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Press release from Business Wire

City Holding Company Announces First Quarter Results

Tuesday, April 23, 2013

City Holding Company Announces First Quarter Results

16:00 EDT Tuesday, April 23, 2013

CHARLESTON, W. Va. (Business Wire) -- City Holding Company, “the Company” (NASDAQ:CHCO), a $3.4 billion bank holding company headquartered in Charleston, today announced first quarter net income per diluted share of $0.51 and net income of $8.0 million. The results for the first quarter of 2013 include $5.5 million, or $0.23 diluted per share on an after tax basis, of acquisition and integration expenses related to the acquisition of Community Financial Corporation (”Community Bank”). For the first quarter of 2013, the Company achieved a return on assets of 0.96%, a return on tangible equity of 11.3%, a net interest margin of 4.18%, and an efficiency ratio of 66.5%. Excluding the acquisition and integration expenses, the Company would have reported net income of $11.7 million, a return on assets of 1.40%, a return on tangible equity of 16.4%, and an efficiency ratio of 53.9% for the first quarter of 2013.

City's CEO Charles Hageboeck stated that, “During the first quarter of 2013, we continued to expand our footprint in Virginia by successfully completing our acquisition of Community Bank. This marked our second acquisition in Virginia in the last 12 months and the ten branches of Community Bank added approximately $381 million in deposits and $363 million in loans, net of the credit mark of $45 million. We are excited about our growth in Virginia and look forward to ongoing efforts to further develop our Virginia presence.”

“Our net interest income increased $4.0 million from the fourth quarter of 2012 due to the acquisition of Community Bank and correspondingly, our net interest margin increased from 3.99% in the fourth quarter of 2012 to 4.18% in the first quarter of 2013. Noninterest income increased $1.1 million from the first quarter of 2012 due to our acquisitions of Virginia Savings Bancorp, Inc. (“Virginia Savings”) and Community Bank and increased mortgage-related lending activity and trust and investment management fee income.”

“In March 2013, we announced a 6% increase in our quarterly dividend from 35 cents per share to 37 cents per share. This increase is based on the Company's current strong liquidity position, our outstanding financial performance in 2012 and our confidence in the Company being able to sustain this performance,” Hageboeck concluded.

Net Interest Income

The Company's tax equivalent net interest income increased $4.0 million, or 15.7%, from $25.7 million during the fourth quarter of 2012 to $29.7 million during the first quarter of 2013. This increase is due to the acquisition of Community Bank as of January 10, 2013 and an increase in the accretion related to the acquisitions of Virginia Savings and Community Bank. The Company's reported net interest margin increased from 3.99% for the fourth quarter of 2012 to 4.18% for the first quarter of 2013. Excluding the favorable impact of the accretion from the fair value adjustments ($2.2 million for the quarter ended March 31, 2013 and $1.7 million for the quarter ended December 31, 2012), the net interest margin would have been 3.87% for the quarter ended March 31, 2013 and 3.73% for the quarter ended December 31, 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 $1.7 million in the first quarter of 2013, compared to $1.95 for the comparable period in 2012 and $1.8 million for the fourth quarter of 2012. The provision for loan losses recorded in the first quarter of 2013 reflects 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 changes in the composition and quality of the Company's loan portfolio. The Company believes its methodology for determining the adequacy of its ALLL adequately provides for probable losses inherent in the loan portfolio and produces a provision and allowance for loan losses that is directionally consistent with changes in asset quality and loss experience.

Non-interest Income

Excluding investment security transactions, non-interest income increased $1.1 million to $14.2 million in the first quarter of 2013 as compared to $13.1 million in the first quarter of 2012. Service charges increased $0.5 million, or 8.1%, to $6.5 million while bankcard revenues increased $0.2 million, or 5.2%, to $3.2 million. These increases were primarily due to the acquisitions of Virginia Savings and Community Bank. In addition, other income increased $0.3 million or 62.5%, to $0.9 million primarily as a result of increased mortgage related revenues. Trust and investment management fee income increased $0.2 million, or 22.7%, to $1.0 million due to core growth, as Virginia Savings and Community Bank did not offer these services.

Non-interest Expenses

During the first quarter of 2013, the Company completed its acquisition of Community Bank and recognized $5.5 million of acquisition and integration expenses. Excluding these expenses, non-interest expenses increased $4.4 million, from $19.5 million in the first quarter of 2012 to $23.9 million in the first quarter of 2013. This increase was primarily related to higher salaries and employee benefits ($2.7 million) due to the acquisitions of Virginia Savings and Community Bank ($1.9 million), higher pension costs ($0.3 million), and higher health insurance ($0.2 million). In addition, other expenses increased $0.7 million, occupancy and equipment expense increased $0.5 million and depreciation increased $0.3 million. These increases were primarily attributable to the acquisitions of Virginia Savings and Community Bank.

Balance Sheet Trends

Loans have increased $350.7 million (16.3%) from December 31, 2012 to $2.50 billion at March 31, 2013, primarily due to the Company's acquisition of Community Bank ($370.9 million). Excluding the Community Bank acquisition, loans have decreased $20.2 million (1.0%) from December 31, 2012 to $2.13 billion at March 31, 2013. Consumer loans declined $5.4 million (14.7%), commercial real estate loans decreased $5.1 million (0.6%), home equity loans declined $5.0 million (3.5%) and commercial and industrial (“C&I”) loans decreased $4.8 million (4.4%). The Company strategically decided to reduce consumer loans due to the acquisition of an indirect portfolio of auto loans associated with Community Bank. These loans have higher loss percentages compared to the Company's historical consumer portfolio. In addition, the Company has opted to allow certain other high risk loans to exit the portfolio.

Total average depository balances increased $397.1 million, or 16.6%, from the quarter ended December 31, 2012 to the quarter ended March 31, 2013. This growth was primarily attributable to deposits acquired from Community Bank ($337.3 million). Exclusive of this contribution, noninterest-bearing deposits increased $24.5 million, interest-bearing deposits increased $21.0 million, and savings deposits increased $16.1 million.

Income Tax Expense

The Company's effective income tax rate for the first quarter of 2013 was 37.4% compared to 34.3% for the year ended December 31, 2012, and 33.9% for the quarter ended March 31, 2012. As a result of the Company's acquisition of Community Bank during the first quarter of 2013, the Company's effective tax rate for 2013 is expected to decrease from 34.3% for the year ending December 31, 2012 to 33.7% for the year ending December 31, 2013. Due to this decline in the effective rate, the Company's net deferred tax assets are expected to be realized at a lower effective rate, and as a result, the Company's net deferred tax asset was reduced by $0.5 million in the first quarter ($0.03 diluted per share).

Capitalization and Liquidity

One of the Company's strengths is that it is highly profitable while maintaining strong liquidity and capital. With respect to liquidity, the Company's loan to deposit ratio was 86.6% and the loan to asset ratio was 72.9% at March 31, 2013. The Company maintained investment securities totaling 10.7% of assets as of this date. Further, the Company's deposit mix is weighted heavily toward checking and saving accounts that fund 51.3% of assets at March 31, 2013. Time deposits fund 32.9% of assets at March 31, 2013, 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 continues to be strongly capitalized. The Company's tangible equity ratio was 8.6% at March 31, 2013 compared to 9.4% at December 31, 2012. At March 31, 2013, City National Bank's Leverage Ratio is 8.70%, its Tier I Capital ratio is 11.53%, and its Total Risk-Based Capital ratio is 12.34%. These regulatory capital ratios are significantly above levels required to be considered “well capitalized,” which is the highest possible regulatory designation.

On March 28, 2013, the Board approved a quarterly cash dividend of $0.37 cents per share payable April 30, 2013, to shareholders of record as of April 15, 2013.

City Holding Company is the parent company of City National Bank of West Virginia. City National operates 83 branches across West Virginia, Virginia, Kentucky and 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 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 our financial 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 March 31, 2013 Form 10-Q. The Company will continue to evaluate the impact of any subsequent events on the preliminary March 31, 2013 results and will adjust the amounts if necessary.

CITY HOLDING COMPANY AND SUBSIDIARIES  
Financial Highlights
(Unaudited)
 
         
Three Months Ended March 31, Percent
2013 2012   Change
 
Earnings ($000s, except per share data):
Net Interest Income (FTE) $ 29,745 $ 23,730 25.35 %
Net Income available to common shareholders 7,987 10,031 (20.38 )%
Earnings per Basic Share 0.51 0.68 (24.51 )%
Earnings per Diluted Share 0.51 0.67 (24.84 )%
         
 
Key Ratios (percent):
Return on Average Assets 0.96 % 1.47 % (34.36 )%
Return on Average Tangible Equity 11.26 % 15.42 % (27.00 )%
Net Interest Margin 4.18 % 3.98 % 5.08 %
Efficiency Ratio 66.52 % 52.95 % 25.62 %
Average Shareholders' Equity to Average Assets 10.74 % 11.55 % (7.06 )%
 
Consolidated Risk Based Capital Ratios (a):
Tier I 11.90 % 13.36 % (10.93 )%
Total 12.74 % 14.27 % (10.72 )%
 
Tangible Equity to Tangible Assets 8.61 % 9.54 % (9.71 )%
         
 
Common Stock Data:
Cash Dividends Declared per Share $ 0.37 $ 0.35 5.71 %
Book Value per Share 23.27 21.46 8.48 %
Tangible Book Value per Share 18.44 17.65 4.46 %
Market Value per Share:
High 40.05 37.16 7.78 %
Low 36.07 32.59 10.68 %
End of Period 39.79 34.74 14.54 %
 
Price/Earnings Ratio (b) 19.43 12.81 51.72 %
         
 
(a) March 31, 2013 risk-based capital ratios are estimated
(b) March 31, 2013 price/earnings ratio computed based on annualized first quarter 2013 earnings
CITY HOLDING COMPANY AND SUBSIDIARIES      
Financial Highlights    
(Unaudited)
 
                       
 
Book Value and Market Price Range per Share
Market Price
Book Value per Share Range per Share
March 31   June 30   September 30   December 31   Low   High
 
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
2013 23.27 36.07 40.05
                       
 
Earnings per Basic Share
 
Quarter Ended
March 31   June 30   September 30   December 31   Year-to-Date
 
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
2013 0.51 0.51
                       
 
Earnings per Diluted Share
 
Quarter Ended
March 31   June 30   September 30   December 31   Year-to-Date
 
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
2013 0.51 0.51
CITY HOLDING COMPANY AND SUBSIDIARIES  
Consolidated Statements of Income
(Unaudited) ($ in 000s, except per share data)
 
Three Months Ended March 31,
2013   2012
 
Interest Income
Interest and fees on loans $ 29,939 $ 23,068
Interest on investment securities:
Taxable 2,750 3,964
Tax-exempt 324 387
Interest on federal funds sold   13     11  
Total Interest Income 33,026 27,430
 
Interest Expense
Interest on deposits 3,227 3,668
Interest on short-term borrowings 71 73
Interest on long-term debt   157     167  
Total Interest Expense   3,455     3,908  
Net Interest Income 29,571 23,522
Provision for loan losses   1,738     1,950  
Net Interest Income After Provision for Loan Losses 27,833 21,572
 
Non-Interest Income
Total investment securities impairment losses - -
Noncredit impairment losses recognized in other comprehensive income   -     -  
Net investment securities impairment losses - -

Gains (losses) on sale of investment securities

  84     (31 )
Net investment securities losses 84 (31 )
 
Service charges 6,535 6,048
Bankcard revenue 3,199 3,042
Insurance commissions 1,840 1,996
Trust and investment management fee income 990 807
Bank owned life insurance 812 723
Other income   866     533  
Total Non-Interest Income 14,326 13,118
 
Non-Interest Expense
Salaries and employee benefits 12,949 10,245
Occupancy and equipment 2,472 1,935
Depreciation 1,399 1,086
FDIC insurance expense 511 385
Advertising 735 644
Bankcard expenses 727 620
Postage, delivery, and statement mailings 605 548
Office supplies 441 455
Legal and professional fees 435 447
Telecommunications 445 389
Repossessed asset (gains)/losses, net of expenses (155 ) 121
Merger related expenses 5,540 -
Other expenses   3,299     2,640  
Total Non-Interest Expense   29,403     19,515  
Income Before Income Taxes 12,756 15,175
Income tax expense   4,769     5,144  
Net Income Available to Common Shareholders $ 7,987   $ 10,031  
 
 
Distributed earnings allocated to common shareholders $ 5,747 $ 5,118
Undistributed earnings allocated to common shareholders   2,175     4,837  
Net earnings allocated to common shareholders $ 7,922   $ 9,955  
 
Average common shares outstanding 15,473 14,679
Effect of dilutive securities:
Employee stock options   154     80  
Shares for diluted earnings per share   15,627     14,759  
 
Basic earnings per common share $ 0.51 $ 0.68
Diluted earnings per common share $ 0.51 $ 0.67
Dividends declared per common share $ 0.37 $ 0.35
 
Comprehensive Income $ 8,077 $ 12,201
CITY HOLDING COMPANY AND SUBSIDIARIES  
Consolidated Statements of Changes in Stockholders' Equity
(Unaudited) ($ in 000s)
 
 
Three Months Ended
March 31, 2013   March 31, 2012
 
Balance at January 1 $ 333,274 $ 311,134
 
Net income 7,987 10,031
Other comprehensive income:
Change in unrealized loss on securities available-for-sale 90 2,170
Cash dividends declared ($0.37/share) and ($0.35/share), respectively (6,064 ) (5,144 )
Issuance of stock award shares, net 1,380 442

Acquisition of Community Financial Corporation

26,405 -
Exercise of 42,250 stock options 1,397 -
Exercise of 16,899 stock options - 485
Purchase of 88,000 common shares of treasury   -     (3,072 )
Balance at March 31 $ 364,469     $ 316,046  
CITY HOLDING COMPANY AND SUBSIDIARIES        
Condensed Consolidated Quarterly Statements of Income
(Unaudited) ($ in 000s, except per share data)
 
Quarter Ended
March 31 December 31 September 30 June 30 March 31
2013   2012   2012   2012   2012
 
Interest income

 

$ 33,026 $ 28,884 $ 28,432 $ 27,466 $ 27,430
Taxable equivalent adjustment

 

  174       183       185       198       208  
Interest income (FTE) 33,200 29,067 28,617 27,664 27,638
Interest expense

 

  3,455       3,360       3,557       3,625       3,908  
Net interest income

 

29,745 25,707 25,060 24,039 23,730
Provision for loan losses   1,738       1,775       975       1,675       1,950  
Net interest income after provision
for loan losses 28,007 23,932 24,085 22,364 21,780
 
Noninterest income 14,326 14,266 14,079 13,790 13,118
Noninterest expense   29,403       21,273       21,846       24,763       19,515  
Income before income taxes 12,930 16,925 16,318 11,391 15,383
Income tax expense 4,769 5,848 5,526 3,780 5,144
Taxable equivalent adjustment   174       183       185       198       208  
Net income available to common shareholders $ 7,987     $ 10,894     $ 10,607     $ 7,413     $ 10,031  
 
                       
 
Distributed earnings allocated to common shareholders $ 5,747 $ 5,151 $ 5,150 $ 5,146 $ 5,118
Undistributed earnings allocated to common shareholders   2,175       5,658       5,373       2,208       4,837  
Net earnings allocated to common shareholders $ 7,922     $ 10,809     $ 10,523     $ 7,354     $ 9,955  
 
Average common shares outstanding 15,473 14,755 14,751 14,680 14,679
 
Effect of dilutive securities:
Employee stock options   154       82       83       79       80  
 
Shares for diluted earnings per share   15,627       14,837       14,834       14,759       14,759  
 
Basic earnings per common share $ 0.51 $ 0.73 $ 0.71 $ 0.50 $ 0.68
Diluted earnings per common share 0.51 0.73 0.71 0.50 0.67
 
Cash dividends declared per share 0.37 0.35 0.35 0.35 0.35
                       
 
Net Interest Margin 4.18 % 3.99 % 3.95 % 3.91 % 3.98 %
 

Interest Income from Accretion Related to Fair Value Adjustments Recorded as a Result of Acquisition

$ 2,181 $ 1,658 $ 936 $ - $ -
CITY HOLDING COMPANY AND SUBSIDIARIES        
Non-Interest Income and Non-Interest Expense
(Unaudited) ($ in 000s)
 
Quarter Ended
March 31 December 31 September 30 June 30 March 31
2013   2012   2012   2012   2012
 
Non-Interest Income:
Service charges $ 6,535 $ 7,113 $ 6,750 $ 6,497 $ 6,048
Bankcard revenue 3,199 3,101 3,111 3,152 3,042
Insurance commissions 1,840 1,289 1,439 1,347 1,996
Trust and investment management fee income 990 1,112 912 942 807
Bank owned life insurance 812 754 738 766 723
Other income   866       897     671       558       533  
Subtotal 14,242 14,266 13,621 13,262 13,149
Total investment securities impairment losses - - (272 ) (606 ) -
Noncredit impairment losses recognized in other
comprehensive income   -       -     -       302       -  
Net investment securities impairment losses - - (272 ) (304 ) -
Gain (loss) on sale of investment securities   84     -   730     832     (31 )
Total Non-Interest Income $ 14,326     $ 14,266   $ 14,079     $ 13,790     $ 13,118  
 
Non-Interest Expense:
Salaries and employee benefits $ 12,949 $ 11,301 $ 11,295 $ 10,668 $ 10,245
Occupancy and equipment 2,472 2,147 2,126 1,978 1,935
Depreciation 1,399 1,234 1,175 1,109 1,086
FDIC insurance expense 511 407 405 394 385
Advertising 735 596 674 675 644
Bankcard expenses 727 628 720 694 620
Postage, delivery and statement mailings 605 514 529 488 548
Office supplies 441 412 407 396 455
Legal and professional fees 435 437 611 421 317
Telecommunications 445 405 433 387 389
Repossessed asset (gains) losses, net of expenses (155 ) 146 429 650 121
Merger related expenses 5,540 373 157 4,042 135
Other expenses   3,299       2,673     2,885       2,861       2,635  
Total Non-Interest Expense $ 29,403     $ 21,273   $ 21,846     $ 24,763     $ 19,515  
 
 
                   
 
Employees (Full Time Equivalent) 932 843 836 831 797
Branch Locations 83 73 73 73 68
CITY HOLDING COMPANY AND SUBSIDIARIES  
Consolidated Balance Sheets
($ in 000s)
March 31 December 31
2013   2012
(Unaudited)
Assets
Cash and due from banks $ 191,865 $ 58,718
Interest-bearing deposits in depository institutions 6,872 16,276
Federal funds sold   35,000       10,000  
Cash and cash equivalents 233,737 84,994
 
Investment securities available-for-sale, at fair value 348,146 377,122
Investment securities held-to-maturity, at amortized cost 8,383 13,454
Other securities   11,502       11,463  
Total investment securities 368,031 402,039
 
Gross loans 2,497,023 2,146,369
Allowance for loan losses   (19,721 )     (18,809 )
Net loans 2,477,302 2,127,560
 
Bank owned life insurance 89,645 81,901
Premises and equipment, net 82,002 72,728
Accrued interest receivable 8,701 6,692
Net deferred tax assets 45,983 32,737
Intangible assets 75,750 65,057
Other assets   46,067       43,758  
Total Assets $ 3,427,218     $ 2,917,466  
 
Liabilities
Deposits:
Noninterest-bearing $ 525,870 $ 429,969
Interest-bearing:
Demand deposits 629,244 553,132
Savings deposits 603,191 506,869
Time deposits   1,125,946       919,346  
Total deposits 2,884,251 2,409,316
Short-term borrowings
Customer repurchase agreements 116,427 114,646
Long-term debt 16,495 16,495
Other liabilities   45,576       43,735  
Total Liabilities 3,062,749 2,584,192
 
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 March 31, 2013 and December 31, 2012
less 2,839,589 and 3,665,999 shares in treasury, respectively 46,249 46,249
Capital surplus 107,977 103,524
Retained earnings 311,193 309,270
Cost of common stock in treasury (98,240 ) (124,347 )
Accumulated other comprehensive loss:
Unrealized gain on securities available-for-sale 3,664 3,573
Underfunded pension liability   (6,374 )     (4,995 )
Total Accumulated Other Comprehensive Loss   (2,710 )     (1,422 )
Total Stockholders' Equity   364,469       333,274  
Total Liabilities and Stockholders' Equity $ 3,427,218     $ 2,917,466  
CITY HOLDING COMPANY AND SUBSIDIARIES      
Investment Portfolio
(Unaudited) ($ in 000s)
 
Original Cost

Credit-Related

Net Investment

Impairment

Losses through

March 31, 2013

Unrealized Gains

(Losses)

Carrying Value
 
US Government Agencies $ 3,295 $ - $ 88 $ 3,383
Mortgage Backed Securities 257,098 - 5,906 263,004
Municipal Bonds 44,311 - 1,490 45,801
Pooled Bank Trust Preferreds 26,839 (20,171 ) (3,166 ) 3,502
Single Issuer Bank Trust Preferreds,
Subdebt of Financial Institutions, and
Bank Holding Company Preferred Stocks 35,360 (1,015 ) (110 ) 34,235
Money Markets and Mutual Funds 1,724 - 39 1,763
Federal Reserve Bank and FHLB stock 11,502 - - 11,502
Community Bank Equity Positions   8,194   (4,813 )       1,460       4,841
Total Investments $ 388,323 $ (25,999 )   $ 5,707     $ 368,031
CITY HOLDING COMPANY AND SUBSIDIARIES      
Loan Portfolio  
(Unaudited) ($ in 000s)
 
March 31 December 31 September 30 June 30 March 31
2013   2012   2012   2012   2012
 
Residential real estate (1) $ 1,149,411 $ 1,031,435 $ 1,008,305 $ 997,016 $ 939,611
Home equity - junior liens 138,333 143,110 143,058 143,400 139,764
Commercial and industrial 149,677 108,739 105,027 116,288 108,707
Commercial real estate (2) 1,001,453 821,970 787,887 768,176 745,586
Consumer 55,274 36,564 38,285 37,383 35,448
DDA overdrafts   2,876     4,551     2,670     3,326     2,848
Gross Loans $ 2,497,024   $ 2,146,369   $ 2,085,232   $ 2,065,589   $ 1,971,964
 
Construction loans included in:
(1) - Residential real estate loans $

16,884

$

15,408

$ 12,787 $ 11,919 $ 11,613
(2) - Commercial real estate loans $

26,163

$

15,352

$ 17,072 $ 18,544 $ 20,661
 
 
 
CITY HOLDING COMPANY AND SUBSIDIARIES
Acquisition Activity - Accretion
(Unaudited) ($ in millions)
 
 
The following table presents the actual and forecasted accretion related to the fair value adjustments on net interest income recorded as a result of the Virginia Savings Bancorp (VSB) and Community Financial Corporation (Community) acquisitions.
 
 
VSB Community
Loan Certificates of Loan Certificates of
Year Ended: Accretion (a)   Deposit (a) Accretion (a)   Deposit (a) Total
 
1Q 2013 $ 985 $ 178 $ 858 $ 160 $ 2,181
Remainder 2013 1,318 364 2,800 480 4,962
2014 1,001 537 3,043 294 4,875
2015 790 518 1,750 160 3,218
Thereafter 1,252 497 6,791 46 8,586
 
a - 1Q 2013 amounts are based on actual results. Remainder 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 SUBSIDIARIES          
Consolidated Average Balance Sheets, Yields, and Rates
(Unaudited) ($ in 000s)
 
Three Months Ended March 31,
2013 2012
Average Yield/ Average Yield/
Balance   Interest   Rate   Balance   Interest   Rate
 
Assets:
Loan portfolio (1):
Residential real estate (2) $ 1,277,557 $ 13,720 4.36 % $ 1,067,911 $ 11,827 4.45 %
Commercial, financial, and agriculture (3) 1,121,916 14,192 5.13 % 862,886 9,584 4.47 %
Installment loans to individuals (4), (5) 65,863 1,377 8.48 % 41,681 770 7.43 %
Previously securitized loans (6) ***   650 *** ***   887 ***
Total loans 2,465,336 29,939 4.93 % 1,972,478 23,068 4.70 %
Securities:
Taxable 350,128 2,750 3.19 % 351,811 3,964 4.53 %
Tax-exempt (7)   32,991     498 6.12 %   41,117     595 5.82 %
Total securities 383,119 3,248 3.44 % 392,928 4,559 4.67 %
Deposits in depository institutions 9,033 - - 7,587 - -
Federal funds sold   29,932     13 0.18 %   27,462     11 0.16 %
Total interest-earning assets 2,887,420 33,200 4.66 % 2,400,455 27,638 4.63 %
Cash and due from banks 112,002 75,484
Bank premises and equipment 80,958 64,746
Other assets 259,335 216,379
Less: Allowance for loan losses   (19,472 )             (19,726 )        
Total assets $ 3,320,243             $ 2,737,338          
 
Liabilities:
Interest-bearing demand deposits 603,300 178 0.12 % 523,761 178 0.14 %
Savings deposits 584,048 213 0.15 % 448,435 188 0.17 %
Time deposits (8) 1,106,982 2,836 1.04 % 889,110 3,302 1.49 %
Short-term borrowings 111,870 71 0.26 % 113,946 73 0.26 %
Long-term debt   16,495       157   3.86 %     16,495       167   4.07 %
Total interest-bearing liabilities 2,422,695 3,455 0.58 % 1,991,747 3,908 0.79 %
Noninterest-bearing demand deposits 498,404 392,902
Other liabilities 42,615 36,436
Stockholders' equity   356,529               316,253          
Total liabilities and
stockholders' equity $ 3,320,243             $ 2,737,338          
Net interest income     $ 29,745           $ 23,730    
Net yield on earning assets         4.18 %           3.98 %
(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 $0.3 million and $0.2 million of accretion related to the fair value market adjustments due to the acquisition of Virginia Savings Bancorp, Inc. and Community Financial Corporation, respectively.
(3) - Interest income on commercial, financial, and agriculture loans includes $0.7 million and $0.6 million of accretion related to the fair value market adjustments due to the acquisition of Virginia Savings Bancorp, Inc. and Community Financial Corporation, respectively.
(4) - Interest income on installment loans to individuals includes $0.1 million and $0.1 million of accretion related to the fair value market adjustments due to the acquisition of Virginia Savings Bancorp, Inc. and Community Financial Corporation, respectively.
(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 $0.2 million and $0.2 million in accretion of the fair market value adjustments related to the acquisition of Virginia Savings Bancorp, Inc. and Community Financial Corporation, respectively.
CITY HOLDING COMPANY AND SUBSIDIARIES  
Analysis of Risk-Based Capital
(Unaudited) ($ in 000s)
 
March 31 December 31 September 30 June 30 March 31
2013 (a) 2012   2012 2012 2012
 
Tier I Capital:
Stockholders' equity $ 364,469 $ 333,274 $ 328,415 $ 320,622 $ 316,046
Goodwill and other intangibles (75,563 ) (64,866 ) (64,912 ) (64,971 ) (55,871 )
Accumulated other comprehensive loss 2,710 1,422 365 2,477 1,737
Qualifying trust preferred stock 16,000 16,000 16,000 16,000 16,000
Excess deferred tax assets   (17,737 )   (6,577 )     (7,472 )   (7,847 )   (4,020 )
Total tier I capital $ 289,880   $ 279,254     $ 272,397   $ 266,282   $ 273,892  
           
 
Total Risk-Based Capital:
Tier I capital $ 289,880 $ 279,254 $ 272,397 $ 266,282 $ 273,892
Qualifying allowance for loan losses 19,721 18,809 18,986 19,452 18,628
Unrealized gain on securities   696     -       -     -     -  
Total risk-based capital $ 310,297   $ 298,063     $ 291,383   $ 285,734   $ 292,520  
 
Net risk-weighted assets $ 2,436,022 $ 2,152,622 $ 2,112,581 $ 2,136,249 $ 2,050,520
             
 
Ratios:
Average stockholders' equity to average assets 10.74 % 11.49 % 11.32 % 11.47 % 11.55 %
Tangible capital ratio 8.61 % 9.40 % 9.29 % 9.03 % 9.54 %
Risk-based capital ratios:
Tier I capital 11.90 % 12.97 % 12.89 % 12.46 % 13.36 %
Total risk-based capital 12.74 % 13.85 % 13.79 % 13.38 % 14.27 %
Leverage capital 8.98 % 9.82 % 9.67 % 9.74 % 10.23 %
 
 
(a) March 31, 2013 risk-based capital ratios are estimated
 
             
 
 
CITY HOLDING COMPANY AND SUBSIDIARIES
Intangibles
(Unaudited) ($ in 000s)
 
As of and for the Quarter Ended
March 31 December 31 September 30 June 30 March 31
2013

2012

  2012 2012 2012
 
Intangibles, net $ 75,750 $ 65,057 $ 65,103 $ 65,162 $ 56,066
Intangibles amortization expense 260 135 135 109 98
CITY HOLDING COMPANY AND SUBSIDIARIES  
Summary of Loan Loss Experience
(Unaudited) ($ in 000s)
 
Quarter Ended
March 31 December 31 September 30 June 30 March 31
2013 2012   2012 2012 2012
 
Balance at beginning of period $ 18,809 $ 18,986 $ 19,452 $ 18,628 $ 19,409
 
Charge-offs:
Commercial and industrial 62 100 9 48 69
Commercial real estate 203 1,744 845 26 1,989
Residential real estate 591 284 252 296 198
Home equity 116 366 133 347 509
Consumer 3 42 53 36 59
DDA overdrafts   339     394       418     375     335  
Total charge-offs 1,314 2,930 1,710 1,128 3,159
 
Recoveries:
Commercial and industrial 1 19 10 - 3
Commercial real estate 18 190 3 - 96
Residential real estate 48 7 8 3 4
Home equity - 6 1 10 1
Consumer 147 45 26 35 29
DDA overdrafts   274     711       221     229     295  
Total recoveries 488 978 269 277 427
           
Net charge-offs 826 1,952 1,441 851 2,731
Provision for loan losses   1,738     1,775       975     1,675     1,950  
Balance at end of period $ 19,721   $ 18,809     $ 18,986   $ 19,452   $ 18,628  
 
Loans outstanding $ 2,497,023   $ 2,146,369     $ 2,085,232   $ 2,065,589   $ 1,971,964  
Average loans outstanding   2,465,336     2,104,483       2,070,264     2,019,281     1,972,478  
Allowance as a percent of loans outstanding   0.79 %   0.88 %     0.91 %   0.94 %   0.94 %
Allowance as a percent of non-performing loans   57.85 %   84.67 %     82.61 %   88.92 %   88.78 %
Net charge-offs (annualized) as a
percent of average loans outstanding   0.13 %   0.37 %     0.28 %   0.17 %   0.55 %
Net charge-offs, excluding overdraft deposit
accounts, (annualized) as a percent of average loans outstanding   0.12 %   0.43 %     0.24 %   0.14 %   0.55 %
CITY HOLDING COMPANY AND SUBSIDIARIES
Summary of Non-Performing Assets
(Unaudited) ($ in 000s)
 
March 31 December 31 September 30 June 30 March 31
2013 2012 2012 2012 2012
 
Nonaccrual loans $ 33,293 $ 21,935 $ 22,586 $ 21,726 $ 20,420
Accruing loans past due 90 days or more   799     280     397     149     562  
Total non-performing loans 34,092 22,215 22,983 21,875 20,982
Other real estate owned   10,508     8,162     9,017     8,697     8,250  
Total non-performing assets $ 44,600   $ 30,377   $ 32,000   $ 30,572   $ 29,232  
 
Non-performing assets as a percent of loans and
other real estate owned 1.78 % 1.41 % 1.53 % 1.47 % 1.48 %
           
 
 
CITY HOLDING COMPANY AND SUBSIDIARIES
Summary of Total Past Due Loans
(Unaudited) ($ in 000s)
 
March 31 December 31 September 30 June 30 March 31
2013 2012 2012 2012 2012
 
Residential real estate $ 7,926 $ 5,748 $ 4,909 $ 5,575 $ 4,108
Home equity 858 2,893 2,643 1,864 1,560
Commercial and industrial 2,949 496 25 540 63
Commercial real estate 2,315 689 1,271 3,145 2,636
Consumer 947 121 136 90 58
DDA overdrafts   337     281     319     364     304  
Total past due loans $ 15,332   $ 10,228   $ 9,303   $ 11,578   $ 8,729  
 
Past due loans as a percent of loans outstanding 0.61 % 0.48 % 0.43 % 0.56 % 0.42 %
           
 
 
CITY HOLDING COMPANY AND SUBSIDIARIES
Summary of Troubled Debt Restructurings
(Unaudited) ($ in 000s)
 
March 31 December 31 September 30 June 30 March 31
2013 2012 2012 2012 2012
 
Residential real estate $

20,136

$ 18,988 $ 17,979 $ - $ -
Home equity 3,025 3,743 3,126 - -
Commercial and industrial 101 101 - - -
Commercial real estate 1,805 734 227 228 228
Consumer   142     142     144     146     147  
Total $

25,209

  $ 23,708   $ 21,476   $ 374   $ 375  
 
 
At September 30, 2012, the Company reclassified $21.1 million of loans as TDRs in accordance with recent regulatory guidance. The regulatory guidance requires loans to be accounted for as collateral-dependent loans when borrowers have filed Chapter 7 bankruptcy, the debt has been discharged by the bankruptcy court and the borrower has not reaffirmed the debt.

City Holding Company
Charles R. Hageboeck, 304-769-1102
Chief Executive Officer and President

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