Exhibit 99.1
NEWS RELEASE
For Immediate Release
October 17, 2007
For Further Information Contact:
Charles R. Hageboeck, Chief Executive Officer and President
(304) 769-1102
City Holding Company Announces Third Quarter Earnings
Charleston, West Virginia – City Holding Company, “the Company” (NASDAQ:CHCO), a $2.5 billion bank holding company headquartered in Charleston, today announced net income for the third quarter of $12.7 million or $0.76 per diluted share compared to $13.6 million or $0.77 per diluted share in the third quarter of 2006. For the third quarter of 2007, the Company achieved a return on assets of 2.03%, a return on equity of 17.2%, a net interest margin of 4.32%, and an efficiency ratio of 46.9%.
The decrease in net income from the quarter ended September 30, 2006 was partially attributable to a $1.0 million decrease in non-interest income. During the third quarter of 2006, the Company recognized a gain of $3.6 million from the sale of its retail credit card portfolio. In response to the credit card sale, the Company repositioned its balance sheet in the third quarter of 2006 by selling approximately $55 million of investment securities that resulted in a loss of $2.1 million.
Charles Hageboeck, Chief Executive Officer and President, noted, “City’s performance continues to be strong, albeit in a difficult operating environment characterized by slower growth, declining net interest margins, and deteriorating asset quality. Despite the decline in net income, the Company remains one of the most profitable banks in the industry with return on assets of 2.03%, and asset quality remains strong. The two largest sources of non-interest income – branch service charges and insurance revenues – both showed solid growth in the third quarter, and the Company has continued to recruit additional talent to strengthen our ability to compete, and to grow effectively in our markets. Although the Company’s nonperforming assets increased during the quarter, our low levels of net charge-offs excluding overdraft depository accounts remained steady at 0.05% (this ratio has not exceeded 0.20% since the quarter ended December 31, 2005) and past due loans remain low at only 0.45% of total loans. During the quarter, the Company was able to repurchase 436,800 shares of its common stock and maintain its strong tangible equity to tangible assets ratio of 9.6% at September 30, 2007.”
Net Interest Income
The Company’s tax equivalent net interest income decreased $1.3 million, or 5.1%, from $25.7 million during the third quarter of 2006 to $24.4 million during the third quarter of 2007. This decrease is attributable to two factors. First, the Company experienced a decrease of $0.3 million in interest income from previously securitized loans in the third quarter of 2007 as compared to the third quarter of 2006 as the average balance of these loans decreased 54.5%. The decrease in average balances was partially mitigated by an increase in the yield on these loans from 43.2% for the third quarter of 2006 to 82.9% for the third quarter of 2007 (see Previously Securitized Loans).
Secondly, the Company’s reported net interest margin experienced compression to 4.32% in the third quarter of 2007 as compared to 4.51% in the third quarter of 2006. The Company’s net interest margin exclusive of Previously Securitized Loans decreased from 4.20% for the third quarter of 2006 to 4.03% for the third quarter of 2007 and resulting in the reduction of approximately $1.0 million in net interest income. The average yield on the Company’s loans (net of Previously Securitized Loans) decreased from 7.14% in the third quarter of 2006 to 7.10% in the third quarter of 2007, while the average cost of interest bearing liabilities increased from 3.04% in the third quarter of 2006 to 3.26% in the third quarter of 2007. The increase in the average cost of interest bearing liabilities can in turn be linked to an increase in the cost of time deposits of 39 basis points between the third quarters of 2006 and 2007.
Credit Quality
At September 30, 2007, the Allowance for Loan Losses (“ALLL”) was $17.0 million or 0.99% of total loans outstanding and 87% of non-performing loans compared to $16.6 million or 0.96% of loans outstanding and 145% of non-performing loans at June 30, 2007, and $15.4 million or 0.92% of loans outstanding and 385% of non-performing loans at December 31, 2006.
As a result of the Company’s quarterly analysis of the adequacy of the ALLL, the Company recorded a provision for loan losses of $1.2 million in the third quarter of 2007 and the third quarter of 2006. The Company’s provision reflects difficulties encountered by two of the Company’s borrowers and the downgrade of their related credits and management’s assessment of these difficulties. Additionally, the provision reflects an increase in the average balances of overdraft depository accounts during the quarter ended September 30, 2007. Changes in the amount of the provision and related allowance are based on the Company’s detailed methodology and are directionally consistent with changes in credit quality, growth, and 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.
While certain of the Company’s loans have been placed on non-performing status, the quality of the Company’s remaining loan portfolio, as reflected in past-due trends, has improved. Total past due loans have declined 22% from $9.9 million at December 31, 2006 to $7.7 million at September 30, 2007. This improvement has been primarily in commercial loans (down $1.8 million or 85%) from December 31, 2006.
The Company had net charge-offs of $0.8 million for the third quarter of 2007, with depository accounts representing $0.6 million (or approximately 76%) of this total. While charge-offs on depository accounts are appropriately taken against the ALLL, the revenue associated with depository accounts is reflected in service charges and has been steadily growing as the core base of checking accounts has grown. Net charge-offs on residential loans were $0.2 million, while commercial and installments loans experienced no net charge-offs for the quarter ended September 30, 2007. The increase in charge-offs on residential loans was primarily related to three credits (that had been appropriately considered in establishing the allowance for loan losses in prior periods). Trends with respect to net charge-offs are positive, with annualized net charge-offs related to loans (excluding overdrafts) of 0.08% for year-to-date 2007, as compared with 0.11% for 2006 and 0.22% for 2005. The positive trend in net charge-offs is attributable to declines in balances of loans originated prior to 2002 (including loans acquired as part of the Classic Bancshares acquisition). At September 30, 2007, balances of loans written subsequent to 2002 comprise approximately 76% of total loan balances.
The Company’s ratio of non-performing assets to total loans and other real estate owned increased from 0.71% at June 30, 2007 to 1.22% at September 30, 2007 as a result of the downgrade of the credit relationships discussed earlier, but continues to compare favorably to that of our peer group (bank holding companies with total assets between $1 and $5 billion), which reported average non-performing assets as a percentage of loans and other real estate owned of 0.98% for the most recently reported quarter ended June 30, 2007. The composition of the Company’s loan portfolio, which is weighted more heavily toward residential mortgage loans and less towards non-real estate secured commercial loans than that of our peers, has allowed us to maintain a lower allowance in comparison to peers.
Non-interest Income
Net of investment security gains/(losses) and the gain from the sale of the Company’s retail credit card portfolio, non-interest income increased $0.5 million to $13.8 million in the third quarter of 2007 as compared to $13.3 million in the third quarter of 2006. The largest source of non-interest income is service charges from depository accounts, which increased $0.4 million, or 3.3%, from $10.8 million during the third quarter of 2006 to $11.2 million during the third quarter of 2007. Insurance commission revenues increased $0.6 million, or 114.3% due to the hiring of additional staff by City Insurance to provide worker’s compensation insurance to West Virginia businesses and to bolster the Company’s team of insurance agents focused on selling directly to retail customers. Partially off-setting these increases was a decrease in other income of $0.4 million due to lower credit card fee income as a result of the sale of the retail credit card portfolio during the third quarter of 2006 and the sale of the merchant credit card processing agreements during the first quarter of 2007.
Non-interest Expenses
Net of charges related to the redemption of $6.0 million of the Company’s trust preferred securities, non-interest expenses increased $0.3 million (or 1.7%) to $18.0 million in the third quarter of 2007 as compared to $17.7 million in the third quarter of 2006. Salaries and employee benefits increased $0.6 million, or 6.6%, from the third quarter of 2006 due to additional staffing while bankcard expenses increased $0.1 million, or 28.5%, due to increased usage by customers. These increases were essentially offset by decreases in other expenses of $0.3 million, or 13.2% due to the sales of the retail and merchant credit card portfolios.
Income Tax Expense
The Company’s effective income tax rate decreased from 34.9% for the quarter ended September 30, 2006 to 32.4% for the quarter ended September 30, 2007. This decrease was attributable to an increase in tax-exempt loan income, lower pre-tax earnings, and realization of $0.2 million of previously unrecognized tax positions during the third quarter of 2007.
Previously Securitized Loans
At September 30, 2007, the Company reported “Previously Securitized Loans” of $8.3 million compared to $10.3 million at June 30, 2007, $15.6 million at December 31, 2006, and $18.5 million at September 30, 2006, respectively. The balance of previously securitized loans has decreased 19.4%, 46.7%, and 55.1% from June 30, 2007, December 31, 2006, and September 30, 2006, respectively. The yield on the previously securitized loans was 82.9% for the quarter ended September 30, 2007, compared to 66.4% for the quarter ended June 30, 2007, 46.6% for the quarter ended December 31, 2006, and 43.2% for the quarter ended September 30, 2006. The yield on the previously securitized loans has increased due to improved cash flows as net default rates have been less than previously estimated. The default rates have decreased as a result of the Company’s assumption of the servicing of all of the pool balances during the second quarter of 2005. Subsequent to our assumption of the servicing of these loans, the Company has experienced net recoveries but does not believe that the trend of net recoveries can be sustained indefinitely.
Capitalization and Liquidity
One of the Company’s strengths is that it is highly profitable while maintaining strong liquidity and capital. With respect to liquidity, the Company’s loan to deposit ratio was 86.7% and the loan to asset ratio was 69.0% at September 30, 2007. The Company maintained investment securities totaling 18.9% of assets as of September 30, 2007. Further, the Company’s deposit mix is weighted heavily toward checking and saving accounts that fund 42.5% of assets at September 30, 2007. Time deposits fund 37.0% of assets at September 30, 2007, but very few of these deposits are in accounts that have balances of more than $150,000, reflecting the core retail orientation of the Company.
The Company is also strongly capitalized. With respect to regulatory capital, at September 30, 2007, the Company’s Leverage Ratio is 10.38%, the Tier I Capital ratio is 14.84%, and the Total Risk-Based Capital ratio is 15.83%. These regulatory capital ratios are significantly above levels required to be considered “well capitalized,” which is the highest possible regulatory designation.
During the quarter ended September 30, 2007, the Company repurchased 436,800 common shares at a weighted average price of $34.49. On August 21, 2007, the Company announced that the Board of Directors authorized the Company to buy back up to 1,000,000 shares of its common shares (approximately 6% of outstanding shares) in open market transactions at prices that are accretive to the earnings per share of continuing shareholders. No time limit was placed on the duration of the share repurchase program. As part of this authorization, the Company rescinded the previous share repurchase program plan approved in December 2006. The Company had repurchased 890,600 shares under the December 2006 Stock Repurchase Plan. The Company’s tangible equity ratio was 9.6% at September 30, 2007 compared with a tangible equity ratio of 10.0% at December 31, 2006.
City Holding Company is the parent company of City National Bank of West Virginia. City National operates 68 branches across West Virginia, Eastern Kentucky and Southeastern 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 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 may experience increases in the default rates or decreased prepayments on previously securitized loans that would result in impairment losses or lower the yield on such loans; (4) the Company may continue to benefit from strong recovery efforts on previously securitized loans resulting in improved yields on these assets; (5) the Company could have adverse legal actions of a material nature; (6) the Company may face competitive loss of customers; (7) the Company may be unable to manage its expense levels; (8) the Company may have difficulty retaining key employees; (9) 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; (10) changes in general economic conditions and increased competition could adversely affect the Company’s operating results; (11) 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; and (12) the Company may experience difficulties growing loan and deposit balances. 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.
CITY HOLDING COMPANY AND SUBSIDIARIES | | | | | | | |
Financial Highlights | | | | | | | | | |
(Unaudited) | | | | | | | | | |
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| | | Three Months Ended September 30, | | | Percent | |
| | | 2007 | | | 2006 | | | Change | |
| | | | | | | | | | |
| Earnings ($000s, except per share data): | | | | | | | | | |
| Net Interest Income (FTE) | | $ | 24,448 | | | $ | 25,750 | | | | (5.06 | )% |
| Net Income | | | 12,714 | | | | 13,620 | | | | (6.65 | )% |
| Earnings per Basic Share | | | 0.76 | | | | 0.78 | | | | (2.56 | )% |
| Earnings per Diluted Share | | | 0.76 | | | | 0.77 | | | | (1.30 | )% |
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| Key Ratios (percent): | | | | | | | | | | | | |
| Return on Average Assets | | | 2.03 | % | | | 2.17 | % | | | (6.22 | )% |
| Return on Average Equity | | | 17.19 | % | | | 18.56 | % | | | (7.38 | )% |
| Net Interest Margin | | | 4.32 | % | | | 4.51 | % | | | (4.36 | )% |
| Efficiency Ratio | | | 46.94 | % | | | 42.39 | % | | | 10.72 | % |
| Average Shareholders' Equity to Average Assets | | | 11.82 | % | | | 11.67 | % | | | 1.27 | % |
| | | | | | | | | | | | | |
| Consolidated Risk Based Capital Ratios (a): | | | | | | | | | | | | |
| Tier I | | | 14.84 | % | | | 14.99 | % | | | (1.00 | )% |
| Total | | | 15.83 | % | | | 15.87 | % | | | (0.25 | )% |
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| Average Tangible Equity to Average Tangible Assets | | | 9.59 | % | | | 9.69 | % | | | (1.06 | )% |
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| Common Stock Data: | | | | | | | | | | | | |
| Cash Dividends Declared per Share | | $ | 0.31 | | | $ | 0.28 | | | | 10.71 | % |
| Book Value per Share | | | 17.68 | | | | 16.99 | | | | 3.63 | % |
| Tangible Book Value per Share | | | 14.14 | | | | 13.68 | | | | 3.37 | % |
| Market Value per Share: | | | | | | | | | | | | |
| High | | | 39.59 | | | | 40.19 | | | | (1.49 | )% |
| Low | | | 31.16 | | | | 35.42 | | | | (12.03 | )% |
| End of Period | | | 36.41 | | | | 39.87 | | | | (8.68 | )% |
| | | | | | | | | | | | | |
| Price/Earnings Ratio (b) | | | 11.98 | | | | 12.78 | | | | (6.27 | )% |
| | | Nine Months Ended September 30, | | | Percent | |
| | | 2007 | | | 2006 | | | Change | |
| | | | | | | | | | | | | |
| Earnings ($000s, except per share data): | | | | | | | | | | | | |
| Net Interest Income (FTE) | | $ | 73,683 | | | $ | 78,025 | | | | (5.56 | )% |
| Net Income | | | 38,267 | | | | 40,247 | | | | (4.92 | )% |
| Earnings per Basic Share | | | 2.24 | | | | 2.27 | | | | (1.32 | )% |
| Earnings per Diluted Share | | | 2.24 | | | | 2.26 | | | | (0.88 | )% |
| | | | | | | | | | | | | |
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| Key Ratios (percent): | | | | | | | | | | | | |
| Return on Average Assets | | | 2.03 | % | | | 2.13 | % | | | (5.00 | )% |
| Return on Average Equity | | | 16.79 | % | | | 18.25 | % | | | (8.00 | )% |
| Net Interest Margin | | | 4.35 | % | | | 4.60 | % | | | (5.49 | )% |
| Efficiency Ratio | | | 45.83 | % | | | 43.88 | % | | | 4.46 | % |
| Average Shareholders' Equity to Average Assets | | | 12.06 | % | | | 11.68 | % | | | 3.26 | % |
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| | | | | | | | | | | | | |
| Common Stock Data: | | | | | | | | | | | | |
| Cash Dividends Declared per Share | | $ | 0.93 | | | $ | 0.84 | | | | 10.71 | % |
| Market Value per Share: | | | | | | | | | | | | |
| High | | | 41.54 | | | | 40.19 | | | | 3.36 | % |
| Low | | | 31.16 | | | | 34.53 | | | | (9.76 | )% |
| | | | | | | | | | | | | |
| (a) September 30, 2007 risk-based capital ratios are estimated | | | | | | | | | |
| (b) September 30, 2007 price/earnings ratio computed based on annualized third quarter 2007 earnings | |
CITY HOLDING COMPANY AND SUBSIDIARIES | | | | | | | | | | | | | |
Financial Highlights | | | | | | | | | | | | | | | | |
(Unaudited) | | | | | | | | | | | | | | | | | | |
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Book Value and Market Price Range per Share | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Market Price | |
| | | Book Value per Share | | | Range per Share | |
| | | March 31 | | | June 30 | | | September 30 | | | December 31 | | | Low | | | High | |
| | | | | | | | | | | | | | | | | | | |
| 2003 | | $ | 10.10 | | | $ | 10.74 | | | $ | 11.03 | | | $ | 11.46 | | | $ | 25.50 | | | $ | 37.15 | |
| 2004 | | | 12.09 | | | | 11.89 | | | | 12.70 | | | | 13.03 | | | | 27.30 | | | | 37.58 | |
| 2005 | | | 13.20 | | | | 15.56 | | | | 15.99 | | | | 16.14 | | | | 27.57 | | | | 39.21 | |
| 2006 | | | 16.17 | | | | 16.17 | | | | 16.99 | | | | 17.46 | | | | 34.53 | | | | 41.87 | |
| 2007 | | | 17.62 | | | | 17.40 | | | | 17.68 | | | | | | | | 31.16 | | | | 41.54 | |
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Earnings per Basic Share | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Quarter Ended | | | | | |
| | | March 31 | | | June 30 | | | September 30 | | | December 31 | | | Year-to-Date | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| 2003 | | $ | 0.56 | | | $ | 0.73 | | | $ | 0.69 | | | $ | 0.64 | | | $ | 2.62 | | | | | |
| 2004 | | | 0.66 | | | | 0.80 | | | | 0.66 | | | | 0.67 | | | | 2.79 | | | | | |
| 2005 | | | 0.70 | | | | 0.72 | | | | 0.73 | | | | 0.72 | | | | 2.87 | | | | | |
| 2006 | | | 0.71 | | | | 0.78 | | | | 0.78 | | | | 0.74 | | | | 3.00 | | | | | |
| 2007 | | | 0.76 | | | | 0.72 | | | | 0.76 | | | | | | | | 2.24 | | | | | |
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Earnings per Diluted Share | | | | | | | | | | | | | | | | | | | | | |
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| | | Quarter Ended | | | | | |
| | | March 31 | | | June 30 | | | September 30 | | | December 31 | | | Year-to-Date | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| 2003 | | $ | 0.55 | | | $ | 0.72 | | | $ | 0.68 | | | $ | 0.63 | | | $ | 2.58 | | | | | |
| 2004 | | | 0.65 | | | | 0.79 | | | | 0.65 | | | | 0.66 | | | | 2.75 | | | | | |
| 2005 | | | 0.69 | | | | 0.71 | | | | 0.72 | | | | 0.72 | | | | 2.84 | | | | | |
| 2006 | | | 0.71 | | | | 0.77 | | | | 0.77 | | | | 0.74 | | | | 2.99 | | | | | |
| 2007 | | | 0.76 | | | | 0.72 | | | | 0.76 | | | | | | | | 2.24 | | | | | |
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Consolidated Statements of Income | | | | | | |
(Unaudited) ($ in 000s, except per share data) | | | | | | |
| | | | | | | |
| | | Three Months Ended September 30, | |
| | | 2007 | | | 2006 | |
| | | | | | | |
Interest Income | | | | | | |
| Interest and fees on loans | | $ | 32,721 | | | $ | 31,774 | |
| Interest on investment securities: | | | | | | | | |
| Taxable | | | 6,024 | | | | 6,870 | |
| Tax-exempt | | | 415 | | | | 437 | |
| Interest on loans held for sale | | | - | | | | 122 | |
| Interest on deposits in depository institutions | | | 171 | | | | 452 | |
| Interest on federal funds sold | | | 266 | | | | 92 | |
Total Interest Income | | | 39,597 | | | | 39,747 | |
| | | | | | | | | |
Interest Expense | | | | | | | | |
| Interest on deposits | | | 13,190 | | | | 11,782 | |
| Interest on short-term borrowings | | | 1,758 | | | | 1,343 | |
| Interest on long-term debt | | | 426 | | | | 1,108 | |
Total Interest Expense | | | 15,374 | | | | 14,233 | |
Net Interest Income | | | 24,223 | | | | 25,514 | |
| Provision for loan losses | | | 1,200 | | | | 1,225 | |
Net Interest Income After Provision for Loan Losses | | | 23,023 | | | | 24,289 | |
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Non-Interest Income | | | | | | | | |
| Investment securities losses | | | (1 | ) | | | (2,067 | ) |
| Service charges | | | 11,192 | | | | 10,833 | |
| Insurance commissions | | | 1,127 | | | | 526 | |
| Trust and investment management fee income | | | 523 | | | | 572 | |
| Bank owned life insurance | | | 596 | | | | 561 | |
| Gain on sale of credit card portfolio | | | - | | | | 3,563 | |
| Other income | | | 377 | | | | 778 | |
Total Non-Interest Income | | | 13,814 | | | | 14,766 | |
| | | | | | | | | |
Non-Interest Expense | | | | | | | | |
| Salaries and employee benefits | | | 9,307 | | | | 8,733 | |
| Occupancy and equipment | | | 1,600 | | | | 1,602 | |
| Depreciation | | | 1,160 | | | | 1,061 | |
| Professional fees | | | 416 | | | | 379 | |
| Postage, delivery, and statement mailings | | | 641 | | | | 765 | |
| Advertising | | | 801 | | | | 810 | |
| Telecommunications | | | 438 | | | | 498 | |
| Bankcard expenses | | | 623 | | | | 485 | |
| Insurance and regulatory | | | 364 | | | | 384 | |
| Office supplies | | | 472 | | | | 417 | |
| Repossessed asset (gains) losses, net of expenses | | | (47 | ) | | | 20 | |
| Loss on early extinguishment of debt | | | - | | | | 379 | |
| Other expenses | | | 2,256 | | | | 2,600 | |
Total Non-Interest Expense | | | 18,031 | | | | 18,133 | |
Income Before Income Taxes | | | 18,806 | | | | 20,922 | |
| Income tax expense | | | 6,092 | | | | 7,302 | |
Net Income | | $ | 12,714 | | | $ | 13,620 | |
| | | | | | | | | |
| Basic earnings per share | | $ | 0.76 | | | $ | 0.78 | |
| Diluted earnings per share | | $ | 0.76 | | | $ | 0.77 | |
Average Common Shares Outstanding: | | | | | | | | |
| Basic | | | 16,714 | | | | 17,557 | |
| Diluted | | | 16,767 | | | | 17,619 | |
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Consolidated Statements of Income | | | | | | |
(Unaudited) ($ in 000s, except per share data) | | | | | | |
| | | | | | | |
| | | Nine months ended September 30, | |
| | | 2007 | | | 2006 | |
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Interest Income | | | | | | |
| Interest and fees on loans | | $ | 96,131 | | | $ | 91,788 | |
| Interest on investment securities: | | | | | | | | |
| Taxable | | | 19,709 | | | | 21,618 | |
| Tax-exempt | | | 1,270 | | | | 1,359 | |
| Interest on loans held for sale | | | - | | | | 322 | |
| Interest on deposits in depository institutions | | | 401 | | | | 1,018 | |
| Interest on federal funds sold | | | 815 | | | | 92 | |
Total Interest Income | | | 118,326 | | | | 116,197 | |
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Interest Expense | | | | | | | | |
| Interest on deposits | | | 38,978 | | | | 31,503 | |
| Interest on short-term borrowings | | | 4,965 | | | | 3,795 | |
| Interest on long-term debt | | | 1,383 | | | | 3,607 | |
Total Interest Expense | | | 45,326 | | | | 38,905 | |
Net Interest Income | | | 73,000 | | | | 77,292 | |
| Provision for loan losses | | | 3,700 | | | | 2,900 | |
Net Interest Income After Provision for Loan Losses | | | 69,300 | | | | 74,392 | |
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Non-Interest Income | | | | | | | | |
| Investment securities gains (losses) | | | 45 | | | | (2,067 | ) |
| Service charges | | | 32,681 | | | | 31,597 | |
| Insurance commissions | | | 2,971 | | | | 1,661 | |
| Trust and investment management fee income | | | 1,529 | | | | 1,642 | |
| Bank owned life insurance | | | 1,877 | | | | 1,776 | |
| Gain on sale of credit card merchant agreements | | | 1,500 | | | | 3,563 | |
| Other income | | | 1,252 | | | | 2,445 | |
Total Non-Interest Income | | | 41,855 | | | | 40,617 | |
| | | | | | | | | |
Non-Interest Expense | | | | | | | | |
| Salaries and employee benefits | | | 27,275 | | | | 26,129 | |
| Occupancy and equipment | | | 4,762 | | | | 4,825 | |
| Depreciation | | | 3,339 | | | | 3,182 | |
| Professional fees | | | 1,204 | | | | 1,345 | |
| Postage, delivery, and statement mailings | | | 1,988 | | | | 2,098 | |
| Advertising | | | 2,533 | | | | 2,339 | |
| Telecommunications | | | 1,352 | | | | 1,499 | |
| Bankcard expenses | | | 1,737 | | | | 1,486 | |
| Insurance and regulatory | | | 1,132 | | | | 1,153 | |
| Office supplies | | | 1,369 | | | | 1,171 | |
| Repossessed asset (gains), net of expenses | | | (52 | ) | | | (105 | ) |
| Loss on early extinguishment of debt | | | - | | | | 661 | |
| Other expenses | | | 6,514 | | | | 7,402 | |
Total Non-Interest Expense | | | 53,153 | | | | 53,185 | |
Income Before Income Taxes | | | 58,002 | | | | 61,824 | |
| Income tax expense | | | 19,735 | | | | 21,577 | |
Net Income | | $ | 38,267 | | | $ | 40,247 | |
| | | | | | | | | |
| Basic earnings per share | | $ | 2.24 | | | $ | 2.27 | |
| Diluted earnings per share | | $ | 2.24 | | | $ | 2.26 | |
Average Common Shares Outstanding: | | | | | | | | |
| Basic | | | 17,057 | | | | 17,759 | |
| Diluted | | | 17,116 | | | | 17,817 | |
| | | | | | |
Consolidated Statements of Changes in Stockholders' Equity | | | | | | |
(Unaudited) ($ in 000s) | | | | | | |
| | | | | | | |
| | | | | | | |
| | | Three Months Ended | |
| | | September 30, 2007 | | | September 30, 2006 | |
| | | | | | | |
Balance at July 1 | | $ | 294,783 | | | $ | 284,120 | |
| | | | | | | | | |
| Net income | | | 12,714 | | | | 13,620 | |
| Other comprehensive income: | | | | | | | | |
| Change in unrealized gain on securities available-for-sale | | | 2,201 | | | | 4,188 | |
| Change in unrealized gain on interest rate floors | | | 2,050 | | | | 1,465 | |
| Cash dividends declared ($0.31/share) | | | (5,105 | ) | | | - | |
| Cash dividends declared ($0.28/share) | | | - | | | | (4,916 | ) |
| Issuance of stock award shares, net | | | 54 | | | | 284 | |
| Exercise of 7,928 stock options | | | - | | | | 228 | |
| Excess tax benefits on stock compensation | | | - | | | | 27 | |
| Purchase of 436,800 common shares of treasury | | | (14,977 | ) | | | - | |
| Purchase of 18,000 common shares of treasury | | | - | | | | (689 | ) |
Balance at September 30 | | $ | 291,720 | | | $ | 298,327 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | Nine Months Ended | |
| | | September 30, 2007 | | | September 30, 2006 | |
| | | | | | | | | |
Balance at January 1 | | $ | 305,307 | | | $ | 292,141 | |
| | | | | | | | | |
| Cumulative effect of adopting FIN 48 | | | (125 | ) | | | - | |
| Net income | | | 38,267 | | | | 40,247 | |
| Other comprehensive income: | | | | | | | | |
| Change in unrealized gain on securities available-for-sale | | | 83 | | | | 277 | |
| Change in unrealized gain on interest rate floors | | | 1,050 | | | | 453 | |
| Cash dividends declared ($0.93/share) | | | (15,703 | ) | | | - | |
| Cash dividends declared ($0.84/share) | | | - | | | | (14,823 | ) |
| Issuance of stock award shares, net | | | 372 | | | | 471 | |
| Exercise of 7,300 stock options | | | 154 | | | | - | |
| Exercise of 39,935 stock options | | | - | | | | 653 | |
| Excess tax benefits on stock compensation | | | 3 | | | | 222 | |
| Purchase of 1,017,000 common shares of treasury | | | (37,688 | ) | | | - | |
| Purchase of 590,053 common shares of treasury | | | - | | | | (21,314 | ) |
Balance at September 30 | | $ | 291,720 | | | $ | 298,327 | |
| | | | | | | | | | |
Condensed Consolidated Quarterly Statements of Income | | | | | | | |
(Unaudited) ($ in 000s, except per share data) | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | Quarter Ended | |
| | | Sept. 30 | | | June 30 | | | March 31 | | | Dec. 31 | | | Sept. 30 | |
| | | 2007 | | | 2007 | | | 2007 | | | 2006 | | | 2006 | |
| | | | | | | | | | | | | | | | |
| Interest income | | $ | 39,597 | | | $ | 39,530 | | | $ | 39,198 | | | $ | 39,925 | | | $ | 39,747 | |
| Taxable equivalent adjustment | | | 224 | | | | 231 | | | | 230 | | | | 228 | | | | 236 | |
| Interest income (FTE) | | | 39,821 | | | | 39,761 | | | | 39,428 | | | | 40,153 | | | | 39,983 | |
| Interest expense | | | 15,374 | | | | 15,196 | | | | 14,756 | | | | 14,820 | | | | 14,233 | |
| Net interest income | | | 24,447 | | | | 24,565 | | | | 24,672 | | | | 25,333 | | | | 25,750 | |
| Provision for loan losses | | | 1,200 | | | | 1,600 | | | | 900 | | | | 901 | | | | 1,225 | |
| Net interest income after provision | | | | | | | | | | | | | | | | | | | | |
| for loan losses | | | 23,247 | | | | 22,965 | | | | 23,772 | | | | 24,432 | | | | 24,525 | |
| | | | | | | | | | | | | | | | | | | | | |
| Noninterest income | | | 13,814 | | | | 13,689 | | | | 14,371 | | | | 13,586 | | | | 14,766 | |
| Noninterest expense | | | 18,031 | | | | 17,525 | | | | 17,616 | | | | 18,099 | | | | 18,133 | |
| Income before income taxes | | | 19,030 | | | | 19,129 | | | | 20,527 | | | | 19,919 | | | | 21,158 | |
| Income tax expense | | | 6,092 | | | | 6,576 | | | | 7,066 | | | | 6,752 | | | | 7,302 | |
| Taxable equivalent adjustment | | | 224 | | | | 231 | | | | 230 | | | | 228 | | | | 236 | |
| Net income | | $ | 12,714 | | | $ | 12,322 | | | $ | 13,231 | | | $ | 12,939 | | | $ | 13,620 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Basic earnings per share | | $ | 0.76 | | | $ | 0.72 | | | $ | 0.76 | | | $ | 0.74 | | | $ | 0.78 | |
| Diluted earnings per share | | | 0.76 | | | | 0.72 | | | | 0.76 | | | | 0.74 | | | | 0.77 | |
| Cash dividends declared per share | | | 0.31 | | | | 0.31 | | | | 0.31 | | | | 0.28 | | | | 0.28 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Average Common Share (000s): | | | | | | | | | | | | | | | | | | | | |
| Outstanding | | | 16,714 | | | | 17,100 | | | | 17,369 | | | | 17,535 | | | | 17,557 | |
| Diluted | | | 16,767 | | | | 17,158 | | | | 17,424 | | | | 17,601 | | | | 17,619 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net Interest Margin | | | 4.32 | % | | | 4.32 | % | | | 4.41 | % | | | 4.43 | % | | | 4.51 | % |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Non-Interest Income and Non-Interest Expense | | | | | | | | | | | | | | | |
(Unaudited) ($ in 000s) | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | Quarter Ended | |
| | | Sept 30 | | | June 30 | | | Mar 31 | | | Dec 31 | | | Sept 30 | |
| | | 2007 | | | 2007 | | | 2007 | | | 2006 | | | 2006 | |
| | | | | | | | | | | | | | | | |
Non-Interest Income: | | | | | | | | | | | | | | | |
| Service charges | | $ | 11,192 | | | $ | 11,426 | | | $ | 10,063 | | | $ | 10,962 | | | $ | 10,833 | |
| Insurance commissions | | | 1,127 | | | | 832 | | | | 1,012 | | | | 675 | | | | 526 | |
| Trust and investment management fee income | | | 523 | | | | 437 | | | | 568 | | | | 498 | | | | 572 | |
| Bank owned life insurance | | | 596 | | | | 585 | | | | 696 | | | | 576 | | | | 561 | |
| Other income | | | 377 | | | | 364 | | | | 513 | | | | 803 | | | | 778 | |
Subtotal | | | 13,815 | | | | 13,644 | | | | 12,852 | | | | 13,514 | | | | 13,270 | |
| Investment securities (losses) gains | | | (1 | ) | | | 45 | | | | - | | | | 72 | | | | (2,067 | ) |
| Gain on sale of credit card merchant agreements | | | - | | | | - | | | | 1,500 | | | | - | | | | 3,563 | |
Total Non-Interest Income | | $ | 13,814 | | | $ | 13,689 | | | $ | 14,352 | | | $ | 13,586 | | | $ | 14,766 | |
| | | | | | | | | | | | | | | | | | | | | |
Non-Interest Expense: | | | | | | | | | | | | | | | | | | | | |
| Salaries and employee benefits | | $ | 9,307 | | | $ | 8,912 | | | $ | 9,057 | | | $ | 8,354 | | | $ | 8,733 | |
| Occupancy and equipment | | | 1,600 | | | | 1,525 | | | | 1,637 | | | | 1,655 | | | | 1,602 | |
| Depreciation | | | 1,160 | | | | 1,109 | | | | 1,070 | | | | 1,037 | | | | 1,061 | |
| Professional fees | | | 416 | | | | 385 | | | | 403 | | | | 415 | | | | 379 | |
| Postage, delivery, and statement mailings | | | 641 | | | | 569 | | | | 777 | | | | 735 | | | | 765 | |
| Advertising | | | 801 | | | | 880 | | | | 852 | | | | 876 | | | | 810 | |
| Telecommunications | | | 438 | | | | 460 | | | | 455 | | | | 549 | | | | 498 | |
| Bankcard expenses | | | 623 | | | | 597 | | | | 518 | | | | 478 | | | | 485 | |
| Insurance and regulatory | | | 364 | | | | 383 | | | | 385 | | | | 375 | | | | 384 | |
| Office supplies | | | 472 | | | | 442 | | | | 455 | | | | 408 | | | | 417 | |
| Repossessed asset (gains) losses, net of expenses | | | (47 | ) | | | 9 | | | | (14 | ) | | | 6 | | | | 20 | |
| Loss on early extinguishment of debt | | | - | | | | - | | | | - | | | | 708 | | | | 379 | |
| Other expenses | | | 2,256 | | | | 2,254 | | | | 2,002 | | | | 2,503 | | | | 2,600 | |
Total Non-Interest Expense | | $ | 18,031 | | | $ | 17,525 | | | $ | 17,597 | | | $ | 18,099 | | | $ | 18,133 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Employees (Full Time Equivalent) | | | 808 | | | | 807 | | | | 791 | | | | 779 | | | | 767 | |
| Branch Locations | | | 68 | | | | 68 | | | | 68 | | | | 67 | | | | 67 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Consolidated Balance Sheets | | | | | | |
($ in 000s) | | | | | | |
| | | September 30 | | | December 31 | |
| | | 2007 | | | 2006 | |
| | | (Unaudited) | | | | |
Assets | | | | | | |
| Cash and due from banks | | $ | 55,695 | | | $ | 58,014 | |
| Interest-bearing deposits in depository institutions | | | 17,248 | | | | 27,434 | |
| Federal funds sold | | | 20,000 | | | | 25,000 | |
Cash and cash equivalents | | | 92,943 | | | | 110,448 | |
| | | | | | | | | |
| Investment securities available-for-sale, at fair value | | | 434,053 | | | | 472,398 | |
| Investment securities held-to-maturity, at amortized cost | | | 35,935 | | | | 47,500 | |
Total investment securities | | | 469,988 | | | | 519,898 | |
| | | | | | | | | |
| Gross Loans | | | 1,719,776 | | | | 1,677,469 | |
| Allowance for loan losses | | | (16,980 | ) | | | (15,405 | ) |
Net loans | | | 1,702,796 | | | | 1,662,064 | |
| | | | | | | | | |
| Bank owned life insurance | | | 56,868 | | | | 55,195 | |
| Premises and equipment | | | 51,561 | | | | 44,689 | |
| Accrued interest receivable | | | 12,255 | | | | 12,337 | |
| Net deferred tax assets | | | 23,369 | | | | 23,652 | |
| Intangible assets | | | 58,328 | | | | 58,857 | |
| Other assets | | | 23,740 | | | | 20,667 | |
Total Assets | | $ | 2,491,848 | | | $ | 2,507,807 | |
| | | | | | | | | |
Liabilities | | | | | | | | |
| Deposits: | | | | | | | | |
| Noninterest-bearing | | $ | 299,819 | | | $ | 321,038 | |
| Interest-bearing: | | | | | | | | |
| Demand deposits | | | 412,479 | | | | 422,925 | |
| Savings deposits | | | 347,810 | | | | 321,075 | |
| Time deposits | | | 922,567 | | | | 920,179 | |
Total deposits | | | 1,982,675 | | | | 1,985,217 | |
| Short-term borrowings | | | 165,787 | | | | 136,570 | |
| Long-term debt | | | 21,853 | | | | 48,069 | |
| Other liabilities | | | 29,813 | | | | 32,644 | |
Total Liabilities | | | 2,200,128 | | | | 2,202,500 | |
| | | | | | | | | |
Stockholders' Equity | | | | | | | | |
| Preferred stock, par value $25 per share: 500,000 shares authorized; none issued | | | - | | | | - | |
| Common stock, par value $2.50 per share: 50,000,000 shares authorized; | | | | | | | | |
| 18,499,282 shares issued at September 30, 2007 and December 31, 2006 | | | | | | | | |
| less 1,995,895 and 1,009,095 shares in treasury, respectively | | | 46,249 | | | | 46,249 | |
| Capital surplus | | | 103,475 | | | | 104,043 | |
| Retained earnings | | | 216,652 | | | | 194,213 | |
| Cost of common stock in treasury | | | (70,260 | ) | | | (33,669 | ) |
| Accumulated other comprehensive (loss): | | | | | | | | |
| Unrealized loss on securities available-for-sale | | | (2,566 | ) | | | (2,649 | ) |
| Unrealized gain (loss) on derivative instruments | | | 840 | | | | (210 | ) |
| Underfunded pension liability | | | (2,670 | ) | | | (2,670 | ) |
Total Accumulated Other Comprehensive (Loss) | | | (4,396 | ) | | | (5,529 | ) |
Total Stockholders' Equity | | | 291,720 | | | | 305,307 | |
Total Liabilities and Stockholders' Equity | | $ | 2,491,848 | | | $ | 2,507,807 | |
| | | | | | | | | | |
Loan Portfolio | | | | | | | | | | | | | | | |
(Unaudited) ($ in 000s) | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | Sept 30 | | | June 30 | | | March 31 | | | Dec 31 | | | Sept 30 | |
| | | 2007 | | | 2007 | | | 2007 | | | 2006 | | | 2006 | |
| | | | | | | | | | | | | | | | |
| Residential real estate | | $ | 600,094 | | | $ | 601,045 | | | $ | 596,412 | | | $ | 598,502 | | | $ | 604,867 | |
| Home equity | | | 338,161 | | | | 330,203 | | | | 324,653 | | | | 321,708 | | | | 318,666 | |
| Commercial, financial, and agriculture | | | 666,960 | | | | 681,388 | | | | 663,183 | | | | 673,719 | | | | 693,933 | |
| Loans to depository institutions | | | 60,000 | | | | 60,000 | | | | 50,000 | | | | 25,000 | | | | 20,000 | |
| Installment loans to individuals | | | 46,244 | | | | 47,397 | | | | 44,756 | | | | 42,943 | | | | 41,215 | |
| Previously securitized loans | | | 8,317 | | | | 10,321 | | | | 12,744 | | | | 15,597 | | | | 18,520 | |
Gross Loans | | $ | 1,719,776 | | | $ | 1,730,354 | | | $ | 1,691,748 | | | $ | 1,677,469 | | | $ | 1,697,201 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
CITY HOLDING COMPANY AND SUBSIDIARIES | | | | | | | | | | | | | |
Previously Securitized Loans | | | | | | | | | | | | | | | | | | | | |
(Unaudited) ($ in millions) | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Annualized | | | Effective | | | | | |
| | | | | | | December 31 | | | Interest | | | Annualized | | | | | |
| | | Year Ended: | | | Balance (a) | | | Income (a) | | | Yield (a) | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | 2005 | | | $ | 30.3 | | | $ | 11.4 | | | | 27 | % | | | | |
| | | 2006 | | | | 15.6 | | | | 9.4 | | | | 42 | % | | | | |
| | | 2007 | | | | 7.5 | | | | 7.2 | | | | 74 | % | | | | |
| | | 2008 | | | | 5.4 | | | | 5.5 | | | | 83 | % | | | | |
| | | 2009 | | | | 4.0 | | | | 4.0 | | | | 83 | % | | | | |
| | | 2010 | | | | 3.4 | | | | 3.2 | | | | 83 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| a - 2005 and 2006 amounts are based on actual results. 2007 amounts are based on actual results through September 30, 2007 and estimated amounts for the remainder of the year. 2008, 2009, and 2010 amounts are based on estimated amounts. | |
| |
| | | | | | |
| Note: The amounts reflected in the table above require management to make significant assumptions based on estimated future default, prepayment, and discount rates. Actual performance could be significantly different from that assumed, which could result in the actual results being materially different from the amounts estimated above. |
| | | | | | | | | | |
Consolidated Average Balance Sheets, Yields, and Rates | | | | | | | |
(Unaudited) ($ in 000s) | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, | |
| | | | | | 2007 | | | | | | | | | 2006 | | | | |
| | | Average | | | | | | Yield/ | | | Average | | | | | | Yield/ | |
| | | Balance | | | Interest | | | Rate | | | Balance | | | Interest | | | Rate | |
| | | | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | | | |
| Loan portfolio: | | | | | | | | | | | | | | | | | | |
| Residential real estate | | $ | 598,954 | | | $ | 9,272 | | | | 6.14 | % | | $ | 601,686 | | | $ | 8,766 | | | | 5.78 | % |
| Home equity | | | 334,363 | | | | 6,547 | | | | 7.77 | % | | | 315,341 | | | | 6,389 | | | | 8.04 | % |
| Commercial, financial, and agriculture | | | 679,104 | | | | 12,776 | | | | 7.46 | % | | | 676,271 | | | | 13,108 | | | | 7.69 | % |
| Loans to depository institutions | | | 60,000 | | | | 820 | | | | 5.42 | % | | | 6,522 | | | | 88 | | | | 5.35 | % |
| Installment loans to individuals | | | 47,626 | | | | 1,379 | | | | 11.49 | % | | | 42,848 | | | | 1,219 | | | | 11.29 | % |
| Previously securitized loans | | | 9,220 | | | | 1,927 | | | | 82.92 | % | | | 20,261 | | | | 2,205 | | | | 43.18 | % |
| Total loans | | | 1,729,267 | | | | 32,721 | | | | 7.51 | % | | | 1,662,929 | | | | 31,775 | | | | 7.58 | % |
| Securities: | | | | | | | | | | | | | | | | | | | | | | | | |
| Taxable | | | 442,696 | | | | 6,024 | | | | 5.40 | % | | | 512,083 | | | | 6,870 | | | | 5.32 | % |
| Tax-exempt | | | 38,810 | | | | 639 | | | | 6.53 | % | | | 40,815 | | | | 673 | | | | 6.54 | % |
| Total securities | | | 481,506 | | | | 6,663 | | | | 5.49 | % | | | 552,898 | | | | 7,543 | | | | 5.41 | % |
| Loans held for Sale | | | - | | | | - | | | | - | | | | 4,353 | | | | 121 | | | | 11.03 | % |
| Deposits in depository institutions | | | 15,184 | | | | 171 | | | | 4.47 | % | | | 35,524 | | | | 452 | | | | 5.05 | % |
| Federal funds sold | | | 20,870 | | | | 266 | | | | 5.06 | % | | | 7,631 | | | | 92 | | | | 4.78 | % |
Total interest-earning assets | | | 2,246,827 | | | | 39,821 | | | | 7.03 | % | | | 2,263,335 | | | | 39,983 | | | | 7.01 | % |
| Cash and due from banks | | | 51,149 | | | | | | | | | | | | 49,801 | | | | | | | | | |
| Bank premises and equipment | | | 50,333 | | | | | | | | | | | | 43,205 | | | | | | | | | |
| Other assets | | | 171,478 | | | | | | | | | | | | 173,761 | | | | | | | | | |
| Less: Allowance for loan losses | | | (16,563 | ) | | | | | | | | | | | (15,425 | ) | | | | | | | | |
Total assets | | $ | 2,503,224 | | | | | | | | | | | $ | 2,514,677 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest-bearing demand deposits | | | 410,907 | | | | 1,136 | | | | 1.10 | % | | | 423,762 | | | | 1,329 | | | | 1.24 | % |
| Savings deposits | | | 347,055 | | | | 1,523 | | | | 1.74 | % | | | 317,038 | | | | 1,118 | | | | 1.40 | % |
| Time deposits | | | 923,937 | | | | 10,530 | | | | 4.52 | % | | | 897,761 | | | | 9,336 | | | | 4.13 | % |
| Short-term borrowings | | | 165,965 | | | | 1,758 | | | | 4.20 | % | | | 136,927 | | | | 1,342 | | | | 3.89 | % |
| Long-term debt | | | 21,871 | | | | 426 | | | | 7.73 | % | | | 82,082 | | | | 1,108 | | | | 5.36 | % |
Total interest-bearing liabilities | | | 1,869,735 | | | | 15,373 | | | | 3.26 | % | | | 1,857,570 | | | | 14,233 | | | | 3.04 | % |
| Noninterest-bearing demand deposits | | | 309,553 | | | | | | | | | | | | 332,494 | | | | | | | | | |
| Other liabilities | | | 28,092 | | | | | | | | | | | | 31,076 | | | | | | | | | |
| Stockholders' equity | | | 295,844 | | | | | | | | | | | | 293,537 | | | | | | | | | |
Total liabilities and | | | | | | | | | | | | | | | | | | | | | | | | |
stockholders' equity | | $ | 2,503,224 | | | | | | | | | | | $ | 2,514,677 | | | | | | | | | |
Net interest income | | | | | | $ | 24,448 | | | | | | | | | | | $ | 25,750 | | | | | |
Net yield on earning assets | | | | | | | | | | | 4.32 | % | | | | | | | | | | | 4.51 | % |
| | | | | | | | | | |
Consolidated Average Balance Sheets, Yields, and Rates | | | | | | | |
(Unaudited) ($ in 000s) | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | Nine Months Ended September 30, | |
| | | | | | 2007 | | | | | | | | | 2006 | | | | |
| | | Average | | | | | | Yield/ | | | Average | | | | | | Yield/ | |
| | | Balance | | | Interest | | | Rate | | | Balance | | | Interest | | | Rate | |
| | | | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | | | |
| Loan portfolio: | | | | | | | | | | | | | | | | | | |
| Residential real estate | | $ | 596,585 | | | $ | 27,144 | | | | 6.08 | % | | $ | 597,223 | | | $ | 25,630 | | | | 5.74 | % |
| Home equity | | | 328,036 | | | | 19,091 | | | | 7.78 | % | | | 309,007 | | | | 17,945 | | | | 7.76 | % |
| Commercial, financial, and agriculture | | | 672,331 | | | | 38,119 | | | | 7.58 | % | | | 654,491 | | | | 36,492 | | | | 7.45 | % |
| Loans to depository institutions | | | 56,410 | | | | 2,271 | | | | 5.38 | % | | | 2,197 | | | | 89 | | | | 5.42 | % |
| Installment loans to individuals | | | 45,596 | | | | 3,967 | | | | 11.63 | % | | | 49,381 | | | | 4,211 | | | | 11.40 | % |
| Previously securitized loans | | | 11,583 | | | | 5,539 | | | | 63.94 | % | | | 24,090 | | | | 7,422 | | | | 41.19 | % |
| Total loans | | | 1,710,541 | | | | 96,131 | | | | 7.51 | % | | | 1,636,389 | | | | 91,789 | | | | 7.50 | % |
| Securities: | | | | | | | | | | | | | | | | | | | | | | | | |
| Taxable | | | 482,484 | | | | 19,709 | | | | 5.46 | % | | | 554,884 | | | | 21,618 | | | | 5.21 | % |
| Tax-exempt | | | 39,789 | | | | 1,954 | | | | 6.57 | % | | | 42,823 | | | | 2,091 | | | | 6.53 | % |
| Total securities | | | 522,273 | | | | 21,663 | | | | 5.55 | % | | | 597,707 | | | | 23,709 | | | | 5.30 | % |
| Loans held for sale | | | - | | | | - | | | | - | | | | 3,337 | | | | 322 | | | | 12.90 | % |
| Deposits in depository institutions | | | 12,823 | | | | 401 | | | | 4.18 | % | | | 28,208 | | | | 1,018 | | | | 4.83 | % |
| Federal funds sold | | | 20,832 | | | | 814 | | | | 5.22 | % | | | 2,571 | | | | 92 | | | | 4.78 | % |
Total interest-earning assets | | | 2,266,469 | | | | 119,009 | | | | 7.02 | % | | | 2,268,212 | | | | 116,930 | | | | 6.89 | % |
| Cash and due from banks | | | 50,668 | | | | | | | | | | | | 51,077 | | | | | | | | | |
| Bank premises and equipment | | | 47,555 | | | | | | | | | | | | 42,787 | | | | | | | | | |
| Other assets | | | 170,137 | | | | | | | | | | | | 170,710 | | | | | | | | | |
| Less: Allowance for loan losses | | | (16,114 | ) | | | | | | | | | | | (16,135 | ) | | | | | | | | |
Total assets | | $ | 2,518,715 | | | | | | | | | | | $ | 2,516,651 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest-bearing demand deposits | | | 423,222 | | | | 3,777 | | | | 1.19 | % | | | 435,505 | | | | 3,917 | | | | 1.20 | % |
| Savings deposits | | | 340,490 | | | | 4,259 | | | | 1.67 | % | | | 314,057 | | | | 2,776 | | | | 1.18 | % |
| Time deposits | | | 922,958 | | | | 30,942 | | | | 4.48 | % | | | 864,972 | | | | 24,810 | | | | 3.83 | % |
| Short-term borrowings | | | 158,250 | | | | 4,965 | | | | 4.19 | % | | | 149,858 | | | | 3,795 | | | | 3.39 | % |
| Long-term debt | | | 25,368 | | | | 1,383 | | | | 7.29 | % | | | 89,834 | | | | 3,607 | | | | 5.37 | % |
Total interest-bearing liabilities | | | 1,870,288 | | | | 45,326 | | | | 3.24 | % | | | 1,854,226 | | | | 38,905 | | | | 2.81 | % |
| Noninterest-bearing demand deposits | | | 314,744 | | | | | | | | | | | | 338,994 | | | | | | | | | |
| Other liabilities | | | 29,803 | | | | | | | | | | | | 29,393 | | | | | | | | | |
| Stockholders' equity | | | 303,880 | | | | | | | | | | | | 294,038 | | | | | | | | | |
Total liabilities and | | | | | | | | | | | | | | | | | | | | | | | | |
stockholders' equity | | $ | 2,518,715 | | | | | | | | | | | $ | 2,516,651 | | | | | | | | | |
Net interest income | | | | | | $ | 73,683 | | | | | | | | | | | $ | 78,025 | | | | | |
Net yield on earning assets | | | | | | | | | | | 4.35 | % | | | | | | | | | | | 4.60 | % |
| | | | | | | | | | | | | | | |
Analysis of Risk-Based Capital | | | | | | | | | | | | | | | |
(Unaudited) ($ in 000s) | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | Sept 30 | | | June 30 | | | March 31 | | | Dec 31 | | | Sept 30 | |
| | | 2007 (a) | | | 2007 | | | 2007 | | | 2006 | | | 2006 | |
| | | | | | | | | | | | | | | | |
| Tier I Capital: | | | | | | | | | | | | | | | |
| Stockholders' equity | | $ | 291,720 | | | $ | 294,783 | | | $ | 303,354 | | | $ | 305,307 | | | $ | 298,327 | |
| Goodwill and other intangibles | | | (58,328 | ) | | | (58,504 | ) | | | (58,681 | ) | | | (58,857 | ) | | | (59,038 | ) |
| Accumulated other comprehensive income | | | 4,396 | | | | 8,647 | | | | 4,684 | | | | 2,859 | | | | 4,109 | |
| Qualifying trust preferred stock | | | 16,000 | | | | 16,000 | | | | 16,000 | | | | 16,000 | | | | 22,000 | |
| Unrealized Loss of AFS securities | | | (94 | ) | | | - | | | | - | | | | - | | | | - | |
| Excess deferred tax assets | | | - | | | | (332 | ) | | | (2,983 | ) | | | - | | | | - | |
| Total tier I capital | | $ | 253,694 | | | $ | 260,594 | | | $ | 262,374 | | | $ | 265,309 | | | $ | 265,398 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Total Risk-Based Capital: | | | | | | | | | | | | | | | | | | | | |
| Tier I capital | | $ | 253,694 | | | $ | 260,594 | | | $ | 262,374 | | | $ | 265,309 | | | $ | 265,398 | |
| Qualifying allowance for loan losses | | | 16,980 | | | | 16,616 | | | | 16,082 | | | | 15,405 | | | | 15,557 | |
| Total risk-based capital | | $ | 270,674 | | | $ | 277,210 | | | $ | 278,456 | | | $ | 280,714 | | | $ | 280,955 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net risk-weighted assets | | $ | 1,709,486 | | | $ | 1,719,589 | | | $ | 1,712,680 | | | $ | 1,734,214 | | | $ | 1,770,458 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Ratios: | | | | | | | | | | | | | | | | | | | | |
| Average stockholders' equity to average assets | | | 11.82 | % | | | 12.11 | % | | | 12.27 | % | | | 12.14 | % | | | 11.67 | % |
| Tangible capital ratio | | | 9.59 | % | | | 9.58 | % | | | 9.79 | % | | | 10.06 | % | | | 9.69 | % |
| Risk-based capital ratios: | | | | | | | | | | | | | | | | | | | | |
| Tier I capital | | | 14.84 | % | | | 15.15 | % | | | 15.32 | % | | | 15.30 | % | | | 14.99 | % |
| Total risk-based capital | | | 15.83 | % | | | 16.12 | % | | | 16.26 | % | | | 16.19 | % | | | 15.87 | % |
| Leverage capital | | | 10.38 | % | | | 10.52 | % | | | 10.68 | % | | | 10.79 | % | | | 10.81 | % |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| (a) September 30, 2007 risk-based capital ratios are estimated | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
CITY HOLDING COMPANY AND SUBSIDIARIES | | | | | | | | | | | | | | | | | | | | |
Intangibles | | | | | | | | | | | | | | | | | | | | |
(Unaudited) ($ in 000s) | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | As of and for the Quarter Ended | |
| | | Sept 30 | | | June 30 | | | March 31 | | | Dec 31 | | | Sept 30 | |
| | | 2007 | | | 2007 | | | 2006 | | | 2006 | | | 2006 | |
| | | | | | | | | | | | | | | | | | | | | |
| Intangibles, net | | $ | 58,328 | | | $ | 58,504 | | | $ | 58,681 | | | $ | 58,857 | | | $ | 59,038 | |
| Intangibles amortization expense | | | 176 | | | | 177 | | | | 176 | | | | 181 | | | | 181 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Summary of Loan Loss Experience | | | | | | | | | | | | | | | |
(Unaudited) ($ in 000s) | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | Quarter Ended | |
| | | Sept. 30 | | | June 30 | | | March 31 | | | Dec. 31 | | | Sept. 30 | |
| | | 2007 | | | 2007 | | | 2007 | | | 2006 | | | 2006 | |
| | | | | | | | | | | | | | | | |
| Balance at beginning of period | | $ | 16,616 | | | $ | 16,083 | | | $ | 15,405 | | | $ | 15,557 | | | $ | 15,268 | |
| | | | | | | | | | | | | | | | | | | | | |
Charge-offs: | | | | | | | | | | | | | | | | | | | | |
| Commercial, financial, and agricultural | | | - | | | | 120 | | | | 35 | | | | 844 | | | | 207 | |
| Real estate-mortgage | | | 240 | | | | 452 | | | | 111 | | | | 230 | | | | 177 | |
| Installment loans to individuals | | | 91 | | | | 60 | | | | 84 | | | | 126 | | | | 165 | |
| Overdraft deposit accounts | | | 1,035 | | | | 956 | | | | 860 | | | | 892 | | | | 1,018 | |
Total charge-offs | | | 1,366 | | | | 1,588 | | | | 1,090 | | | | 2,092 | | | | 1,567 | |
| | | | | | | | | | | | | | | | | | | | | |
Recoveries: | | | | | | | | | | | | | | | | | | | | |
| Commercial, financial, and agricultural | | | 19 | | | | 41 | | | | 148 | | | | 101 | | | | 44 | |
| Real estate-mortgage | | | 22 | | | | 15 | | | | 15 | | | | 350 | | | | 64 | |
| Installment loans to individuals | | | 89 | | | | 98 | | | | 132 | | | | 118 | | | | 131 | |
| Overdraft deposit accounts | | | 400 | | | | 367 | | | | 573 | | | | 470 | | | | 392 | |
Total recoveries | | | 530 | | | | 521 | | | | 868 | | | | 1,039 | | | | 631 | |
| | | | | | | | | | | | | | | | | | | | | |
Net charge-offs | | | 836 | | | | 1,067 | | | | 222 | | | | 1,053 | | | | 936 | |
| Provision for loan losses | | | 1,200 | | | | 1,600 | | | | 900 | | | | 901 | | | | 1,225 | |
Balance at end of period | | $ | 16,980 | | | $ | 16,616 | | | $ | 16,083 | | | $ | 15,405 | | | $ | 15,557 | |
| | | | | | | | | | | | | | | | | | | | | |
| Loans outstanding | | $ | 1,719,776 | | | $ | 1,730,354 | | | $ | 1,691,748 | | | $ | 1,677,469 | | | $ | 1,697,201 | |
| Average loans outstanding | | | 1,729,267 | | | | 1,710,989 | | | | 1,690,946 | | | | 1,689,846 | | | | 1,662,929 | |
| Allowance as a percent of loans outstanding | | | 0.99 | % | | | 0.96 | % | | | 0.95 | % | | | 0.92 | % | | | 0.92 | % |
| Allowance as a percent of non-performing loans | | | 86.88 | % | | | 145.11 | % | | | 235.75 | % | | | 384.93 | % | | | 408.43 | % |
| Net charge-offs (annualized) as a | | | | | | | | | | | | | | | | | | | | |
| percent of average loans outstanding | | | 0.19 | % | | | 0.25 | % | | | 0.05 | % | | | 0.25 | % | | | 0.23 | % |
| Net charge-offs, excluding overdraft deposit | | | | | | | | | | | | | | | | | | | | |
accounts, (annualized) as a percent of average loans outstanding | | | 0.05 | % | | | 0.11 | % | | | (0.02 | )% | | | 0.15 | % | | | 0.07 | % |
| | | | | | | | | | | | | | | |
Summary of Non-Performing Assets | | | | | | | | | | | | | | | |
(Unaudited) ($ in 000s) | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | Sept 30 | | | June 30 | | | March 31 | | | Dec 31 | | | Sept 30 | |
| | | 2007 | | | 2007 | | | 2007 | | | 2006 | | | 2006 | |
| | | | | | | | | | | | | | | | |
| Nonaccrual loans | | $ | 18,896 | | | $ | 11,194 | | | $ | 6,714 | | | $ | 3,319 | | | $ | 3,359 | |
| Accruing loans past due 90 days or more | | | 566 | | | | 212 | | | | 108 | | | | 635 | | | | 328 | |
| Previously securitized loans past due 90 days or more | | | 83 | | | | 45 | | | | - | | | | 48 | | | | 122 | |
Total non-performing loans | | | 19,545 | | | | 11,451 | | | | 6,822 | | | | 4,002 | | | | 3,809 | |
| Other real estate owned, excluding property associated | | | | | | | | | | | | | | | | | | | | |
| with previously securitized loans | | | 1,091 | | | | 624 | | | | 290 | | | | 161 | | | | 499 | |
| Other real estate owned associated with previously | | | | | | | | | | | | | | | | | | | | |
| securitized loans | | | 405 | | | | 231 | | | | 252 | | | | 20 | | | | 20 | |
Other real estate owned | | | 1,496 | | | | 855 | | | | 542 | | | | 181 | | | | 519 | |
Total non-performing assets | | $ | 21,041 | | | $ | 12,306 | | | $ | 7,364 | | | $ | 4,183 | | | $ | 4,328 | |
| | | | | | | | | | | | | | | | | | | | | |
| Non-performing assets as a percent of loans and | | | | | | | | | | | | | | | | | | | | |
| other real estate owned | | | 1.22 | % | | | 0.71 | % | | | 0.44 | % | | | 0.25 | % | | | 0.25 | % |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
CITY HOLDING COMPANY AND SUBSIDIARIES | | | | | | | | | | | | | | | | | | | | |
Summary of Total Past Due Loans | | | | | | | | | | | | | | | | | | | | |
(Unaudited) ($ in 000s) | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | Sept 30 | | | June 30 | | | March 31 | | | Dec 31 | | | Sept 30 | |
| | | 2007 | | | 2007 | | | 2007 | | | 2006 | | | 2006 | |
| | | | | | | | | | | | | | | | | | | | | |
| Residential real estate | | $ | 4,500 | | | $ | 3,354 | | | $ | 2,372 | | | $ | 4,534 | | | $ | 4,072 | |
| Home equity | | | 1,075 | | | | 879 | | | | 999 | | | | 1,083 | | | | 1,412 | |
| Commercial, financial, and agriculture | | | 311 | | | | 2,248 | | | | 1,185 | | | | 2,082 | | | | 1,970 | |
| Loans to depository institutions | | | - | | | | - | | | | - | | | | - | | | | - | |
| Installment loans to individuals | | | 279 | | | | 370 | | | | 283 | | | | 389 | | | | 495 | |
| Previously securitized loans | | | 948 | | | | 799 | | | | 596 | | | | 1,110 | | | | 949 | |
| Overdraft deposit accounts | | | 575 | | | | 692 | | | | 500 | | | | 652 | | | | 548 | |
Total past due loans | | $ | 7,688 | | | $ | 8,342 | | | $ | 5,935 | | | $ | 9,850 | | | $ | 9,446 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
-21-
