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Section 1: 8-K (8-K, CHCO 3Q2018 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)
October 22, 2018

395427434_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 October 22, 2018, City Holding Company (“the Company”) issued a news release, attached as Exhibit 99.1, announcing the Company’s earnings results for the third quarter ended September 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 October 22, 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: October 22, 2018


(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1, PRESS RELEASE CHCO 3Q2018 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
Issuing Company: City Holding Company
Registration Statement on Form S-4 No. 333-226870
Subject Company: Poage Bankshares, Inc.
NEWS RELEASE

For Immediate Release
October 22, 2018

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

City Holding Company Announces Third Quarter Results

Charleston, West Virginia - City Holding Company (“Company” or “City”) (NASDAQ:CHCO), a $4.4 billion bank holding company headquartered in Charleston, today announced quarterly net income of $20.7 million and diluted earnings of $1.33 per share.

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

Return on assets and return on tangible equity of 1.90% and 18.9%, respectively.
Reported net interest income increased $3.5 million, or 11.0%, from the quarter ended September 30, 2017, while net interest income exclusive of accretion from fair value adjustments increased $3.6 million, or 11.4%, from the quarter ended September 30, 2017.
Primarily due to continued improvement in the Company’s historical loss rates, no provision for loan losses was recorded in the third quarter of 2018.

Net Interest Income

The Company’s net interest income increased from $33.6 million during the second quarter of 2018 to $35.6 million during the third quarter of 2018. The Company’s tax equivalent net interest income increased $1.9 million, or 5.9%, from $33.8 million during the second quarter of 2018 to $35.7 million during the third quarter of 2018. During the quarter ended September 30, 2018, certain commercial loan customers prepaid loan balances, which resulted in the Company recognizing $1.3 million in prepayment fees that are reflected in interest income. In addition, higher yields on commercial and residential real estate loans increased net interest income $0.7 million and $0.5 million, respectively, from the quarter ended June 30, 2018. Interest income from deposits in depository institutions also increased $0.9 million from the quarter ended June 30, 2018 as the Company elected to improve its on-balance sheet liquidity during the quarter ended September 30, 2018. These increases were partially offset by increased interest expense on short-term borrowings to fund the improved on-balance sheet liquidity ($1.0 million) and increased interest expense as a result of higher interest rates on interest bearing liabilities ($0.5 million). The Company’s reported net interest margin decreased slightly from 3.56% for the second quarter of 2018 to 3.54% for the third quarter of 2018. Excluding the favorable impact of the accretion from the fair value adjustments, the net interest margin would have been 3.52% for the quarter ended June 30, 2018 and 3.51% for the quarter ended September 30, 2018.






On September 26, 2018, the Board of Directors of the Company authorized repayment of its Junior Subordinated Deferrable Interest Debentures issued by the Company and held by City Holding Capital Trust III at a price of 100.00% of the principal amount. Pending all required regulatory approvals, City Holding Capital Trust III will repay its Capital Securities on December 17, 2018 at a price of 100.00% of the principal amount. These securities were issued on March 27, 2008 and were callable in whole any time after June 15, 2013. The Company estimates that the redemption of the debentures and trust preferred securities will reduce the Company’s interest expense by approximately $1.0 million annually through 2038. After giving effect to the redemption of the trust preferred securities, the Company anticipates it will remain “Well Capitalized” as defined by the banking regulators (Total Risk-based capital of at least 10%, Tier I Capital ratio of at least 6% and a leverage ratio of at least 5%).

Credit Quality

The Company’s ratio of nonperforming assets to total loans and other real estate owned improved modestly from 0.53% at June 30, 2018 to 0.50% at September 30, 2018. Total nonperforming assets decreased from $16.9 million at June 30, 2018 to $15.7 million at September 30, 2018. Total past due loans decreased from $8.2 million, or 0.26% of total loans outstanding, at June 30, 2018 to $6.9 million, or 0.22% of total loans outstanding, at September 30, 2018.

As a result of the Company’s quarterly analysis of the adequacy of the Allowance for Loan Losses (“ALLL”), the Company recorded no provision for loan losses in the third quarter of 2018, compared to $1.4 million for the comparable period in 2017 and a recovery of $2.1 million for the second quarter of 2018. The Company did not record a provision for loan losses in the third quarter of 2018 due to continued improvement in the Company’s historical loss rates used to compute the allowance not specifically allocated to individual credits and changes in the quality of the portfolio in general. During September 2018, Hurricane Florence brought historic flooding to many parts of North and South Carolina. The Company has a loan production office in Charlotte, NC and has commercial real estate loans on properties in areas affected by the flooding. Based on management’s review, the Company does not anticipate any losses related to this flooding. The Company will work closely with any of its customers to help ensure the best outcome for all parties. 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 $14.6 million for the third quarter of 2017 to $15.8 million for the third quarter of 2018. This increase was mainly due to an increase in other income of $0.4 million due to unrealized fair market value gains in equity securities, an increase in bankcard revenues of $0.4 million, or 9.0%, and an increase in service charges of $0.2 million, or 2.5%.
  
Non-interest Expenses

Non-interest expenses increased $0.7 million, from $24.3 million in the third quarter of 2017 to $25.0 million in the third quarter of 2018. This increase was primarily due to an increase in salaries and employee benefits of $1.0 million due to annual salary adjustments. This increase was partially offset by a decrease in other expenses of $0.3 million.
 






Balance Sheet Trends

Loan balances have increased $19.3 million (0.6%) from December 31, 2017 to $3.15 billion at September 30, 2018. Residential real estate loans increased $17.5 million (1.2%), commercial and industrial loans increased $5.3 million (2.6%) and home equity junior lien loans increased $4.0 million (2.9%). These increases were partially offset by a decrease in commercial real estate loans ($9.5 million).

Total average depository balances remained stable at $3.43 billion during the quarter ended June 30, 2018 and the quarter ended September 30, 2018. The Company experienced an increase in time deposits ($18.2 million) that was essentially offset by decreases in interest-bearing demand deposits ($8.9 million) and noninterest-bearing demand deposits ($7.1 million).

Income Tax Expense

The Company’s effective income tax rate for the third quarter of 2018 was 21.3% compared to 40.2% for the year ended December 31, 2017, and 33.5% for the quarter ended September 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 third 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 91.4% and the loan to asset ratio was 71.2% at September 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 51.9% of assets at September 30, 2018. Time deposits fund 26.0% of assets at September 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 declined from 10.5% at December 31, 2017 to 10.0% at September 30, 2018. At September 30, 2018, City National Bank’s Leverage Ratio was 9.39%, its Common Equity Tier I ratio was 14.00%, its Tier I Capital ratio was 14.00%, and its Total Risk-Based Capital ratio was 14.59%. These regulatory capital ratios are significantly above levels required to be considered “well capitalized,” which is the highest possible regulatory designation.

On September 26, 2018, the Board approved a quarterly cash dividend of 53 cents per share payable October 31, 2018, to shareholders of record as of October 15, 2018. This dividend increase represents a 15.2% increase from the 46 cents per share paid on July 31, 2018. During the quarter ended September 30, 2018, the Company repurchased 7,000 common shares at a weighted average price of $77.18 per share as part of a one million share repurchase plan authorized by the Board of Directors in September 2014. As of September 30, 2018, the Company could repurchase approximately 181,000 shares under the current plan.

City Holding Company is the parent company of City National Bank of West Virginia. City National Bank operates 87 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, Town 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. City has received all regulatory approvals for both Poage and Farmers Deposit. Consummation of the respective mergers is subject to approval by the shareholders of Poage and Farmers Deposit and the completion of other customary closing conditions. The Poage and Farmers Deposit transactions are not conditional upon each other.

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 has filed a registration statement on Form S-4 and will file other documents regarding the proposed transaction referenced in this press release related to the Poage merger 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 includes a proxy statement/prospectus, which was sent to the shareholders of Poage in advance of its special meeting 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 on Form 10-K, their Quarterly Reports on Form 10-Q, their Current Reports on 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. 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; (14) the businesses of City Holding Company, City National Bank of West Virginia, Poage Bankshares, Inc., Town Square Bank, Farmer's Deposit Bancorp, Inc. and Farmers Deposit Bank may not integrate successfully or such integration may take longer to accomplish than expected (15) the expected cost savings and any revenue synergies from the merger of City Holding Company, City National Bank of West Virginia, Poage Bankshares, Inc., Town Square Bank, Farmer's Deposit Bancorp, Inc. and Farmers Deposit Bank may not be fully realized within the expected time frames; (16) the disruption from the merger of City Holding Company, City National Bank of West Virginia, Poage Bankshares, Inc., Town Square Bank, Farmer's Deposit Bancorp, Inc. may make it more difficult to maintain relationships with clients, associates, or suppliers; and (17) 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 September 30, 2018 Form 10-Q. The Company will continue to evaluate the impact of any subsequent events on the preliminary September 30, 2018 results and will adjust the amounts if necessary.










CITY HOLDING COMPANY AND SUBSIDIARIES
Financial Highlights
(Unaudited)
 
Three Months Ended
 
Nine Months Ended
 
September 30,
June 30,
March 31,
December 31,
September 30,
 
September 30,
September 30,
 
2018
2018
2018
2017
2017
 
2018
2017
 
 
 
 
 
 
 
 
 
Earnings
 
 
 
 
 
 
 
 
Net Interest Income (FTE)
$
35,745

$
33,760

$
32,834

$
32,760

$
32,384

 
$
102,339

$
94,822

Net Income available to common shareholders
20,692

20,979

17,616

9,669

13,932

 
59,283

44,646

 
 
 
 
 
 
 
 
 
Per Share Data
 
 
 
 
 
 
 
 
Earnings per share available to common shareholders:
 
 
 
 
 
 
 
 
   Basic
$
1.34

$
1.36

$
1.13

$
0.62

$
0.89

 
$
3.82

$
2.87

   Diluted
1.33

1.35

1.13

0.62

0.89

 
3.82

2.86

Weighted average number of shares:
 
 
 
 
 
 
 
 
   Basic
15,340

15,326

15,414

15,472

15,485

 
15,360

15,391

   Diluted
15,358

15,345

15,436

15,497

15,505

 
15,380

15,415

Period-end number of shares
15,449

15,452

15,439

15,618

15,618

 
15,449

15,618

Cash dividends declared
$
0.53

$
0.46

$
0.46

$
0.46

$
0.44

 
$
1.45

$
1.32

Book value per share (period-end)
33.14

32.60

31.86

32.17

32.03

 
33.14

32.03

Tangible book value per share (period-end)
28.08

27.53

26.78

27.14

26.99

 
28.08

26.99

Market data:
 
 
 
 
 
 
 
 
   High closing price
$
82.79

$
78.44

$
72.87

$
73.98

$
71.91

 
$
82.79

$
72.78

   Low closing price
75.54

67.95

65.03

65.5

59.94

 
65.03

59.94

   Period-end closing price
76.80

75.23

68.56

67.47

71.91

 
76.80

71.91

   Average daily volume
54

60

56

66

54

 
57

55

Treasury share activity:
 
 
 
 
 
 
 
 
      Treasury shares repurchased
7

10

204



 
221


      Average treasury share repurchase price
$
77.18

$
69.26

$
68.5

$

$

 
$
68.81

$

Common share issuance:
 
 
 
 
 
 
 
 
      Common shares issued (in thousands)





 

441

      Average common share issue price (a)
$

$

$

$

$

 
$

$
64.48

 
 
 
 
 
 
 
 
 
Key Ratios (percent)
 
 
 
 
 
 
 
 
Return on average assets
1.90
%
2.00
%
1.69
%
0.94
%
1.37
%
 
1.86
%
1.46
%
Return on average tangible equity
18.90
%
19.90
%
16.70
%
9.00
%
13.20
%
 
18.50
%
14.60
%
Yield on interest earning assets
4.25
%
4.15
%
4.05
%
3.95
%
3.92
%
 
4.13
%
3.90
%
Cost of interest bearing liabilities
0.92
%
0.76
%
0.69
%
0.64
%
0.61
%
 
0.79
%
0.57
%
Net Interest Margin
3.54
%
3.52
%
3.51
%
3.46
%
3.45
%
 
3.52
%
3.46
%
Non-interest income as a percent of total revenue
30.70
%
31.70
%
30.70
%
32.20
%
31.30
%
 
31.10
%
31.80
%
Efficiency Ratio (a)
48.60
%
50.40
%
52.60
%
47.70
%
51.80
%
 
50.50
%
52.90
%





Price/Earnings Ratio (b)
14.37

13.88

15.17

27.30

20.20

 
15.07

18.80

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Capital (period-end)
 
 
 
 
 
 
 
 
Average Shareholders' Equity to Average Assets
11.81
%
11.88
%
12.05
%
12.34
%
12.29
%
 
 
 
Tangible equity to tangible assets
9.99
%
9.90
%
10.03
%
10.45
%
10.49
%
 
 
 
Consolidated City Holding Company risk based capital ratios (c):
 
 
 
 
 
 
 
 
   CET I
15.94
%
15.49
%
15.08
%
15.10
%
15.08
%
 
 
 
   Tier I
16.49
%
16.05
%
15.64
%
15.66
%
15.65
%
 
 
 
   Total
17.08
%
16.65
%
16.31
%
16.34
%
16.40
%
 
 
 
   Leverage
11.01
%
11.13
%
10.90
%
11.00
%
11.05
%
 
 
 
City National Bank risk based capital ratios (c):
 
 
 
 
 
 
 
 
   CET I
14.00
%
13.26
%
12.59
%
11.93
%
12.74
%
 
 
 
   Tier I
14.00
%
13.26
%
12.59
%
11.93
%
12.74
%
 
 
 
   Total
14.59
%
13.87
%
13.25
%
12.61
%
13.44
%
 
 
 
   Leverage
9.39
%
9.24
%
8.81
%
8.43
%
9.04
%
 
 
 
 
 
 
 
 
 
 
 
 
Other
 
 
 
 
 
 
 
 
Branches
87

86

86

86

86

 
 
 
FTE
846

849

832

839

835

 
 
 
 
 
 
 
 
 
 
 
 
   Assets per FTE
$
5,226

$
5,152

$
5,048

$
4,925

$
4,910

 
 
 
   Deposits per FTE
4,070

4,030

4,143

3,952

3,900

 
 
 
 
 
 
 
 
 
 
 
 
(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) September 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
 
Nine Months Ended
 
September 30,
June 30,
March 31,
December 31,
September 30,
 
September 30,
September 30,
 
2018
2018
2018
2017
2017
 
2018
2017
Interest Income
 
 
 
 
 
 
 
 
   Interest and fees on loans
$
36,872

$
34,292

$
32,918

$
32,529

$
32,004

 
$
104,082

$
93,223

   Interest on investment securities:
 
 
 
 
 
 
 
 
     Taxable
4,216

4,117

3,981

3,797

3,666

 
12,314

10,591

     Tax-exempt
701

710

703

692

665

 
2,114

2,014

   Interest on deposits in depository institutions
940

61

42

35

31

 
1,043

51

Total Interest Income
42,729

39,180

37,644

37,053

36,366

 
119,553

105,879

 
 
 
 
 
 
 
 
 
Interest Expense
 
 
 
 
 
 
 
 
   Interest on deposits
5,497

4,918

4,326

3,941

3,796

 
14,741

10,885

   Interest on short-term borrowings
1,435

459

460

522

349

 
2,354

693

   Interest on long-term debt
239

230

211

201

195

 
680

565

Total Interest Expense
7,171

5,607

4,997

4,664

4,340

 
17,775

12,143

Net Interest Income
35,558

33,573

32,647

32,389

32,026

 
101,778

93,736

   Provision for loan losses
(27
)
(2,064
)
181

422

1,393

 
(1,910
)
2,584

Net Interest Income After Provision for Loan Losses
35,585

35,637

32,466

31,967

30,633

 
103,688

91,152

 
 
 
 
 
 
 
 
 
Non-Interest Income
 
 
 
 
 
 
 
 
   Gains on sale of investment securities



200


 

4,276

   Service charges
7,598

7,323

6,862

7,355

7,415

 
21,783

21,219

   Bankcard revenue
4,677

4,532

4,334

4,316

4,291

 
13,543

12,804

   Trust and investment management fee income
1,579

1,645

1,568

1,800

1,471

 
4,792

4,469

   Bank owned life insurance
813

722

821

1,241

774

 
2,356

2,972

   Other income
1,086

1,389

907

655

660

 
3,382

2,303

Total Non-Interest Income
15,753

15,611

14,492

15,567

14,611

 
45,856

48,043

 
 
 
 
 
 
 
 
 
Non-Interest Expense
 
 
 
 
 
 
 
 
   Salaries and employee benefits
13,576

13,551

13,241

11,845

12,580

 
40,368

38,783

   Occupancy related expense
2,323

2,346

2,404

2,195

2,426

 
7,073

7,361

   Equipment and software related expense
1,965

1,895

1,831

1,897

1,940

 
5,691

5,835

   FDIC insurance expense
315

313

315

318

328

 
943

1,031

   Advertising
808

849

787

711

689

 
2,444

2,203

   Bankcard expenses
1,134

1,064

1,076

960

1,051

 
3,274

2,964

   Postage, delivery, and statement mailings
537

515

578

518

517

 
1,630

1,576

   Office supplies
364

329

313

355

377

 
1,006

1,082






   Legal and professional fees
453

475

450

563

504

 
1,378

1,393

   Telecommunications
408

441

500

517

494

 
1,349

1,470

   Repossessed asset losses, net of expenses
156

112

370

145

107

 
638

589

   Other expenses
3,001

3,021

3,072

2,869

3,296

 
9,098

8,799

Total Non-Interest Expense
25,040

24,911

24,937

22,893

24,309

 
74,892

73,086

Income Before Income Taxes
26,298

26,337

22,021

24,641

20,935

 
74,652

66,109

   Income tax expense
5,606

5,358

4,405

14,972

7,003

 
15,369

21,463

Net Income Available to Common Shareholders
$
20,692

$
20,979

$
17,616

$
9,669

$
13,932

 
$
59,283

$
44,646

 
 
 
 
 
 
 
 
 
Distributed earnings allocated to common shareholders
$
8,109

$
7,039

$
7,023

$
7,106

$
6,797

 
$
22,184

$
20,391

Undistributed earnings allocated to common shareholders
12,382

13,729

10,398

2,454

6,981

 
36,522

23,767

Net earnings allocated to common shareholders
$
20,491

$
20,768

$
17,421

$
9,560

$
13,778

 
$
58,706

$
44,158

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average common shares outstanding
15,340

15,326

15,414

15,472

15,485

 
15,360

15,391

Shares for diluted earnings per share
15,358

15,345

15,436

15,497

15,505

 
15,380

15,415

 
 
 
 
 
 
 
 
 
Basic earnings per common share
$
1.34

$
1.36

$
1.13

$
0.62

$
0.89

 
$
3.82

$
2.87

Diluted earnings per common share
$
1.33

$
1.35

$
1.13

$
0.62

$
0.89

 
$
3.82

$
2.86







CITY HOLDING COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
($ in 000s)
 
(Unaudited)
(Unaudited)
(Unaudited)
 
(Unaudited)
 
September 30,
June 30,
March 31,
December 31,
September 30,
 
2018
2018
2018
2017
2017
Assets
 
 
 
 
 
Cash and due from banks
$
49,806

$
43,466

$
39,340

$
54,450

$
54,281

Interest-bearing deposits in depository institutions
256,104

222,058

84,438

28,058

28,884

Cash and cash equivalents
305,910

265,524

123,778

82,508

83,165

 
 
 
 
 
 
Investment securities available-for-sale, at fair value
563,003

552,603

545,628

550,389

525,633

Investment securities held-to-maturity, at amortized cost
57,812

60,030

62,277

64,449

66,989

Other securities
28,875

28,920

22,165

14,147

15,988

Total investment securities
649,690

641,553

630,070

628,985

608,610

 
 
 
 
 
 
Gross loans
3,146,697

3,155,468

3,137,681

3,127,410

3,105,912

Allowance for loan losses
(16,311
)
(16,876
)
(18,381
)
(18,836
)
(19,554
)
Net loans
3,130,386

3,138,592

3,119,300

3,108,574

3,086,358

 
 
 
 
 
 
Bank owned life insurance
105,372

104,773

104,052

103,440

102,706

Premises and equipment, net
72,484

72,482

72,920

72,682

72,334

Accrued interest receivable
11,449

9,348

9,528

9,223

9,236

Net deferred tax assets
15,653

14,528

14,467

11,913

22,355

Intangible assets
78,215

78,342

78,468

78,595

78,730

Other assets
51,643

49,241

47,432

36,361

36,060

Total Assets
$
4,420,802

$
4,374,383

$
4,200,015

$
4,132,281

$
4,099,554

 
 
 
 
 
 
Liabilities
 
 
 
 
 
Deposits:
 
 
 
 
 
   Noninterest-bearing
$
672,042

$
684,614

$
703,209

$
666,639

$
669,876

   Interest-bearing:
 
 
 
 
 
   Demand deposits
802,490

785,933

816,976

769,245

711,121

   Savings deposits
821,390

817,547

816,245

796,275

799,592

   Time deposits
1,147,709

1,133,684

1,110,532

1,083,475

1,075,945

Total deposits
3,443,631

3,421,778

3,446,962

3,315,634

3,256,534

Short-term borrowings
 
 
 
 
 
Federal Funds purchased
170,000

181,375


54,000

79,800

Customer repurchase agreements
220,124

196,635

195,375

198,219

201,664

Long-term debt
16,495

16,495

16,495

16,495

16,495

Other liabilities
58,526

54,346

49,306

45,426

44,746

Total Liabilities
3,908,776

3,870,629

3,708,138

3,629,774

3,599,239

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 





Stockholders' Equity
 
 
 
 
 
Preferred stock





Common stock
47,619

47,619

47,619

47,619

47,619

Capital surplus
140,450

140,091

140,547

140,960

140,381

Retained earnings
484,017

471,515

457,650

444,481

441,001

Cost of common stock in treasury
(136,783
)
(136,520
)
(137,420
)
(124,909
)
(124,909
)
Accumulated other comprehensive loss:
 
 
 
 
 
   Unrealized gain on securities available-for-sale
(18,244
)
(13,918
)
(11,486
)
(611
)
883

   Underfunded pension liability
(5,033
)
(5,033
)
(5,033
)
(5,033
)
(4,660
)
Total Accumulated Other Comprehensive Loss
(23,277
)
(18,951
)
(16,519
)
(5,644
)
(3,777
)
Total Stockholders' Equity
512,026

503,754

491,877

502,507

500,315

Total Liabilities and Stockholders' Equity
$
4,420,802

$
4,374,383

$
4,200,015

$
4,132,281

$
4,099,554

 
 
 
 
 
 
Regulatory Capital
 
 
 
 
 
Total CET 1 capital
$
457,580

$
444,869

$
430,044

$
430,154

$
426,057

Total tier 1 capital
473,580

460,869

446,044

446,154

442,057

Total risk-based capital
490,307

478,255

464,936

465,292

463,198

Total risk-weighted assets
2,871,241

2,871,561

2,851,330

2,842,453

2,824,751








CITY HOLDING COMPANY AND SUBSIDIARIES
Loan Portfolio
(Unaudited) ($ in 000s)
 
September 30,
June 30,
March 31,
December 31,
September 30,
 
2018
2018
2018
2017
2017
 
 
 
 
 
 
Residential real estate (1)
$
1,485,823

$
1,472,916

$
1,465,215

$
1,468,278

$
1,465,942

Home equity - junior liens
143,540

139,245

138,477

139,499

139,702

Commercial and industrial
213,815

213,687

204,592

208,484

204,722

Commercial real estate (2)
1,268,052

1,294,489

1,296,304

1,277,576

1,260,906

Consumer
31,869

31,137

29,570

29,162

30,323

DDA overdrafts
3,598

3,994

3,523

4,411

4,317

Gross Loans
$
3,146,697

$
3,155,468

$
3,137,681

$
3,127,410

$
3,105,912

 
 
 
 
 
 
Construction loans included in:
 
 
 
 
 
(1) - Residential real estate loans
$
17,628

$
21,662

$
26,610

$
25,270

$
19,849

(2) - Commercial real estate loans
24,110

28,567

30,857

28,871

24,318

 
 
 
 
 
 
 
 
 
 
 
 
Secondary Mortgage Loan Activity
 
 
 
 
 
Mortgage loans originated
$
3,417

$
3,263

$
2,606

$
2,593

$
4,474

Mortgage loans sold
3,590

3,137

2,874

2,975

4,732

Mortgage loans gain on loans sold
86

84

79

79

128







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

 
Three Months Ended
 
Nine Months Ended
 
September 30,
June 30,
March 31,
December 31,
September 30,
 
September 30,
September 30,
 
2018
2018
2018
2017
2017
 
2018
2017
Allowance for Loan Losses
 
 
 
 
 
 
 
 
Balance at beginning of period
$
16,876

$
18,381

$
18,836

$
19,554

$
19,063

 
$
18,836

$
19,730

 
 
 
 
 
 
 
 
 
Charge-offs:
 
 
 
 
 
 
 
 
Commercial and industrial

(385
)
(339
)
(250
)
(40
)
 
(724
)
(150
)
Commercial real estate
(74
)
(118
)
(157
)
(156
)
(282
)
 
(349
)
(564
)
Residential real estate
(244
)
(96
)
(124
)
(342
)
(411
)
 
(464
)
(1,295
)
Home equity
(108
)
(33
)
(78
)
(147
)
(17
)
 
(219
)
(256
)
Consumer
(206
)
(255
)
(99
)
(13
)
(18
)
 
(560
)
(47
)
DDA overdrafts
(704
)
(636
)
(636
)
(725
)
(718
)
 
(1,976
)
(1,989
)
Total charge-offs
(1,336
)
(1,523
)
(1,433
)
(1,633
)
(1,486
)
 
(4,292
)
(4,301
)
 
 
 
 
 
 
 
 
 
Recoveries:
 
 
 
 
 
 
 
 
Commercial and industrial
147

1,476

2

1

2

 
1,625

57

Commercial real estate
166

149

223

20

60

 
538

92

Residential real estate
116

53

106

8

130

 
275

286

Home equity




45

 

45

Consumer
25

59

46

17

21

 
130

46

DDA overdrafts
344

345

420

447

326

 
1,109

1,016

Total recoveries
798

2,082

797

493

584

 
3,677

1,542

 
 
 
 
 
 
 
 
 
Net charge-offs
(538
)
559

(636
)
(1,140
)
(903
)
 
(615
)
(2,759
)
Provision for (recovery of) acquired loans
(27
)
(13
)

122


 
(40
)
39

Provision for loan losses

(2,051
)
181

300

1,393

 
(1,870
)
2,544

Balance at end of period
$
16,311

$
16,876

$
18,381

$
18,836

$
19,554

 
$
16,311

$
19,554

 
 
 
 
 
 
 
 
 
Loans outstanding
$
3,146,697

$
3,155,468

$
3,137,681

$
3,127,410

$
3,105,912

 
 
 
Allowance as a percent of loans outstanding
0.52
%
0.53
 %
0.59
%
0.60
%
0.63
%
 
 
 
Allowance as a percent of non-performing loans
142.1
%
127.6
 %
189.9
%
178.4
%
182.8
%
 
 
 
 
 
 
 
 
 
 
 
 
Average loans outstanding
$
3,149,320

$
3,138,146

$
3,133,804

$
3,110,084

$
3,089,793

 
$
3,140,480

$
3,073,132

Net charge-offs (annualized) as a percent of average loans outstanding
0.07
%
(0.07
)%
0.08
%
0.15
%
0.12
%
 
0.03
%
0.12
%









CITY HOLDING COMPANY AND SUBSIDIARIES
Asset Quality Information, Continued
(Unaudited) ($ in 000s)
 
September 30,
June 30,
March 31,
December 31,
September 30,
 
2018
2018
2018
2017
2017
Nonaccrual Loans
 
 
 
 
 
Residential real estate
$
3,029

$
3,783

$
3,331

$
2,814

$
2,556

Home equity

168

135

168

92

Commercial and industrial
818

863

1,063

1,345

1,325

Commercial real estate
7,599

7,707

5,061

5,970

6,700

Consumer
1

557




   Total nonaccrual loans
11,447

13,078

9,590

10,297

10,673

Accruing loans past due 90 days or more
35

145

91

262

22

   Total non-performing loans
11,482

13,223

9,681

10,559

10,695

Other real estate owned
4,259

3,636

3,912

3,585

3,995

   Total non-performing assets
$
15,741

$
16,859

$
13,593

$
14,144

$
14,690

 
 
 
 
 
 
Non-performing assets as a percent of loans and other real estate owned
0.50
%
0.53
%
0.43
%
0.45
%
0.47
%
 
 
 
 
 
 
Past Due Loans
 
 
 
 
 
Residential real estate
$
4,657

$
5,998

$
5,641

$
6,718

$
5,295

Home equity
468

583

616

851

873

Commercial and industrial
187

624

61

692

304

Commercial real estate
934

402

1,520

2,086

520

Consumer
39

34

21

42

26

DDA overdrafts
582

525

432

575

551

   Total past due loans
$
6,867

$
8,166

$
8,291

$
10,964

$
7,569

 
 
 
 
 
 
Total past due loans as a percent of loans outstanding
0.22
%
0.26
%
0.26
%
0.35
%
0.24
%
 
 
 
 
 
 
Troubled Debt Restructurings ("TDRs") (period-end)
 
 
 
 
 
Accruing:
 
 
 
 
 
   Residential real estate
$
20,414

$
20,424

$
20,786

$
21,005

$
20,741

   Home equity
2,941

3,156

3,015

3,047

2,947

   Commercial and industrial
108

119

125

135

31

   Commercial real estate
8,231

8,279

8,324

8,381

8,427

   Consumer





     Total accruing TDRs
$
31,694

$
31,978

$
32,250

$
32,568

$
32,146







Non-Accruing
 
 
 
 
 
   Residential real estate
$
175

$
307

256

$
84

$
47

   Home equity

40

40

50


   Commercial and industrial





   Commercial real estate





   Consumer





     Total non-accruing TDRs
$
175

$
347

$
296

$
134

$
47

 
 
 
 
 
 
Total TDRs
$
31,869

$
32,325

$
32,546

$
32,702

$
32,193

 
 
 
 
 
 







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

 
Three Months Ended
 
September 30, 2018
June 30, 2018
September 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)
$
1,618,829

$
17,653

4.33
%
$
1,602,103

$
16,951

4.24
%
$
1,598,037

$
16,117

4.00
%
Commercial, financial, and agriculture (2)
1,494,666

18,460

4.90
%
1,501,618

16,578

4.43
%
1,457,821

14,975

4.08
%
Installment loans to individuals (2), (3)
35,825

584

6.47
%
34,425

516

6.01
%
33,935

558

6.52
%
Previously securitized loans (4)
 ***
175

 ***
 ***
246

 ***
 ***
353

 ***
Total loans
3,149,320

36,872

4.64
%
3,138,146

34,291

4.38
%
3,089,793

32,003

4.11
%
Securities:
 
 
 
 
 
 
 
 
 
Taxable
554,157

4,216

3.02
%
541,990

4,117

3.05
%
507,106

3,666

2.87
%
Tax-exempt (5)
90,596

888

3.89
%
91,135

898

3.95
%
91,276

1,024

4.45
%
Total securities
644,753

5,104

3.14
%
633,125

5,015

3.18
%
598,382

4,690

3.11
%
Deposits in depository institutions
210,994

940

1.77
%
29,164

61

0.84
%
31,517

31

0.39
%
Total interest-earning assets
4,005,067

42,916

4.25
%
3,800,435

39,367

4.15
%
3,719,692

36,724

3.92
%
Cash and due from banks
49,933

 
 
92,426

 
 
62,723

 
 
Premises and equipment, net
72,733

 
 
72,889

 
 
72,756

 
 
Other assets
256,834

 
 
255,719

 
 
247,076

 
 
Less: Allowance for loan losses
(17,247
)
 
 
(18,215
)
 
 
(20,038
)
 
 
       Total assets
$
4,367,320

 
 
$
4,203,254

 
 
$
4,082,209

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
Interest-bearing demand deposits
$
778,639

$
526

0.27
%
$
787,554

$
445

0.23
%
$
700,625

$
159

0.09
%
Savings deposits
816,597

537

0.26
%
817,187

453

0.22
%
821,949

321

0.15
%
Time deposits (2)
1,141,461

4,434

1.54
%
1,123,261

4,020

1.44
%
1,070,941

3,316

1.23
%
Short-term borrowings
350,832

1,435

1.62
%
208,939

459

0.88
%
230,030

349

0.60
%
Long-term debt
16,495

239

5.75
%
16,495

230

5.59
%
16,495

195

4.69
%
   Total interest-bearing liabilities
3,104,024

7,171

0.92
%
2,953,436

5,607

0.76
%
2,840,040

4,340

0.61
%
Noninterest-bearing demand deposits
697,485

 
 
704,546

 
 
698,106

 
 
Other liabilities
50,093

 
 
45,933

 
 
42,202

 
 
Stockholders' equity
515,718

 
 
499,339

 
 
501,861

 
 
Total liabilities and
 
 
 
 
 
 
 
 
 
stockholders' equity
$
4,367,320

 
 
$
4,203,254

 
 
$
4,082,209

 
 
Net interest income
 
$
35,745

 
 
$
33,760

 
 
$
32,384

 
Net yield on earning assets
 
 
3.54
%
 
 
3.56
%
 
 
3.45
%
 
 
 
 
 
 
 
 
 
 
(1) For purposes of this table, non-accruing loans have been included in average balances and the following amounts (in thousands) of loan fees have been included in interest income:
 
 
 
 
 
 
 
 
 
 
Loan fees
 
$
1,365

 
 
$
152

 
 
$
162

 
 
 
 
 
 
 
 
 
 
 





 
 
 
 
 
 
 
 
 
 
(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
 
$
110

 
 
$
130

 
 
$
122

 
Commercial, financial, and agriculture
 
157

 
 
238

 
 
235

 
Installment loans to individuals
 
3

 
 
4

 
 
3

 
 
 
$
270

 
 
$
372

 
 
$
360

 
 
 
 
 
 
 
 
 
 
 
(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 periods ending September 30, 2018 & June 30, 2018 and 35% for the period ending September 30, 2017.






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

 
Nine Months Ended
 
September 30, 2018
September 30, 2017
 
Average
 
Yield/
Average
 
Yield/
 
Balance
Interest
Rate
Balance
Interest
Rate
Assets:
 
 
 
 
 
 
Loan portfolio (1):
 
 
 
 
 
 
Residential real estate (2)
$
1,607,396

$
51,083

4.25
%
$
1,591,403

$
47,329

3.98
%
Commercial, financial, and agriculture (2)
1,498,612

50,646

4.52
%
1,446,849

43,121

3.98
%
Installment loans to individuals (2), (3)
34,472

1,604

6.22
%
34,881

1,688

6.47
%
Previously securitized loans (4)
 ***
748

 ***
 ***
1,086

 ***
Total loans
3,140,480

104,081

4.43
%
3,073,132

93,224

4.06
%
Securities:
 
 
 
 
 
 
Taxable
544,351

12,314

3.02
%
481,372

10,591

2.94
%
Tax-exempt (5)
91,147

2,677

3.93
%
88,484

3,099

4.68
%
Total securities
635,498

14,991

3.15
%
569,856

13,690

3.21
%
Deposits in depository institutions
116,532

1,043

1.2
%
25,822