City Holding Company Announces First Quarter Results of Operations

Apr 23, 2001, 01:00 ET from City Holding Company

    CHARLESTON, W.Va., April 23 /PRNewswire Interactive News Release/ --
 City Holding Company (Nasdaq: CHCO), a $2.52 billion bank holding company
 headquartered in Charleston, West Virginia, today announced a net loss of
 $5.74 million or $0.34 per share for the first quarter of 2001 compared to a
 net profit of $4.02 million or $0.24 per share for the same period last year.
     The first quarter 2001 net loss was due primarily to non-recurring
 expenses approximating $7.88 million (pre-tax) along with a $5.73 million
 provision for loan losses. Non-recurring expenses included a $2.18 million
 (pre-tax) charge to recognize the impairment in fair value of the Company's
 retained interests in securitized loans, a $1.90 million (pre-tax) charge
 related to a contractual obligation to Fannie Mae, a $1.97 million (pre-tax)
 charge to reflect the estimated fair value of the Company's direct mail
 division, and a $1.28 million (pre-tax) charge to recognize contractual
 obligations to departing senior officers.
     The contractual obligation to Fannie Mae resulted from loan repurchase
 requirements associated with a Title I loan servicing portfolio previously
 acquired, and recently sold, by the Company.  The Company may receive some
 level of recovery of this charge over time through the application of excess
 loan servicing fees to be paid to Fannie Mae, but the recently completed sale
 of the Company's loan servicing division creates uncertainty in the size and
 timing of potential recoveries, if any.  The first quarter 2001 charge related
 to the Company's direct mail division, currently being marketed for sale, was
 based on the Company's current negotiations to divest this division. Terms of
 the sale contemplate financing to be provided by the Company to the buyer for
 100% of the selling price and the Company has considered this factor in
 recording the estimated loss. The Company may recognize some recovery of this
 loss as prospective cash payments are received from the buyer, although this
 cannot be assured.
     The first quarter 2001 provision for loan losses of $5.73 million compared
 to $2.09 million in the first quarter of 2000.  This significant increase is
 in response to first quarter net charge-offs of $7.51 million compared to
 $1.86 million in the same period last year, as well as continuing high levels
 of non-performing loans of 1.09% of loans outstanding at March 31, 2001
 compared to .80% at March 31, 2000 and 1.03% at December 31, 2000.  The
 allowance for loan losses was 2.06 % of loans outstanding at March 31, 2001
 compared to 1.41% at March 31, 2000 and 2.06% at December 31, 2000.  The ratio
 of the allowance for loan losses to non-performing loans increased to 1.89 at
 March 31, 2001, compared to 1.75 at March 31, 2000.  Management is keenly
 focused upon the Company's credit issues and is committing whatever resources
 necessary to cure its loan quality problems.  Absent further deterioration in
 the local economy, management feels cautiously optimistic that loan quality,
 as well as losses, will be brought in line with industry averages by this year
 end.
     The Company revised its estimated fair value of the retained interests at
 March 31, 2001 based upon recent economic news concerning the increased
 potential for economic downturns in the national and local economies, which
 indicates the possibility exists for increased levels of borrower defaults in
 the securitized loan pools.  Additionally, the Company recently completed the
 sale of the loan servicing responsibilities for its securitized loans, which
 could have a negative impact on the collection activities related to those
 loans.  As a result, the Company increased its projected loan default
 assumptions by approximately 25% during the first quarter of 2001, resulting
 in an additional decline in the estimated fair value of the retained interests
 of $21.22 million (pre-tax).  Under accounting rules in effect as of March 31,
 2001, the Company recorded $2.18 million (pre-tax) of this fair value decline
 through its first quarter income statement and the remaining $19.04 million is
 recorded as an other comprehensive loss in stockholders' equity at March 31,
 2001. On April 1, 2001, the Company recorded a pre-tax charge against earnings
 of approximately $29.98 million, which includes the $19.04 million additional
 write-down in the current quarter plus the accumulated unrealized losses of
 $10.94 million reflected in prior years, in conjunction with its adoption of
 new accounting guidance related to its retained interests in securitized
 loans. As previously disclosed, the Emerging Issues Task Force (the "EITF")
 recently clarified the intent of EITF Issue No. 99-20, which became effective
 on April 1, 2001. Issue No. 99-20 provides specific accounting guidance
 regarding the recognition of interest income on, and impairment of, retained
 interests in securitized loans.  Upon implementation of Issue No. 99-20, the
 accumulated other comprehensive loss reserve recorded by the Company in
 stockholders' equity at March 31, 2001 was recorded through earnings as a
 cumulative effect adjustment of a change in accounting principle. Future
 declines in fair value of the retained interests, if any, determined to be
 "other-than-temporary" will also be recorded through earnings.
     Unaudited summary financial data is presented below:
 
                                         For the three months ended March 31,
     Income Statement                         2001                 2000
                                                   (in thousands)
     Interest income                       $ 46,915            $ 49,317
     Interest expense                        26,307              26,281
     Net interest income                     20,608              23,036
     Provision for loan losses                5,730               2,085
     Non-interest income
       Investment securities gains              821                  --
       Service charges                        2,934               2,404
       Mortgage loan servicing fees              32               4,854
       Net origination fees on junior lien      540                 902
       Gain on sale of loans                  1,205               1,028
       Other income                           3,182               4,460
     Non-interest expenses
       Salaries and employee benefits        11,451              12,421
       Occupancy and depreciation             4,085               4,865
       Advertising                              597               1,611
       Retained interest impairment           2,182                  --
       Other expenses                        14,562               9,877
     Income tax (benefit) expense            (3,540)              1,806
     Net (loss) income                      $(5,745)             $4,019
 
                                                       As of
                                                     March 31,
     Balance Sheet                           2001                 2000
                                                   (in thousands)
     Cash and cash equivalents             $ 71,019            $ 78,319
     Securities available for sale          335,208             363,620
     Loans, net of unearned income        1,885,302           1,942,285
     Allowance for loan losses              (38,848)            (27,334)
     Loans held for sale                     24,129             116,468
     Total assets                         2,516,597           2,792,371
     Non-interest bearing deposits          270,890             232,309
     Interest-bearing deposits            1,742,610           1,737,953
     Short-term borrowings                  191,560             366,838
     Long-term debt                          33,868             116,000
     Trust preferred securities              87,500              87,500
     Total liabilities                    2,367,672           2,593,837
     Total stockholders' equity             148,925             198,534
 
                                       For the three months ended March 31,
     Average Balance Sheet                  2001                 2000
                                                (in thousands)
     Loans                              $ 1,929,375         $ 1,905,127
     Loans held-for-sale                     10,921             117,651
     Securities                             386,459             364,761
     Total interest earning assets        2,415,122           2,468,134
     Interest-bearing deposits            1,774,810           1,717,136
     Short-term borrowings                  230,544             331,306
     Long-term debt                          34,524             116,000
     Trust preferred securities              87,500              87,500
     Total interest-bearing liabilities   2,127,378           2,251,942
 
    The following table summarizes the Company's allowance for loan losses for
 the three months ended March 31, 2001 and 2000, and asset quality as of
 March 31, 2001 and 2000:
 
                                       For the three months ended March 31,
     Allowance for Loan Losses               2001                2000
                                                  (in thousands)
     Balance at beginning of period        $ 40,627            $ 27,113
     Provision for loan losses                5,730               2,085
     Charge-offs                             (8,208)             (2,530)
     Recoveries                                 699                 666
     Balance at end of period              $ 38,848            $ 27,334
 
                                                  As of March 31,
                                             2001                2000
 
     Net charge-offs to average loans          1.56%               0.39%
     Provision for loan
      losses to average loans                  1.19%               0.44%
     Allowance for loan
      losses to average loans                  2.01%               1.43%
 
     Asset Quality
     Non-accrual loans                     $ 16,917            $ 12,313
     Accruing loans past due
      90 days or more                         3,172               2,600
     Restructured loans                         486                 695
     Total non-performing loans              20,575              15,608
     Other real estate owned                  3,726               4,376
     Total non-performing assets           $ 24,301            $ 19,984
      Allowance for loan losses
      times non-performing loans               1.89x               1.75x
 
     Gerald R. Francis, Interim Chief Executive Officer of City Holding Company
 and special assistant to the Board of Directors said, "While the first quarter
 results, along with the April 1st revaluation of the retained interests,
 virtually assures the Company will not operate profitably in 2001, and will
 further delay the restoration of cash dividends to common shareholders for the
 foreseeable future, management and the Board of Directors believe that these
 adjustments reflect the current estimates of the net realizable values of the
 retained interests and the loan portfolio and will position the Company for
 the best and quickest way to return to profitability. Additionally, as of
 March 31, 2001, both the Company's and City National's capital ratios remain
 above regulatory requirements established to be classified as "well
 capitalized."
     We continue to make good progress in the disposition of non-core and out-
 of-market assets, and in the recruitment of a new executive management team.
 We will continue to keep you informed as events unfold in the coming weeks and
 months."
     Information contained in this news release includes forward-looking
 information.  Such forward-looking information involves risks and
 uncertainties and is provided to assist investors and Company shareholders in
 understanding anticipated operations of the Company. The forward-looking
 information is included pursuant to the safe harbor provisions of the Private
 Securities Litigation Reform Act of 1995.   Actual results achieved may differ
 materially from those projected in the forward-looking information.  Factors
 that might cause such a difference include, but are not limited to: (1) the
 Company may be required to take additional actions and incur additional
 expenses in order to restructure its operations; (2) actions taken to
 restructure the operations of the Company and divest all of the Company's non-
 core business lines may not have the anticipated effect or may require the
 Company to incur additional expenses; (3) competitive pressures may increase
 significantly; (4) general economic or business conditions, either nationally
 or in the states or regions in which the Company and its subsidiaries conduct
 business, may be less favorable than expected, resulting in, among other
 things, a deterioration in credit quality or a reduced demand for credit; (5)
 legislative or regulatory changes may adversely affect the businesses in which
 the Companies are engaged; and (6) changes may occur in securities markets.
 The Company disclaims any intent or obligations to update this forward-looking
 information.
     City Holding Company's common stock is publicly traded on The Nasdaq Stock
 Market under the symbol CHCO.
 
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SOURCE City Holding Company
    CHARLESTON, W.Va., April 23 /PRNewswire Interactive News Release/ --
 City Holding Company (Nasdaq: CHCO), a $2.52 billion bank holding company
 headquartered in Charleston, West Virginia, today announced a net loss of
 $5.74 million or $0.34 per share for the first quarter of 2001 compared to a
 net profit of $4.02 million or $0.24 per share for the same period last year.
     The first quarter 2001 net loss was due primarily to non-recurring
 expenses approximating $7.88 million (pre-tax) along with a $5.73 million
 provision for loan losses. Non-recurring expenses included a $2.18 million
 (pre-tax) charge to recognize the impairment in fair value of the Company's
 retained interests in securitized loans, a $1.90 million (pre-tax) charge
 related to a contractual obligation to Fannie Mae, a $1.97 million (pre-tax)
 charge to reflect the estimated fair value of the Company's direct mail
 division, and a $1.28 million (pre-tax) charge to recognize contractual
 obligations to departing senior officers.
     The contractual obligation to Fannie Mae resulted from loan repurchase
 requirements associated with a Title I loan servicing portfolio previously
 acquired, and recently sold, by the Company.  The Company may receive some
 level of recovery of this charge over time through the application of excess
 loan servicing fees to be paid to Fannie Mae, but the recently completed sale
 of the Company's loan servicing division creates uncertainty in the size and
 timing of potential recoveries, if any.  The first quarter 2001 charge related
 to the Company's direct mail division, currently being marketed for sale, was
 based on the Company's current negotiations to divest this division. Terms of
 the sale contemplate financing to be provided by the Company to the buyer for
 100% of the selling price and the Company has considered this factor in
 recording the estimated loss. The Company may recognize some recovery of this
 loss as prospective cash payments are received from the buyer, although this
 cannot be assured.
     The first quarter 2001 provision for loan losses of $5.73 million compared
 to $2.09 million in the first quarter of 2000.  This significant increase is
 in response to first quarter net charge-offs of $7.51 million compared to
 $1.86 million in the same period last year, as well as continuing high levels
 of non-performing loans of 1.09% of loans outstanding at March 31, 2001
 compared to .80% at March 31, 2000 and 1.03% at December 31, 2000.  The
 allowance for loan losses was 2.06 % of loans outstanding at March 31, 2001
 compared to 1.41% at March 31, 2000 and 2.06% at December 31, 2000.  The ratio
 of the allowance for loan losses to non-performing loans increased to 1.89 at
 March 31, 2001, compared to 1.75 at March 31, 2000.  Management is keenly
 focused upon the Company's credit issues and is committing whatever resources
 necessary to cure its loan quality problems.  Absent further deterioration in
 the local economy, management feels cautiously optimistic that loan quality,
 as well as losses, will be brought in line with industry averages by this year
 end.
     The Company revised its estimated fair value of the retained interests at
 March 31, 2001 based upon recent economic news concerning the increased
 potential for economic downturns in the national and local economies, which
 indicates the possibility exists for increased levels of borrower defaults in
 the securitized loan pools.  Additionally, the Company recently completed the
 sale of the loan servicing responsibilities for its securitized loans, which
 could have a negative impact on the collection activities related to those
 loans.  As a result, the Company increased its projected loan default
 assumptions by approximately 25% during the first quarter of 2001, resulting
 in an additional decline in the estimated fair value of the retained interests
 of $21.22 million (pre-tax).  Under accounting rules in effect as of March 31,
 2001, the Company recorded $2.18 million (pre-tax) of this fair value decline
 through its first quarter income statement and the remaining $19.04 million is
 recorded as an other comprehensive loss in stockholders' equity at March 31,
 2001. On April 1, 2001, the Company recorded a pre-tax charge against earnings
 of approximately $29.98 million, which includes the $19.04 million additional
 write-down in the current quarter plus the accumulated unrealized losses of
 $10.94 million reflected in prior years, in conjunction with its adoption of
 new accounting guidance related to its retained interests in securitized
 loans. As previously disclosed, the Emerging Issues Task Force (the "EITF")
 recently clarified the intent of EITF Issue No. 99-20, which became effective
 on April 1, 2001. Issue No. 99-20 provides specific accounting guidance
 regarding the recognition of interest income on, and impairment of, retained
 interests in securitized loans.  Upon implementation of Issue No. 99-20, the
 accumulated other comprehensive loss reserve recorded by the Company in
 stockholders' equity at March 31, 2001 was recorded through earnings as a
 cumulative effect adjustment of a change in accounting principle. Future
 declines in fair value of the retained interests, if any, determined to be
 "other-than-temporary" will also be recorded through earnings.
     Unaudited summary financial data is presented below:
 
                                         For the three months ended March 31,
     Income Statement                         2001                 2000
                                                   (in thousands)
     Interest income                       $ 46,915            $ 49,317
     Interest expense                        26,307              26,281
     Net interest income                     20,608              23,036
     Provision for loan losses                5,730               2,085
     Non-interest income
       Investment securities gains              821                  --
       Service charges                        2,934               2,404
       Mortgage loan servicing fees              32               4,854
       Net origination fees on junior lien      540                 902
       Gain on sale of loans                  1,205               1,028
       Other income                           3,182               4,460
     Non-interest expenses
       Salaries and employee benefits        11,451              12,421
       Occupancy and depreciation             4,085               4,865
       Advertising                              597               1,611
       Retained interest impairment           2,182                  --
       Other expenses                        14,562               9,877
     Income tax (benefit) expense            (3,540)              1,806
     Net (loss) income                      $(5,745)             $4,019
 
                                                       As of
                                                     March 31,
     Balance Sheet                           2001                 2000
                                                   (in thousands)
     Cash and cash equivalents             $ 71,019            $ 78,319
     Securities available for sale          335,208             363,620
     Loans, net of unearned income        1,885,302           1,942,285
     Allowance for loan losses              (38,848)            (27,334)
     Loans held for sale                     24,129             116,468
     Total assets                         2,516,597           2,792,371
     Non-interest bearing deposits          270,890             232,309
     Interest-bearing deposits            1,742,610           1,737,953
     Short-term borrowings                  191,560             366,838
     Long-term debt                          33,868             116,000
     Trust preferred securities              87,500              87,500
     Total liabilities                    2,367,672           2,593,837
     Total stockholders' equity             148,925             198,534
 
                                       For the three months ended March 31,
     Average Balance Sheet                  2001                 2000
                                                (in thousands)
     Loans                              $ 1,929,375         $ 1,905,127
     Loans held-for-sale                     10,921             117,651
     Securities                             386,459             364,761
     Total interest earning assets        2,415,122           2,468,134
     Interest-bearing deposits            1,774,810           1,717,136
     Short-term borrowings                  230,544             331,306
     Long-term debt                          34,524             116,000
     Trust preferred securities              87,500              87,500
     Total interest-bearing liabilities   2,127,378           2,251,942
 
    The following table summarizes the Company's allowance for loan losses for
 the three months ended March 31, 2001 and 2000, and asset quality as of
 March 31, 2001 and 2000:
 
                                       For the three months ended March 31,
     Allowance for Loan Losses               2001                2000
                                                  (in thousands)
     Balance at beginning of period        $ 40,627            $ 27,113
     Provision for loan losses                5,730               2,085
     Charge-offs                             (8,208)             (2,530)
     Recoveries                                 699                 666
     Balance at end of period              $ 38,848            $ 27,334
 
                                                  As of March 31,
                                             2001                2000
 
     Net charge-offs to average loans          1.56%               0.39%
     Provision for loan
      losses to average loans                  1.19%               0.44%
     Allowance for loan
      losses to average loans                  2.01%               1.43%
 
     Asset Quality
     Non-accrual loans                     $ 16,917            $ 12,313
     Accruing loans past due
      90 days or more                         3,172               2,600
     Restructured loans                         486                 695
     Total non-performing loans              20,575              15,608
     Other real estate owned                  3,726               4,376
     Total non-performing assets           $ 24,301            $ 19,984
      Allowance for loan losses
      times non-performing loans               1.89x               1.75x
 
     Gerald R. Francis, Interim Chief Executive Officer of City Holding Company
 and special assistant to the Board of Directors said, "While the first quarter
 results, along with the April 1st revaluation of the retained interests,
 virtually assures the Company will not operate profitably in 2001, and will
 further delay the restoration of cash dividends to common shareholders for the
 foreseeable future, management and the Board of Directors believe that these
 adjustments reflect the current estimates of the net realizable values of the
 retained interests and the loan portfolio and will position the Company for
 the best and quickest way to return to profitability. Additionally, as of
 March 31, 2001, both the Company's and City National's capital ratios remain
 above regulatory requirements established to be classified as "well
 capitalized."
     We continue to make good progress in the disposition of non-core and out-
 of-market assets, and in the recruitment of a new executive management team.
 We will continue to keep you informed as events unfold in the coming weeks and
 months."
     Information contained in this news release includes forward-looking
 information.  Such forward-looking information involves risks and
 uncertainties and is provided to assist investors and Company shareholders in
 understanding anticipated operations of the Company. The forward-looking
 information is included pursuant to the safe harbor provisions of the Private
 Securities Litigation Reform Act of 1995.   Actual results achieved may differ
 materially from those projected in the forward-looking information.  Factors
 that might cause such a difference include, but are not limited to: (1) the
 Company may be required to take additional actions and incur additional
 expenses in order to restructure its operations; (2) actions taken to
 restructure the operations of the Company and divest all of the Company's non-
 core business lines may not have the anticipated effect or may require the
 Company to incur additional expenses; (3) competitive pressures may increase
 significantly; (4) general economic or business conditions, either nationally
 or in the states or regions in which the Company and its subsidiaries conduct
 business, may be less favorable than expected, resulting in, among other
 things, a deterioration in credit quality or a reduced demand for credit; (5)
 legislative or regulatory changes may adversely affect the businesses in which
 the Companies are engaged; and (6) changes may occur in securities markets.
 The Company disclaims any intent or obligations to update this forward-looking
 information.
     City Holding Company's common stock is publicly traded on The Nasdaq Stock
 Market under the symbol CHCO.
 
                     MAKE YOUR OPINION COUNT -  Click Here
                http://tbutton.prnewswire.com/prn/11690X39372392
 
 SOURCE  City Holding Company