City Holding Company Announces 2009 Earnings

Jan 21, 2010, 09:21 ET from City Holding Company

CHARLESTON, W.Va., Jan. 21 /PRNewswire-FirstCall/ -- City Holding Company, “the Company” (Nasdaq: CHCO), a $2.6 billion bank holding company headquartered in Charleston, today announced net income of $42.6 million for the year ended December 31, 2009 compared to $28.1 million during 2008.  Diluted earnings per share increased $0.94 per share, from $1.74 in 2008 to $2.68 in 2009 primarily due to a decrease in other-than-temporary impairment charges on investments and a lower provision for loan losses.  Return on assets for the full year was 1.63%, return on tangible equity was 18.0%, the net interest margin was 4.18%, and the efficiency ratio was 50.0%.

For the fourth quarter of 2009, the Company reported net income of $11.1 million, or $0.70 per diluted share compared to $4.2 million or $0.26 per diluted share in the fourth quarter of 2008.  For the quarter, the Company achieved a return on assets of 1.69%, a return on tangible equity of 17.7%, a net interest margin of 4.07%, and an efficiency ratio of 50.3%.  

Charles Hageboeck, Chief Executive Officer and President stated “While the U.S. economy continued to struggle in 2009, I am quite pleased with City’s results.  Our asset quality continues to improve with non-performing assets, net charge-offs, and past due loans all improving as compared to December 31, 2008.  We attribute this improvement to our disciplined lending approach and the relative stability of the markets in which we operate.  For example, the national unemployment rate was 10.0% for November 2009 compared to 8.4% for West Virginia.  Likewise, the national foreclosure rate for November 2009 was 0.24% compared to 0.01% for West Virginia.  Our primary asset quality problems continue to be non-owner occupied residential construction at The Greenbrier Resort in White Sulphur Springs, West Virginia and real estate in the Eastern Panhandle of West Virginia, a distant part of the Washington DC metropolitan area.  These properties accounted for approximately one half of City’s net charge-offs in 2009.  

“City’s total non-interest revenues increased in 2009 despite the recession and lower spending by consumers which dropped our branch service charge income 2% from 2008.  Increased insurance revenues of $1.4 million, or 32%, associated with our wholly owned insurance agency, City Insurance, helped offset the lower service fee income.  Despite increased FDIC insurance costs of $2.0 million, our expenses continue to be well maintained.  The increases in FDIC insurance premiums and a special assessment ($1.2 million) – costs created by losses and failures of other banks – essentially accounted for our increase in non-interest expenses.

“Due to the historically low interest rate environment and the duration of these low levels, City’s net interest income declined during 2009.  City also experienced some additional other-than-temporary impairment losses in 2009.  However, these losses were down significantly from 2008 and we believe that our methodology in reviewing our investment portfolio is appropriate given the current economic environment.  

“City continues to have strong capital, solid liquidity, and a stable core-deposit franchise, and our asset sensitive balance sheet is poised to benefit from future interest rate increases.  We are well positioned to compete against banks as they continue to work through asset quality and liquidity issues.  We are proud to have been able to maintain our strong quarterly dividend of 34 cents per share while many of our peers eliminated or greatly reduced dividends to shareholders. City remains one of the most profitable, most liquid, and best capitalized publicly traded banks in the U.S. and looks forward to continuing to help our shareholders and customers through this difficult economic environment,” Hageboeck concluded.

Net Interest Income

The Company’s tax equivalent net interest income decreased $6.3 million, or 6.1%, from $102.6 million in 2008 to $96.3 million in 2009, as interest income from loans and investments decreased more quickly than interest expense on deposits and other interest bearing liabilities. The Company’s reported net interest margin decreased to 4.18% for the year ended December 31, 2009 as compared to 4.64% for the year ended December 31, 2008.

During the third and fourth quarters of 2008, the Company sold $450 million of interest rate floors.  The $16.7 million gain from sales of these interest rate floors is being recognized over the remaining lives of the various hedged loans – primarily prime-based commercial and home equity loans.  During the year ended December 31, 2009, the Company recognized $9.7 million of interest income from the interest rate floors compared to $8.8 million of interest income recognized during the year ended December 31, 2008.  

The Company’s tax equivalent net interest income decreased $2.5 million, or 9.4%, from $26.3 million during the fourth quarter of 2008 to $23.8 million during the fourth quarter of 2009, as interest income from loans and investments decreased more quickly than interest expense on deposits and other interest bearing liabilities.  As previously discussed, the Company is recognizing the gain from the sale of its interest rate floors over the remaining lives of the various hedged loans.  $150 million of those loans matured during 2009, resulting in a decline in interest income recognized from these floors of $1.2 million from the fourth quarter of 2008 to the fourth quarter of 2009.  

Credit Quality

The Company’s ratio of non-performing assets to total loans and other real estate owned decreased from 1.59% at September 30, 2009 to 1.43% at December 31, 2009, and improved 21 basis points from December 31, 2008.  The Company’s ratio of non-performing assets to total loans and other real estate owned compares very favorably to peers. The Company’s non-performing asset ratio of 1.43% at December 31, 2009 is only 27% of the 5.23% non-performing asset ratio reported by the Company’s peer group (bank holding companies with total assets between $1 and $5 billion) as of the most recently reported quarter ended September 30, 2009.

Past due loans increased modestly from $7.2 million at September 30, 2009 to $8.5 million or 0.47% of total loans outstanding at December 31, 2009.  Past due commercial, financial, and agriculture loans were $0.6 million or 0.08% of loans outstanding at December 31, 2009; past due residential real estate loans were $3.8 million or 0.64% of loans outstanding at December 31, 2009; and past due home equity loans were $2.4 million or 0.60% of loans outstanding at December 31, 2009.

The Company recognized net charge-offs of $2.5 million for the fourth quarter of 2009. Net charge-offs on commercial and residential loans were $1.7 million and $0.4 million, respectively, for the fourth quarter.  Charge-offs for commercial loans were primarily related to a specific Greenbrier Resort-related credit relationship that had been appropriately considered in establishing the allowance for loans losses in prior periods.  Net charge-offs for depository accounts were $0.3 million for the fourth quarter of 2009.  While charge-offs on depository accounts are appropriately taken against the Allowance for Loan Losses (“ALLL”), the revenue associated with depository accounts is reflected in service charges.

At December 31, 2009, the ALLL was $18.7 million or 1.04% of total loans outstanding and 133% of non-performing loans compared to $22.3 million or 1.23% of loans outstanding and 86% of non-performing loans at December 31, 2008.  

As a result of the Company’s quarterly analysis of the adequacy of the ALLL, the Company recorded a provision for loan losses of $1.6 million in the fourth quarter of 2009 and $7.1 million for the year ended December 31, 2009 compared to $5.3 million and $10.4 million for the comparable periods in 2008.  The provision for loan losses recorded during 2009 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. Additionally, the provision reflects changes in the economic conditions in the Company’s geographic market and the United States in general.  Despite the additional credit issues that occurred in 2009, the overall credit quality of the Company’s loan portfolio has improved over 2008, which resulted in a lower allowance for loan losses and provision for loan loss expense. 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.

Impairment Losses

During 2009, the Company recorded $5.3 million of investment impairment losses, including $0.9 million in the fourth quarter.  The charges deemed to be other than temporary were related to pooled bank trust preferreds ($0.3 million impairment in the fourth quarter and a $3.8 million impairment for the full year) with remaining book value of $7.1 million at December 31, 2009 and community bank and bank holding company equity positions ($0.6 million impairment in the fourth quarter and $1.5 million for the full year) with remaining book value of $5.1 million at December 31, 2009.  The 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.  Based on management’s assessment of the securities the Company owns, the seniority position of the securities within the pools, the level of defaults and deferred payments within the pools, and a review of the financial strength of the banks within the respective pools, management concluded that impairment charges of $3.8 million on the pooled bank trust preferred securities were appropriate for the year ended December 31, 2009.  The impairment charges of $1.5 million related to community bank and bank holding company equity positions were due to poor financial performance of the community banks and bank holding companies and the length of time and extent to which the market values have been below the Company’s cost basis in these positions.

Non-interest Income

Exclusive of other than temporary investment impairment losses, investment losses, and the gain from the VISA initial public offering in 2008, total non-interest income increased $1.2 million to $58.1 million for the year ended December 31, 2009 as compared to $56.9 million for the year ended December 31, 2008.  Insurance commission revenues increased $1.4 million, or 32.4%, from $4.2 million during the year ended December 31, 2008 to $5.6 million during the year ended December 31, 2009 due to contingency payments and new business.  In addition, other income increased $0.4 million and bank owned life insurance revenues increased $0.3 million as the result of proceeds from a death benefit.  Partially offsetting these increases was a decrease of $1.0 million, or 2.1%, in service charges from depository accounts.  This decrease is attributable to a general nationwide decline in consumer spending.

Exclusive of other than temporary investment impairment losses and investment losses, total non-interest income increased $0.4 million to $14.4 million for the fourth quarter of 2009 as compared to the fourth quarter of 2008.  Service charges from depository accounts increased $0.2 million and insurance commission revenues increased $0.1 million from the fourth quarter of 2008.

Non-interest Expenses

Excluding the loss on the early redemption of the trust preferred securities in 2008, total non-interest expense increased $2.7 million from $74.5 million for the year ended December 31, 2008 to $77.2 million for the year ended December 31, 2009.  Insurance and regulatory expense increased $2.0 million, or 143.4%, from the year ended December 31, 2008 primarily due to a special assessment levied by the Federal Deposit Insurance Corporation (“FDIC”) to rebuild the Deposit Insurance Fund and to help maintain public confidence in the banking system.  The special assessment of $1.2 million was principally based on the asset size of the Company’s federally insured depository institution.  Additionally, as a result of the Company fully utilizing its FDIC credits and increases in the assessment rates during 2009, FDIC related insurance expense increased $0.8 million from the year ended December 31, 2008.  Occupancy and equipment expense increased $0.8 million, or 11.9%, from the year ended December 31, 2008 due to an upgrade of the Company’s core processing system and increased occupancy expenses.  In addition, advertising expense rose $0.6 million from the year ended December 31, 2008.  Partially offsetting these increases was a decline in other expenses of $1.0 million.  The decrease in other expenses was predominately attributable to a decrease of $1.1 million of amortization expense associated with interest rate floors that were sold in the third and fourth quarters of 2008.

Total non-interest expenses increased $1.4 million from $17.8 million in the fourth quarter of 2008 to $19.2 million in the fourth quarter of 2009.    Other expenses increased $1.1 million due primarily to amortization associated with low income housing tax credits while insurance and regulatory expenses were $0.7 million higher as the Company fully utilized its FDIC credits and the assessment rates increased in 2009.  In addition, occupancy and equipment expenses increased $0.2 million and repossessed asset losses (net of expenses) increased $0.2 million from the fourth quarter of 2008.  These increases were partially offset by decreased salaries and employee benefit expenses of $0.3 million.

Balance Sheet Trends

As compared to December 31, 2008, loans have decreased $20.0 million (1.1%) at December 31, 2009 due to decreases in residential real estate loans of $16.3 million (2.7%) and commercial loans of $16.2 million (2.1%).  These decreases were partially offset by an increase in home equity loans of $14.4 million (3.8%).

Total average depository balances increased $113.9 million, or 5.6%, from the quarter ended December 31, 2008 to the quarter ended December 31, 2009.  This growth was due to increases in time deposits ($52.6 million), interest bearing demand deposits ($33.4 million), and savings deposits ($24.1 million).

Income Tax Expense

The Company’s effective income tax rate for the quarter and year ended December 31, 2009 was 29.5% and 32.5% compared to 31.0% and 25.2% for the quarter and year ended December 31, 2008, respectively.  The increase in the effective tax rate is attributable to higher pre-tax income in 2009 as a result of higher other than temporary impairment losses on investments and loan loss provision recorded during 2008.

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 82.8% and the loan to asset ratio was 68.3% at December 31, 2009.  The Company maintained investment securities totaling 19.6% of assets as of this date.  Further, the Company’s deposit mix is weighted heavily toward checking and saving accounts that fund 44.4% of assets at December 31, 2009.  Time deposits fund 38.0% of assets at December 31, 2009, but very few of these deposits are in accounts that have balances of more than $150,000, reflecting the core retail orientation of the Company.

The Company is also strongly capitalized. The Company’s tangible equity ratio was 9.8% at December 31, 2009 compared with a tangible equity ratio of 8.8% at December 31, 2008.  At December 31, 2009, City National Bank’s Leverage Ratio is 8.25%, its Tier I Capital ratio is 11.06%, and its Total Risk-Based Capital ratio is 12.05%.  These preliminary regulatory capital ratios are significantly above levels required to be considered “well capitalized,” which is the highest possible regulatory designation.  Further, the Company has not achieved strong bank capital through the excessive issuance of trust preferred debt by the bank holding company or by participation in the Troubled Asset Relief Program (“TARP”).

On December 31, 2009, the Board approved a quarterly cash dividend to 34 cents per share payable January 31, 2010, to shareholders of record as of January 15, 2010.  During the quarter ended December 31, 2009, the Company repurchased 27,600 common shares at a weighted average price of $30.48.  On October 28, 2009, the Company announced that the Board of Directors authorized the Company to buy back up to 1,000,000 shares of its common shares (approximately 6% of outstanding shares) in open market transactions at prices that are accretive to the earnings per share of continuing shareholders.  No time limit was placed on the duration of the share repurchase program.  As part of this authorization, the Company rescinded the previous share repurchase program plan approved in August 2007.  The Company had repurchased 900,258 shares under the August 2007 Stock Repurchase Plan.

City Holding Company is the parent company of City National Bank of West Virginia.  City National operates 67 branches across West Virginia, Eastern Kentucky and Southern Ohio.

The Company is required under generally accepted accounting principles to evaluate subsequent events through the filing of its December 31, 2009 consolidated financial statements on Form 10-K. As a result, the Company will continue to evaluate the impact of any subsequent events on critical accounting assumptions and estimates made as of December 31, 2009 and will adjust amounts preliminarily reported, if necessary.

Forward-Looking Information

This news release contains certain forward-looking statements that are included pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Such information involves risks and uncertainties that could result in the Company's actual results differing from those projected in the forward-looking statements. Important factors that could cause actual results to differ materially from those discussed in such forward-looking statements include, but are not limited to, (1) the Company may incur additional loan loss provision due to negative credit quality trends in the future that may lead to a deterioration of asset quality; (2) the Company may incur increased charge-offs in the future; (3) the Company may experience increases in the default rates on previously securitized loans that would result in impairment losses or lower the yield on such loans; (4) the Company may not continue to benefit from strong recovery efforts on previously securitized loans resulting in improved yields on these assets; (5)  the Company could have adverse legal actions of a material nature; (6) the Company may face competitive loss of customers; (7) the Company may be unable to manage its expense levels; (8) the Company may have difficulty retaining key employees; (9) changes in the interest rate environment may have results on the Company’s operations materially different from those anticipated by the Company’s market risk management functions; (10) changes in general economic conditions and increased competition could adversely affect the Company’s operating results; (11) changes in other regulations and government policies affecting bank holding companies and their subsidiaries, including changes in monetary policies, could negatively impact the Company’s operating results; (12) the Company may experience difficulties growing loan and deposit balances; (13) the current economic environment poses significant challenges for us and could adversely affect our  financial condition and results of operations; (14) 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; and (15) the United States government’s plan to purchase large amounts of illiquid, mortgage-backed and other securities from financial institutions may not be effective and/or it may not be available to us.  Forward-looking statements made herein reflect management's expectations as of the date such statements are made. Such information is provided to assist stockholders and potential investors in understanding current and anticipated financial operations of the Company and is included pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances that arise after the date such statements are made.

CITY HOLDING COMPANY AND SUBSIDIARIES

Financial Highlights

(Unaudited)






Three Months Ended December 31,

Percent


2009   

2008   

Change





Earnings ($000s, except per share data):




Net Interest Income (FTE)

$  23,817   

$  26,280   

(9.37)%

Net Income

11,078   

4,249   

160.72%

Earnings per Basic Share

0.70   

0.26   

169.23%

Earnings per Diluted Share

0.70   

0.26   

169.23%









Key Ratios (percent):




Return on Average Assets

1.69%

0.68%

149.57%

Return on Average Tangible Equity

17.71%

7.32%

142.02%

Net Interest Margin

4.07%

4.73%

(14.08)%

Efficiency Ratio

50.33%

44.04%

14.28%

Average Shareholders' Equity to Average Assets

11.70%

11.53%

1.50%





Consolidated Risk Based Capital Ratios (a):




Tier I

13.46%

12.27%

9.70%

Total

14.44%

13.46%

7.28%





Tangible Equity to Tangible Assets

9.78%

9.02%

8.51%









Common Stock Data:




Cash Dividends Declared per Share

$ 0.34   

$  0.34   

-   

Book Value per Share

19.40   

17.88   

8.54%

Tangible Book Value per Share

15.81   

14.27   

10.79%

Market Value per Share:




High

33.29   

42.88   

(22.36)%

Low

28.96   

29.08   

(0.41)%

End of Period

31.25   

36.42   

(14.20)%






Twelve Months Ended December 31,

Percent


2009   

2008   

Change





Earnings ($000s, except per share data):




Net Interest Income (FTE)

$  96,338   

$ 102,575   

(6.08)%

Net Income

42,645   

28,109   

51.71%

Earnings per Basic Share

2.69   

1.74   

54.60%

Earnings per Diluted Share

2.68   

1.74   

54.02%









Key Ratios (percent):




Return on Average Assets

1.63%

1.12%

45.53%

Return on Average Tangible Equity

17.95%

11.44%

56.91%

Net Interest Margin

4.18%

4.64%

(9.90)%

Efficiency Ratio

49.95%

46.33%

7.82%

Average Shareholders' Equity to Average Assets

11.29%

12.12%

(6.80)%









Common Stock Data:




Cash Dividends Declared per Share

$ 1.36   

$  1.36   

-   

Market Value per Share:




High

34.34   

47.28   

(27.37)%

Low

20.88   

29.08   

(28.20)%





Price/Earnings Ratio (b)

11.62   

20.93   

(44.50)%









(a) December 31, 2009 risk-based capital ratios are estimated

(b) December 31, 2009 price/earnings ratio computed based on 2009 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








2005

$  13.20 

$  15.56 

$  15.99 

$  16.14 

$  27.57 

$ 39.21 

2006

16.17 

16.17 

16.99 

17.46 

34.53 

41.87 

2007

17.62 

17.40 

17.68 

18.14 

31.16 

41.54 

2008

18.92 

18.72 

17.61 

17.58 

29.08 

42.88 

2009

17.69 

18.24 

18.95 

19.40 

28.96 

33.29 










Earnings per Basic Share


Quarter Ended



March 31

June 30

September 30

December 31

Year-to-Date









2005

$  0.70 

$  0.72 

$  0.73 

$  0.72 

$  2.87 


2006

0.71 

0.78 

0.78 

0.74 

3.00 


2007

0.76 

0.72 

0.76 

0.78 

3.02 


2008

0.81 

0.83 

(0.16)

0.26 

1.74 


2009

0.69 

0.64 

0.66 

0.70 

2.69 











Earnings per Diluted Share


Quarter Ended



March 31

June 30

September 30

December 31

Year-to-Date









2005

$  0.69 

$   0.71 

$  0.72 

$  0.72 

$  2.84 


2006

0.71 

0.77 

0.77 

0.74 

2.99 


2007

0.76 

0.72 

0.76 

0.78 

3.01 


2008

0.80 

0.83 

(0.16)

0.26 

1.74 


2009

0.69 

0.64 

0.66 

0.70 

2.68 





CITY HOLDING COMPANY AND SUBSIDIARIES

Consolidated Statements of Income

(Unaudited) ($ in 000s, except per share data)






Three Months Ended December 31,


2009


2008





Interest Income




Interest and fees on loans

$  25,746 


$  30,465 

Interest on investment securities:




Taxable

5,706 


5,818 

Tax-exempt

434 


372 

Interest on deposits in depository institutions


Total Interest Income

31,887 


36,663 





Interest Expense




Interest on deposits

8,000 


9,926 

Interest on short-term borrowings

134 


343 

Interest on long-term debt

168 


313 

Total Interest Expense

8,302 


10,582 

Net Interest Income

23,585 


26,081 

Provision for loan losses

1,575 


5,340 

Net Interest Income After Provision for Loan Losses

22,010 


20,741 





Non-Interest Income




Investment securities (losses)

(1,437)


(10,800)

Service charges

11,628 


11,459 

Insurance commissions

1,110 


981 

Trust and investment management fee income

549 


518 

Bank owned life insurance

753 


739 

Other income

320 


284 

Total Non-Interest Income

12,923 


3,181 





Non-Interest Expense




Salaries and employee benefits

8,523 


8,845 

Occupancy and equipment

1,947 


1,773 

Depreciation

1,180 


1,193 

Professional fees

439 


451 

Postage, delivery, and statement mailings

573 


641 

Advertising

830 


818 

Telecommunications

455 


562 

Bankcard expenses

570 


711 

Insurance and regulatory

1,014 


363 

Office supplies

484 


533 

Repossessed asset losses, net of expenses

321 


87 

Other expenses

2,880 


1,789 

Total Non-Interest Expense

19,216 


17,766 

Income Before Income Taxes

15,717 


6,156 

Income tax expense

4,639 


1,907 

Net Income

$  11,078 


$    4,249 





Basic earnings per share

$      0.70 


$      0.26 

Diluted earnings per share

$      0.70 


$      0.26 

Average Common Shares Outstanding:




Basic

15,838 


16,078 

Diluted

15,897 


16,100 


CITY HOLDING COMPANY AND SUBSIDIARIES

Consolidated Statements of Income

(Unaudited) ($ in 000s, except per share data)


Twelve months ended December 31,


2009


2008





Interest Income




Interest and fees on loans

$ 107,142 


$ 122,127 

Interest on investment securities:




Taxable

23,200 


23,852 

Tax-exempt

1,683 


1,523 

Interest on deposits in depository institutions

11 


171 

Total Interest Income

132,036 


147,673 





Interest Expense




Interest on deposits

35,230 


41,906 

Interest on short-term borrowings

529 


2,629 

Interest on long-term debt

844 


1,383 

Total Interest Expense

36,603 


45,918 

Net Interest Income

95,433 


101,755 

Provision for loan losses

7,050 


10,423 

Net Interest Income After Provision for Loan Losses

88,383 


91,332 





Non-Interest Income




Investment securities (losses)

(6,164)


(38,265)

Service charges

45,013 


45,995 

Insurance commissions

5,576 


4,212 

Trust and investment management fee income

2,343 


2,239 

Bank owned life insurance

3,271 


2,932 

VISA IPO Gain


3,289 

Other income

1,944 


1,534 

Total Non-Interest Income

51,983 


21,936 





Non-Interest Expense




Salaries and employee benefits

37,526 


37,263 

Occupancy and equipment

7,689 


6,871 

Depreciation

4,746 


4,523 

Professional fees

1,505 


1,680 

Postage, delivery, and statement mailings

2,600 


2,549 

Advertising

3,503 


2,899 

Telecommunications

1,865 


1,916 

Bankcard expenses

2,599 


2,689 

Insurance and regulatory

3,379 


1,388 

Office supplies

2,005 


2,021 

Repossessed asset losses, net of expenses

672 


524 

Loss on early extinguishment of debt


1,208 

Other expenses

9,099 


10,141 

Total Non-Interest Expense

77,188 


75,672 

Income Before Income Taxes

63,178 


37,596 

Income tax expense

20,533 


9,487 

Net Income

$   42,645 


$   28,109 





Basic earnings per share

$       2.69 


$       1.74 

Diluted earnings per share

$       2.68 


$       1.74 

Average Common Shares Outstanding:




Basic

15,877 


16,118 

Diluted

15,932 


16,167 


CITY HOLDING COMPANY AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders' Equity

(Unaudited) ($ in 000s)


Three Months Ended


December 31, 2009

December 31, 2008




Balance at October 1

$  306,154 

$   284,912 




Net income

11,078 

4,249 

Other comprehensive income:



Change in unrealized (loss) gain on securities available-for-sale

(2,224)

9,705 

Change in underfunded pension liability

521 

(2,284)

Change in unrealized (loss) gain on interest rate floors

(1,242)

1,159 

Cash dividends declared ($0.34/share)

(5,401)

(5,425)

Issuance of stock award shares, net

110 

69 

Exercise of 300 stock options

Exercise of 200 stock options

Purchase of 27,600 common shares of treasury

(841)

Balance at December 31

$                  308,159 

$   285,131 











Twelve Months Ended


December 31, 2009

December 31, 2008




Balance at January 1

$   285,131 

$   293,994 




Net income

42,645 

28,109 

Other comprehensive income:



Change in unrealized gain (loss) on securities available-for-sale

11,031 

(9,143)

Change in unrealized (loss) gain on interest rate floors

(6,224)

4,897 

Change in underfunded pension liability

521 

(2,284)

Cash dividends declared ($1.36/share)

(21,652)

(21,882)

Issuance of stock award shares, net

564 

479 

Exercise of 1,350 stock options

29 

Exercise of 66,454 stock options

1,669 

Excess tax benefits on stock compensation

266 

Purchase of 133,286 common shares of treasury

(3,886)

Purchase of 337,060 common shares of treasury

(10,974)

Balance at December 31

$   308,159 

$  285,131 


CITY HOLDING COMPANY AND SUBSIDIARIES

Condensed Consolidated Quarterly Statements of Income

(Unaudited) ($ in 000s, except per share data)


Quarter Ended


December 31

September 30

June 30

March 31

December 31


2009

2009

2009

2009

2008







Interest income

$  31,887   

$  32,651   

$  32,964   

$  34,534   

$  36,663   

Taxable equivalent adjustment

234   

236   

219   

220   

200   

Interest income (FTE)

32,121   

32,887   

33,183   

34,754   

36,863   

Interest expense

8,302   

8,995   

9,526   

9,780   

10,582   

Net interest income

23,819   

23,892   

23,657   

24,974   

26,281   

Provision for loan losses

1,575   

1,675   

2,150   

1,650   

5,340   

Net interest income after provision






for loan losses

22,244   

22,217   

21,507   

23,324   

20,941   







Noninterest income

12,923   

12,340   

14,287   

12,433   

3,181   

Noninterest expense

19,216   

18,802   

20,336   

18,834   

17,766   

Income before income taxes

15,951   

15,755   

15,458   

16,923   

6,356   

Income tax expense

4,639   

5,022   

5,093   

5,779   

1,907   

Taxable equivalent adjustment

234   

236   

219   

220   

200   

Net income

$  11,078   

$  10,497   

$  10,146   

$  10,924   

$  4,249   



















Basic earnings per share

$  0.70   

$  0.66   

$  0.64   

$  0.69   

$  0.26   

Diluted earnings per share

0.70   

0.66   

0.64   

0.69   

0.26   

Cash dividends declared per share

0.34   

0.34   

0.34   

0.34   

0.34   













Average Common Share (000s):






Outstanding

15,838   

15,893   

15,908   

15,921   

16,078   

Diluted

15,897   

15,952   

15,949   

15,933   

16,100   







Net Interest Margin

4.07%

4.09%

4.12%

4.46%

4.73%


CITY HOLDING COMPANY AND SUBSIDIARIES

Non-Interest Income and Non-Interest Expense

(Unaudited) ($ in 000s)


Quarter Ended


December 31

September 30

June 30

March 31

December 31


2009

2009

2009

2009

2008







Non-Interest Income:






Service charges

$  11,628 

$  11,689 

$  11,261 

$  10,435 

$  11,459 

Insurance commissions

1,110 

1,208 

1,325 

1,933 

981 

Trust and investment management fee income

549 

590 

497 

707 

518 

Bank owned life insurance

753 

794 

992 

732 

739 

Other income

320 

379 

544 

701 

284 

Subtotal

14,360 

14,660 

14,619 

14,508 

13,981 

Investment securities (losses)

(1,437)

(2,320)

(332)

(2,075)

(10,800)

Total Non-Interest Income

$  12,923 

$  12,340 

$  14,287 

$  12,433 

$   3,181 







Non-Interest Expense:






Salaries and employee benefits

$  8,523 

$  9,623 

$  9,797 

$  9,583 

$   8,845 

Occupancy and equipment

1,947 

1,953 

1,880 

1,909 

1,773 

Depreciation

1,180 

1,171 

1,184 

1,211 

1,193 

Professional fees

439 

216 

397 

453 

451 

Postage, delivery, and statement mailings

573 

611 

698 

718 

641 

Advertising

830 

883 

927 

863 

818 

Telecommunications

455 

476 

514 

420 

562 

Bankcard expenses

570 

695 

686 

648 

711 

Insurance and regulatory

1,014 

411 

1,578 

376 

363 

Office supplies

484 

520 

470 

531 

533 

Repossessed asset losses, net of expenses

321 

136 

86 

129 

87 

Other expenses

2,880 

2,107 

2,119 

1,993 

1,789 

Total Non-Interest Expense

$  19,216 

$  18,802 

$  20,336 

$  18,834 

$  17,766 

























Employees (Full Time Equivalent)

809 

814 

831 

830 

827 

Branch Locations

67 

68 

69 

69 

69 


CITY HOLDING COMPANY AND SUBSIDIARIES

Consolidated Balance Sheets

($ in 000s)


December 31

December 31


2009

2008


(Unaudited)


Assets



Cash and due from banks

$         59,116 

$         55,511 

Interest-bearing deposits in depository institutions

3,519 

4,118 

Cash and cash equivalents

62,635 

59,629 




Investment securities available-for-sale, at fair value

486,818 

431,966 

Investment securities held-to-maturity, at amortized cost

27,806 

29,067 

Total investment securities

514,624 

461,033 




Gross loans

1,792,434 

1,812,344 

Allowance for loan losses

(18,687)

(22,254)

Net loans

1,773,747 

1,790,090 




Bank owned life insurance

73,388 

70,400 

Premises and equipment

64,193 

60,138 

Accrued interest receivable

7,969 

9,024 

Net deferred tax assets

30,478 

45,412 

Intangible assets

57,010 

57,479 

Other assets

40,121 

33,943 

Total Assets

$    2,624,165 

$    2,587,148 




Liabilities



Deposits:



Noninterest-bearing

$       328,440 

$       298,530 

Interest-bearing:



Demand deposits

457,293 

420,554 

Savings deposits

379,893 

354,956 

Time deposits

998,096 

967,090 

Total deposits

2,163,722 

2,041,130 

Short-term borrowings

118,329 

194,463 

Long-term debt

16,959 

19,047 

Other liabilities

16,996 

47,377 

Total Liabilities

2,316,006 

2,302,017 




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, 2009 and December 31, 2008



   less 2,616,161 and 2,548,538 shares in treasury, respectively

46,249 

46,249 

Capital surplus

101,750 

102,895 

Retained earnings

251,606 

230,613 

Cost of common stock in treasury

(90,877)

(88,729)

Accumulated other comprehensive (loss):



Unrealized gain/(loss) on securities available-for-sale

105 

(10,926)

Unrealized gain on derivative instruments

3,063 

9,287 

Underfunded pension liability

(3,737)

(4,258)

Total Accumulated Other Comprehensive (Loss)

(569)

(5,897)

Total Stockholders' Equity

308,159 

285,131 

Total Liabilities and Stockholders' Equity

$    2,624,165 

$    2,587,148 


CITY HOLDING COMPANY AND SUBSIDIARIES

Investment Portfolio

(Unaudited) ($ in 000s)


Original Cost


Other Than Temporary Impairment Charges through December 31, 2009


Unrealized Gains (Losses)


Carrying Value









Mortgage Backed Securities

306,076 



8,705 


314,781 

Municipal Bonds

54,115 



261 


54,376 

Pooled Bank Trust Preferreds

27,088 


(20,018)



7,070 

Single Issuer Bank Trust Preferreds,








Subdebt of Financial Institutions, and








Bank Holding Company Preferred Stocks

109,630 


(1,000)


(5,259)


103,371 

Money Markets and Mutual Funds

16,931 



(22)


16,909 

Federal Reserve Bank and FHLB stock

13,023 




13,023 

Community Bank Equity Positions

10,089 


(1,486)


(3,509)


5,094 

Total Investments

$  536,952 


$  (22,504)


$  176 


$   514,624 


CITY HOLDING COMPANY AND SUBSIDIARIES

Loan Portfolio

(Unaudited) ($ in 000s)


December 31

September 30

June 30

March 31

December 31


2009

2009

2009

2009

2008







Residential real estate

$  595,678

$  590,653

$  596,925

$   599,692

$   611,962

Home equity

398,752

396,648

392,751

389,453

384,320

Commercial, financial, and agriculture

752,052

762,194

747,886

753,234

768,255

Installment loans to individuals

44,239

45,309

45,550

45,175

43,585

Previously securitized loans

1,713

2,580

3,223

3,754

4,222

Gross Loans

$  1,792,434

$  1,797,384

$  1,786,335

$   1,791,308

$   1,812,344


CITY HOLDING COMPANY AND SUBSIDIARIES

Previously Securitized Loans

(Unaudited) ($ in millions)




Annualized

Effective



December 31

Interest

Annualized


Year Ended:

Balance (a)

Income (a)

Yield (a)







2008   

$  4.2   

$  5.6   

108%


2009   

1.7   

3.9   

128%


2010   

1.3   

2.4   

159%


2011   

1.0   

1.8   

159%


2012   

0.7   

1.3   

159%

a - 2008 and 2009 amounts are based on actual results.  2010, 2011, and 2012 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 December 31,





2009



2008





Average


Yield/

Average


Yield/




Balance

Interest

Rate

Balance

Interest

Rate












Assets:









Loan portfolio:









Residential real estate

$   590,284   

$   8,064   

5.42%

$   616,944   

$   9,308   

6.00%



Home equity

397,088   

5,744   

5.74%

379,884   

6,746   

7.06%



Commercial, financial, and agriculture

752,870   

10,095   

5.32%

737,454   

11,882   

6.41%



Installment loans to individuals

50,430   

1,008   

7.93%

49,335   

1,250   

10.08%



Previously securitized loans

2,087   

835   

158.73%

4,244   

1,279   

119.89%



Total loans

1,792,759   

25,746   

5.70%

1,787,861   

30,465   

6.78%



Securities:









Taxable

480,051   

5,706   

4.72%

381,810   

5,817   

6.06%



Tax-exempt

44,964   

668   

5.89%

34,202   

573   

6.66%



Total securities

525,015   

6,374   

4.82%

416,012   

6,390   

6.11%



Deposits in depository institutions

5,546   

1   

0.07%

4,855   

8   

0.66%



Federal funds sold

-   

-   

-   

-   

-   

0.00%



Total interest-earning assets

2,323,320   

32,121   

5.49%

2,208,728   

36,863   

6.64%



Cash and due from banks

51,956   



55,633   





Bank premises and equipment

64,188   



60,058   





Other assets

206,080   



208,314   





Less:  Allowance for loan losses

(19,641)  



(19,082)  





      Total assets

$            2,625,903   



$            2,513,651   














Liabilities:









Interest-bearing demand deposits

435,374   

377   

0.34%

402,000   

596   

0.59%



Savings deposits

378,728   

360   

0.38%

354,661   

843   

0.95%



Time deposits

1,009,667   

7,264   

2.85%

957,064   

8,487   

3.53%



Short-term borrowings

128,995   

135   

0.42%

137,533   

343   

0.99%



Long-term debt

17,151   

168   

3.89%

21,037   

314   

5.94%



  Total interest-bearing liabilities

1,969,915   

8,304   

1.67%

1,872,295   

10,583   

2.25%



Noninterest-bearing demand deposits

331,012   



327,145   





Other liabilities

17,752   



24,463   





Stockholders' equity

307,224   



289,748   





Total liabilities and









stockholders' equity

$   2,625,903   



$   2,513,651   





Net interest income


$   23,817   



$   26,280   




Net yield on earning assets



4.07%



4.73%




CITY HOLDING COMPANY AND SUBSIDIARIES

Consolidated Average Balance Sheets, Yields, and Rates

(Unaudited) ($ in 000s)


Twelve Months Ended December 31,



2009



2008



Average


Yield/

Average


Yield/


Balance

Interest

Rate

Balance

Interest

Rate








Assets:







Loan portfolio:







Residential real estate

$     595,518   

$   33,558   

5.64%

$    607,851   

$   37,495   

6.17%

Home equity

392,077   

23,909   

6.10%

364,325   

26,266   

7.21%

Commercial, financial, and agriculture

756,745   

41,614   

5.50%

713,767   

47,445   

6.65%

Loans to depository institutions

-   

-   

-   

1,161   

35   

3.01%

Installment loans to individuals

49,733   

4,158   

8.36%

51,542   

5,264   

10.21%

Previously securitized loans

3,042   

3,902   

128.27%

5,200   

5,622   

108.12%

Total loans

1,797,115   

107,141   

5.96%

1,743,846   

122,127   

7.00%

Securities:







Taxable

460,352   

23,200   

5.04%

422,708   

23,852   

5.64%

Tax-exempt

41,123   

2,589   

6.30%

35,738   

2,344   

6.56%

Total securities

501,475   

25,789   

5.14%

458,446   

26,196   

5.71%

Deposits in depository institutions

5,340   

11   

0.21%

7,944   

171   

2.15%

Federal funds sold

123   

-   

-   

-   

-   

-   

Total interest-earning assets

2,304,053   

132,941   

5.77%

2,210,236   

148,494   

6.72%

Cash and due from banks

51,655   



57,624   



Bank premises and equipment

62,883   



57,183   



Other assets

211,469   



195,820   



Less:  Allowance for loan losses

(21,306)  



(18,452)  



      Total assets

$  2,608,754   



$ 2,502,411   










Liabilities:







Interest-bearing demand deposits

428,342   

1,703   

0.40%

409,799   

2,576   

0.63%

Savings deposits

373,476   

1,746   

0.47%

359,754   

3,640   

1.01%

Time deposits

1,006,146   

31,781   

3.16%

921,971   

35,691   

3.87%

Short-term borrowings

134,016   

529   

0.39%

136,867   

2,629   

1.92%

Long-term debt

18,286   

844   

4.62%

21,506   

1,383   

6.43%

  Total interest-bearing liabilities

1,960,266   

36,603   

1.87%

1,849,897   

45,919   

2.48%

Noninterest-bearing demand deposits

328,985   



323,551   



Other liabilities

24,920   



25,774   



Stockholders' equity

294,583   



303,189   



Total liabilities and







stockholders' equity

$  2,608,754   



$ 2,502,411   



Net interest income


$   96,338   



$ 102,575   


Net yield on earning assets



4.18%



4.64%


CITY HOLDING COMPANY AND SUBSIDIARIES

Analysis of Risk-Based Capital

(Unaudited) ($ in 000s)


December 31

September 30

June 30

March 31

December 31


2009 (a)

2009

2009

2009

2008







Tier I Capital:






Stockholders' equity

$   308,159   

$    304,108   

$   294,426   

$  284,734   

$   285,131   

Goodwill and other intangibles

(56,810)  

(56,928)  

(57,046)  

(57,165)  

(57,275)  

Accumulated other comprehensive loss (income)

569   

(330)  

5,970   

10,844   

5,897   

Qualifying trust preferred stock

16,000   

16,000   

16,000   

16,000   

16,000   

Unrealized Loss on AFS securities

(3,531)  

(2,490)  

(3,988)  

(4,401)  

(3,547)  

Excess deferred tax assets

(5,499)  

(10,105)  

(14,804)  

(15,796)  

(15,101)  

Total tier I capital

$   258,888   

$  250,255   

$    240,558   

$    234,215   

$   231,105   













Total Risk-Based Capital:






Tier I capital

$   258,888   

$  250,255   

$    240,558   

$    234,215   

$   231,105   

Qualifying allowance for loan losses

18,687   

19,655   

20,975   

21,980   

22,254   

Total risk-based capital

$   277,575   

$  269,910   

$    261,533   

$    256,195   

$   253,359   







Net risk-weighted assets

$   1,922,826   

$  1,919,093   

$ 1,910,831   

$ 1,899,282   

$  1,882,884   













Ratios:






Average stockholders' equity to average assets

11.70%

11.33%

11.00%

11.12%

11.53%

Tangible capital ratio

9.78%

9.62%

9.11%

8.87%

9.00%

Risk-based capital ratios:






Tier I capital

13.46%

13.04%

12.59%

12.33%

12.27%

Total risk-based capital

14.44%

14.06%

13.69%

13.49%

13.46%

Leverage capital

10.10%

9.79%

9.47%

9.37%

9.47%













(a) December 31, 2009 risk-based capital ratios are estimated














CITY HOLDING COMPANY AND SUBSIDIARIES






Intangibles






(Unaudited) ($ in 000s)













As of and for the Quarter Ended


December 31

September 30

June 30

March 31

December 31


2009   

2009   

2009   

2009   

2008   







Intangibles, net

$  57,010   

$  57,127   

$  57,244   

$  57,362   

$    57,479   

Intangibles amortization expense

117   

117   

117   

117   

121   


CITY HOLDING COMPANY AND SUBSIDIARIES






Summary of Loan Loss Experience






(Unaudited) ($ in 000s)













Quarter Ended


December 31

September 30

June 30

March 31

December 31


2009

2009

2009

2009

2008







Balance at beginning of period

$   19,655   

$   20,975   

$    21,980   

$   22,254   

$   18,879   







Charge-offs:






Commercial, financial, and agricultural

1,821   

2,117   

2,332   

1,479   

1,073   

Real estate-mortgage

448   

567   

507   

394   

603   

Installment loans to individuals

87   

36   

73   

69   

29   

Overdraft deposit accounts

737   

795   

690   

664   

779   

Total charge-offs

3,093   

3,515   

3,602   

2,606   

2,484   







Recoveries:






Commercial, financial, and agricultural

88   

27   

91   

29   

14   

Real estate-mortgage

31   

19   

(9)  

81   

79   

Installment loans to individuals

37   

95   

35   

55   

45   

Overdraft deposit accounts

394   

379   

330   

517   

381   

Total recoveries

550   

520   

447   

682   

519   







Net charge-offs

2,543   

2,995   

3,155   

1,924   

1,965   

Provision for loan losses

1,575   

1,675   

2,150   

1,650   

5,340   

Balance at end of period

$   18,687   

$   19,655   

$   20,975   

$  21,980   

$  22,254   







Loans outstanding

$  1,792,434   

$ 1,797,384   

$ 1,786,335   

$ 1,791,308   

$  1,812,344   

Average loans outstanding

1,792,759   

1,803,611   

1,794,022   

1,798,054   

1,787,861   

Allowance as a percent of loans outstanding

1.04%

1.09%

1.17%

1.23%

1.23%

Allowance as a percent of non-performing loans

133.06%

118.88%

96.80%

107.44%

86.07%

Net charge-offs (annualized) as a






percent of average loans outstanding

0.57%

0.66%

0.70%

0.43%

0.44%

Net charge-offs, excluding overdraft deposit






accounts, (annualized) as a percent of average loans outstanding

0.49%

0.57%

0.62%

0.40%

0.35%


CITY HOLDING COMPANY AND SUBSIDIARIES






Summary of Non-Performing Assets






(Unaudited) ($ in 000s)













December 31

September 30

June 30

March 31

December 31


2009   

2009   

2009   

2009   

2008   







Nonaccrual loans

$   13,583   

$  16,423   

$  20,956   

$  20,007   

$  25,224   

Accruing loans past due 90 days or more

382   

98   

680   

386   

623   

Previously securitized loans past due 90 days or more

79   

12   

32   

64   

10   

Total non-performing loans

14,044   

16,533   

21,668   

20,457   

25,857   

Other real estate owned, excluding property associated






with previously securitized loans

11,729   

12,323   

9,840   

6,686   

3,469   

Other real estate owned associated with previously






securitized loans

-   

-   

189   

374   

400   

Other real estate owned

11,729   

12,323   

10,029   

7,060   

3,869   

Total non-performing assets

$   25,773   

$  28,856   

$  31,697   

$  27,517   

$   29,726   







Non-performing assets as a percent of loans and






other real estate owned

1.43%

1.59%

1.76%

1.53%

1.64%


CITY HOLDING COMPANY AND SUBSIDIARIES






Summary of Total Past Due Loans






(Unaudited) ($ in 000s)













December 31

September 30

June 30

March 31

December 31


2009

2009

2009

2009

2008







Residential real estate

$   3,830

$   3,167

$   5,029

$  5,882

$   6,179

Home equity

2,396

1,718

2,019

1,454

1,243

Commercial, financial, and agriculture

601

545

1,754

2,044

1,679

Installment loans to individuals

172

185

118

192

241

Previously securitized loans

1,023

1,054

878

818

999

Overdraft deposit accounts

461

510

526

410

592

Total past due loans

$   8,483

$   7,179

$  10,324

$  10,800

$   10,933


SOURCE City Holding Company



RELATED LINKS

http://www.cityholding.com