
December 31,
September 30,
June 30,
 
2018
2018
2017
2017
2017
Assets
 
 
 
 
 
Cash and due from banks
$
240,483

$
97,495

$
54,450

$
54,281

$
54,577

Interest-bearing deposits in depository institutions
25,041

26,283

28,058

28,884

27,783

Cash and cash equivalents
265,524

123,778

82,508

83,165

82,360

 
 
 
 
 
 
Investment securities available-for-sale, at fair value
552,603

545,628

550,389

525,633

504,660

Investment securities held-to-maturity, at amortized cost
60,030

62,277

64,449

66,989

69,798

Other securities
28,920

22,165

14,147

15,988

16,039

Total investment securities
641,553

630,070

628,985

608,610

590,497

 
 
 
 
 
 
Gross loans
3,155,468

3,137,681

3,127,410

3,105,912

3,083,767

Allowance for loan losses
(16,876
)
(18,381
)
(18,836
)
(19,554
)
(19,063
)
Net loans
3,138,592

3,119,300

3,108,574

3,086,358

3,064,704

 
 
 
 
 
 
Bank owned life insurance
104,773

104,052

103,440

102,706

101,960

Premises and equipment, net
72,482

72,920

72,682

72,334

72,809

Accrued interest receivable
9,348

9,528

9,223

9,236

8,122

Net deferred tax assets
14,528

14,467

11,913

22,355

22,944

Intangible assets
78,342

78,468

78,595

78,730

78,865

Other assets
49,241

47,432

36,361

36,060

35,138

Total Assets
$
4,374,383

$
4,200,015

$
4,132,281

$
4,099,554

$
4,057,399

 
 
 
 
 
 
Liabilities
 
 
 
 
 
Deposits:
 
 
 
 
 
   Noninterest-bearing
$
684,614

$
703,209

$
666,639

$
669,876

$
688,223

   Interest-bearing:
 
 
 
 
 
   Demand deposits
785,933

816,976

769,245

711,121

722,440

   Savings deposits
817,547

816,245

796,275

799,592

797,552

   Time deposits
1,133,684

1,110,532

1,083,475

1,075,945

1,069,932

Total deposits
3,421,778

3,446,962

3,315,634

3,256,534

3,278,147

Short-term borrowings
 
 
 
 
 
Federal Funds purchased
181,375


54,000

79,800

46,400

Customer repurchase agreements
196,635

195,375

198,219

201,664

177,904

Long-term debt
16,495

16,495

16,495

16,495

16,495

Other liabilities
54,346

49,306

45,426

44,746

45,946

Total Liabilities
3,870,629

3,708,138

3,629,774

3,599,239

3,564,892

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 





Stockholders' Equity
 
 
 
 
 
Preferred stock





Common stock
47,619

47,619

47,619

47,619

47,619

Capital surplus
140,091

140,547

140,960

140,381

139,972

Retained earnings
471,515

457,650

444,481

441,001

433,944

Cost of common stock in treasury
(136,520
)
(137,420
)
(124,909
)
(124,909
)
(124,943
)
Accumulated other comprehensive loss:
 
 
 
 
 
   Unrealized gain on securities available-for-sale
(13,918
)
(11,486
)
(611
)
883

575

   Underfunded pension liability
(5,033
)
(5,033
)
(5,033
)
(4,660
)
(4,660
)
Total Accumulated Other Comprehensive Loss
(18,951
)
(16,519
)
(5,644
)
(3,777
)
(4,085
)
Total Stockholders' Equity
503,754

491,877

502,507

500,315

492,507

Total Liabilities and Stockholders' Equity
$
4,374,383

$
4,200,015

$
4,132,281

$
4,099,554

$
4,057,399

 
 
 
 
 
 
Regulatory Capital
 
 
 
 
 
Total CET 1 capital
$
444,869

$
430,044

$
430,154

$
426,057

$
418,449

Total tier 1 capital
460,869

446,044

446,154

442,057

434,449

Total risk-based capital
478,255

464,936

465,292

463,198

454,832

Total risk-weighted assets
2,871,561

2,851,330

2,842,453

2,824,751

2,812,443








CITY HOLDING COMPANY AND SUBSIDIARIES
Loan Portfolio
(Unaudited) ($ in 000s)
 
June 30,
March 31,
December 31,
September 30,
June 30,
 
2018
2018
2017
2017
2017
 
 
 
 
 
 
Residential real estate (1)
$
1,472,916

$
1,465,215

$
1,468,278

$
1,465,942

$
1,455,578

Home equity - junior liens
139,245

138,477

139,499

139,702

139,534

Commercial and industrial
213,687

204,592

208,484

204,722

197,429

Commercial real estate (2)
1,294,489

1,296,304

1,277,576

1,260,906

1,256,736

Consumer
31,137

29,570

29,162

30,323

30,860

DDA overdrafts
3,994

3,523

4,411

4,317

3,630

Gross Loans
$
3,155,468

$
3,137,681

$
3,127,410

$
3,105,912

$
3,083,767

 
 
 
 
 
 
Construction loans included in:
 
 
 
 
 
(1) - Residential real estate loans
$
21,662

$
26,610

$
25,270

$
19,849

$
12,056

(2) - Commercial real estate loans
28,567

30,857

28,871

24,318

20,204

 
 
 
 
 
 
 
 
 
 
 
 
Secondary Mortgage Loan Activity
 
 
 
 
 
Mortgage loans originated
$
3,263

$
2,606

$
2,593

$
4,474

$
5,433

Mortgage loans sold
3,137

2,874

2,975

4,732

5,465

Mortgage loans gain on loans sold
84

79

79

128

142







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

 
Three Months Ended
 
Six Months Ended
 
June 30,
March 31,
December 31,
March 31,
June 30,
 
June 30,
June 30,
 
2018
2018
2017
2017
2017
 
2018
2017
Allowance for Loan Losses
 
 
 
 
 
 
 
 
Balance at beginning of period
$
18,381

$
18,836

$
19,554

$
19,063

$
19,209

 
$
18,836

$
19,730

 
 
 
 
 
 
 
 
 
Charge-offs:
 
 
 
 
 
 
 
 
Commercial and industrial
(385
)
(339
)
(250
)
(40
)
(57
)
 
(724
)
(110
)
Commercial real estate
(118
)
(157
)
(156
)
(282
)
(102
)
 
(275
)
(282
)
Residential real estate
(96
)
(124
)
(342
)
(411
)
(258
)
 
(220
)
(884
)
Home equity
(33
)
(78
)
(147
)
(17
)
(118
)
 
(111
)
(239
)
Consumer
(255
)
(99
)
(13
)
(18
)
(23
)
 
(354
)
(29
)
DDA overdrafts
(636
)
(636
)
(725
)
(718
)
(635
)
 
(1,272
)
(1,271
)
Total charge-offs
(1,523
)
(1,433
)
(1,633
)
(1,486
)
(1,193
)
 
(2,956
)
(2,815
)
 
 
 
 
 
 
 
 
 
Recoveries:
 
 
 
 
 
 
 
 
Commercial and industrial
1,476

2

1

2

53

 
1,478

55

Commercial real estate
149

223

20

60

21

 
372

32

Residential real estate
53

106

8

130

131

 
159

156

Home equity



45


 


Consumer
59

46

17

21

14

 
105

25

DDA overdrafts
345

420

447

326

319

 
765

690

Total recoveries
2,082

797

493

584

538

 
2,879

958

 
 
 
 
 
 
 
 
 
Net charge-offs
559

(636
)
(1,140
)
(903
)
(655
)
 
(77
)
(1,857
)
Provision for (recovery of) acquired loans
(13
)

122


58

 
(13
)
39

Provision for loan losses
(2,051
)
181

300

1,393

451

 
(1,870
)
1,151

Balance at end of period
$
16,876

$
18,381

$
18,836

$
19,554

$
19,063

 
$
16,876

$
19,063

 
 
 
 
 
 
 
 
 
Loans outstanding
$
3,155,468

$
3,137,681

$
3,127,410

$
3,105,912

$
3,083,767

 
 
 
Allowance as a percent of loans outstanding
0.53
 %
0.59
%
0.6
%
0.63
%
0.62
%
 
 
 
Allowance as a percent of non-performing loans
127.6
 %
189.9
%
178.4
%
182.8
%
177.6
%
 
 
 
 
 
 
 
 
 
 
 
 
Average loans outstanding
$
3,138,146

$
3,133,804

$
3,110,084

$
3,089,793

$
3,073,255

 
$
3,135,987

$
3,064,665

Net charge-offs (annualized) as a percent of average loans outstanding
(0.07
)%
0.08
%
0.15
%
0.12
%
0.09
%
 
%
0.12
%









CITY HOLDING COMPANY AND SUBSIDIARIES
Asset Quality Information, Continued
(Unaudited) ($ in 000s)
 
June 30,
March 31,
December 31,
September 30,
June 30,
 
2018
2018
2017
2017
2017
Nonaccrual Loans
 
 
 
 
 
Residential real estate
$
3,783

$
3,331

$
2,814

$
2,556

$
1,608

Home equity
168

135

168

92

153

Commercial and industrial
863

1,063

1,345

1,325

1,571

Commercial real estate
7,707

5,061

5,970

6,700

7,250

Consumer
557





   Total nonaccrual loans
13,078

9,590

10,297

10,673

10,582

Accruing loans past due 90 days or more
145

91

262

22

150

   Total non-performing loans
13,223

9,681

10,559

10,695

10,732

Other real estate owned
3,636

3,912

3,585

3,995

4,204

   Total non-performing assets
$
16,859

$
13,593

$
14,144

$
14,690

$
14,936

 
 
 
 
 
 
Non-performing assets as a percent of loans and other real estate owned
0.53
%
0.43
%
0.45
%
0.47
%
0.48
%
 
 
 
 
 
 
Past Due Loans
 
 
 
 
 
Residential real estate
$
5,998

$
5,641

$
6,718

$
5,295

$
5,648

Home equity
583

616

851

873

628

Commercial and industrial
624

61

692

304

259

Commercial real estate
402

1,520

2,086

520

819

Consumer
34

21

42

26

70

DDA overdrafts
525

432

575

551

527

   Total past due loans
$
8,166

$
8,291

$
10,964

$
7,569

$
7,951

 
 
 
 
 
 
Total past due loans as a percent of loans outstanding
0.26
%
0.26
%
0.35
%
0.24
%
0.26
%
 
 
 
 
 
 
Troubled Debt Restructurings ("TDRs") (period-end)
 
 
 
 
 
Accruing:
 
 
 
 
 
   Residential real estate
$
20,424

$
20,786

$
21,005

$
20,741

$
20,647

   Home equity
3,156

3,015

3,047

2,947

3,146

   Commercial and industrial
119

125

135

31

35

   Commercial real estate
8,279

8,324

8,381

8,427

8,483

   Consumer





     Total accruing TDRs
$
31,978

$
32,250

$
32,568

$
32,146

$
32,311







Non-Accruing
 
 
 
 
 
   Residential real estate
$
307

$
256

84

$
47

$
154

   Home equity
40

40

50



   Commercial and industrial





   Commercial real estate





   Consumer





     Total non-accruing TDRs
$
347

$
296

$
134

$
47

$
154

 
 
 
 
 
 
Total TDRs
$
32,325

$
32,546

$
32,702

$
32,193

$
32,465

 
 
 
 
 
 







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

 
Three Months Ended
 
June 30, 2018
March 31, 2018
June 30, 2017
 
Average
 
Yield/
Average
 
Yield/
Average
 
Yield/
 
Balance
Interest
Rate
Balance
Interest
Rate
Balance
Interest
Rate
Assets:
 
 
 
 
 
 
 
 
 
Loan portfolio (1):
 
 
 
 
 
 
 
 
 
Residential real estate (2)
$
1,602,103

$
16,951

4.24
%
$
1,603,911

$
16,479

4.17
%
$
1,589,748

$
15,732

3.97
%
Commercial, financial, and agriculture (2)
1,501,618

16,578

4.43
%
1,496,817

15,608

4.23
%
1,448,535

14,562

4.03
%
Installment loans to individuals (2), (3)
34,425

516

6.01
%
33,076

504

6.18
%
34,972

535

6.14
%
Previously securitized loans (4)
 ***
246

 ***
 ***
327

 ***
 ***
285

 ***
Total loans
3,138,146

34,291

4.38
%
3,133,804

32,918

4.26
%
3,073,255

31,114

4.06
%
Securities:
 
 
 
 
 
 
 
 
 
Taxable
541,990

4,117

3.05
%
536,714

3,981

3.01
%
478,179

3,480

2.92
%
Tax-exempt (5)
91,135

898

3.95
%
91,722

890

3.94
%
89,320

1,056

4.74
%
Total securities
633,125

5,015

3.18
%
628,436

4,871

3.14
%
567,499

4,536

3.21
%
Deposits in depository institutions
29,164

61

0.84
%
29,648

42

0.57
%
28,961

17

0.24
%
Total interest-earning assets
3,800,435

39,367

4.15
%
3,791,888

37,831

4.05
%
3,669,715

35,667

3.90
%
Cash and due from banks
92,426

 
 
71,480

 
 
132,331

 
 
Premises and equipment, net
72,889

 
 
72,716

 
 
73,555

 
 
Other assets
255,719

 
 
245,721

 
 
248,716

 
 
Less: Allowance for loan losses
(18,215
)
 
 
(19,420
)
 
 
(19,809
)
 
 
       Total assets
$
4,203,254

 
 
$
4,162,385

 
 
$
4,104,508

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
Interest-bearing demand deposits
$
787,554

$
445

0.23
%
$
782,499

$
357

0.19
%
$
710,091

$
160

0.09
%
Savings deposits
817,187

453

0.22
%
801,504

341

0.17
%
879,643

352

0.16
%
Time deposits (2)
1,123,261

4,020

1.44
%
1,096,157

3,628

1.34
%
1,066,047

3,147

1.18
%
Short-term borrowings
208,939

459

0.88
%
236,605

460

0.79
%
199,224

187

0.38
%
Long-term debt
16,495

230

5.59
%
16,495

211

5.19
%
16,495

189

4.60
%
   Total interest-bearing liabilities
2,953,436

5,607

0.76
%
2,933,260

4,997

0.69
%
2,871,500

4,035

0.56
%
Noninterest-bearing demand deposits
704,546

 
 
681,150

 
 
703,259

 
 
Other liabilities
45,933

 
 
46,426

 
 
37,633

 
 
Stockholders' equity
499,339

 
 
501,549

 
 
492,116

 
 
Total liabilities and
 
 
 
 
 
 
 
 
 
stockholders' equity
$
4,203,254

 
 
$
4,162,385

 
 
$
4,104,508

 
 
Net interest income
 
$
33,760

 
 
$
32,834

 
 
$
31,632

 
Net yield on earning assets
 
 
3.56
%
 
 
3.51
%
 
 
3.46
%
 
 
 
 
 
 
 
 
 
 
(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
 
$
130

 
 
$
110

 
 
$
144

 
Commercial, financial, and agriculture
 
238

 
 
150

 
 
496

 
Installment loans to individuals
 
4

 
 
10

 
 
5

 
 
 
$
372

 
 
$
270

 
 
$
645

 
 
 
 
 
 
 
 
 
 
 
(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 21% for the period ending June 30, 2018 & March 31, 2018 and 35% for the period ending June 30, 2017.






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

 
Six Months Ended
 
June 30, 2018
June 30, 2017
 
Average
 
Yield/
Average
 
Yield/
 
Balance
Interest
Rate
Balance
Interest
Rate
Assets:
 
 
 
 
 
 
Loan portfolio (1):
 
 
 
 
 
 
Residential real estate (2)
$
1,601,554

$
33,431

4.21
%
$
1,590,528

$
31,211

3.96
%
Commercial, financial, and agriculture (2)
1,500,698

32,186

4.33
%
1,438,764

28,146

3.94
%
Installment loans to individuals (2), (3)
33,735

1,020

6.1
%
35,374

1,130

6.44
%
Previously securitized loans (4)
 ***
573

 ***
 ***
732

 ***
Total loans
3,135,987

67,210

4.32
%
3,064,665

61,219

4.03
%
Securities:
 
 
 
 
 
 
Taxable
539,366

8,098

3.03
%
468,292

6,924

2.98
%
Tax-exempt (5)
91,427

1,789

3.95
%
87,065

2,075

4.81
%
Total securities
630,793

9,887

3.16
%
555,357

8,999

3.27
%
Deposits in depository institutions
29,405

102

0.7
%
22,927

20

0.18
%
Total interest-earning assets
3,796,185