City Holding Company (“Company” or “City”) (NASDAQ:CHCO), a $4.0
billion bank holding company headquartered in Charleston, West
Virginia, today announced net income of $52.1 million and diluted
earnings of $3.45 per share for the year ended December 31,
2016.
Highlights of the Company’s performance and results for the year
ended December 31, 2016 include the following:
- Return on assets and return on tangible
equity of 1.36% and 14.8%, respectively.
- Reported net interest income increased
$4.0 million (3.4%) from the year ended December 31, 2015, while
net interest income exclusive of accretion from fair value
adjustments increased $7.7 million (7.1%) from the year ended
December 31, 2015.
- Total loan growth of $183.7 million
(6.4%) from December 31, 2015 to December 31, 2016.
- Asset quality continues to remain
strong with nonperforming assets declining from $24.0 million, or
0.84% of total loans and other real estate owned at December 31,
2015 to $18.7 million, or 0.61%, at December 31, 2016. Past due
loans declined from 0.32% of total loans outstanding at December
31, 2015 to 0.28% at December 31, 2016.
Highlights of the Company’s fourth quarter performance include
the following:
- Return on assets and return on tangible
equity of 1.49% and 16.1%, respectively.
- Reported net interest income increased
$0.6 million (2.1%) from the quarter ended September 30, 2016,
while net interest income exclusive of accretion from fair value
adjustments increased $0.8 million (2.8%) from the quarter ended
September 30, 2016.
- Total loan growth of $88.3 million
(3.0%) from September 30, 2016 to December 31, 2016.
Net Interest Income
The Company’s tax equivalent net interest income increased $4.0
million, or 3.4%, from $115.8 million in 2015 to $119.8 million in
2016. This increase was due primarily to an increase in average
loan balances from organic growth ($127.1 million) and from loans
associated with the acquisition of three branches in the Lexington,
Kentucky market in November 2015 (approximately $102.4 million in
loans) contributing additional net interest income of $9.0 million
in 2016. In addition, higher average investment balances ($111.5
million) increased net interest income by $3.9 million. During 2016
in conjunction with its interest rate risk management strategy, the
Company elected to grow investment balances and reduce cash
balances to enhance net interest income. As part of this strategy,
the Company purchased tax-exempt municipal securities to improve
its earnings by lowering its effective income tax rate. As a result
of this strategy, the Company’s overnight borrowings increased
during 2016 and the Company anticipates growing time deposit
balances in 2017 to reduce overnight borrowings. These increases in
net interest income were partially offset by lower accretion from
fair value adjustments on recent acquisitions that decreased net
interest income $3.8 million ($6.7 million in 2015 compared to $2.9
million in 2016) and margin compression which lowered net interest
income $3.9 million. The Company’s reported net interest margin
decreased from 3.76% for the year ended December 31, 2015 to 3.50%
for the year ended December 31, 2016. Excluding the favorable
impact of the accretion from the fair value adjustments, the net
interest margin would have been 3.54% for the year ended December
31, 2015 and 3.41% for the year ended December 31, 2016. This
decrease was primarily caused by the yield on loans (excluding
accretion) compressing slightly from 4.05% for the year ended
December 31, 2015 to 3.96% for the year ended December 31, 2016 and
by the yield on investment securities decreasing from 3.28% to
3.01% for the same period.
During the fourth quarter of 2016, the Company’s tax equivalent
net interest income increased $0.6 million, or 2.1%, to $30.6
million from $30.0 million during the third quarter of 2016. This
increase was largely due to higher average commercial and
residential real estate loan balances (up $87.3 million from the
third quarter of 2016) that increased net interest income by $0.8
million and higher average investment securities balances (up $39.3
million from the third quarter of 2016) that increased net interest
income by $0.2 million. The Company’s reported net interest margin
decreased from 3.48% for the third quarter of 2016 to 3.42% for the
fourth quarter of 2016. Excluding the favorable impact of the
accretion from the fair value adjustments ($0.5 million for the
quarter ended December 31, 2016 and $0.6 million for the quarter
ended September 30, 2016), the net interest margin would have been
3.37% for the quarter ended December 31, 2016 and 3.40% for the
quarter ended September 30, 2016. The decrease in the net interest
margin from the third quarter of 2016 is attributable to the yield
on investment securities compressing 8 basis points and a slightly
higher cost of funds. The Company’s yield on loans (excluding
accretion) remained stable at 3.94% for both the quarter ended
September 30, 2016 and the quarter ended December 31, 2016. The
majority of the Company’s commercial loans originated in 2016 have
variable interest rates and the Company believes that it remains
well positioned to benefit from rising interest rates.
Credit Quality
The Company’s ratio of nonperforming assets to total loans and
other real estate owned improved from 0.84% at December 31, 2015 to
0.61% at December 31, 2016. Total nonperforming assets decreased
from $24.0 million at December 31, 2015 to $18.7 million at
December 31, 2016. Excluded from this ratio are purchased
credit-impaired loans in which the Company estimated cash flows and
estimated a credit mark. Such loans would be considered
nonperforming loans if the loan’s performance deteriorates below
the initial expectations. Total past due loans decreased from $9.2
million, or 0.32% of total loans outstanding, at December 31, 2015
to $8.6 million, or 0.28% of total loans outstanding, at December
31, 2016.
As a result of the Company’s quarterly analysis of the adequacy
of the Allowance for Loan Losses (“ALLL”), the Company recorded a
provision for loan losses of $1.3 million in the fourth quarter of
2016 and $4.4 million for the year ended December 31, 2016,
compared to $2.8 million and $7.0 million for the comparable
periods in 2015. The provision for loan losses recorded in 2016
reflects the impact of several factors, including the growth in the
loan portfolio and changes in the quality of the portfolio.
Additionally, during the fourth quarter of 2016, a commercial
customer of the Company with a hotel/motel related credit whose
business is located in North Central West Virginia experienced a
downfall in occupancy rates as a result of a slowdown in the oil
and gas industry. As a result, the Company increased the allowance
for loan losses in the fourth quarter in relation to this loan.
Beyond this particular loan, the Company has very limited exposure
to the oil and gas industry and does not have any direct loans to
any oil and gas operations. Changes in the amount of the allowance
and related provision 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
During 2016, the Company realized $3.5 million of investment
gains compared to $2.1 million during 2015. These gains represented
partial recoveries of impairment charges previously recognized on
pools of trust preferred securities. In addition, during 2015 the
Company sold its insurance operation which resulted in the
recognition of a pre-tax gain of $11.1 million in 2015. Exclusive
of these gains, non-interest income increased from $54.0 million
for the year ended December 31, 2015 to $55.3 million for the year
ended December 31, 2016. This increase was primarily attributable
to an increase of $0.6 million, or 3.9%, in bankcard revenues; an
increase of $0.4 million, or 8.8%, in trust and investment
management fee income; and an increase of $0.4 million, or 1.5%, in
service charges.
Non-interest income increased from $14.1 million for the fourth
quarter of 2015 to $14.4 million for the fourth quarter of 2016.
This increase was mainly due to an increase in bankcard revenues of
$0.2 million, or 5.6%, from the fourth quarter of 2015.
Non-interest Expenses
Non-interest expenses increased $3.2 million from the year ended
December 31, 2015 to the year ended December 31, 2016. During 2015,
the Company recognized $0.6 million of acquisition and integration
expenses associated with the acquisition of three branches in
Lexington, Kentucky. Excluding acquisition related expenses,
non-interest expenses increased $3.8 million from $92.4 million for
the year ended December 31, 2015 to $96.2 million for the year
ended December 31, 2016. This increase was largely due to an
increase in salaries and employee benefits ($2.1 million) due to
salary adjustments and increased health insurance costs. In
addition non-interest expenses increased $1.7 million due to the
annual operating costs of the three branches acquired in November
2015 and from an increase of $0.5 million in bankcard expenses due
to increased transaction volumes.
Non-interest expenses increased $1.3 million from the quarter
ended December 31, 2015 to the quarter ended December 31, 2016.
Exclusive of acquisition related expenses of $0.3 million, total
non-interest expenses increased $1.6 million from $20.9 million in
the fourth quarter of 2015 to $22.5 million in the fourth quarter
of 2016. This increase was due to an increase in salaries and
employee benefits of $1.0 million caused by salary adjustments and
increased health insurance costs, an increase in other expenses of
$0.2 million, advertising expenses of $0.2 million, and the
operating costs associated with the acquisition of three branches
of $0.2 million. These increases were partially offset by lower
FDIC insurance expenses ($0.3 million).
Balance Sheet Trends
For the year ending December 31, 2016, period end loan balances
increased $183.7 million (6.4%) to $3.05 billion. Commercial loans
increased $122.3 million (9.4%) and residential real estate loans
increased $68.3 million (4.9%) from December 31, 2015 to December
31, 2016. A significant portion of the increase in commercial loans
during 2016 were in the Columbus, Ohio and Charlotte, North
Carolina markets and were diversified across a broad base of
industry types, such as multi-family housing, properties leased to
the government, nursing homes, grocery and retail stores, and other
commercial and industrial loans. These increases were slightly
offset by decreases in home equity junior lien loans ($5.1 million)
and consumer loans ($3.5 million).
Total average depository balances increased $219.3 million, or
7.4%, from the year ended December 31, 2015 to the year ended
December 31, 2016. This growth was partially attributable to
deposits acquired in 2015 via acquisition in Lexington, Kentucky
($126.6 million). Exclusive of these acquired deposits, noninterest
deposits increased $64.2 million (10.9%), interest bearing deposits
increased $27.4 million (4.3%) and savings deposits increased $21.1
million (3.0%). These increases were partially offset by a decrease
in time deposits ($20.0 million).
Income Tax Expense
The Company’s effective income tax rate for the year ended
December 31, 2016 was 32.5% compared to 34.4% for the year ended
December 31, 2015. During the years ended December 31, 2016 and
December 31, 2015, the Company reduced income tax expense by $0.5
million and $0.6 million, respectively, due to the recognition of
previously unrecognized tax positions subsequent to the close of
the statute of limitations for previous tax years. In addition, as
previously noted, the Company sold its insurance agency,
CityInsurance, in the first quarter of 2015. As a result of
differences between the book and tax basis of the assets that were
sold, the Company’s income tax expense increased by $1.1 million.
Exclusive of these items, the Company’s tax rate from operations
was 33.2% and 33.6% for the year ended December 31, 2016 and
December 31, 2015, respectively.
The Company’s effective income tax rate for the quarter ended
December 31, 2016 was 30.2% compared to 30.0% for the quarter ended
December 31, 2015. During the quarters ended December 31, 2016, and
December 31, 2015, the Company reduced income tax expense by $0.5
million and $0.6 million, respectively, due to the recognition of
previously unrecognized tax positions resulting from the close of
the statute of limitations for previous tax years. Exclusive of
these items, the Company’s tax rate from operations was 32.8% and
33.1% for the quarters ended December 31, 2016 and December 31,
2015, respectively.
Capitalization and Liquidity
At December 31, 2016, the Company’s loan to deposit ratio was
94.3% and the loan to asset ratio was 76.7%. The Company maintained
investment securities totaling 13.6% of assets as of the same date.
Further, the Company’s deposit mix is weighted heavily toward
checking and saving accounts that fund 55.2% of assets at December
31, 2016. Time deposits fund 26.2% of assets at December 31, 2016,
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 strongly capitalized. The Company’s tangible
equity ratio was 9.3% at both December 31, 2016 and December 31,
2015. At December 31, 2016, City National Bank’s Leverage Ratio of
8.33%, Common Equity Tier I ratio of 11.29%, Tier I Capital ratio
of 11.58%, and Total Risk-Based Capital ratio of 12.30%. These
regulatory capital ratios are significantly above levels required
to be considered “well capitalized,” which is the highest possible
regulatory designation.
On December 14, 2016, the Board approved a quarterly cash
dividend of $0.43 cents per share payable January 31, 2017, to
shareholders of record as of January 13, 2017.
On December 19, 2016, the Company announced that it had filed a
prospectus supplement to its existing shelf registration statement
on Form S-3 for the sale of its common stock having an aggregate
value of up to $55 million through an “at-the-market” equity
offering program. The Company intends to use the net proceeds from
the offering to support loan growth, bolster regulatory capital,
and provide cash for possible future acquisitions. Pending this
use, the proceeds will be invested by the Company in various
investment securities. During the quarter ended December 31, 2016,
the Company sold approximately 108,000 common shares at a weighted
average price of $66.21, net of broker fees. Through January 17,
2017, the Company has sold approximately 145,000 common shares at a
weighted average price of $66.02, net of broker fees.
City Holding Company is the parent company of City National Bank
of West Virginia. City National Bank operates 85 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 materially 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) 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”) and the regulations
promulgated and to be promulgated thereunder, which may subject the
Company and its subsidiaries to a variety of new and more stringent
legal and regulatory requirements which adversely affect their
respective businesses; (14) the impact of new minimum capital
thresholds established as a part of the implementation of Basel
III; and (15) other risk factors relating to the banking industry
or the Company as detailed from time to time in the Company’s
reports filed with the Securities and Exchange Commission,
including those risk factors included in the disclosures under the
heading “ITEM 1A Risk Factors” of the Company’s Annual Report on
Form 10-K for the fiscal year ended December 31, 2015.
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
Form 10-K for the fiscal year ended December 31, 2016. The Company
will continue to evaluate the impact of any subsequent events on
the preliminary December 31, 2016 results and will adjust the
amounts if necessary.
CITY HOLDING COMPANY AND SUBSIDIARIES Financial
Highlights
(Unaudited) Three Months Ended Twelve
Months Ended December 31, 2016 September 30,
2016 June 30, 2016 March 31, 2016
December 31, 2015 December 31, 2016
December 31, 2015 Earnings Net Interest Income
(FTE) $ 30,638 $ 30,002 $ 29,863 $ 29,312 $ 29,391 $ 119,817 $
115,856 Net Income available to common shareholders 14,656 13,232
12,541 11,702 13,515 52,128 54,097
Per Share Data
Earnings per share available to common shareholders: Basic $ 0.97 $
0.88 $ 0.83 $ 0.78 $ 0.88 $ 3.46 $ 3.54 Diluted 0.97 0.88 0.83 0.78
0.88 3.45 3.53 Weighted average number of shares (in thousands):
Basic 14,894 14,899 14,889 14,916 15,158 14,900 15,123 Diluted
14,914 14,909 14,902 14,927 15,174 14,913 15,170 Period-end number
of shares (in thousands) 15,128 15,007 15,005 14,971 15,180 15,128
15,180 Cash dividends declared $ 0.43 $ 0.43 $ 0.43 $ 0.43 $ 0.42 $
1.72 $ 1.68 Book value per share (period-end) 29.25 28.97 28.60
27.93 27.62 29.25 27.62 Tangible book value per share (period-end)
24.02 23.69 23.30 22.61 22.36 24.02 22.36 Market data: High closing
price $ 68.29 $ 50.60 $ 50.14 $ 47.78 $ 51.12 $ 68.29 $ 51.73 Low
closing price 48.49 44.53 43.06 40.82 43.85 40.82 41.76 Period-end
closing price 67.60 50.29 45.47 47.78 45.64 67.60 45.64 Average
daily volume (in thousands) 57 61 63 71 55 63 53 Treasury share
activity: Treasury shares repurchased (in thousands) - - 2 229 150
231 150 Average treasury share repurchase price $ - $ - $ 46.65 $
43.31 $ 46.91 $ 43.34 $ 46.91 Common share issuance: Common shares
issued (in thousands) 108 - - - - 108 - Average common share issue
price (a) $ 66.21 $ - $ - $ - $ - $ 66.21 $ -
Key Ratios
(percent) Return on average assets 1.49 % 1.38 % 1.31 % 1.25 %
1.48 % 1.36 % 1.52 % Return on average tangible equity 16.1 % 14.9
% 14.5 % 13.8 % 15.5 % 14.8 % 15.8 % Yield on interest earning
assets 3.81 % 3.85 % 3.95 % 3.91 % 3.99 % 3.88 % 4.14 % Cost of
interest bearing liabilities 0.50 % 0.49 % 0.49 % 0.48 % 0.46 %
0.49 % 0.47 % Net Interest Margin 3.42 % 3.48 % 3.56 % 3.53 % 3.62
% 3.50 % 3.76 % Non-interest income as a percent of total revenue
32.1 % 32.1 % 31.6 % 31.1 % 32.5 % 31.7 % 36.1 % Efficiency Ratio
48.9 % 56.3 % 55.6 % 56.8 % 48.5 % 54.8 % 53.7 % Price/Earnings
Ratio (b) 17.38 14.33 13.66 15.40 12.94 19.56 12.91
Capital (period-end) Average Shareholders' Equity to Average
Assets 11.25 % 11.35 % 11.13 % 11.23 % 11.65 % Tangible equity to
tangible assets 9.34 % 9.39 % 9.38 % 9.03 % 9.34 % Consolidated
risk based capital ratios (c): CET I 13.41 % 13.00 % 13.21 % 13.38
% 13.65 % Tier I 13.98 % 13.59 % 13.82 % 14.00 % 14.28 % Total
14.73 % 14.33 % 14.57 % 14.78 % 15.10 % Leverage 10.08 % 9.92 %
9.74 % 9.78 % 10.15 %
Other Branches 85 85 85 85 85
FTE 847 834 852 854 853 Assets per FTE (in thousands) $
4,687 $ 4,636 $ 4,468 $ 4,484 $ 4,354 Deposits per FTE (in
thousands) 3,815 3,812 3,688 3,732 3,615 (a) The
common share issue price is presented net of commissions and
excludes one-time offering costs of approximately $265,000. (b) The
price/earnings ratio is computed based on annualized quarterly
earnings. (c) December 31, 2016 risk-based capital ratios are
estimated.
CITY
HOLDING COMPANY AND SUBSIDIARIES Consolidated Statements of
Income (Unaudited) ($ in 000s, except per share
data) Three Months Ended Twelve Months
Ended December 31, 2016 September 30, 2016
June 30, 2016 March 31, 2016
December 31, 2015 December 31, 2016
December 31, 2015 Interest Income Interest and
fees on loans $ 30,126 $ 29,444 $ 29,640 $ 28,927 $ 29,032 $
118,138 $ 115,107 Interest on investment securities: Taxable 3,277
3,183 2,927 3,005 2,856 12,392 10,830 Tax-exempt 481
419 365 357 334
1,622 1,137
Total Interest Income
33,884 33,046 32,932 32,289 32,222 132,152 127,074
Interest Expense Interest on deposits 3,137 3,006 3,011
2,898 2,760 12,052 10,886 Interest on short-term borrowings 188 90
86 107 91 472 327 Interest on long-term debt 179
172 167 164 159
683 617
Total Interest Expense
3,504 3,268 3,264 3,169
3,010 13,207 11,830
Net
Interest Income 30,380 29,778 29,668 29,120 29,212 118,945
115,244 Provision for loan losses 1,301 1,432
1,122 539 2,813
4,395 6,988
Net Interest Income After Provision
for Loan Losses 29,079 28,346 28,546 28,581 26,399 114,550
108,256
Non-Interest Income Net gains on sale of
investment securities - 2,668 845 - - 3,513 2,130 Service charges
6,995 6,842 6,564 6,303 6,893 26,703 26,316 Bankcard revenue 4,142
4,216 4,190 3,967 3,923 16,515 15,894 Trust and investment
management fee income 1,597 1,329 1,371 1,276 1,547 5,573 5,124
Bank owned life insurance 952 846 768 760 898 3,326 3,374 Gain on
sale of insurance division - - - - - - 11,084 Other income
685 846 843 821
813 3,195 3,284
Total Non-Interest
Income 14,371 16,747 14,581 13,127 14,074 58,825 67,206
Non-Interest Expense Salaries and employee benefits 12,427
12,993 12,790 12,673 11,296 50,883 47,847 Occupancy and equipment
2,792 2,759 2,708 2,836 2,583 11,095 10,277 Depreciation 1,516
1,585 1,567 1,567 1,539 6,235 6,088 FDIC insurance expense 137 508
512 465 443 1,622 1,794 Advertising 445 667 778 716 264 2,606 2,446
Bankcard expenses 1,011 1,188 1,016 938 918 4,154 3,690 Postage,
delivery, and statement mailings 492 517 506 565 532 2,080 2,123
Office supplies 320 325 366 353 273 1,364 1,350 Legal and
professional fees 515 869 437 366 522 2,186 1,963
Telecommunications 494 459 431 428 409 1,813 1,765 Repossessed
asset losses, net of expenses 244 305 53 288 217 890 1,264 Merger
related expenses - - - - 315 - 598 Other expenses 2,063
3,109 3,119 2,945
1,854 11,236 11,746
Total
Non-Interest Expense 22,456 25,284
24,283 24,140 21,165
96,164 92,951
Income Before Income Taxes
20,994 19,809 18,844 17,568 19,308 77,211 82,511 Income tax expense
6,338 6,577 6,303
5,866 5,793 25,083 28,414
Net
Income Available to Common Shareholders $ 14,656 $
13,232 $ 12,541 $ 11,702 $ 13,515 $ 52,128
$ 54,097 Distributed earnings allocated to common
shareholders $ 6,428 $ 6,376 $ 6,375 $ 6,365 $ 6,303 $ 25,710 $
25,212 Undistributed earnings allocated to common shareholders
8,051 6,699 6,016
5,206 7,059 25,795 28,272 Net
earnings allocated to common shareholders $ 14,479 $ 13,075
$ 12,391 $ 11,571 $ 13,362 $ 51,505 $
53,484 Average common shares outstanding 14,894 14,899
14,889 14,916 15,158 14,900 15,123 Shares for diluted earnings per
share 14,914 14,909 14,902 14,927 15,175 14,913 15,170
Basic earnings per common share $ 0.97 $ 0.88 $ 0.83 $ 0.78
$ 0.88 $ 3.46 $ 3.54 Diluted earnings per common share $ 0.97 $
0.88 $ 0.83 $ 0.78 $ 0.88 $ 3.45 $ 3.53
CITY HOLDING COMPANY AND SUBSIDIARIES Loan
Portfolio (Unaudited) ($ in 000s)
December 31, 2016 September 30, 2016
June 30, 2016 March 31, 2016
December 31, 2015 Residential real estate (1) $
1,451,462 $ 1,445,242 $ 1,417,137 $ 1,395,670 $ 1,383,133 Home
equity - junior liens 141,965 141,616 142,827 142,694 147,036
Commercial and industrial 185,667 176,387 171,362 165,549 165,340
Commercial real estate (2) 1,229,516 1,158,088 1,135,493 1,135,625
1,127,581 Consumer 32,545 33,614 33,799 34,754 36,083 DDA
overdrafts 5,071 2,965 2,780
2,825 3,361
Gross Loans $
3,046,226 $ 2,957,912 $ 2,903,398 $ 2,877,117
$ 2,862,534 Construction loans included in: (1) -
Residential real estate loans $ 14,182 $ 12,284 $ 12,344 $ 13,966 $
13,135 (2) - Commercial real estate loans 12,840 7,309 2,237 15,172
12,599
Secondary Mortgage Loan Activity
Mortgage loans originated $ 6,444 $ 5,624 $ 3,103 $ 2,809 $ 3,855
Mortgage loans sold 4,936 5,836 3,183 3,107 4,135 Mortgage loans
gain on loans sold 107 129 80 58 88
CITY HOLDING COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets ($ in 000s)
(Unaudited) (Unaudited) (Unaudited)
(Unaudited) December 31, 2016 September 30,
2016 June 30, 2016 March 31, 2016
December 31, 2015 Assets Cash and due
from banks $ 62,263 $ 57,233 $ 69,933 $ 165,134 $ 58,829
Interest-bearing deposits in depository institutions 25,876
7,576 8,643
10,031 11,284
Cash and cash
equivalents 88,139 64,809 78,576 175,165 70,113
Investment securities available-for-sale, at fair value 450,083
434,717 409,039 362,282 369,466 Investment securities
held-to-maturity, at amortized cost 75,169 79,499 83,208 86,518
88,937 Other securities 14,352 11,895
10,203 9,960
12,915
Total investment securities
539,604 526,111 502,450 458,760 471,318 Gross loans
3,046,226 2,957,912 2,903,398 2,877,117 2,862,534 Allowance for
loan losses (19,730 ) (19,550 )
(19,139 ) (19,315 ) (19,251 )
Net
loans 3,026,496 2,938,362 2,884,259 2,857,802 2,843,283
Bank owned life insurance 100,732 100,293 99,446 98,679 97,919
Premises and equipment, net 75,165 75,589 75,040 75,965 77,271
Accrued interest receivable 8,408 7,986 8,428 8,517 7,432 Net
deferred tax assets 28,012 23,179 23,995 27,541 29,974 Intangible
assets 79,135 79,284 79,433 79,581 79,792 Other assets
23,957 50,748 55,234
47,656 36,957
Total Assets $ 3,969,648 $ 3,866,361
$ 3,806,861 $ 3,829,666 $
3,714,059
Liabilities Deposits:
Noninterest-bearing $ 672,286 $ 669,865 $ 651,867 $ 666,523 $
621,073 Interest-bearing: Demand deposits 695,891 713,642 701,248
711,366 679,735 Savings deposits 822,057 765,195 758,323 780,982
765,611 Time deposits 1,041,419
1,030,584 1,030,841
1,028,400 1,017,556
Total
deposits 3,231,653 3,179,286 3,142,279 3,187,271 3,083,975
Short-term borrowings Federal Funds purchased 64,100 6,000 - -
13,000 Customer repurchase agreements 184,205 173,384 153,674
156,714 141,869 Long-term debt 16,495 16,495 16,495 16,495 16,495
Other liabilities 30,702 56,412
66,054 51,068
39,448
Total Liabilities 3,527,155 3,431,577
3,378,502 3,411,548 3,294,787
Stockholders' Equity
Preferred stock - - - - - Common stock 46,518 46,249 46,249 46,249
46,249 Capital surplus 112,873 105,996 105,648 106,137 106,269
Retained earnings 417,017 408,823 402,044 395,963 390,690 Cost of
common stock in treasury (126,958 ) (127,538 ) (127,619 ) (129,142
) (120,104 ) Accumulated other comprehensive loss: Unrealized gain
(loss) on securities available-for-sale (2,352 ) 6,013 6,796 3,670
927 Underfunded pension liability (4,605 )
(4,759 ) (4,759 ) (4,759 )
(4,759 )
Total Accumulated Other Comprehensive Loss
(6,957 ) 1,254 2,037
(1,089 ) (3,832 )
Total
Stockholders' Equity 442,493
434,784 428,359 418,118
419,272
Total Liabilities and
Stockholders' Equity $ 3,969,648 $ 3,866,361
$ 3,806,861 $ 3,829,666 $
3,714,059
Regulatory Capital Total CET 1
capital $ 371,677 $ 355,934 $ 349,100 $ 341,165 $ 345,620 Total
tier 1 capital 387,677 371,934 365,100 357,165 361,620 Total
risk-based capital 408,406 392,258 384,855 377,003 382,180 Total
risk-weighted assets 2,772,456 2,737,721 2,642,040 2,550,739
2,531,525
CITY
HOLDING COMPANY AND SUBSIDIARIES Asset Quality
Information (Unaudited) ($ in 000s)
Three Months Ended Twelve Months Ended December
31, 2016 September 30, 2016 June 30,
2016 March 31, 2016 December 31,
2015 December 31, 2016 December 31, 2015
Allowance for Loan Losses Balance at beginning of period $
19,550 $ 19,139 $ 19,315 $ 19,251 $ 20,148 $ 19,251 $ 20,074
Charge-offs: Commercial and industrial - (103 ) (44 ) (1 ) (3,148 )
(148 ) (5,768 ) Commercial real estate (463 ) (142 ) (769 ) (302 )
(303 ) (1,676 ) (580 ) Residential real estate (453 ) (539 ) (337 )
(405 ) (386 ) (1,734 ) (1,144 ) Home equity (90 ) (125 ) (69 ) (106
) (76 ) (390 ) (312 ) Consumer (24 ) (20 ) (44 ) (38 ) (39 ) (126 )
(210 ) DDA overdrafts (395 ) (378 )
(321 ) (318 ) (376 )
(1,412 ) (1,414 ) Total charge-offs (1,425 ) (1,307 )
(1,584 ) (1,170 ) (4,328 ) (5,486 ) (9,428 ) Recoveries:
Commercial and industrial 1 9 3 1 2 14 74 Commercial real estate 40
43 20 384 317 487 366 Residential real estate 74 23 51 39 69 187
199 Home equity - - - - - - - Consumer 9 28 52 29 32 118 186 DDA
overdrafts 180 183
160 242 198
764 792 Total recoveries 304 286 286
695 618 1,570 1,617
Net charge-offs (1,121 )
(1,021 ) (1,298 ) (475 ) (3,710 ) (3,916 ) (7,811 ) Provision for
(recovery of) acquired loans (1 ) (4 ) 128 40 32 163 553 Provision
for loan losses 1,302 1,436
994 499
2,781 4,232 6,435 Balance
at end of period $ 19,730 $ 19,550 $
19,139 $ 19,315 $ 19,251 $
19,730 $ 19,251 Loans outstanding $
3,046,226 $ 2,957,912 $ 2,903,398 $ 2,877,117 $ 2,862,534 Allowance
as a percent of loans outstanding 0.65 % 0.66 % 0.66 % 0.67 % 0.67
% Allowance as a percent of non-performing loans 140.1 % 129.0 %
124.0 % 120.4 % 110.4 % Average loans outstanding $
3,006,426 $ 2,919,756 $ 2,891,292 $ 2,864,943 $ 2,789,354 $
2,920,837 $ 2,691,304 Net charge-offs (annualized) as a percent of
average loans outstanding 0.15 % 0.14 % 0.18 % 0.07 % 0.53 % 0.13 %
0.29 %
CITY HOLDING COMPANY
AND SUBSIDIARIES Asset Quality Information, continued
(Unaudited) ($ in 000s) December 31,
2016 September 30, 2016 June 30,
2016 March 31, 2016 December 31,
2015 Nonaccrual Loans Residential real estate $ 4,302 $
3,919 $ 2,531 $ 2,977 $ 2,918 Home equity 100 154 165 152 136
Commercial and industrial 1,958 2,441 2,724 2,967 2,745 Commercial
real estate 7,341 8,077 9,779 9,718 11,149 Consumer -
- - -
- Total nonaccrual loans 13,701 14,591
15,199 15,814 16,948 Accruing loans past due 90 days or more
382 569 241
225 495 Total non-performing
loans 14,083 15,160 15,440 16,039 17,443 Other real estate owned
4,588 5,435 5,868
6,054 6,519 Total
non-performing assets $ 18,671 $ 20,595
$ 21,308 $ 22,093 $ 23,962
Non-performing assets as a percent of loans and other real
estate owned 0.61 % 0.69 % 0.73 % 0.77 % 0.84 %
Past Due
Loans Residential real estate $ 6,074 $ 5,713 $ 5,490 $ 5,045 $
6,610 Home equity 673 925 595 595 406 Commercial and industrial 94
399 304 343 159 Commercial real estate 1,115 1,275 1,746 2,138
1,480 Consumer 39 104 150 82 196 DDA overdrafts 599
554 290 514
313 Total past due loans $ 8,594
$ 8,970 $ 8,575 $ 8,717
$ 9,164 Total past due loans as a percent of
loans outstanding 0.28 % 0.30 % 0.30 % 0.30 % 0.32 %
Troubled Debt Restructurings ("TDRs") Accruing: Residential
real estate $ 20,643 $ 19,944 $ 19,685 $ 18,306 $ 17,796 Home
equity 3,105 3,159 2,873 2,878 2,659 Commercial and industrial 42
46 50 54 58 Commercial real estate 5,525
2,718 2,743 523
1,746 Total accruing TDRs $ 29,315
$ 25,867 $ 25,351 $
21,761 $ 22,259 Non-Accruing
Residential real estate $ 172 $ 452 $ 390 $ 36 $ 191 Home equity 30
85 44 - 34 Commercial and industrial - - - - - Commercial real
estate - - - - - Consumer - -
- - -
Total non-accruing TDRs $ 202 $ 537
$ 434 $ 36 $ 225
Total TDRs $ 29,517 $ 26,404 $ 25,785
$ 21,797 $ 22,484
CITY HOLDING COMPANY AND SUBSIDIARIES Consolidated
Average Balance Sheets, Yields, and Rates (Unaudited) ($ in
000s)
Three Months Ended December 31, 2016
September 30, 2016 December 31, 2015 Average
Yield/ Average Yield/ Average
Yield/ Balance Interest
Rate Balance Interest
Rate Balance Interest
Rate Assets: Loan portfolio (1): Residential
real estate (2) $ 1,597,711 $ 15,469 3.85 % $ 1,570,787 $ 15,310
3.88 % $ 1,518,581 $ 14,763 3.86 % Commercial, financial, and
agriculture (2) 1,372,197 13,518 3.92 % 1,311,819 13,066 3.96 %
1,230,907 13,034 4.20 % Installment loans to individuals (2), (3)
36,518 696 7.59 % 37,150 690 7.39 % 39,865 750 7.47 % Previously
securitized loans (4) *** 443 *** ***
378 *** *** 485
*** Total loans 3,006,426 30,126 3.99 % 2,919,756 29,444 4.01 %
2,789,353 29,032 4.13 % Securities: Taxable 479,272 3,277 2.72 %
449,977 3,183 2.81 % 387,048 2,856 2.93 % Tax-exempt (5)
64,351 739 4.57 % 54,317
644 4.72 % 37,818
513 5.38 % Total securities 543,623 4,016 2.94
% 504,294 3,827 3.02 % 424,866 3,369 3.15 % Deposits in depository
institutions 11,117 - -
9,623 - -
9,562 - -
Total
interest-earning assets 3,561,166 34,142 3.81 % 3,433,673
33,271 3.85 % 3,223,781 32,401 3.99 % Cash and due from banks
68,514 87,219 117,290 Premises and equipment, net 75,744 75,743
75,729 Other assets 249,270 263,258 248,694 Less: Allowance for
loan losses (20,024 )
(19,517 ) (21,101
)
Total assets $ 3,934,670
$ 3,840,376
$ 3,644,393
Liabilities: Interest-bearing demand deposits
$ 689,784 $ 157 0.09 % $ 687,487 $ 138 0.08 % $ 650,523 $ 126 0.08
% Savings deposits 793,362 276 0.14 % 761,734 234 0.12 % 732,129
192 0.10 % Time deposits (2) 1,036,103 2,704 1.04 % 1,030,731 2,634
1.02 % 1,004,296 2,442 0.96 % Short-term borrowings 233,192 188
0.32 % 154,585 90 0.23 % 165,996 91 0.22 % Long-term debt
16,495 179 4.32 % 16,495
172 4.15 % 16,495
159 3.82 %
Total interest-bearing
liabilities 2,768,936 3,504 0.50 % 2,651,032 3,268 0.49 %
2,569,439 3,010 0.46 % Noninterest-bearing demand deposits 680,604
700,932 609,350 Other liabilities 42,353 52,641 41,151
Stockholders' equity 442,777
435,771
424,453
Total liabilities and stockholders'
equity
$ 3,934,670 $ 3,840,376
$ 3,644,393
Net interest income $
30,638 $ 30,003
$ 29,391
Net yield on earning
assets 3.42 %
3.48 % 3.62 %
(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) Included in the above
table are the following amounts (in thousands) for the accretion of
the fair value adjustments related to the acquisitions of Virginia
Savings Bancorp ("Virginia Savings"), Community Financial
Corporation ("Community") and American Founders Banks, Inc.
("AFB"): Residential real estate $ 160 $ 166 $ 196
Commercial, financial, and agriculture 145 311 1,146 Installment
loans to individuals 13 16 50 Time deposits 148 148
180 $ 466 $ 641 $ 1,572 (3) Includes the Company’s
consumer and DDA overdrafts loan categories. (4) Effective January
1, 2012, the carrying value of the Company's previously securitized
loans was reduced to $0. (5) Computed on a fully federal
tax-equivalent basis assuming a tax rate of approximately 35%.
CITY HOLDING COMPANY AND SUBSIDIARIES
Consolidated Average Balance Sheets, Yields, and Rates
(Unaudited) ($ in 000s)
Twelve Months Ended December 31, 2016
December 31, 2015 Average Yield/
Average Yield/ Balance Interest
Rate Balance Interest
Rate Assets: Loan portfolio (1):
Residential real estate (2) $ 1,565,079 $ 60,736 3.88 % $ 1,474,631
$ 57,692 3.91 % Commercial, financial, and agriculture (2)
1,318,094 52,812 4.01 % 1,175,707 52,177 4.44 % Installment loans
to individuals (2), (3) 37,664 2,917 7.75 % 40,966 3,442 8.40 %
Previously securitized loans (4) *** 1,673 ***
*** 1,796 *** Total loans 2,920,837
118,138 4.04 % 2,691,304 115,107 4.28 % Securities: Taxable 444,110
12,392 2.79 % 352,296 10,830 3.07 % Tax-exempt (5) 51,096
2,494 4.88 % 31,389
1,749 5.57 % Total securities 495,206
14,886 3.01 % 383,685 12,579 3.28 % Deposits in depository
institutions 10,115 - -
9,733 - -
Total
interest-earning assets 3,426,158 133,024 3.88 % 3,084,722
127,686 4.14 % Cash and due from banks 95,295 180,965 Premises and
equipment, net 76,056 76,136 Other assets 257,525 243,902 Less:
Allowance for loan losses (19,953 )
(20,995 )
Total
assets $ 3,835,081 $
3,564,730
Liabilities: Interest-bearing demand deposits $ 685,399 $
615 0.09 % $ 644,961 $ 505 0.08 % Savings deposits 772,296 975 0.13
% 706,926 712 0.10 % Time deposits (2) 1,029,172 10,462 1.02 %
1,005,232 9,669 0.96 % Short-term borrowings 176,065 472 0.27 %
145,199 327 0.23 % Long-term debt 16,495
683 4.14 % 16,495
617 3.74 %
Total interest-bearing liabilities
2,679,427 13,207 0.49 % 2,518,813 11,830 0.47 % Noninterest-bearing
demand deposits 679,950 590,424 Other liabilities 44,673 40,442
Stockholders' equity 431,031
415,051
Total liabilities and stockholders'
equity
$ 3,835,081 $ 3,564,730
Net interest income
$ 119,817 $
115,856
Net yield on earning assets
3.50 % 3.76
%
(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) Included in the above table are the following amounts (in
thousands) for the accretion of the fair value adjustments related
to the acquisitions of Virginia Savings Bancorp ("Virginia
Savings"), Community Financial Corporation ("Community") and
American Founders Banks, Inc. ("AFB"):
Residential real estate $ 698 $ 893 Commercial, financial, and
agriculture 1,505 4,830 Installment loans to individuals 112 275
Time deposits 592 687 $ 2,907 $ 6,685 (3)
Includes the Company’s consumer and DDA overdrafts loan categories.
(4) Effective January 1, 2012, the carrying value of the Company's
previously securitized loans was reduced to $0. (5) Computed on a
fully federal tax-equivalent basis assuming a tax rate of
approximately 35%.
CITY
HOLDING COMPANY AND SUBSIDIARIES Acquisition Activity
(Unaudited) ($ in 000s) Three Months
Ended December 31, 2016 September 30, 2016
June 30, 2016 March 31, 2016
December 31, 2015 Purchased Credit Impaired Loans
Virginia Savings Acquisition Contractual required principal and
interest $ 1,895 $ 1,908 $ 1,924 $ 1,942 $ 1,965 Carrying value
1,700 1,707 1,714 1,715 1,707 Community Acquisition
Contractual required principal and interest $ 11,157 $ 12,091 $
14,042 $ 14,415 $ 16,362 Carrying value 8,857 9,712 11,160 11,219
12,899
Accretion 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 ("Virginia Savings"), Community Financial
Corporation ("Community") and American Founders Bank, Inc. ("AFB")
acquisitions.
Virginia Savings Acquisition
Loans $ 48 $ 65 $ 67 $ 104 $ 138 Certificates of deposit 124
124 124 124
129 $ 172 $ 189 $ 191 $ 228
$ 267 Community Acquisition Loans $ 286 $ 261 $ 699 $
408 $ 1,226 Certificates of deposit 11
11 11 11 40 $ 297
$ 272 $ 710 $ 419 $ 1,266 AFB
Acquisition Loans $ (16 ) $ 167 $ 109 $ 117 $ 28 Certificates of
deposit 13 13 13
13 11 $ (3 ) $ 180 $ 122
$ 130 $ 39 All Acquisitions Loans $ 318 $ 493 $ 875 $
629 $ 1,392 Certificates of deposit 148
148 148 148 180 $ 466
$ 641 $ 1,023 $ 777 $ 1,572
Accretion Forecast Year Ended December 31, 2017 $
1,273 Year Ended December 31, 2018 981 Year Ended December 31, 2019
868 Note: The amounts reflected 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 Non-GAAP
Reconciliations (Unaudited) ($ in 000s, except per share
data) Three Months Ended Twelve Months
Ended December 31, 2016 September 30, 2016
June 30, 2016 March 31, 2016
December 31, 2015 December 31, 2016
December 31, 2015 Net Interest Income/Margin
Net interest income, fully taxable equivalent $ 30,638 $ 30,002 $
29,863 $ 29,312 $ 29,391 $ 119,814 $ 115,856 Taxable equivalent
adjustment (258 ) (224 ) (195 )
(192 ) (179 ) (869 )
(612 ) Net interest income ("GAAP") $ 30,380 $
29,778 $ 29,668 $ 29,120
$ 29,212 $ 118,945 $ 115,244
Average interest earning assets 3,561,166 3,433,673 3,369,565
3,338,659 3,223,782 3,426,158 3,084,722 Net Interest Margin 3.42 %
3.48 % 3.56 % 3.53 % 3.62 % 3.50 % 3.76 % Net interest
income, fully taxable equivalent, excluding accretion $ 30,172 $
29,361 $ 28,840 $ 28,535 $ 27,819 $ 116,907 $ 109,171 Taxable
equivalent adjustment (258 ) (224 ) (195 ) (192 ) (179 ) (869 )
(612 ) Accretion related to fair value adjustments 466
641 1,023
777 1,572 2,907
6,685 Net interest income ("GAAP") $ 30,380
$ 29,778 $ 29,668 $
29,120 $ 29,212 $ 118,945 $
115,244 Average interest earning assets $ 3,561,166 $
3,433,673 $ 3,369,565 $ 3,338,659 $ 3,223,782 $ 3,426,158 $
3,084,722 Net Interest Margin (excluding accretion) 3.37 % 3.40 %
3.44 % 3.44 % 3.42 % 3.41 % 3.54 %
Tangible Equity Ratio
(period end) Tangible common equity to tangible assets 9.34 %
9.39 % 9.38 % 9.03 % 9.34 % Effect of goodwill and other
intangibles, net 1.81 % 1.86 %
1.89 % 1.89 % 1.95 % Equity to assets
("GAAP") 11.15 % 11.25 % 11.27 %
10.92 % 11.29 %
Income tax expense, excluding FIN 48 and
Sale of insurance operations
$ 6,338 $ 6,577 $ 6,303 $ 5,866 $ 5,793 $ 25,083 $ 28,414 FIN 48
554 - - - 592 554 592
Sale of insurance operations
- - -
- - -
(1,282 ) Income tax expense ("GAAP") $ 6,892
$ 6,577 $ 6,303 $ 5,866
$ 6,385 $ 25,637 $ 27,724
Income before income taxes 20,994 19,809 18,844 17,568 19,308
77,211 82,511
Effective tax rate, excluding FIN 48 and
Sale of insurance operations
30.2 % 33.2 % 33.4 % 33.4 % 30.0 % 32.5 % 34.4 % Effective tax rate
("GAAP") 32.8 % 33.2 % 33.4 % 33.4 % 33.1 % 33.2 % 33.6 %
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version on businesswire.com: http://www.businesswire.com/news/home/20170119005128/en/
City Holding CompanyCharles R. Hageboeck, 304-769-1102Chief
Executive Officer and President
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