Exhibit 99
NEWS RELEASE
For Immediate Release
May 16, 2002
For Further Information Contact:
Charles Hageboeck, Executive Vice President & CFO
(304) 769-1102
City Holding Company Announces Termination of Formal Agreements with the Office
of the Comptroller of the Currency and The Federal Reserve
Charleston, West Virginia - City Holding Company, "the Company" (NASDAQ:CHCO;
NASDAQ:CHCOP), a $2.1 billion bank holding company headquartered in Charleston,
today announced it has received official confirmation from the Office of the
Comptroller of the Currency ("OCC") that the OCC has terminated its Formal
Agreement with the Company's principal banking subsidiary, City National Bank of
West Virginia (the "Bank"). The Formal Agreement was originally executed between
the OCC and the board of directors of the Bank in June 2000, and amended in
September 2001. Likewise, a Memorandum of Understanding (MOU) between City
Holding Company's board and its primary regulator, the Federal Reserve Bank of
Richmond, has also been terminated, effective immediately.
In terminating the agreements, the regulatory agencies indicated that they
believe the protection of the depositors, other customers and shareholders of
the bank as well as the Company's continued safe and sound operation do not
require the continued existence of the agreements, which were principally
focused on lending policies and other operating practices and procedures. The
termination follows the completion of the OCC's annual safety and soundness
examination of the bank during the second quarter of 2002. It also comes after
two consecutive quarters where the Company reported strong financial
performance.
The most significant impact of the formal agreements on the Company and its
shareholders was the higher costs associated with deposit insurance, the staff
expense burden of regulatory compliance, and limitations on capital management
strategies such as dividend payments or stock buy-backs.
"We are thankful for this affirmation by our regulators of the turnaround that
has been achieved by the Company", stated Jerry Francis, Chairman, President and
CEO of City Holding Company and its primary subsidiary City National Bank of
West Virginia. "Following the OCC's implementation of a Formal Agreement with
the directors of City National Bank, and the Federal Reserve's MOU with City
Holding Company, the boards of both the Bank and the Company took immediate and
decisive action to resolve the primary objectives of the agreements."
Following the resignation of the Company's former CEO in June of 2000, the board
embarked upon a strategic plan re-focusing the Company on its core West Virginia
franchise and began the process of eliminating non-banking divisions and out-of
market activities. At the same time, the board launched a search for a new CEO
and executive management team, which was hired in early 2001. Under the
leadership of the board of directors, the Company's management undertook to:
o Exit the mortgage-banking business activities of City Mortgage
Services
o Sell two California banking subsidiaries
o Sell the printing/direct mail subsidiary
o Sell the Internet Service Provider
o Close out-of-state loan production offices
o Sell a loan collection business in Dallas
o Reduce commercial lending activities and improve the bank's liquidity
o Exit the indirect automobile lending business
o Implement best practices operating procedures within the banking
organization resulting in a substantial reduction in headcount and
achieving staffing levels similar to peers
o Implement policy changes and revenue enhancements in the retail
banking franchise
o Improve employee benefits
o Implement improved financial planning and other tools to manage the
business
o Discontinue the Bank's securities brokerage business and form a
strategic alliance to provide customers with these services
o Make appropriate adjustments to the carrying value of the Bank's
retained interests in securitized mortgages to reflect the inherent
risk of these assets
o Take a provision for loan losses sufficient to adequately reserve for
losses anticipated within the loan portfolio
o Pay off the Company's financial obligation to SunTrust
o Enhance liquidity and capital
o Lift performance ratios to above peer median levels
As a result of the active participation and cooperation of management and the
boards, the issues that led to the Formal Agreement and MOU have been
successfully resolved. "We are extremely proud of these accomplishments and of
the contributions the board, management, and all our employees have made during
2001 and 2002 to accomplish this remarkable turnaround in our Company," added
Francis.
The revised, less comprehensive formal agreement that the bank had entered into
with the OCC in September 2001 undertook to implement remedial action in a small
number of areas. That agreement recognized areas of compliance under the formal
agreement signed in July 2000, and replaced it. It called for, among other
things:
o Continuation of a compliance committee responsible for monitoring and
coordinating the Bank's adherence to the provisions of the Agreement
o Continued refinement of the process to request and review real estate
appraisals for adequacy and compliance
o Further development and implementation of a written program to improve
the Bank's loan portfolio management
o Further development of an effective, independent and ongoing loan
review system
o Implementation and adherence to the capital program previously
approved by the Board of Directors
o Implementation of an independent, risk-based, internal audit program
o Continuing review of the adequacy of the bank's allowance for loan and
lease losses
In releasing the Company and the Bank from its formal agreements, the regulatory
agencies are acknowledging satisfactory compliance with these objectives.
Francis announced at the Company's Annual Shareholder Meeting in April that he
believed the Company to be fully compliant with the agreements and was hopeful
that the agencies' decision would be to lift the agreements. In addition to the
strong income reported for the fourth quarter 2001 and first quarter 2002, the
Company has reported significant improvement in credit quality. Non-performing
assets fell from $31.7 million at December 31, 2001 to $17.8 million at March
31, 2002, for a decrease of $13.9 million or 43.9%. At March 31, 2002,
non-performing assets represented 1.38% of total loans and other real estate
owned, down from 2.47% at December 31, 2001. The Allowance for Loan and Lease
Losses (ALLL) remains at a level that the Company believes adequately provides
for probable inherent losses in the loan portfolio. At March 31, 2002, the
Allowance was 212% of non-performing assets, significantly improved from 153% at
December 31, 2001. Likewise, the ALLL was at 2.94% of total loans outstanding at
March 31, 2002.
"We are excited by the confidence, and appreciative of the patience that our
shareholders have shown in the board, management, and employees of City Holding
Company. Further, we believe that City's performance through the rest of 2002
should continue to demonstrate strength and stability," said Francis. The common
stock of City Holding closed on May 15, 2002 at $19.15, up from $9.00 the same
date in 2001, reflecting an increase of 113% for the twelve-month period.
Even though the formal agreements have been terminated, the Company remains
restricted in its ability to pay cash dividends or buy back shares without prior
approval of both the OCC and the Federal Reserve as a consequence of agency
policies. Both agencies may, however, approve exceptions to their policies, and
the Company previously announced that it believes it will be permitted to pay
preferred shareholders their accrued dividends some time this year. Mr. Francis
announced at the Annual Meeting that the Company would wish to restore cash
dividends to common shareholders or engage in a stock buy back program, or both,
at the earliest possible date and expects to make a request for a policy
exception in the near future. In any event, the Company will announce by July
3rd the status of the next quarterly dividend due on its Capital Trust II
securities.
City Holding Company is the parent company of City National Bank of West
Virginia. In addition to the Bank, City National Bank operates CityInsurance
Professionals, an insurance agency offering a full range of insurance products
and services.
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, or conversely, the Company may incur less, or
even negative, loan loss provision due to positive credit quality trends in the
future and further resolution of various loan quality issues; (2) the Company
may experience increases in the default rates on its retained interests in
securitized mortgages causing it to take impairment charges to earnings; (3) the
Company could have adverse legal actions of a material nature; (4) the Company
may face competitive loss of customers associated with its efforts to increase
fee-based revenues; (5) the Company may be unable to manage its expense levels
due to the expenses associated with its loan portfolio quality, regulatory, and
legal issues; (6) current earnings from the Company's subsidiaries may not be
sufficient to fund the cash needs of the Parent Company, including the payment
of common stock dividends and interest payments required to be paid to City
Holding Company Capital Trust and the City Holding Company Capital Trust II; (7)
the Company may be unable to engage in a stock buy-back program; (8) rulings
affecting, among other things, the Company's and its banking subsidiaries'
regulatory capital and required loan loss allocations may change, resulting in
the need for increased capital levels; (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; and (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. 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.