For Immediate Release
October 27, 2008
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, “the Company” (NASDAQ:CHCO), a $2.5 billion bank holding company headquartered in Charleston, today announced net income of $23.9 million, or diluted earnings per share of $1.47, year-to-date through September 30, 2008 compared to $38.3 million, or diluted earnings per share of $2.24 year-to-date through September 30, 2007. The Company reported a net loss of $2.6 million for the third quarter of 2008, primarily as a result of the federal government’s actions to place Freddie Mac and Fannie Mae into conservatorship in September 2008. As a result of this action, the Company recorded a $21.1 million ($12.7 million after tax or $0.78 per diluted share) impairment loss for the third quarter of 2008 on its investment of $22.7 million in Freddie Mac and Fannie Mae preferred stock.
Charles Hageboeck, Chief Executive Officer and President, stated, “During the third quarter of 2008, the U.S. financial service sector has experienced serious challenges as a result of continuing turmoil associated with overbuilding, foreclosures, and price deterioration in the residential construction industry. Following the acquisition of Bear Stearns by J.P. Morgan Chase in March 2008, every major investment bank in the U.S. has been impacted: Lehman Brothers failed, Merrill Lynch agreed to be acquired by Bank of America, and Goldman Sachs and Morgan Stanley accepted capital infusions from private investors and converted from ‘Investment Banks’ to ’Bank Holding Companies.’ In July, IndyMac was seized by federal bank regulators and became our nation’s 3rd largest bank failure ever. On September 25, 2008, Washington Mutual became our nation’s largest bank failure ever and its principal banking subsidiary was sold to JP Morgan Chase. Within days, another of our nation’s largest banks, Wachovia, was acquired by Wells Fargo. Against this back-drop, City National Bank (’City’) was not immune to the negative effects of the general deterioration of the United States economy, and the results on our Company are evident in our third quarter results.
“Nevertheless, City’s core businesses remain very strong. City is extremely well capitalized, with tangible capital of 9.4% and total risk-based capital of 14.1%. City’s balance sheet is liquid, with a loan to deposit ratio of 89.2%. City has experienced strong loan growth ($118 million in the last 12 months) of 7.1%. City has also experienced growth in average transaction deposits and savings deposits in the third quarter of 2008 as compared to the year-ago period. As a result of City’s balance sheet growth and because City was positioned to benefit from a declining interest rate environment, City’s net interest income increased $2.1 million, or 8.5%, in the third quarter of 2008 as compared to the third quarter of 2007. And, City’s net interest margin rose from 4.32% in the third quarter of 2007 to 4.78% in the third quarter of 2008. Service fees, our largest source of non-interest income, increased $0.8 million, or 7.2%, from the third quarter of 2007. Expenses remain controlled with an efficiency ratio of 46.5%. Non-performing assets declined to 1.00% of total loans and Other Real Estate Owned at September 30, 2008 as compared to 1.23% at September 30, 2007. Overall, I can say that I am pleased with the performance of our business during the third quarter of 2008 with one exception – our ownership of preferred stock in the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC).
“According to the American Banker’s Association, approximately 27% of all community banks in the United States owned preferred stock in FNMA and FHLMC. FNMA and FHLMC were considered ’quasi-governmental agencies.’ The Federal Government was widely believed to be willing to ‘stand behind’ the debt or these two Congressionally chartered companies. They were regulated by the government through the Office of Federal Housing Enterprise Oversight created by the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, and the United States Congress was actively involved in overseeing these institutions - encouraging them to increase and extend credit to homeowners to increase total home ownership in the United States. City’s primary regulator, the Office of the Comptroller of the Currency (the ‘OCC’) allowed national banks such as City to own only two preferred stocks – FNMA and FHLMC – ostensibly due to their ’special nature’ as quasi-governmental agencies. These preferred shares were rated by the rating agencies – Moody’s and S&P – as ‘investment grade’ at the time they were purchased and in fact right up until the federal government placed both institutions in a ‘Conservatorship’ on September 6, 2008. It now appears that FNMA and FHLMC were encouraged to take on too much risk in their mortgage lending, were inadequately regulated, received inadequate oversight from the Congress, and carried ratings from the rating agencies that did not represent their true financial position. The impact of the decision to place these institutions into a ‘Conservatorship’ had an extremely negative impact upon the value of City’s preferred shares in these two institutions. Due to the actions (and the inaction) by the federal government, City recorded an ‘Other Than Temporary Impairment’ charge of $21.1 million ($12.7 million after tax or $0.78 per diluted share) during the third quarter in regard to our investments in these preferred shares.
“Additionally, City took a charge of $5.4 million with respect to other investments in pooled trust preferred securities and recorded a provision for loan losses of $2.35 million reflecting several commercial loan customers whose credit worthiness has deteriorated in the third quarter of 2008.
“Although difficulties in the United States’ financial system have caused the Company to incur significant ‘Other Than Temporary Impairment’ charges and higher provision for loan losses for the third quarter, the Company remains very profitable with year-to-date return on assets ratio of 1.27%, and as previously described, our core business remains very strong. As a result, we will continue to focus on achieving reasonable growth given the markets in which we operate. For example, we were pleased to announce the opening of a new branch in Hurricane, West Virginia in September 2008. Although the financial services industry and the United States economy are experiencing severe stress and unprecedented challenges, we believe that we are uniquely positioned in a regional economy that remains strong, and look forward to continuing our solid performance for our shareholders in the fourth quarter of 2008.”
Net Interest Income
The Company’s tax equivalent net interest income increased $2.0 million, or 8.3%, from $24.5 million during the third quarter of 2007 to $26.5 million during the third quarter of 2008. This increase is primarily attributable to interest expense on deposits and other interest bearing liabilities decreasing more quickly than interest income from loans and investments as a result of rate declines in the Federal Funds rate during 2008. As a result of the Company’s positioning of its balance sheet, interest sensitive liabilities have repriced to lower levels at a faster rate than interest sensitive assets. Additionally, the Company’s interest rate floors with a total notional value of $500 million during the quarter diminished the impact of falling rates on the Company’s interest income from variable rate loans. Partially offsetting these increases from falling market rates was a decrease of $0.6 million in interest income from Previously Securitized Loans from the third quarter of 2007, as the balances of these loans have decreased 48.2%. The decrease in average balances was partially mitigated by an increase in the yield on these loans to 110.3% for the third quarter of 2008 from 82.9% for the third quarter of 2007 and 69.1% for the year ended December 31, 2007. 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 third quarter of 2005. Subsequent to our assumption of the servicing of these loans, the Company has averaged net recoveries, but does not believe that continued net recoveries can be sustained indefinitely. During the quarter, the Company sold an interest rate floor with a notional value of $100 million that matured in June 2011 in order to mitigate its risk associated with the counterparty of this interest rate floor. The gain from this sale will be recognized over the period of the interest rate floor’s original maturity.
The Company’s net interest margin was 4.78% in the third quarter of 2008 as compared to 4.32% in the third quarter of 2007.
Credit Quality
At September 30, 2008, the Allowance for Loan Losses (“ALLL”) was $18.9 million or 1.06% of total loans outstanding and 135% of non-performing loans, compared to $17.6 million or 1.00% of loans outstanding and 103% of non-performing loans at December 31, 2007, and $17.0 million or 0.99% of loans outstanding and 86% of non-performing loans at September 30, 2007.
As a result of the Company’s quarterly analysis of the adequacy of the ALLL, the Company recorded a provision for loan losses of $2.35 million in the third quarter of 2008 compared to $1.2 million for the comparable period in 2007 and $0.85 million in the first quarter of 2008. The provision for loan losses recorded during the third quarter of 2008 reflects the difficulties of certain commercial borrowers of the Company during the quarter, the downgrade of their related credits, and management’s assessment of the impact of these difficulties on the ultimate collectability of the loans. Changes in the amount of the provision and related allowance are based on the Company’s detailed systematic methodology and are directionally consistent with 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 and produces a provision and allowance for loan losses that is directionally consistent with changes in asset quality and loss experience.
The Company’s ratio of non-performing assets to total loans and other real estate owned improved from 1.20% at June 30, 2008 to 1.00% at September 30, 2008. This decrease was due to the sale of an upscale residence in Southern West Virginia during the quarter that had previously been reported as other real estate owned. Based on our analysis, the Company believes that the allowance allocated to the substandard and nonperforming loans, after considering the value of the collateral securing such loans, is adequate to cover losses that may result from these loans at September 30, 2008. The Company’s ratio of non-performing assets to total loans and other real estate owned is 91 basis points lower than 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 1.91% for the most recently reported quarter ended June 30, 2008.
The Company had net charge-offs of $1.4 million for the third quarter of 2008. Net charge-offs on commercial and residential loans were $0.6 and $0.5 million, respectively, while installment loans experienced no net charge-offs for the third quarter. Charge-offs for commercial and residential loans were primarily related to two specific credits that had been appropriately considered in establishing the allowance for loan losses in prior periods. In addition, net charge-offs for depository accounts were $0.4 million for the third quarter of 2008. While charge-offs on depository accounts are appropriately taken against the ALLL, the revenue associated with depository accounts is reflected in service charges.
Non-interest Income
Exclusive of investment losses, non-interest income increased $0.9 million, or 6.5%, to $14.7 million in the third quarter of 2008 as compared to $13.8 million in the third quarter of 2007. The largest source of non-interest income is service charges from depository accounts, which increased $0.8 million, or 7.2%, from $11.2 million during the third quarter of 2007 to $12.0 million during the third quarter of 2008. Bank owned life insurance revenues increased $0.2 million from the quarter ended September 30, 2007, as a result of the Company modifying this portfolio during 2008.
Non-interest Expenses
Non-interest expenses increased $1.2 million from $18.0 million in the third quarter of 2007 to $19.2 million in the third quarter of 2008. Repossessed asset losses increased $0.4 million from the third quarter of 2007 primarily as a result of the sale of an upper-scale residential property in Southern West Virginia. Salaries and employee benefits increased $0.2 million, or 2.5%, from the third quarter of 2007 due in part to additional staffing for new retail locations. In addition, other expenses increased $0.2 million from the third quarter of 2007 due to increased derivative amortization and check card expenses (higher volume) and occupancy equipment expenses increased $0.2 million due to higher maintenance costs associated with the Company’s new core system that is used to process and accumulate data for customers and financial reporting.
Balance Sheet Trends
As compared to December 31, 2007, loans have increased $10.7 million (0.6%) at September 30, 2008, due to increases in home equity loans of $36.1 million (10.6%), commercial loans of $21.6 million (3.1%), and residential real estate loans of $18.9 million (3.1%). These increases were partially offset by decreases in loans to depository institutions of $60.0 million (100.0%), installment loans of $3.5 million (7.3%), and previously securitized loans of $2.4 million (34.4%).
Investment securities balances declined from $439.8 million at June 30, 2008 to $379.0 million at September 30, 2008. This decrease was primarily attributable to other than temporary impairment charges of $27.5 million and declines in the fair market value of available for sale securities deemed to be temporary of $22.8 million. The charges deemed to be other than temporary were related to agency preferreds ($21.1 million compared to a book value of $22.7 million), pooled bank trust preferreds ($4.3 million compared to a book value of $22.3 million), income notes ($1.1 million compared to a book value of $2.0 million), and corporate debt securities ($1.0 million compared to a book value of $24.6 million). The impairment charges for the agency preferred securities were due to the actions of the federal government to place Freddie Mac and Fannie Mae into conservatorship and the suspension of dividends on such preferred securities. The impairment charges related to the pooled bank trust preferred securities and income notes were based on the Company’s quarterly review of its investment securities for indications of losses considered to be other than temporary. Based on management’s assessment of the securities the Company owns, the seniority position of the securities within the pools, the level of defaults and deferred payments within the pools, and a review of the financial strength of the banks within the respective pools, management concluded that an impairment charge of $4.3 million and $1.1 million on the pooled bank trust preferred securities and the income notes, respectively, was necessary at September 30, 2008. The $1.0 million impairment charge for corporate debt securities was due to Lehman Brothers Holdings bankruptcy filing. The Company had acquired this security as the result of an acquisition of a bank in 2005.
Total average depository balances increased $17.1 million, or 0.9%, from the quarter ended December 31, 2007 to the quarter ended September 30, 2008. This increase was primarily in non-interest bearing demand deposits, savings deposits, and interest bearing demand deposits, which have increased $25.8 million, $15.6 million, and $9.4 million, respectively. These increases have been partially offset by decreases in average balances of time deposits of $33.7 million.
The effective rate is based upon the Company’s expected tax rate for the year ending December 31, 2008, excluding impairment losses and the realization of previously unrecognized tax positions. Excluding the impact of other than temporary impairment losses and the realization of previously unrecognized tax positions during the third quarter, the Company’s effective income tax rate for the third quarter of 2008 was 33.9% compared to 33.8% for the year ended December 31 2007, and 33.4% for the quarter ended September 30, 2007. During the quarter ended September 30, 2008, the Company realized $1.1 million of previously unrecognized tax positions compared to $0.2 million during the quarter ended September 30, 2007.
Previously Securitized Loans
At September 30, 2008, the Company reported “Previously Securitized Loans” of $4.5 million compared to $6.9 million at December 31, 2007 and $8.3 million at September 30, 2007, respectively, representing a decrease of 34.4% and 45.7%, respectively. The yield on the previously securitized loans was 110.2% for the quarter ended September 30, 2008, compared to 93.2% for the quarter ended December 31, 2007, and 82.9% for the quarter ended September 30, 2007. 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 averaged net recoveries but does not believe that continued 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 89.2% and the loan to asset ratio was 72.1% at September 30, 2008. The Company maintained investment securities totaling 15.4% of assets as of this date. Further, the Company’s deposit mix is weighted heavily toward checking and saving accounts that fund 43.8% of assets at September 30, 2008. Time deposits fund 37.0% of assets at September 30, 2008, 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, 2008, the Company’s Leverage Ratio is 9.97%, the Tier I Capital ratio is 13.11%, and the Total Risk-Based Capital ratio is 14.13%. These regulatory capital ratios are significantly above levels required to be considered “well capitalized,” which is the highest possible regulatory designation. The Company’s tangible equity ratio was 9.4% at September 30, 2008 compared with a tangible equity ratio of 9.7% at December 31, 2007.
City Holding Company is the parent company of City National Bank of West Virginia. City National operates 69 branches across West Virginia, Eastern Kentucky and Southern 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 on previously securitized loans that would result in impairment losses or lower the yield on such loans; (4) the Company may not 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; (12) the Company may experience difficulties growing loan and deposit balances; (13) the current economic environment poses significant challenges for us and could adversely affect our financial condition and results of operations; and (14) the United States government’s plan to purchase large amounts of illiquid, mortgage-backed and other securities from financial institutions may not be effective and/or it may not be available to us. 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)
| | | Three Months Ended September 30, | | | Percent | |
| | | 2008 | | | 2007 | | | Change | |
| | | | | | | | | | |
| Earnings ($000s, except per share data): | | | | | | | | | |
| Net Interest Income (FTE) | | $ | 26,484 | | | $ | 24,448 | | | | 8.33 | % |
| Net (Loss) Income | | | (2,557 | ) | | | 12,714 | | | | (120.11 | )% |
| (Loss) Earnings per Basic Share | | | (0.16 | ) | | | 0.76 | | | | (121.05 | )% |
| (Loss) Earnings per Diluted Share | | | (0.16 | ) | | | 0.76 | | | | (121.05 | )% |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Key Ratios (percent): | | | | | | | | | | | | |
| Return on Average Assets | | | (0.41 | )% | | | 2.03 | % | | | (120.18 | )% |
| Return on Average Tangible Equity | | | (4.04 | )% | | | 21.42 | % | | | (118.87 | )% |
| Net Interest Margin | | | 4.78 | % | | | 4.32 | % | | | 10.66 | % |
| Efficiency Ratio | | | 46.53 | % | | | 46.94 | % | | | (0.86 | )% |
| Average Shareholders' Equity to Average Assets | | | 12.45 | % | | | 11.82 | % | | | 5.36 | % |
| | | | | | | | | | | | | |
| Consolidated Risk Based Capital Ratios (a): | | | | | | | | | | | | |
| Tier I | | | 13.11 | % | | | 14.84 | % | | | (11.66 | )% |
| Total | | | 14.13 | % | | | 15.83 | % | | | (10.74 | )% |
| | | | | | | | | | | | | |
| Tangible Equity to Tangible Assets | | | 9.44 | % | | | 9.59 | % | | | (1.57 | )% |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Common Stock Data: | | | | | | | | | | | | |
| Cash Dividends Declared per Share | | $ | 0.34 | | | $ | 0.31 | | | | 9.68 | % |
| Book Value per Share | | | 17.61 | | | | 17.68 | | | | (0.40 | )% |
| Tangible Book Value per Share | | | 14.05 | | | | 14.14 | | | | (0.67 | )% |
| Market Value per Share: | | | | | | | | | | | | |
| High | | | 47.28 | | | | 39.59 | | | | 19.42 | % |
| Low | | | 35.74 | | | | 31.16 | | | | 14.70 | % |
| End of Period | | | 42.25 | | | | 36.41 | | | | 16.04 | % |
| | | Nine Months Ended September 30 | | | Percent | |
| | | 2008 | | | 2007 | | | Change | |
| | | | | | | | | | |
| Earnings ($000s, except per share data): | | | | | | | | | |
| Net Interest Income (FTE) | | $ | 76,295 | | | $ | 73,683 | | | | 3.54 | % |
| Net Income | | | 23,860 | | | | 38,267 | | | | (37.65 | )% |
| Earnings per Basic Share | | | 1.48 | | | | 2.24 | | | | (33.93 | )% |
| Earnings per Diluted Share | | | 1.47 | | | | 2.24 | | | | (34.38 | )% |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Key Ratios (percent): | | | | | | | | | | | | |
| Return on Average Assets | | | 1.27 | % | | | 2.03 | % | | | (37.15 | )% |
| Return on Average Tangible Equity | | | 12.73 | % | | | 20.80 | % | | | (38.81 | )% |
| Net Interest Margin | | | 4.61 | % | | | 4.35 | % | | | 6.06 | % |
| Efficiency Ratio | | | 47.08 | % | | | 45.83 | % | | | 2.72 | % |
| Average Shareholders' Equity to Average Assets | | | 12.31 | % | | | 12.06 | % | | | 2.07 | % |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Common Stock Data: | | | | | | | | | | | | |
| Cash Dividends Declared per Share | | $ | 1.02 | | | $ | 0.93 | | | | 9.68 | % |
| Market Value per Share: | | | | | | | | | | | | |
| High | | | 47.28 | | | | 41.54 | | | | 13.82 | % |
| Low | | | 32.51 | | | | 31.16 | | | | 4.33 | % |
| | | | | | | | | | | | | |
| Price/Earnings Ratio (b) | | | 21.41 | | | | 12.19 | | | | 75.63 | % |
(a) September 30, 2008 risk-based capital ratios are estimated
(b) September 30, 2008 price/earnings ratio computed based on annualized year to date 2008 earnings
CITY HOLDING COMPANY AND SUBSIDIARIES Financial Highlights
(Unaudited)
Book Value and Market Price Range per Share
| | | Book Value per Share | | | Market Price Range per Share | |
| | | March 31 | | | June 30 | | | September 30 | | | December 31 | | | Low | | | High | |
| | | | | | | | | | | | | | | | | | | |
| 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 | | | | 18.14 | | | | 31.16 | | | | 41.54 | |
| 2008 | | | 18.92 | | | | 18.72 | | | | 17.61 | | | | | | | | 35.74 | | | | 47.28 | |
Earnings per Basic Share
| | | Quarter Ended | |
| | | March 31 | | | June 30 | | | September 30 | | | December 31 | | | Year-to-Date | |
| | | | | | | | | | | | | | | | |
| 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 | | | | 0.78 | | | | 3.02 | |
| 2008 | | | 0.81 | | | | 0.83 | | | | (0.16 | ) | | | | | | | 1.48 | |
Earnings per Diluted Share
| | | Quarter Ended | |
| | | March 31 | | | June 30 | | | September 30 | | | December 31 | | | Year-to-Date | |
| | | | | | | | | | | | | | | | |
| 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 | | | | 0.78 | | | | 3.01 | |
| 2008 | | | 0.80 | | | | 0.83 | | | | (0.16 | ) | | | | | | | 1.47 | |
CITY HOLDING COMPANY AND SUBSIDIARIES Consolidated Statements of Income
(Unaudited) ($ in 000s, except per share data)
| | | Three Months Ended September 30, | |
| | | 2008 | | | 2007 | |
| | | | | | | |
| Interest Income | | | | | | |
| Interest and fees on loans | | $ | 30,254 | | | $ | 32,721 | |
| Interest on investment securities: | | | | | | | | |
| Taxable | | | 5,850 | | | | 6,024 | |
| Tax-exempt | | | 371 | | | | 415 | |
| Interest on deposits in depository institutions | | | 47 | | | | 171 | |
| Interest on federal funds sold | | | - | | | | 266 | |
| Total Interest Income | | | 36,522 | | | | 39,597 | |
| | | | | | | | | |
| Interest Expense | | | | | | | | |
| Interest on deposits | | | 9,446 | | | | 13,190 | |
| Interest on short-term borrowings | | | 478 | | | | 1,758 | |
| Interest on long-term debt | | | 317 | | | | 426 | |
| Total Interest Expense | | | 10,241 | | | | 15,374 | |
| Net Interest Income | | | 26,281 | | | | 24,223 | |
| Provision for loan losses | | | 2,350 | | | | 1,200 | |
| Net Interest Income After Provision for Loan Losses | | | 23,931 | | | | 23,023 | |
| | | | | | | | | |
| Non-Interest Income | | | | | | | | |
| Investment securities (losses) | | | (27,467 | ) | | | (1 | ) |
| Service charges | | | 11,993 | | | | 11,192 | |
| Insurance commissions | | | 1,025 | | | | 1,127 | |
| Trust and investment management fee income | | | 640 | | | | 523 | |
| Bank owned life insurance | | | 767 | | | | 596 | |
| Other income | | | 284 | | | | 377 | |
| Total Non-Interest Income | | | (12,758 | ) | | | 13,814 | |
| | | | | | | | | |
| Non-Interest Expense | | | | | | | | |
| Salaries and employee benefits | | | 9,538 | | | | 9,307 | |
| Occupancy and equipment | | | 1,800 | | | | 1,600 | |
| Depreciation | | | 1,110 | | | | 1,160 | |
| Professional fees | | | 435 | | | | 416 | |
| Postage, delivery, and statement mailings | | | 636 | | | | 641 | |
| Advertising | | | 821 | | | | 801 | |
| Telecommunications | | | 496 | | | | 438 | |
| Bankcard expenses | | | 717 | | | | 623 | |
| Insurance and regulatory | | | 354 | | | | 364 | |
| Office supplies | | | 527 | | | | 472 | |
| Repossessed asset losses (gains), net of expenses | | | 314 | | | | (47 | ) |
| Other expenses | | | 2,498 | | | | 2,256 | |
| Total Non-Interest Expense | | | 19,246 | | | | 18,031 | |
| (Loss) Income Before Income Taxes | | | (8,073 | ) | | | 18,806 | |
| Income tax (benefit) expense | | | (5,516 | ) | | | 6,092 | |
| Net (Loss) Income | | $ | (2,557 | ) | | $ | 12,714 | |
| | | | | | | | | |
| Basic (loss) earnings per share | | $ | (0.16 | ) | | $ | 0.76 | |
| Diluted (loss) earnings per share | | $ | (0.16 | ) | | $ | 0.76 | |
| Average Common Shares Outstanding: | | | | | | | | |
| Basic | | | 16,142 | | | | 16,714 | |
| Diluted | | | 16,195 | | | | 16,767 | |
CITY HOLDING COMPANY AND SUBSIDIARIES Consolidated Statements of Income
(Unaudited) ($ in 000s, except per share data)
| | | Nine months ended September 30 | |
| | | 2008 | | | 2007 | |
| | | | | | | |
| Interest Income | | | | | | |
| Interest and fees on loans | | $ | 91,662 | | | $ | 96,131 | |
| Interest on investment securities: | | | | | | | | |
| Taxable | | | 18,034 | | | | 19,709 | |
| Tax-exempt | | | 1,151 | | | | 1,270 | |
| Interest on deposits in depository institutions | | | 163 | | | | 401 | |
| Interest on federal funds sold | | | - | | | | 815 | |
| Total Interest Income | | | 111,010 | | | | 118,326 | |
| | | | | | | | | |
| Interest Expense | | | | | | | | |
| Interest on deposits | | | 31,980 | | | | 38,978 | |
| Interest on short-term borrowings | | | 2,286 | | | | 4,965 | |
| Interest on long-term debt | | | 1,070 | | | | 1,383 | |
| Total Interest Expense | | | 35,336 | | | | 45,326 | |
| Net Interest Income | | | 75,674 | | | | 73,000 | |
| Provision for loan losses | | | 5,083 | | | | 3,700 | |
| Net Interest Income After Provision for Loan Losses | | | 70,591 | | | | 69,300 | |
| | | | | | | | | |
| Non-Interest Income | | | | | | | | |
| Investment securities (losses) gains | | | (27,465 | ) | | | 45 | |
| Service charges | | | 34,536 | | | | 32,681 | |
| Insurance commissions | | | 3,231 | | | | 2,971 | |
| Trust and investment management fee income | | | 1,721 | | | | 1,529 | |
| Bank owned life insurance | | | 2,193 | | | | 1,877 | |
| Gain on sale of credit card merchant agreements | | | - | | | | 1,500 | |
| VISA IPO Gain | | | 3,289 | | | | - | |
| Other income | | | 1,250 | | | | 1,252 | |
| Total Non-Interest Income | | | 18,755 | | | | 41,855 | |
| | | | | | | | | |
| Non-Interest Expense | | | | | | | | |
| Salaries and employee benefits | | | 28,418 | | | | 27,275 | |
| Occupancy and equipment | | | 5,098 | | | | 4,762 | |
| Depreciation | | | 3,330 | | | | 3,339 | |
| Professional fees | | | 1,229 | | | | 1,204 | |
| Postage, delivery, and statement mailings | | | 1,908 | | | | 1,988 | |
| Advertising | | | 2,081 | | | | 2,533 | |
| Telecommunications | | | 1,354 | | | | 1,352 | |
| Bankcard expenses | | | 1,978 | | | | 1,737 | |
| Insurance and regulatory | | | 1,025 | | | | 1,132 | |
| Office supplies | | | 1,488 | | | | 1,369 | |
| Repossessed asset losses (gains), net of expenses | | | 437 | | | | (52 | ) |
| Loss on early extinguishment of debt | | | 1,208 | | | | - | |
| Other expenses | | | 8,352 | | | | 6,514 | |
| Total Non-Interest Expense | | | 57,906 | | | | 53,153 | |
| Income Before Income Taxes | | | 31,440 | | | | 58,002 | |
| Income tax expense | | | 7,580 | | | | 19,735 | |
| Net Income | | $ | 23,860 | | | $ | 38,267 | |
| | | | | | | | | |
| Basic earnings per share | | $ | 1.48 | | | $ | 2.24 | |
| Diluted earnings per share | | $ | 1.47 | | | $ | 2.24 | |
| Average Common Shares Outstanding: | | | | | | | | |
| Basic | | | 16,130 | | | | 17,057 | |
| Diluted | | | 16,189 | | | | 17,116 | |
CITY HOLDING COMPANY AND SUBSIDIARIES Consolidated Statements of Changes in Stockholders' Equity
(Unaudited) ($ in 000s)
| | | Three Months Ended | |
| | | September 30, 2008 | | | September 30, 2007 | |
| | | | | | | |
| Balance at July 1 | | $ | 302,056 | | | $ | 294,783 | |
| | | | | | | | | |
| Net (loss) income | | | (2,557 | ) | | | 12,714 | |
| Other comprehensive income: | | | | | | | | |
| Change in unrealized (loss) gain on securities available-for-sale | | | (13,682 | ) | | | 2,201 | |
| Change in unrealized gain on interest rate floors | | | 2,923 | | | | 2,050 | |
| Cash dividends declared ($0.34/share) | | | (5,492 | ) | | | - | |
| Cash dividends declared ($0.31/share) | | | - | | | | (5,105 | ) |
| Issuance of stock award shares, net | | | 70 | | | | 54 | |
| Exercise of 48,179 stock options | | | 1,351 | | | | - | |
| Excess tax benefits on stock compensation | | | 243 | | | | - | |
| Purchase of 436,800 common shares of treasury | | | - | | | | (14,977 | ) |
| Balance at September 30 | | $ | 284,912 | | | $ | 291,720 | |
| | | Nine Months Ended | |
| | | September 30, 2008 | | | September 30, 2007 | |
| | | | | | | |
| Balance at January 1 | | $ | 293,994 | | | $ | 305,307 | |
| | | | | | | | | |
| Cumulative effect of adopting FIN 48 | | | - | | | | (125 | ) |
| Net income | | | 23,860 | | | | 38,267 | |
| Other comprehensive income: | | | | | | | | |
| Change in unrealized (loss) gain on securities available-for-sale | | | (18,848 | ) | | | 83 | |
| Change in unrealized gain on interest rate floors | | | 3,738 | | | | 1,050 | |
| Cash dividends declared ($1.02/share) | | | (16,457 | ) | | | - | |
| Cash dividends declared ($0.93/share) | | | - | | | | (15,703 | ) |
| Issuance of stock award shares, net | | | 410 | | | | 372 | |
| Exercise of 66,254 stock options | | | 1,666 | | | | - | |
| Exercise of 7,300 stock options | | | - | | | | 154 | |
| Excess tax benefits on stock compensation | | | 266 | | | | 3 | |
| Purchase of 104,960 common shares of treasury | | | (3,717 | ) | | | - | |
| Purchase of 1,017,000 common shares of treasury | | | - | | | | (37,688 | ) |
| Balance at September 30 | | $ | 284,912 | | | $ | 291,720 | |
CITY HOLDING COMPANY AND SUBSIDIARIES Condensed Consolidated Quarterly Statements of Income
(Unaudited) ($ in 000s, except per share data)
| | | Quarter Ended | |
| | | September 30 2008 | | | June 30 2008 | | | March 31 2008 | | | Dec. 31 2007 | | | Sept. 30 2007 | |
| | | | | | | | | | | | | | | | |
| Interest income | | $ | 36,522 | | | $ | 36,968 | | | $ | 37,520 | | | $ | 38,989 | | | $ | 39,597 | |
| Taxable equivalent adjustment | | | 200 | | | | 204 | | | | 214 | | | | 226 | | | | 224 | |
| Interest income (FTE) | | | 36,722 | | | | 37,172 | | | | 37,734 | | | | 39,215 | | | | 39,821 | |
| Interest expense | | | 10,241 | | | | 11,494 | | | | 13,601 | | | | 14,950 | | | | 15,374 | |
| Net interest income | | | 26,481 | | | | 25,678 | | | | 24,133 | | | | 24,265 | | | | 24,447 | |
| Provision for loan losses | | | 2,350 | | | | 850 | | | | 1,883 | | | | 1,650 | | | | 1,200 | |
| Net interest income after provision for loan losses | | | 24,131 | | | | 24,828 | | | | 22,250 | | | | 22,615 | | | | 23,247 | |
| | | | | | | | | | | | | | | | | | | | | |
| Noninterest income | | | (12,758 | ) | | | 14,195 | | | | 17,318 | | | | 14,281 | | | | 13,814 | |
| Noninterest expense | | | 19,246 | | | | 18,761 | | | | 19,899 | | | | 17,861 | | | | 18,031 | |
| (Loss) Income before income taxes | | | (7,873 | ) | | | 20,262 | | | | 19,669 | | | | 19,035 | | | | 19,030 | |
| Income tax (benefit) expense | | | (5,516 | ) | | | 6,679 | | | | 6,417 | | | | 6,051 | | | | 6,092 | |
| Taxable equivalent adjustment | | | 200 | | | | 204 | | | | 214 | | | | 226 | | | | 224 | |
| Net (loss) income | | $ | (2,557 | ) | | $ | 13,379 | | | $ | 13,038 | | | $ | 12,758 | | | $ | 12,714 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Basic (loss) earnings per share | | $ | (0.16 | ) | | $ | 0.83 | | | $ | 0.81 | | | $ | 0.78 | | | $ | 0.76 | |
| Diluted (loss) earnings per share | | | (0.16 | ) | | | 0.83 | | | | 0.80 | | | | 0.78 | | | | 0.76 | |
| Cash dividends declared per share | | | 0.34 | | | | 0.34 | | | | 0.34 | | | | 0.31 | | | | 0.31 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Average Common Share (000s): | | | | | | | | | | | | | | | | | | | | |
| Outstanding | | | 16,142 | | | | 16,103 | | | | 16,147 | | | | 16,359 | | | | 16,714 | |
| Diluted | | | 16,195 | | | | 16,167 | | | | 16,205 | | | | 16,414 | | | | 16,767 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net Interest Margin | | | 4.78 | % | | | 4.65 | % | | | 4.40 | % | | | 4.32 | % | | | 4.32 | % |
CITY HOLDING COMPANY AND SUBSIDIARIES Non-Interest Income and Non-Interest Expense
(Unaudited) ($ in 000s)
| | | Quarter Ended | |
| | | September 30 2008 | | | June 30 2008 | | | March 31 2008 | | | Dec. 31 2007 | | | Sept. 30 2007 | |
| | | | | | | | | | | | | | | | |
| Non-Interest Income: | | | | | | | | | | | | | | | |
| Service charges | | $ | 11,993 | | | $ | 11,269 | | | $ | 11,274 | | | $ | 11,735 | | | $ | 11,192 | |
| Insurance commissions | | | 1,025 | | | | 1,168 | | | | 1,038 | | | | 1,119 | | | | 1,127 | |
| Trust and investment management fee income | | | 640 | | | | 449 | | | | 632 | | | | 514 | | | | 523 | |
| Bank owned life insurance | | | 767 | | | | 750 | | | | 676 | | | | 600 | | | | 596 | |
| Other income | | | 284 | | | | 559 | | | | 407 | | | | 312 | | | | 377 | |
| Subtotal | | | 14,709 | | | | 14,195 | | | | 14,027 | | | | 14,280 | | | | 13,815 | |
| Investment securities (losses) gains | | | (27,467 | ) | | | - | | | | 2 | | | | 1 | | | | (1 | ) |
| VISA IPO Gain | | | - | | | | - | | | | 3,289 | | | | - | | | | - | |
| Total Non-Interest Income | | $ | (12,758 | ) | | $ | 14,195 | | | $ | 17,318 | | | $ | 14,281 | | | $ | 13,814 | |
| | | | | | | | | | | | | | | | | | | | | |
| Non-Interest Expense: | | | | | | | | | | | | | | | | | | | | |
| Salaries and employee benefits | | $ | 9,538 | | | $ | 9,517 | | | $ | 9,363 | | | $ | 8,759 | | | $ | 9,307 | |
| Occupancy and equipment | | | 1,800 | | | | 1,701 | | | | 1,597 | | | | 1,604 | | | | 1,600 | |
| Depreciation | | | 1,110 | | | | 1,087 | | | | 1,133 | | | | 1,133 | | | | 1,160 | |
| Professional fees | | | 435 | | | | 427 | | | | 367 | | | | 424 | | | | 416 | |
| Postage, delivery, and statement mailings | | | 636 | | | | 618 | | | | 654 | | | | 601 | | | | 641 | |
| Advertising | | | 821 | | | | 643 | | | | 617 | | | | 590 | | | | 801 | |
| Telecommunications | | | 496 | | | | 440 | | | | 418 | | | | 456 | | | | 438 | |
| Bankcard expenses | | | 717 | | | | 640 | | | | 621 | | | | 617 | | | | 623 | |
| Insurance and regulatory | | | 354 | | | | 333 | | | | 338 | | | | 422 | | | | 364 | |
| Office supplies | | | 527 | | | | 504 | | | | 457 | | | | 469 | | | | 472 | |
| Repossessed asset losses (gains), net of expenses | | | 314 | | | | 91 | | | | 32 | | | | (105 | ) | | | (47 | ) |
| Loss on early extinguishment of debt | | | - | | | | - | | | | 1,208 | | | | - | | | | - | |
| Other expenses | | | 2,498 | | | | 2,760 | | | | 3,094 | | | | 2,891 | | | | 2,256 | |
| Total Non-Interest Expense | | $ | 19,246 | | | $ | 18,761 | | | $ | 19,899 | | | $ | 17,861 | | | $ | 18,031 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Employees (Full Time Equivalent) | | | 812 | | | | 817 | | | | 821 | | | | 811 | | | | 808 | |
| Branch Locations | | | 69 | | | | 68 | | | | 69 | | | | 69 | | | | 68 | |
CITY HOLDING COMPANY AND SUBSIDIARIES Consolidated Balance Sheets
($ in 000s)
| | | September 30 2008 | | | December 31 2007 | |
| | | (Unaudited) | | | | |
| Assets | | | | | | |
| Cash and due from banks | | $ | 52,206 | | | $ | 64,726 | |
| Interest-bearing deposits in depository institutions | | | 4,045 | | | | 9,792 | |
| Cash and cash equivalents | | | 56,251 | | | | 74,518 | |
| | | | | | | | | |
| Investment securities available-for-sale, at fair value | | | 345,982 | | | | 382,098 | |
| Investment securities held-to-maturity, at amortized cost | | | 33,033 | | | | 34,918 | |
| Total investment securities | | | 379,015 | | | | 417,016 | |
| | | | | | | | | |
| Gross loans | | | 1,777,731 | | | | 1,767,021 | |
| Allowance for loan losses | | | (18,879 | ) | | | (17,581 | ) |
| Net loans | | | 1,758,852 | | | | 1,749,440 | |
| | | | | | | | | |
| Bank owned life insurance | | | 69,660 | | | | 64,467 | |
| Premises and equipment | | | 59,574 | | | | 54,635 | |
| Accrued interest receivable | | | 9,733 | | | | 11,254 | |
| Net deferred tax assets | | | 41,173 | | | | 20,633 | |
| Intangible assets | | | 57,600 | | | | 58,238 | |
| Other assets | | | 33,707 | | | | 32,566 | |
| Total Assets | | $ | 2,465,565 | | | $ | 2,482,767 | |
| | | | | | | | | |
| Liabilities | | | | | | | | |
| Deposits: | | | | | | | | |
| Noninterest-bearing | | $ | 316,205 | | | $ | 314,231 | |
| Interest-bearing: | | | | | | | | |
| Demand deposits | | | 404,593 | | | | 397,510 | |
| Savings deposits | | | 359,644 | | | | 350,607 | |
| Time deposits | | | 912,184 | | | | 927,733 | |
| Total deposits | | | 1,992,626 | | | | 1,990,081 | |
| Short-term borrowings | | | 140,726 | | | | 161,916 | |
| Long-term debt | | | 21,075 | | | | 4,973 | |
| Other liabilities | | | 26,226 | | | | 31,803 | |
| Total Liabilities | | | 2,180,653 | | | | 2,188,773 | |
| | | | | | | | | |
| 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, 2008 and December 31, 2007 less 2,316,638 and 2,292,357 shares in treasury, respectively | | | 46,249 | | | | 46,249 | |
| Capital surplus | | | 102,831 | | | | 103,390 | |
| Retained earnings | | | 231,789 | | | | 224,386 | |
| Cost of common stock in treasury | | | (81,480 | ) | | | (80,664 | ) |
| Accumulated other comprehensive (loss) income: | | | | | | | | |
| Unrealized loss on securities available-for-sale | | | (20,631 | ) | | | (1,783 | ) |
| Unrealized gain on derivative instruments | | | 8,128 | | | | 4,390 | |
| Underfunded pension liability | | | (1,974 | ) | | | (1,974 | ) |
| Total Accumulated Other Comprehensive (Loss) Income | | | (14,477 | ) | | | 633 | |
| Total Stockholders' Equity | | | 284,912 | | | | 293,994 | |
| Total Liabilities and Stockholders' Equity | | $ | 2,465,565 | | | $ | 2,482,767 | |
CITY HOLDING COMPANY AND SUBSIDIARIES Loan Portfolio
(Unaudited) ($ in 000s)
| | | September 30 2008 | | | June 30 2008 | | | March 31 2008 | | | Dec 31 2007 | | | Sept 30 2007 | |
| | | | | | | | | | | | | | | | |
| Residential real estate | | $ | 620,951 | | | $ | 612,676 | | | $ | 605,579 | | | $ | 602,057 | | | $ | 600,094 | |
| Home equity | | | 377,919 | | | | 371,537 | | | | 347,986 | | | | 341,818 | | | | 338,161 | |
| Commercial, financial, and agriculture | | | 729,613 | | | | 715,196 | | | | 699,653 | | | | 707,987 | | | | 666,960 | |
| Loans to depository institutions | | | - | | | | - | | | | - | | | | 60,000 | | | | 60,000 | |
| Installment loans to individuals | | | 44,728 | | | | 45,385 | | | | 45,557 | | | | 48,267 | | | | 46,244 | |
| Previously securitized loans | | | 4,520 | | | | 5,253 | | | | 6,025 | | | | 6,892 | | | | 8,317 | |
| Gross Loans | | $ | 1,777,731 | | | $ | 1,750,047 | | | $ | 1,704,800 | | | $ | 1,767,021 | | | $ | 1,719,776 | |
CITY HOLDING COMPANY AND SUBSIDIARIES
Previously Securitized Loans
(Unaudited) ($ in millions)
| | Year Ended: | | December 31 Balance (a) | | | Annualized Interest Income (a) | | | Effective Annualized Yield (a) | |
| | | | | | | | | | | |
| | 2007 | | $ | 6.9 | | | $ | 7.3 | | | | 69 | % |
| | 2008 | | | 4.7 | | | | 5.6 | | | | 102 | % |
| | 2009 | | | 3.5 | | | | 4.1 | | | | 102 | % |
| | 2010 | | | 2.9 | | | | 3.2 | | | | 102 | % |
| | 2011 | | | 2.4 | | | | 2.6 | | | | 102 | % |
a - 2007 amounts are based on actual results. 2008 amounts are based on actual results through September 30, 2008 and estimated amounts for the remainder of the year. 2009, 2010, and 2011 amounts are based on estimated amounts.
| Note: | The amounts reflected in the table above require management to make significant assumptions based on estimated future default, prepayment, and discount rates. Actual performance could be significantly different from that assumed, which could result in the actual results being materially different from the amounts estimated above. |
CITY HOLDING COMPANY AND SUBSIDIARIES Consolidated Average Balance Sheets, Yields, and Rates
(Unaudited) ($ in 000s)
| | | Three Months Ended September 30, | |
| | | 2008 | | | 2007 | |
| | | Average Balance | | | Interest | | | Yield/ Rate | | | Average Balance | | | Interest | | | Yield/ Rate | |
| | | | | | | | | | | | | | | | | | | |
| Assets: | | | | | | | | | | | | | | | | | | |
| Loan portfolio: | | | | | | | | | | | | | | | | | | |
| Residential real estate | | $ | 613,771 | | | $ | 9,393 | | | | 6.09 | % | | $ | 598,954 | | | $ | 9,272 | | | | 6.14 | % |
| Home equity | | | 373,445 | | | | 6,644 | | | | 7.08 | % | | | 334,363 | | | | 6,547 | | | | 7.77 | % |
| Commercial, financial, and agriculture | | | 708,665 | | | | 11,622 | | | | 6.52 | % | | | 679,104 | | | | 12,776 | | | | 7.46 | % |
| Loans to depository institutions | | | - | | | | - | | | | - | | | | 60,000 | | | | 820 | | | | 5.42 | % |
| Installment loans to individuals | | | 53,521 | | | | 1,270 | | | | 9.44 | % | | | 47,626 | | | | 1,379 | | | | 11.49 | % |
| Previously securitized loans | | | 4,781 | | | | 1,325 | | | | 110.25 | % | | | 9,220 | | | | 1,927 | | | | 82.92 | % |
| Total loans | | | 1,754,183 | | | | 30,254 | | | | 6.86 | % | | | 1,729,267 | | | | 32,721 | | | | 7.51 | % |
| Securities: | | | | | | | | | | | | | | | | | | | | | | | | |
| Taxable | | | 407,754 | | | | 5,850 | | | | 5.71 | % | | | 442,696 | | | | 6,024 | | | | 5.40 | % |
| Tax-exempt | | | 34,653 | | | | 571 | | | | 6.56 | % | | | 38,810 | | | | 639 | | | | 6.53 | % |
| Total securities | | | 442,407 | | | | 6,421 | | | | 5.77 | % | | | 481,506 | | | | 6,663 | | | | 5.49 | % |
| Deposits in depository institutions | | | 8,981 | | | | 47 | | | | 2.08 | % | | | 15,184 | | | | 171 | | | | 4.47 | % |
| Federal funds sold | | | - | | | | - | | | | - | | | | 20,870 | | | | 266 | | | | 5.06 | % |
| Total interest-earning assets | | | 2,205,571 | | | | 36,722 | | | | 6.62 | % | | | 2,246,827 | | | | 39,821 | | | | 7.03 | % |
| Cash and due from banks | | | 54,572 | | | | | | | | | | | | 51,149 | | | | | | | | | |
| Bank premises and equipment | | | 57,923 | | | | | | | | | | | | 50,333 | | | | | | | | | |
| Other assets | | | 195,217 | | | | | | | | | | | | 171,478 | | | | | | | | | |
| Less: Allowance for loan losses | | | (18,158 | ) | | | | | | | | | | | (16,563 | ) | | | | | | | | |
| Total assets | | $ | 2,495,125 | | | | | | | | | | | $ | 2,503,224 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest-bearing demand deposits | | | 414,022 | | | | 654 | | | | 0.63 | % | | | 410,907 | | | | 1,136 | | | | 1.10 | % |
| Savings deposits | | | 362,550 | | | | 862 | | | | 0.95 | % | | | 347,055 | | | | 1,523 | | | | 1.74 | % |
| Time deposits | | | 887,884 | | | | 7,929 | | | | 3.55 | % | | | 923,937 | | | | 10,530 | | | | 4.52 | % |
| Short-term borrowings | | | 142,290 | | | | 477 | | | | 1.33 | % | | | 165,965 | | | | 1,758 | | | | 4.20 | % |
| Long-term debt | | | 21,089 | | | | 316 | | | | 5.96 | % | | | 21,871 | | | | 426 | | | | 7.73 | % |
| Total interest-bearing liabilities | | | 1,827,835 | | | | 10,238 | | | | 2.23 | % | | | 1,869,735 | | | | 15,373 | | | | 3.26 | % |
| Noninterest-bearing demand deposits | | | 331,919 | | | | | | | | | | | | 309,553 | | | | | | | | | |
| Other liabilities | | | 24,677 | | | | | | | | | | | | 28,092 | | | | | | | | | |
| Stockholders' equity | | | 310,694 | | | | | | | | | | | | 295,844 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total liabilities and stockholders' equity | | $ | 2,495,125 | | | | | | | | | | | $ | 2,503,224 | | | | | | | | | |
| Net interest income | | | | | | $ | 26,484 | | | | | | | | | | | $ | 24,448 | | | | | |
| Net yield on earning assets | | | | | | | | | | | 4.78 | % | | | | | | | | | | | 4.32 | % |
CITY HOLDING COMPANY AND SUBSIDIARIES Consolidated Average Balance Sheets, Yields, and Rates
(Unaudited) ($ in 000s)
| | | Nine Months Ended September 30, | |
| | | 2008 | | | 2007 | |
| | | Average Balance | | | Interest | | | Yield/ Rate | | | Average Balance | | | Interest | | | Yield/ Rate | |
| | | | | | | | | | | | | | | | | | | |
| Assets: | | | | | | | | | | | | | | | | | | |
| Loan portfolio: | | | | | | | | | | | | | | | | | | |
| Residential real estate | | $ | 604,798 | | | $ | 28,187 | | | | 6.23 | % | | $ | 596,585 | | | $ | 27,144 | | | | 6.08 | % |
| Home equity | | | 359,101 | | | | 19,520 | | | | 7.26 | % | | | 328,036 | | | | 19,091 | | | | 7.78 | % |
| Commercial, financial, and agriculture | | | 705,819 | | | | 35,563 | | | | 6.73 | % | | | 672,331 | | | | 38,119 | | | | 7.58 | % |
| Loans to depository institutions | | | 1,551 | | | | 35 | | | | 3.01 | % | | | 56,410 | | | | 2,271 | | | | 5.38 | % |
| Installment loans to individuals | | | 52,277 | | | | 4,014 | | | | 10.26 | % | | | 45,596 | | | | 3,967 | | | | 11.63 | % |
| Previously securitized loans | | | 5,521 | | | | 4,343 | | | | 105.08 | % | | | 11,583 | | | | 5,539 | | | | 63.94 | % |
| Total loans | | | 1,729,067 | | | | 91,662 | | | | 7.08 | % | | | 1,710,541 | | | | 96,131 | | | | 7.51 | % |
| Securities: | | | | | | | | | | | | | | | | | | | | | | | | |
| Taxable | | | 436,440 | | | | 18,034 | | | | 5.52 | % | | | 482,484 | | | | 19,709 | | | | 5.46 | % |
| Tax-exempt | | | 36,253 | | | | 1,771 | | | | 6.53 | % | | | 39,789 | | | | 1,954 | | | | 6.57 | % |
| Total securities | | | 472,693 | | | | 19,805 | | | | 5.60 | % | | | 522,273 | | | | 21,663 | | | | 5.55 | % |
| Deposits in depository institutions | | | 8,981 | | | | 163 | | | | 2.42 | % | | | 12,823 | | | | 401 | | | | 4.18 | % |
| Federal funds sold | | | - | | | | - | | | | - | | | | 20,832 | | | | 814 | | | | 5.22 | % |
| Total interest-earning assets | | | 2,210,741 | | | | 111,630 | | | | 6.74 | % | | | 2,266,469 | | | | 119,009 | | | | 7.02 | % |
| Cash and due from banks | | | 58,293 | | | | | | | | | | | | 50,668 | | | | | | | | | |
| Bank premises and equipment | | | 56,217 | | | | | | | | | | | | 47,555 | | | | | | | | | |
| Other assets | | | 191,625 | | | | | | | | | | | | 170,137 | | | | | | | | | |
| Less: Allowance for loan losses | | | (18,240 | ) | | | | | | | | | | | (16,114 | ) | | | | | | | | |
| Total assets | | $ | 2,498,636 | | | | | | | | | | | $ | 2,518,715 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest-bearing demand deposits | | | 412,417 | | | | 1,979 | | | | 0.64 | % | | | 423,222 | | | | 3,777 | | | | 1.19 | % |
| Savings deposits | | | 361,465 | | | | 2,796 | | | | 1.03 | % | | | 340,490 | | | | 4,259 | | | | 1.67 | % |
| Time deposits | | | 910,187 | | | | 27,204 | | | | 3.99 | % | | | 922,958 | | | | 30,942 | | | | 4.48 | % |
| Short-term borrowings | | | 136,644 | | | | 2,286 | | | | 2.23 | % | | | 158,250 | | | | 4,965 | | | | 4.19 | % |
| Long-term debt | | | 21,663 | | | | 1,070 | | | | 6.60 | % | | | 25,368 | | | | 1,383 | | | | 7.29 | % |
| Total interest-bearing liabilities | | | 1,842,376 | | | | 35,335 | | | | 2.56 | % | | | 1,870,288 | | | | 45,326 | | | | 3.24 | % |
| Noninterest-bearing demand deposits | | | 322,344 | | | | | | | | | | | | 314,744 | | | | | | | | | |
| Other liabilities | | | 26,213 | | | | | | | | | | | | 29,803 | | | | | | | | | |
| Stockholders' equity | | | 307,703 | | | | | | | | | | | | 303,880 | | | | | | | | | |
| Total liabilities and stockholders' equity | | $ | 2,498,636 | | | | | | | | | | | $ | 2,518,715 | | | | | | | | | |
| Net interest income | | | | | | $ | 76,295 | | | | | | | | | | | $ | 73,683 | | | | | |
| Net yield on earning assets | | | | | | | | | | | 4.61 | % | | | | | | | | | | | 4.35 | % |
CITY HOLDING COMPANY AND SUBSIDIARIES Analysis of Risk-Based Capital
(Unaudited) ($ in 000s)
| | | September 30 2008 (a) | | | June 30 2008 | | | March 31 2008 | | | Dec 31 2007 | | | Sept 30 2007 | |
| | | | | | | | | | | | | | | | |
| Tier I Capital: | | | | | | | | | | | | | | | |
| Stockholders' equity | | $ | 284,912 | | | $ | 302,056 | | | $ | 304,841 | | | $ | 293,994 | | | $ | 291,720 | |
| Goodwill and other intangibles | | | (57,600 | ) | | | (57,893 | ) | | | (58,065 | ) | | | (58,238 | ) | | | (58,328 | ) |
| Accumulated other comprehensive loss (income) | | | 14,477 | | | | 3,718 | | | | (7,280 | ) | | | (633 | ) | | | 4,396 | |
| Qualifying trust preferred stock | | | 16,000 | | | | 16,000 | | | | 16,000 | | | | 16,000 | | | | 16,000 | |
| Unrealized Loss on AFS securities | | | (761 | ) | | | (712 | ) | | | (275 | ) | | | (247 | ) | | | (94 | ) |
| Excess deferred tax assets | | | (15,470 | ) | | | - | | | | - | | | | - | | | | - | |
| Total tier I capital | | $ | 241,558 | | | $ | 263,169 | | | $ | 255,221 | | | $ | 250,876 | | | $ | 253,694 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Total Risk-Based Capital: | | | | | | | | | | | | | | | | | | | | |
| Tier I capital | | $ | 241,558 | | | $ | 263,169 | | | $ | 255,221 | | | $ | 250,876 | | | $ | 253,694 | |
| Qualifying allowance for loan losses | | | 18,879 | | | | 17,959 | | | | 18,567 | | | | 17,581 | | | | 16,980 | |
| Total risk-based capital | | $ | 260,437 | | | $ | 281,128 | | | $ | 273,788 | | | $ | 268,457 | | | $ | 270,674 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net risk-weighted assets | | $ | 1,842,684 | | | $ | 1,855,401 | | | $ | 1,828,559 | | | $ | 1,776,158 | | | $ | 1,709,486 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Ratios: | | | | | | | | | | | | | | | | | | | | |
| Average stockholders' equity to average assets | | | 12.45 | % | | | 12.46 | % | | | 12.03 | % | | | 11.84 | % | | | 11.82 | % |
| Tangible capital ratio | | | 9.44 | % | | | 10.02 | % | | | 10.00 | % | | | 9.72 | % | | | 9.59 | % |
| Risk-based capital ratios: | | | | | | | | | | | | | | | | | | | | |
| Tier I capital | | | 13.11 | % | | | 14.18 | % | | | 13.96 | % | | | 14.12 | % | | | 14.84 | % |
| Total risk-based capital | | | 14.13 | % | | | 15.15 | % | | | 14.97 | % | | | 15.11 | % | | | 15.83 | % |
| Leverage capital | | | 9.97 | % | | | 10.75 | % | | | 10.47 | % | | | 10.31 | % | | | 10.38 | % |
(a) September 30, 2008 risk-based capital ratios are estimated
CITY HOLDING COMPANY AND SUBSIDIARIES
Intangibles
(Unaudited) ($ in 000s)
| | | As of and for the Quarter Ended | |
| | | September 30 2008 | | | June 30 2008 | | | March 31 2008 | | | Dec 31 2007 | | | Sept 30 2007 | |
| | | | | | | | | | | | | | | | |
| Intangibles, net | | $ | 57,600 | | | $ | 57,893 | | | $ | 58,065 | | | $ | 58,238 | | | $ | 58,328 | |
| Intangibles amortization expense | | | 173 | | | | 172 | | | | 173 | | | | 177 | | | | 176 | |
CITY HOLDING COMPANY AND SUBSIDIARIES Summary of Loan Loss Experience
(Unaudited) ($ in 000s)
| | | Quarter Ended | |
| | | September 30 2008 | | | June 30 2008 | | | March 31 2008 | | | Dec 31 2007 | | | Sept 30 2007 | |
| | | | | | | | | | | | | | | | |
| Balance at beginning of period | | $ | 17,959 | | | $ | 18,567 | | | $ | 17,581 | | | $ | 16,980 | | | $ | 16,616 | |
| | | | | | | | | | | | | | | | | | | | | |
| Charge-offs: | | | | | | | | | | | | | | | | | | | | |
| Commercial, financial, and agricultural | | | 563 | | | | 1,022 | | | | 406 | | | | 359 | | | | - | |
| Real estate-mortgage | | | 523 | | | | 190 | | | | 274 | | | | 203 | | | | 240 | |
| Installment loans to individuals | | | 62 | | | | 77 | | | | 75 | | | | 108 | | | | 91 | |
| Overdraft deposit accounts | | | 783 | | | | 604 | | | | 985 | | | | 938 | | | | 1,035 | |
| Total charge-offs | | | 1,931 | | | | 1,893 | | | | 1,740 | | | | 1,608 | | | | 1,366 | |
| | | | | | | | | | | | | | | | | | | | | |
| Recoveries: | | | | | | | | | | | | | | | | | | | | |
| Commercial, financial, and agricultural | | | (30 | ) | | | 41 | | | | 13 | | | | 23 | | | | 19 | |
| Real estate-mortgage | | | 69 | | | | 48 | | | | 27 | | | | 35 | | | | 22 | |
| Installment loans to individuals | | | 71 | | | | 72 | | | | 108 | | | | 97 | | | | 89 | |
| Overdraft deposit accounts | | | 391 | | | | 274 | | | | 695 | | | | 404 | | | | 400 | |
| Total recoveries | | | 501 | | | | 435 | | | | 843 | | | | 559 | | | | 530 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net charge-offs | | | 1,430 | | | | 1,458 | | | | 897 | | | | 1,049 | | | | 836 | |
| Provision for loan losses | | | 2,350 | | | | 850 | | | | 1,883 | | | | 1,650 | | | | 1,200 | |
| Balance at end of period | | $ | 18,879 | | | $ | 17,959 | | | $ | 18,567 | | | $ | 17,581 | | | $ | 16,980 | |
| | | | | | | | | | | | | | | | | | | | | |
| Loans outstanding | | $ | 1,777,731 | | | $ | 1,750,047 | | | $ | 1,704,800 | | | $ | 1,767,021 | | | $ | 1,719,776 | |
| Average loans outstanding | | | 1,754,183 | | | | 1,728,609 | | | | 1,704,133 | | | | 1,739,166 | | | | 1,729,267 | |
| Allowance as a percent of loans outstanding | | | 1.06 | % | | | 1.03 | % | | | 1.09 | % | | | 1.00 | % | | | 0.99 | % |
| Allowance as a percent of non-performing loans | | | 134.95 | % | | | 122.89 | % | | | 113.55 | % | | | 103.28 | % | | | 86.47 | % |
| Net charge-offs (annualized) as a percent of average loans outstanding | | | 0.33 | % | | | 0.34 | % | | | 0.21 | % | | | 0.24 | % | | | 0.19 | % |
| Net charge-offs, excluding overdraft deposit accounts, (annualized) as a percent of average loans outstanding | | | 0.24 | % | | | 0.26 | % | | | 0.14 | % | | | 0.12 | % | | | 0.05 | % |
CITY HOLDING COMPANY AND SUBSIDIARIES Summary of Non-Performing Assets
(Unaudited) ($ in 000s)
| | | September 30 2008 | | | June 30 2008 | | | March 31 2008 | | | Dec 31 2007 | | | Sept 30 2007 | |
| | | | | | | | | | | | | | | | |
| Nonaccrual loans | | $ | 13,709 | | | $ | 14,018 | | | $ | 15,840 | | | $ | 16,437 | | | $ | 18,896 | |
| Accruing loans past due 90 days or more | | | 181 | | | | 431 | | | | 257 | | | | 314 | | | | 566 | |
| Previously securitized loans past due 90 days or more | | | 100 | | | | 165 | | | | 255 | | | | 76 | | | | 176 | |
| Total non-performing loans | | | 13,990 | | | | 14,614 | | | | 16,352 | | | | 16,827 | | | | 19,638 | |
| Other real estate owned, excluding property associated with previously securitized loans | | | 3,332 | | | | 6,164 | | | | 4,192 | | | | 4,163 | | | | 1,091 | |
| Other real estate owned associated with previously securitized loans | | | 417 | | | | 321 | | | | 148 | | | | - | | | | 405 | |
| Other real estate owned | | | 3,749 | | | | 6,485 | | | | 4,340 | | | | 4,163 | | | | 1,496 | |
| Total non-performing assets | | $ | 17,739 | | | $ | 21,099 | | | $ | 20,692 | | | $ | 20,990 | | | $ | 21,134 | |
| | | | | | | | | | | | | | | | | | | | | |
| Non-performing assets as a percent of loans and other real estate owned | | | 1.00 | % | | | 1.20 | % | | | 1.21 | % | | | 1.20 | % | | | 1.23 | % |
CITY HOLDING COMPANY AND SUBSIDIARIES
Summary of Total Past Due Loans
(Unaudited) ($ in 000s)
| | | September 30 2008 | | | June 30 2008 | | | March 31 2008 | | | Dec 31 2007 | | | Sept 30 2007 | |
| | | | | | | | | | | | | | | | |
| Residential real estate | | $ | 3,636 | | | $ | 5,487 | | | $ | 3,763 | | | $ | 5,480 | | | $ | 4,500 | |
| Home equity | | | 1,400 | | | | 1,316 | | | | 1,344 | | | | 2,141 | | | | 1,075 | |
| Commercial, financial, and agriculture | | | 1,741 | | | | 1,166 | | | | 806 | | | | 1,506 | | | | 311 | |
| Loans to depository institutions | | | - | | | | - | | | | - | | | | - | | | | - | |
| Installment loans to individuals | | | 216 | | | | 290 | | | | 360 | | | | 385 | | | | 279 | |
| Previously securitized loans | | | 598 | | | | 632 | | | | 897 | | | | 1,099 | | | | 948 | |
| Overdraft deposit accounts | | | 491 | | | | 485 | | | | 568 | | | | 612 | | | | 575 | |
| Total past due loans | | $ | 8,082 | | | $ | 9,376 | | | $ | 7,738 | | | $ | 11,223 | | | $ | 7,688 | |
