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Press release from Business Wire

City Holding Company Announces 2012 Earnings

Tuesday, January 29, 2013

City Holding Company Announces 2012 Earnings14:05 EST Tuesday, January 29, 2013 CHARLESTON, W.Va. (Business Wire) -- City Holding Company, “the Company” (NASDAQ:CHCO), a $2.9 billion bank holding company headquartered in Charleston, today announced net income of $38.9 million, or $2.61 per diluted share for the year ended December 31, 2012. During 2012, City's net interest income increased $5.6 million from 2011, loan balances increased $173 million, and noninterest income (exclusive of investment security gains) increased $1.9 million. For 2012, the Company achieved a return on assets of 1.37%, a return on tangible equity of 14.7%, a net interest margin of 3.96%, and an efficiency ratio of 57.2%. City's results for 2012 are down slightly compared to 2011 as a result of merger-related expenses of $4.7 million. Exclusive of the acquisition and integration expenses, 2012's results compared to 2011 were quite favorable. For the fourth quarter of 2012 the Company reported net income of $10.9 million, or $0.73 per diluted share. The Company also achieved a return on assets of 1.49%, a return on tangible equity of 16.2%, a net interest margin of 3.99%, and an efficiency ratio of 53.1% in the fourth quarter of 2012. City's CEO Charles Hageboeck stated that, “2012 was an exciting and important year for City. The acquisition of Virginia Savings Bancorp marked our first acquisition in seven years and earlier this month, we completed our acquisition of Community Financial Corporation. With these acquisitions, City now has total assets of $3.4 billion, and 15 branch locations in Virginia. We look forward to continuing the development of our presence in Virginia.” “Net interest income in 2012 was up $5.6 million due to the acquisition of Virginia Savings Bancorp, core loan growth of $101 million, and lower deposit pricing. As a result, our net interest margin increased from 3.89% for 2011 to 3.96% for 2012.” “Our asset quality continues to remain strong with stable and relatively low levels of past due loans. The ratio of non-performing assets to total loans and other real estate owned of 1.41% at December 31, 2012 was down compared to the prior quarter's ratio of 1.53%. Provision expense was higher for 2012 due to loan growth throughout the year, particularly in the fourth quarter, rather than due to deteriorating asset quality.” “During 2012, our bankcard interchange fee income increased $1.3 million, or about 11%, due to increased transaction volumes. Trust and investment management fee income increased $0.7 million, or 21.5%, from 2011 due to assets under management increasing from $580 million at December 31, 2011 to $750 million at December 31, 2012. This increase was the result of core growth, as Virginia Savings Bancorp did not offer these services. In addition, an increase in mortgage-related lending activity led to an increase of $0.6 million in other income.” “In summary, 2012 was another successful year for City both from a financial performance perspective and from a growth perspective. We expanded our footprint into Virginia while maintaining solid financial results. We look forward to 2013 and the opportunities to continue meeting the expectations of our shareholders and customers.” Net Interest Income The Company's tax equivalent net interest income increased $5.5 million, or 5.9%, from $93.0 million in 2011 to $98.5 million in 2012. This increase is due primarily to the acquisition of Virginia Savings Bancorp as of May 31, 2012, an increase in loan balances outstanding, and a decline in the average rate paid on interest bearing deposits. The acquisition of Virginia Savings Bancorp increased our net interest income by $4.5 million, which included $2.6 million of accretion related to the fair value adjustments recorded as a result of the acquisition. Excluding the Virginia Savings Bancorp acquisition, the average balance of loans outstanding increased $71 million, or 3.73%, from the year ended December 31, 2011. The average rate paid on interest bearing deposits decreased from 1.07% during 2011 to 0.70% during 2012 and was largely attributable to the average rate paid on time deposits declining from 1.93% during 2011 to 1.32% during 2012. These increases were partially offset by a decrease in investment interest income as approximately $38 million of higher yielding trust preferred securities were called during the third quarter of 2012. The Company's reported net interest margin increased from 3.89% for the year ended December 31, 2011 to 3.96% for the year ended December 31, 2012. Excluding the favorable impact of the accretion from the fair value adjustments, the net interest margin for the year ended December 31, 2012 would have been 3.85%. During the fourth quarter of 2012, the Company's tax equivalent net interest income increased $0.6 million, or 2.6%, from $25.1 million during the third quarter of 2012 to $25.7 million. This increase is due to an increase in the accretion related to the accounting fair value adjustments recorded as a result of the acquisition of Virginia Savings Bancorp. The Company's reported net interest margin increased from 3.95% for the third quarter of 2012 to 3.99% for the fourth quarter of 2012. Excluding the favorable impact of the accretion from the fair value adjustments ($1.7 million for the quarter ended December 31, 2012 and $0.9 million for the quarter ended September 30, 2012), the net interest margin would have been 3.73% for the quarter ended December 31, 2012 and 3.80% for the quarter ended September 30, 2012. Credit Quality As a result of the Company's quarterly analysis of the adequacy of the ALLL, the Company recorded a provision for loan losses of $1.8 million in the fourth quarter of 2012 and $6.4 million for the year ended December 31, 2012 compared to $2.2 million and $4.6 million of the comparable periods in 2011. During the fourth quarter of 2012 the Company's loan portfolio increased $61.1 million from September 30, 2012 which resulted in a $0.5 million addition to the ALLL. The provision for loan losses recorded during 2012 reflects difficulties encountered by certain commercial borrowers of the Company during the year, the downgrade of their related credits and management's assessment of the impact of these difficulties on the ultimate collectability of the loans. In addition, the Company received life insurance proceeds as the beneficiary of a life insurance policy carried by a commercial borrower during the third quarter of 2012 that enabled the Company to reduce the ALLL by approximately $0.6 million for amounts previously included in the ALLL. Changes in the amount of the provision and related allowance are based on the Company's detailed systematic methodology and are directionally consistent with changes in the composition and quality of the Company's loan portfolio. The Company believes its methodology for determining the adequacy of its ALLL adequately provides for probable losses inherent in the loan portfolio and produces a provision and allowance for loan losses that is directionally consistent with changes in asset quality and loss experience. Investment Securities Gains/(Losses) During 2012, the Company realized investment gains of $1.2 million from the sale of certain equity positions related to community banks and bank holding companies. In addition, the Company also recognized gains of $0.3 million associated with the calls of trust preferred securities. These gains were partially offset by $0.6 million of credit-related net investment impairment losses that were recorded by the Company in 2012. The charges deemed to be other than temporary were related to pooled bank trust preferreds with a remaining carrying value of $3.5 million at December 31, 2012. The credit-related net impairment charges related to the pooled bank trust preferred securities were based on the Company's quarterly reviews of its investment securities for indications of losses considered to be other than temporary. Non-interest Income Exclusive of net investment securities gains and losses, non-interest income increased $1.9 million to $54.3 million for the year ended December 31, 2012 as compared to $52.4 million for the year ended December 31, 2011. Bankcard interchange fees increased $1.3 million, or 11.3%, to $12.4 million for the year ended December 31, 2012. This increase was primarily due to increased transaction volumes. In addition, trust and investment management fee income increased $0.7 million, or 21.5%, to $3.8 million due to core growth as Virginia Savings Bancorp did not offer these services. Other income increased $0.6 million, or 30.8%, to $2.7 million due largely to an increase in mortgage related lending activity. Exclusive of other than temporary investment impairment losses and investment losses, total non-interest income increased $1.2 million to $14.3 million for the fourth quarter of 2012 as compared to the fourth quarter of 2011. This increase was due primarily to an increase in service charges from depository accounts of $0.6 million, an increase of $0.3 million in other income, and an increase of $0.2 million in trust and investment management fee income. Non-interest Expenses During 2012, the Company recognized $4.7 million of acquisition and integration expenses associated with the completed acquisition of Virginia Savings Bancorp and the upcoming acquisition of Community Financial Corporation. In comparison, during 2011, the Company recorded a $3.0 million litigation reserve accrual. Excluding these expenses, noninterest expenses increased $4.6 million from $78.1 million for the year ended December 31, 2011 to $82.7 million for the year ended December 31, 2012. Included in this increase are expenses of $1.8 million related to the operation of the acquired Virginia Savings Bancorp facilities. Salaries and employee benefits increased $2.8 million due primarily to additional employees associated with the acquisition of Virginia Savings Bancorp ($1.0 million) and increased health insurance costs ($1.0 million). Repossessed asset losses increased $1.1 million due to the decline in estimated fair values of several residential properties located in the eastern panhandle of West Virginia and at the Greenbrier Resort located in southern West Virginia. The Company continually reevaluates the estimated fair value of properties that it has repossessed by obtaining updated appraisals on at least an annual basis. In addition, other expenses increased $0.8 million, advertising expenses increased $0.6 million, and bankcard expenses increased $0.4 million. These increases were partially offset by a decrease in FDIC insurance expense of $1.0 million due to a change in the assessment base methodology during the third quarter of 2011. For the fourth quarter of 2012, total non-interest expenses increased $2.6 million, from $18.7 million for the fourth quarter of 2011 to $21.3 million. Salaries and employee benefit expense increased $1.0 million, primarily associated with the acquisition of Virginia Savings Bancorp and increased health insurance costs. In addition, advertising expense increased $0.4 million, merger related expenses increased $0.3 million, occupancy and equipment expenses increased $0.2 million, and repossessed asset losses increased $0.2 million from the fourth quarter of 2011. Balance Sheet Trends Loans increased $173.3 million (8.8%) from December 31, 2011 to $2.15 billion at December 31, 2012, in part due to the Company's acquisition of Virginia Savings Bancorp, Inc. ($72.0 million). Excluding the Virginia Savings Bancorp, Inc. acquisition, loans increased $101.3 million (5.1%) from December 31, 2011 to $2.07 billion at December 31, 2012. Increases in residential real estate loans of $69.7 million (7.5%) and commercial real estate loans of $57.6 million (7.9%) were partially offset by a decline in commercial and industrial (“C&I”) loans of $23.9 million. Total average depository balances increased $186.9 million, or 8.5%, from the quarter ended December 31, 2011 to the quarter ended December 31, 2012. This growth was primarily attributable to deposits acquired from Virginia Savings Bancorp, Inc. ($122.7 million). Exclusive of this contribution, the Company experienced increases in noninterest-bearing demand deposits ($35.2 million), savings deposits ($31.5 million), and interest-bearing demand deposits ($20.3 million) that were partially offset by a decrease in time deposits ($22.9 million). Income Tax Expense The Company's effective income tax rate for the quarter and year ended December 31, 2012 was 34.9% and 34.3%, respectively, compared to 33.2% and 33.6% for the quarter and year ended December 31, 2011, respectively. 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 89.1% and the loan to asset ratio was 73.6% at December 31, 2012. The Company maintained investment securities totaling 13.8% of assets as of this date. Further, the Company's deposit mix is weighted heavily toward checking and saving accounts that fund 51.1% of assets at December 31, 2012. Time deposits fund 31.5% of assets at December 31, 2012, but very few of these deposits are in accounts that have balances of more than $250,000, reflecting the core retail orientation of the Company. The Company is also strongly capitalized. The Company's tangible equity ratio was 9.4% at both December 31, 2012 and at December 31, 2011. At December 31, 2012, City National Bank's leverage ratio is 8.72%, its tier I capital ratio is 11.51%, and its total risk-based capital ratio is 12.40%. These regulatory capital ratios are significantly above levels required to be considered “well capitalized,” which is the highest possible regulatory designation. On December 19, 2012, the Board approved a quarterly cash dividend of 35 cents per share payable January 31, 2013, to shareholders of record as of January 15, 2013. During the year ended December 31, 2012, the Company repurchased 237,535 common shares at a weighted average price of $33.32 as part of a one million share repurchase plan authorized by the Board of Directors in July 2011. At December 31, 2012, the Company could repurchase approximately 454,000 shares under the July 2011 authorization. City Holding Company is the parent company of City National Bank of West Virginia. City National operates 73 branches across West Virginia, Kentucky, Virginia, and Ohio. City completed the acquisition of Staunton, Virginia-based Community Financial Corporation (“Community”) and its wholly owned banking subsidiary, Community Bank effective January 10, 2013 at 12:01 a.m. The merger, which was announced in August 2012, received the approval of all required regulatory agencies in December 2012 and Community's shareholders on January 8, 2013. Community shareholders received 0.1753 shares of City stock for each share of Community common stock, resulting in the issuance of 766,849 shares of City Holding Company. In connection with the acquisition, City repaid Community's borrowings under the U.S. Troubled Asset Relief Program (TARP) of $12.6 million on January 9, 2013. At December 31, 2012, Community had total assets of approximately $460 million, with stockholders' equity of approximately $53 million, loans of approximately $410 million, and deposits of approximately $380 million. In addition, nonperforming assets at December 31, 2012 totaled $27 million. During the quarter ended December 31, 2012, Community had net interest income of $5.1 million, noninterest income of $0.85 million, and noninterest expenses of $4.3 million. Included in the noninterest expenses for the quarter ending December 31, 2012 were compensation and benefit costs of $2.0 million, repossessed asset losses of $0.8 million, data processing expenses of $0.25 million, and professional expenses of $0.2 million. City expects to reduce compensation and benefit expenses by approximately 25% based on employees retained after January 2013. During the fourth quarter of 2012, City recognized approximately $0.2 million, after taxes, of one-time merger related expenses for the Community acquisition and anticipates that between $4.0 million and $4.6 million, after taxes, will be recognized in the first quarter of 2013. Additionally, the credit mark originally estimated at $55 million is now anticipated to be in the range of $46 million to $51 million. This acquisition further expands City's presence in Virginia by adding ten branches and City grows to $3.4 billion in assets with 83 banking offices in West Virginia, Virginia, Kentucky, and Ohio. Forward-Looking InformationThis 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 could have adverse legal actions of a material nature; (4) the Company may face competitive loss of customers; (5) the Company may be unable to manage its expense levels; (6) the Company may have difficulty retaining key employees; (7) changes in the interest rate environment may have results on the Company's operations materially different from those anticipated by the Company's market risk management functions; (8) changes in general economic conditions and increased competition could adversely affect the Company's operating results; (9) changes in other regulations and government policies affecting bank holding companies and their subsidiaries, including changes in monetary policies, could negatively impact the Company's operating results; (10) the Company may experience difficulties growing loan and deposit balances; (11) the current economic environment poses significant challenges for us and could adversely affect ourfinancial condition and results of operations; (12) continued deterioration in the financial condition of the U.S. banking system may impact the valuations of investments the Company has made in the securities of other financial institutions resulting in either actual losses or other than temporary impairments on such investments; (13)the effects of the Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) recently adopted by the United States Congress and (14) the integration of the operations of City Holding and Community Financial may be more difficult than anticipated. Forward-looking statements made herein reflect management's expectations as of the date such statements are made.Forward-looking statements made herein reflect management's expectations as of the date such statements are made. Such information is provided to assist stockholders and potential investors in understanding current and anticipated financial operations of the Company and is included pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances that arise after the date such statements are made.Further, the Company is required to evaluate subsequent events through the filing of its December 31, 2012 Form 10-K. The Company will continue to evaluate the impact of any subsequent events on the preliminary December 31, 2012 results and will adjust the amounts if necessary.     CITY HOLDING COMPANY AND SUBSIDIARIESFinancial Highlights(Unaudited)                     Three Months Ended December 31,Percent   2012       2011     Change   Earnings ($000s, except per share data): Net Interest Income (FTE) $ 25,707 $ 23,440 9.67 % Net Income available to common shareholders 10,894 9,652 12.87 % Earnings per Basic Share 0.73 0.65 12.71 % Earnings per Diluted Share 0.73 0.65 12.63 %                 Key Ratios (percent): Return on Average Assets 1.49 % 1.43 % 4.64 % Return on Average Tangible Equity 16.15 % 14.93 % 8.21 % Net Interest Margin 3.99 % 3.90 % 2.30 % Efficiency Ratio 53.12 % 51.24 % 3.69 % Average Shareholders' Equity to Average Assets 11.49 % 11.65 % (1.39 )%   Consolidated Risk Based Capital Ratios (a): Tier I 12.97 % 13.12 % (1.14 )% Total 13.85 % 14.07 % (1.56 )%   Tangible Equity to Tangible Assets 9.40 % 9.37 % 0.35 %                 Common Stock Data: Cash Dividends Declared per Share $ 0.35 $ 0.35 - Book Value per Share 22.47 21.05 6.74 % Tangible Book Value per Share 18.08 17.25 4.83 % Market Value per Share: High 36.45 35.10 3.85 % Low 31.78 26.06 21.95 % End of Period 34.85 33.89 2.83 %   Price/Earnings Ratio (b) 11.89 13.04 (8.77 )%               Twelve Months Ended December 31,Percent   2012       2011     Change   Earnings ($000s, except per share data): Net Interest Income (FTE) $ 98,538 $ 93,044 5.90 % Net Income available to common shareholders 38,945 40,678 (4.26 )% Earnings per Basic Share 2.63 2.68 (2.10 )% Earnings per Diluted Share 2.61 2.67 (2.16 )%                 Key Ratios (percent): Return on Average Assets 1.37 % 1.51 % (8.83 )% Return on Average Tangible Equity 14.74 % 15.66 % (5.84 )% Net Interest Margin 3.96 % 3.89 % 1.75 % Efficiency Ratio 57.16 % 55.87 % 2.32 % Average Shareholders' Equity to Average Assets 11.46 % 11.70 % (2.09 )%                 Common Stock Data: Cash Dividends Declared per Share $ 1.40 $ 1.37 2.19 % Market Value per Share: High 37.16 37.22 (0.16 )% Low 30.96 26.06 18.80 %   Price/Earnings Ratio (b) 13.27 12.63 5.04 %     (a) December 31, 2012 risk-based capital ratios are estimated (b) December 31, 2012 price/earnings ratio computed based on annualized fourth quarter 2012 earnings     CITY HOLDING COMPANY AND SUBSIDIARIESFinancial Highlights(Unaudited)                                         Book Value and Market Price Range per ShareMarket PriceBook Value per ShareRange per ShareMarch 31   June 30   September 30   December 31   Low   High   2008 $ 18.92 $ 18.72 $ 17.61 $ 17.58 $ 29.08 $ 42.88 2009 17.69 18.24 18.95 19.37 20.88 34.34 2010 19.71 20.02 20.31 20.31 26.87 38.03 2011 20.39 20.58 20.86 21.05 26.06 37.22 2012 21.46 21.63 22.14 22.47 30.96 37.16                             Earnings per Basic Share   Quarter EndedMarch 31   June 30   September 30   December 31   Year-to-Date   2008 $ 0.81 $ 0.83 $ (0.16 ) $ 0.26 $ 1.74 2009 0.69 0.64 0.66 0.70 2.69 2010 0.59 0.68 0.58 0.64 2.48 2011 0.62 0.65 0.77 0.65 2.68 2012 0.68 0.50 0.71 0.73 2.63                             Earnings per Diluted Share   Quarter EndedMarch 31   June 30   September 30   December 31   Year-to-Date   2008 $ 0.80 $ 0.83 $ (0.16 ) $ 0.26 $ 1.74 2009 0.69 0.64 0.66 0.70 2.68 2010 0.58 0.68 0.58 0.64 2.47 2011 0.62 0.64 0.76 0.65 2.67 2012 0.67 0.50 0.71 0.73 2.61     CITY HOLDING COMPANY AND SUBSIDIARIESConsolidated Statements of Income(Unaudited) ($ in 000s, except per share data)   Three Months Ended December 31,2012   2011   Interest Income Interest and fees on loans $ 25,588 $ 22,998 Interest on investment securities: Taxable 2,940 4,036 Tax-exempt 341 398 Interest on federal funds sold   15   9   Total Interest Income 28,884 27,441   Interest Expense Interest on deposits 3,114 3,965 Interest on short-term borrowings 83 86 Interest on long-term debt   163   165   Total Interest Expense   3,360   4,216   Net Interest Income 25,524 23,225 Provision for loan losses   1,775   2,229   Net Interest Income After Provision for Loan Losses 23,749 20,996   Non-Interest Income Total investment securities impairment losses - (918 ) Noncredit impairment losses recognized in other comprehensive income   -   -   Net investment securities impairment losses - (918 ) Gains on sale of investment securities   -   1   Net investment securities losses - (917 )   Service charges 7,113 6,511 Bankcard interchange fees 3,101 2,849 Insurance commissions 1,289 1,433 Trust and investment management fee income 1,112 925 Bank owned life insurance 754 728 Other income   897   599   Total Non-Interest Income 14,266 12,128   Non-Interest Expense Salaries and employee benefits 11,301 10,320 Occupancy and equipment 2,147 1,929 Depreciation 1,234 1,100 FDIC insurance expense 407 300 Advertising 596 153 Bankcard expenses 628 566 Postage, delivery, and statement mailings 514 484 Office supplies 412 429 Legal and professional fees 437 366 Telecommunications 405 388 Repossessed asset (gains)/losses, net of expenses 146 (27 ) Merger related expenses 373 - Other expenses   2,673   2,677   Total Non-Interest Expense   21,273   18,685   Income Before Income Taxes 16,742 14,439 Income tax expense   5,848   4,787   Net Income Available to Common Shareholders $ 10,894 $ 9,652       Distributed earnings allocated to common shareholders $ 5,151 $ 5,136 Undistributed earnings allocated to common shareholders   5,658   4,446   Net earnings allocated to common shareholders $ 10,809 $ 9,582     Average common shares outstanding 14,755 14,743 Effect of dilutive securities: Employee stock options   82   71   Shares for diluted earnings per share   14,837   14,814     Basic earnings per common share $ 0.73 $ 0.65 Diluted earnings per common share $ 0.73 $ 0.65 Dividends declared per common share $ 0.35 $ 0.35   Comprehensive Income $ 9,837 $ 8,446     CITY HOLDING COMPANY AND SUBSIDIARIESConsolidated Statements of Income(Unaudited) ($ in 000s, except per share data)     Twelve months ended December 31,2012   2011   Interest Income Interest and fees on loans $ 96,432 $ 93,414 Interest on investment securities: Taxable 14,285 17,729 Tax-exempt 1,442 1,697 Interest on federal funds sold   53     48   Total Interest Income 112,212 112,888   Interest Expense Interest on deposits 13,477 19,794 Interest on short-term borrowings 312 325 Interest on long-term debt   661     639   Total Interest Expense   14,450     20,758   Net Interest Income 97,762 92,130 Provision for loan losses   6,375     4,600   Net Interest Income After Provision for Loan Losses 91,387 87,530   Non-Interest Income Total investment securities impairment losses (878 ) (2,767 ) Noncredit impairment losses recognized in other comprehensive income   302     1,494   Net investment securities impairment losses (576 ) (1,273 ) Gains on sale of investment securities   1,530     3,756   Net investment securities gains 954 2,483   Service charges 26,409 26,959 Bankcard interchange fees 12,406 11,150 Insurance commissions 6,071 5,946 Trust and investment management fee income 3,774 3,106 Bank owned life insurance 2,983 3,183 Other income   2,660     2,033   Total Non-Interest Income 55,257 54,860   Non-Interest Expense Salaries and employee benefits 43,509 40,717 Occupancy and equipment 8,186 8,013 Depreciation 4,605 4,508 FDIC insurance expense 1,590 2,576 Advertising 2,589 2,007 Bankcard expenses 2,662 2,258 Postage, delivery, and statement mailings 2,079 2,099 Office supplies 1,669 1,911 Legal and professional fees 1,786 4,913 Telecommunications 1,614 1,605 Repossessed asset losses, net of expenses 1,346 272 Merger related expenses 4,708 - Other expenses   11,058     10,262   Total Non-Interest Expense   87,401     81,141   Income Before Income Taxes 59,243 61,249 Income tax expense   20,298     20,571   Net Income Available to Common Shareholders $ 38,945   $ 40,678       Distributed earnings allocated to common shareholders $ 20,603 $ 20,102   Undistributed earnings allocated to common shareholders   18,034     20,280     Net earnings allocated to common shareholders $ 38,637   $ 40,382     Average common shares outstanding 14,714 15,055   Effect of dilutive securities: Employee stock options   82     75     Shares for diluted earnings per share   14,796     15,130     Basic earnings per common share $ 2.63 $ 2.68 Diluted earnings per common share $ 2.61 $ 2.67 Dividends declared per common share $ 1.40 $ 1.37   Comprehensive Income $ 41,430 $ 39,268     CITY HOLDING COMPANY AND SUBSIDIARIESConsolidated Statements of Changes in Stockholders' Equity(Unaudited) ($ in 000s)       Three Months EndedDecember 31, 2012   December 31, 2011   Balance at October 1 $ 328,415 $ 309,892   Net income 10,894 9,652 Other comprehensive income: Change in unrealized loss on securities available-for-sale (794 ) (288 ) Change in underfunded pension liability (263 ) (918 ) Cash dividends declared ($0.35/share) and ($0.35/share), respectively (5,192 ) (5,137 ) Issuance of stock award shares, net 214 201 Exercise of 3,000 stock options - 94 Purchase of 80,000 common shares of treasury   -       (2,362 ) Balance at December 31 $ 333,274     $ 311,134         Twelve Months EndedDecember 31, 2012   December 31, 2011   Balance at January 1 $ 311,134 $ 314,861   Net income 38,945 40,678 Other comprehensive income: Change in unrealized gain (loss) on securities available-for-sale 2,749 (196 ) Change in unrealized (loss) on interest rate floors - (295 ) Change in underfunded pension liability (264 ) (919 ) Cash dividends declared ($1.40/share) and ($1.37/share), respectively (20,725 ) (20,533 ) Issuance of stock award shares, net 1,083 1,066 Acquisition of Virgina Savings Bancorp 7,723 - Exercise of 18,899 stock options 544 - Exercise of 9,576 stock options - 262 Purchase of 237,535 common shares of treasury (7,915 ) - Purchase of 755,501 common shares of treasury   -       (23,790 ) Balance at December 31 $ 333,274     $ 311,134             CITY HOLDING COMPANY AND SUBSIDIARIESCondensed Consolidated Quarterly Statements of Income(Unaudited) ($ in 000s, except per share data)   Quarter EndedDecember 31September 30June 30March 31December 31   2012       2012       2012       2012       2011     Interest income   $ 28,884 $ 28,432 $ 27,466 $ 27,430 $ 27,441 Taxable equivalent adjustment     183       185       198       208       215   Interest income (FTE) 29,067 28,617 27,664 27,638 27,656 Interest expense     3,360       3,557       3,625       3,908       4,216   Net interest income   25,707 25,060 24,039 23,730 23,440 Provision for loan losses   1,775       975       1,675       1,950       2,229   Net interest income after provision for loan losses 23,932 24,085 22,364 21,780 21,211   Noninterest income 14,266 14,079 13,790 13,118 12,128 Noninterest expense   21,273       21,846       24,763       19,515       18,685   Income before income taxes 16,925 16,318 11,391 15,383 14,654 Income tax expense 5,848 5,526 3,780 5,144 4,787 Taxable equivalent adjustment   183       185       198       208       215   Net income available to common shareholders $ 10,894     $ 10,607     $ 7,413     $ 10,031     $ 9,652                             Distributed earnings allocated to common shareholders $ 5,151 $ 5,150 $ 5,146 $ 5,118 $ 5,136 Undistributed earnings allocated to common shareholders   5,658       5,373       2,208       4,837       4,446   Net earnings allocated to common shareholders $ 10,809     $ 10,523     $ 7,354     $ 9,955     $ 9,582     Average common shares outstanding 14,755 14,751 14,680 14,679 14,743   Effect of dilutive securities: Employee stock options   82       83       79       80       71     Shares for diluted earnings per share   14,837       14,834       14,759       14,759       14,814     Basic earnings per common share $ 0.73 $ 0.71 $ 0.50 $ 0.68 $ 0.65 Diluted earnings per common share 0.73 0.71 0.50 0.67 0.65   Cash dividends declared per share 0.35 0.35 0.35 0.35 0.35                         Net Interest Margin 3.99 % 3.95 % 3.91 % 3.98 % 3.90 %   Interest Income from Accretion Related to Fair Value Adjusments Recorded as a Result of Acquisition $ 1,658 $ 936 $ - $ - $ -           CITY HOLDING COMPANY AND SUBSIDIARIESNon-Interest Income and Non-Interest Expense(Unaudited) ($ in 000s)   Quarter EndedDecember 31September 30June 30March 31December 31   2012     2012       2012       2012       2011     Non-Interest Income: Service charges $ 7,113 $ 6,750 $ 6,497 $ 6,048 $ 6,511 Bankcard interchange fees 3,101 3,111 3,152 3,042 2,849 Insurance commissions 1,289 1,439 1,347 1,996 1,433 Trust and investment management fee income 1,112 912 942 807 925 Bank owned life insurance 754 738 766 723 728 Other income   897     671       558       533       599   Subtotal 14,266 13,621 13,262 13,149 13,045 Total investment securities impairment losses - (272 ) (606 ) - (918 ) Noncredit impairment losses recognized in other comprehensive income   -     -       302       -       -   Net investment securities impairment losses - (272 ) (304 ) - (918 ) Gain (loss) on sale of investment securities   -     730       832       (31 )     1   Total Non-Interest Income $ 14,266   $ 14,079     $ 13,790     $ 13,118     $ 12,128     Non-Interest Expense: Salaries and employee benefits $ 11,301 $ 11,295 $ 10,668 $ 10,245 $ 10,320 Occupancy and equipment 2,147 2,126 1,978 1,935 1,929 Depreciation 1,234 1,175 1,109 1,086 1,100 FDIC insurance expense 407 405 394 385 300 Advertising 596 674 675 644 153 Bankcard expenses 628 720 694 620 566 Postage, delivery and statement mailings 514 529 488 548 484 Office supplies 412 407 396 455 429 Legal and professional fees 437 611 421 317 366 Telecommunications 405 433 387 389 388 Repossessed asset (gains) losses, net of expenses 146 429 650 121 (27 ) Merger related expenses 373 157 4,042 135 - Other expenses   2,673     2,885       2,861       2,635       2,677   Total Non-Interest Expense $ 21,273   $ 21,846     $ 24,763     $ 19,515     $ 18,685                             Employees (Full Time Equivalent) 843 836 831 797 795 Branch Locations 73 73 73 68 68     CITY HOLDING COMPANY AND SUBSIDIARIESConsolidated Balance Sheets($ in 000s)December 31   December 312012   2011(Unaudited)Assets Cash and due from banks $ 58,718 $ 140,873 Interest-bearing deposits in depository institutions 16,276 5,526 Federal funds sold   10,000       -   Cash and cash equivalents 84,994 146,399   Investment securities available-for-sale, at fair value 377,122 360,783 Investment securities held-to-maturity, at amortized cost 13,454 23,458 Other securities   11,463       11,934   Total investment securities 402,039 396,175   Gross loans 2,146,369 1,973,103 Allowance for loan losses   (18,809 )     (19,409 ) Net loans 2,127,560 1,953,694   Bank owned life insurance 81,901 78,961 Premises and equipment, net 72,728 64,612 Accrued interest receivable 6,692 7,093 Net deferred tax assets 32,737 32,219 Intangible assets 65,057 56,164 Other assets   43,758       41,792   Total Assets $ 2,917,466     $ 2,777,109     Liabilities Deposits: Noninterest-bearing $ 429,969 $ 369,025 Interest-bearing: Demand deposits 553,132 526,824 Savings deposits 506,869 439,823 Time deposits   919,346       885,596   Total deposits 2,409,316 2,221,268 Short-term borrowings Federal Funds purchased - 75,000 Customer repurchase agreements 114,646 114,050 Long-term debt 16,495 16,495 Other liabilities   43,735       39,162   Total Liabilities 2,584,192 2,465,975   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 December 31, 2012 and December 31, 2011 less 3,665,999 and 3,717,993 shares in treasury, respectively 46,249 46,249 Capital surplus 103,524 103,335 Retained earnings 309,270 291,050 Cost of common stock in treasury (124,347 ) (125,593 ) Accumulated other comprehensive loss: Unrealized gain on securities available-for-sale 3,573 825 Underfunded pension liability   (4,995 )     (4,732 ) Total Accumulated Other Comprehensive Loss   (1,422 )     (3,907 ) Total Stockholders' Equity   333,274       311,134   Total Liabilities and Stockholders' Equity $ 2,917,466     $ 2,777,109       CITY HOLDING COMPANY AND SUBSIDIARIESInvestment Portfolio(Unaudited) ($ in 000s)           Original CostCredit-RelatedNet InvestmentImpairment Losses throughDecember 31, 2012Unrealized Gains(Losses)Carrying Value   US Government Agencies $ 3,792 $ - $ 96 $ 3,888 Mortgage Backed Securities 282,572 - 7,182 289,754 Municipal Bonds 47,293 - 1,636 48,929 Pooled Bank Trust Preferreds 26,917 (20,171 ) (3,206 ) 3,540 Single Issuer Bank Trust Preferreds, Subdebt of Financial Institutions, and Bank Holding Company Preferred Stocks 40,401 (1,015 ) (880 ) 38,506 Money Markets and Mutual Funds 1,724 - 50 1,774 Federal Reserve Bank and FHLB stock 11,463 - - 11,463 Community Bank Equity Positions   8,194   (4,813 )   804     4,185 Total Investments $ 422,356 $ (25,999 ) $ 5,682   $ 402,039     CITY HOLDING COMPANY AND SUBSIDIARIESLoan Portfolio(Unaudited) ($ in 000s)           December 31September 30June 30March 31December 31   2012     2012     2012     2012     2011   Residential real estate (1) $ 1,031,435 $ 1,008,305 $ 997,016 $ 939,611 $ 929,788 Home equity - junior liens 143,110 143,058 143,400 139,764 141,797 Commercial and industrial 108,739 105,027 116,288 108,707 130,899 Commercial real estate (2) 821,970 787,887 768,176 745,586 732,146 Consumer 36,564 38,285 37,383 35,448 35,845 DDA overdrafts   4,551     2,670     3,326     2,848     2,628 Gross Loans $ 2,146,369   $ 2,085,232   $ 2,065,589   $ 1,971,964   $ 1,973,103   Construction loans included in: (1) - Residential real estate loans $ 15,408 $ 12,787 $ 11,919 $ 11,613 $ 9,287 (2) - Commercial real estate loans $ 15,352 $ 17,072 $ 18,544 $ 20,661 $ 20,201       CITY HOLDING COMPANY AND SUBSIDIARIESAcquisition Activity - Accretion(Unaudited) ($ in millions)     The following table presents the accretion related to the fair value adjustments on net interest income recorded as a result of the Virginia Savings Bancorp acquisition completed on May 31, 2012.       LoanCertificates ofYear Ended:Accretion(a)   Deposit(a)   Total   2012 $ 2.4 $ 0.2 $ 2.6 2013 2.2 0.4 2.6 2014 1.1 0.4 1.4 2015 0.8 0.3 1.1 Thereafter 1.5 1.1 2.5   a - 2012 amounts are based on actual results. 2013, 2014, 2015, and Thereafter 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 SUBSIDIARIESConsolidated Average Balance Sheets, Yields, and Rates(Unaudited) ($ in 000s)             Three Months Ended December 31,20122011AverageYield/AverageYield/Balance   Interest   Rate   Balance   Interest   Rate   Assets: Loan portfolio (1): Residential real estate (2) $ 1,152,921 $ 12,267 4.23 % $ 1,060,133 $ 12,043 4.51 % Commercial, financial, and agriculture (3) 901,966 11,420 5.04 % 833,217 9,463 4.51 % Installment loans to individuals (4), (5) 49,596 1,007 8.08 % 47,515 805 6.72 % Previously securitized loans (6) ***     894   ***     85       687   3206.59 % Total loans 2,104,483 25,588 4.84 % 1,940,950 22,998 4.70 % Securities: Taxable 380,897 2,940 3.07 % 366,024 4,036 4.37 % Tax-exempt (7)   35,847       524   5.82 %     42,968       613   5.66 % Total securities 416,744 3,464 3.31 % 408,992 4,649 4.51 % Deposits in depository institutions 7,431 - - 7,183 - - Federal funds sold   32,876       15   0.18 %     25,714       9   0.14 % Total interest-earning assets 2,561,534 29,067 4.51 % 2,382,839 27,656 4.60 % Cash and due from banks 70,075 62,176 Bank premises and equipment 72,702 65,030 Other assets 230,098 212,106 Less: Allowance for loan losses   (19,551 )             (19,777 )         Total assets $ 2,914,858             $ 2,702,374             Liabilities: Interest-bearing demand deposits 540,107 165 0.12 % 501,570 184 0.15 % Savings deposits 498,027 183 0.15 % 433,480 233 0.21 % Time deposits (8) 923,025 2,766 1.19 % 886,187 3,548 1.59 % Short-term borrowings 128,706 83 0.26 % 130,154 86 0.26 % Long-term debt   16,495       163   3.93 %     16,495       165   3.97 % Total interest-bearing liabilities 2,106,360 3,360 0.63 % 1,967,886 4,216 0.85 % Noninterest-bearing demand deposits 434,429 387,459 Other liabilities 39,120 32,134 Stockholders' equity   334,949               314,895           Total liabilities and stockholders' equity $ 2,914,858             $ 2,702,374           Net interest income     $ 25,707           $ 23,440     Net yield on earning assets         3.99 %           3.90 %       (1) - For purposes of this table, non-accruing loans have been included in average balances and loan fees,      which are immaterial, have been included in interest income. (2) - Interest income on residential real estate loans includes $0.1 million of accretion related to the fair      value market adjustments due to the acquisition of Virginia Savings Bancorp. (3) - Interest income on commercial, financial, and agriculture loans includes $1.4 million of accretion      related to the fair value market adjustments due to the acquisition of Virginia Savings Bancorp. (4) - Interest income on installment loans to individuals includes $0.1 million of accretion related to the      fair value market adjustments due to the acquisition of Virginia Savings Bancorp. (5) - Includes the Company's consumer and DDA overdrafts loan categories. (6) - Effective January 1, 2012, the carrying value of the Company's previously securitized loans was reduced      to $0. (7) - Computed on a fully federal tax-equivalent basis assuming a tax rate of approximately 35%. (8) - Interest expense on time deposits includes $0.1 million in accretion of the fair market value adjustments      related to the acquisition of Virginia Savings Bancorp.               CITY HOLDING COMPANY AND SUBSIDIARIESConsolidated Average Balance Sheets, Yields, and Rates(Unaudited) ($ in 000s)   Twelve Months Ended December 31,20122011AverageYield/AverageYield/BalanceInterestRateBalanceInterestRate   Assets: Loan portfolio (1): Residential real estate (2), (3) $ 1,114,653 $ 49,000 4.40 % $ 1,040,460 $ 48,948 4.70 % Commercial, financial, and agriculture (4), (5) 880,502 40,815 4.64 % 812,401 37,955 4.67 % Installment loans to individuals (6, (7)) 46,721 3,311 7.09 % 46,167 3,375 7.31 % Previously securitized loans (8) ***     3,306   ***     360       3,136   871.11 % Total loans 2,041,876 96,432 4.72 % 1,899,388 93,414 4.92 % Securities: Taxable 371,092 14,285 3.85 % 408,472 17,729 4.34 % Tax-exempt (9)   38,339       2,218   5.79 %     46,041       2,611   5.67 % Total securities 409,431 16,503 4.03 % 454,513 20,340 4.48 % Deposits in depository institutions 7,258 - - 7,655 - - Federal funds sold   30,507       53   0.17 %     29,928       48   0.16 % Total interest-earning assets 2,489,072 112,988 4.54 % 2,391,484 113,802 4.76 % Cash and due from banks 74,193 58,247 Bank premises and equipment 69,772 64,678 Other assets 223,783 206,724 Less: Allowance for loan losses   (19,586 )             (19,413 )         Total assets $ 2,837,234             $ 2,701,720             Liabilities: Interest-bearing demand deposits 534,211 697 0.13 % 493,433 895 0.18 % Savings deposits 479,760 759 0.16 % 420,212 1,023 0.24 % Time deposits (10) 909,951 12,021 1.32 % 927,789 17,876 1.93 % Short-term borrowings 121,780 312 0.26 % 123,569 325 0.26 % Long-term debt   16,495       661   4.01 %     16,495       639   3.87 % Total interest-bearing liabilities 2,062,197 14,450 0.70 % 1,981,498 20,758 1.05 % Noninterest-bearing demand deposits 414,969 379,980 Other liabilities 34,995 24,081 Stockholders' equity   325,073               316,161           Total liabilities and stockholders' equity $ 2,837,234             $ 2,701,720           Net interest income     $ 98,538           $ 93,044     Net yield on earning assets         3.96 %           3.89 %   (1) - For purposes of this table, non-accruing loans have been included in average balances and loan fees, which      are immaterial, have been included in interest income. (2) - Interest income includes $0.6 million from interest rate floors for the twelve months ended December 31, 2011. (3) - Interest income on residential real estate loans includes $0.7 million of accretion related to the fair      value market adjustments due to the acquisition of Virginia Savings Bancorp. (4) - Includes the Company's commercial and industrial and commercial real estate loan categories. Interest income      includes $0.5 million from interest rate floors for the twelve months ended December 31, 2011. (5) - Interest income on commercial, financial, and agriculture loans includes $1.6 million of accretion related      to the fair value market adjustments due to the acquisition of Virginia Savings Bancorp. (6) - Includes the Company's consumer and DDA overdrafts loan categories. (7) - Interest income on installment loans to individuals includes $0.1 million of accretion related to the fair      value market adjustments due to the acquisition of Virginia Savings Bancorp. (8) - Effective January 1, 2012, the carrying value of the Company's previously securitized loans was reduced to $0. (9) - Computed on a fully federal tax-equivalent basis assuming a tax rate of approximately 35%. (10) - Interest expense on time deposits includes $0.2 million in accretion of the fair market value adjustments       related to the acquisition of Virginia Savings Bancorp.     CITY HOLDING COMPANY AND SUBSIDIARIESAnalysis of Risk-Based Capital(Unaudited) ($ in 000s)         December 31September 30June 30March 31December 31   2012 (a)       2012       2012       2012       2011     Tier I Capital: Stockholders' equity $ 333,274 $ 328,415 $ 320,622 $ 316,046 $ 311,134 Goodwill and other intangibles (64,866 ) (64,912 ) (64,971 ) (55,871 ) (55,969 ) Accumulated other comprehensive loss 1,422 365 2,477 1,737 3,907 Qualifying trust preferred stock 16,000 16,000 16,000 16,000 16,000 Unrealized loss on AFS securities - - - - (448 ) Excess deferred tax assets   (6,577 )     (7,472 )     (7,847 )     (4,020 )     (5,897 ) Total tier I capital $ 279,254     $ 272,397     $ 266,282     $ 273,892     $ 268,727                         Total Risk-Based Capital: Tier I capital $ 279,254 $ 272,397 $ 266,282 $ 273,892 $ 268,727 Qualifying allowance for loan losses   18,809       18,986       19,452       18,628       19,409   Total risk-based capital $ 298,063     $ 291,383     $ 285,734     $ 292,520     $ 288,136     Net risk-weighted assets $ 2,152,622 $ 2,112,581 $ 2,136,249 $ 2,050,520 $ 2,048,398                       Ratios: Average stockholders' equity to average assets 11.49 % 11.32 % 11.47 % 11.55 % 11.65 % Tangible capital ratio 9.40 % 9.29 % 9.03 % 9.54 % 9.37 % Risk-based capital ratios: Tier I capital 12.97 % 12.89 % 12.46 % 13.36 % 13.12 % Total risk-based capital 13.85 % 13.79 % 13.38 % 14.27 % 14.07 % Leverage capital 9.82 % 9.67 % 9.74 % 10.23 % 10.18 %     (a) December 31, 2012 risk-based capital ratios are estimated                           CITY HOLDING COMPANY AND SUBSIDIARIESIntangibles(Unaudited) ($ in 000s)   As of and for the Quarter EndedDecember 31September 30June 30March 31December 31   2012       2012       2012       2012       2011     Intangibles, net $ 65,057 $ 65,103 $ 65,162 $ 56,066 $ 56,164 Intangibles amortization expense 135 135 109 98 102     CITY HOLDING COMPANY AND SUBSIDIARIESSummary of Loan Loss Experience(Unaudited) ($ in 000s)           Quarter EndedDecember 31September 30June 30March 31December 31   2012     2012     2012     2012     2011     Balance at beginning of period $ 18,986 $ 19,452 $ 18,628 $ 19,409 $ 19,848   Charge-offs: Commercial and industrial 100 9 48 69 247 Commercial real estate 1,744 845 26 1,989 1,650 Residential real estate 284 252 296 198 176 Home equity 366 133 347 509 475 Consumer 42 53 36 59 31 DDA overdrafts   394     418     375     335     394   Total charge-offs 2,930 1,710 1,128 3,159 2,973   Recoveries: Commercial and industrial 19 10 - 3 15 Commercial real estate 190 3 - 96 - Residential real estate 7 8 3 4 10 Home equity 6 1 10 1 1 Consumer 45 26 35 29 29 DDA overdrafts   711     221     229     295     250   Total recoveries 978 269 277 427 305           Net charge-offs 1,952 1,441 851 2,731 2,668 Provision for loan losses   1,775     975     1,675     1,950     2,229   Balance at end of period $ 18,809   $ 18,986   $ 19,452   $ 18,628   $ 19,409     Loans outstanding $ 2,146,369   $ 2,085,232   $ 2,065,589   $ 1,971,964   $ 1,973,103   Average loans outstanding   2,104,483     2,070,264     2,019,281     1,972,478     1,940,950   Allowance as a percent of loans outstanding   0.88 %   0.91 %   0.94 %   0.94 %   0.98 % Allowance as a percent of non-performing loans   84.67 %   82.61 %   88.92 %   88.78 %   87.76 % Net charge-offs (annualized) as a percent of average loans outstanding   0.37 %   0.28 %   0.17 %   0.55 %   0.55 % Net charge-offs, excluding overdraft deposit accounts, (annualized) as a percent of average loans outstanding   0.43 %   0.24 %   0.14 %   0.55 %   0.52 %     CITY HOLDING COMPANY AND SUBSIDIARIESSummary of Non-Performing Assets(Unaudited) ($ in 000s)           December 31September 30June 30March 31December 31   2012       2012       2012       2012       2011     Nonaccrual loans $ 21,935 $ 22,586 $ 21,726 $ 20,420 $ 21,951 Accruing loans past due 90 days or more   280       397       149       562       166   Total non-performing loans 22,215 22,983 21,875 20,982 22,117 Other real estate owned   8,162       9,017       8,697       8,250       7,948   Total non-performing assets $ 30,377     $ 32,000     $ 30,572     $ 29,232     $ 30,065     Non-performing assets as a percent of loans and other real estate owned 1.41 % 1.53 % 1.47 % 1.48 % 1.52 %                           CITY HOLDING COMPANY AND SUBSIDIARIESSummary of Total Past Due Loans(Unaudited) ($ in 000s)   December 31September 30June 30March 31December 31   2012       2012       2012       2012       2011     Residential real estate $ 5,748 $ 4,909 $ 5,575 $ 4,108 $ 5,362 Home equity 2,893 2,643 1,864 1,560 2,246 Commercial and industrial 496 25 540 63 1,243 Commercial real estate 689 1,271 3,145 2,636 3,415 Consumer 121 136 90 58 138 DDA overdrafts   281       319       364       304       909   Total past due loans $ 10,228     $ 9,303     $ 11,578     $ 8,729     $ 13,313     Past due loans as a percent of loans outstanding 0.48 % 0.45 % 0.56 % 0.44 % 0.67 % City Holding CompanyCharles R. Hageboeck, Chief Executive Officer and President304-769-1102