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| 8-K - 8-K, CHCO 3Q2018 EARNINGS - CITY HOLDING CO | chco09-30x188xk.htm |
Filed by City Holding Company
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Issuing Company: City Holding Company
Registration Statement on Form S-4 No. 333-226870
Subject Company: Poage Bankshares, Inc.
NEWS RELEASE
For Immediate Release
October 22, 2018
For Further Information Contact:
Charles R. Hageboeck, Chief Executive Officer and President
(304) 769-1102
City Holding Company Announces Third Quarter Results
Charleston, West Virginia - City Holding Company (“Company” or “City”) (NASDAQ:CHCO), a $4.4 billion bank holding company headquartered in Charleston, today announced quarterly net income of $20.7 million and diluted earnings of $1.33 per share.
Highlights of the Company’s third quarter performance and results included the following:
• | Return on assets and return on tangible equity of 1.90% and 18.9%, respectively. |
• | Reported net interest income increased $3.5 million, or 11.0%, from the quarter ended September 30, 2017, while net interest income exclusive of accretion from fair value adjustments increased $3.6 million, or 11.4%, from the quarter ended September 30, 2017. |
• | Primarily due to continued improvement in the Company’s historical loss rates, no provision for loan losses was recorded in the third quarter of 2018. |
Net Interest Income
The Company’s net interest income increased from $33.6 million during the second quarter of 2018 to $35.6 million during the third quarter of 2018. The Company’s tax equivalent net interest income increased $1.9 million, or 5.9%, from $33.8 million during the second quarter of 2018 to $35.7 million during the third quarter of 2018. During the quarter ended September 30, 2018, certain commercial loan customers prepaid loan balances, which resulted in the Company recognizing $1.3 million in prepayment fees that are reflected in interest income. In addition, higher yields on commercial and residential real estate loans increased net interest income $0.7 million and $0.5 million, respectively, from the quarter ended June 30, 2018. Interest income from deposits in depository institutions also increased $0.9 million from the quarter ended June 30, 2018 as the Company elected to improve its on-balance sheet liquidity during the quarter ended September 30, 2018. These increases were partially offset by increased interest expense on short-term borrowings to fund the improved on-balance sheet liquidity ($1.0 million) and increased interest expense as a result of higher interest rates on interest bearing liabilities ($0.5 million). The Company’s reported net interest margin decreased slightly from 3.56% for the second quarter of 2018 to 3.54% for the third quarter of 2018. Excluding the favorable impact of the accretion from the fair value adjustments, the net interest margin would have been 3.52% for the quarter ended June 30, 2018 and 3.51% for the quarter ended September 30, 2018.
On September 26, 2018, the Board of Directors of the Company authorized repayment of its Junior Subordinated Deferrable Interest Debentures issued by the Company and held by City Holding Capital Trust III at a price of 100.00% of the principal amount. Pending all required regulatory approvals, City Holding Capital Trust III will repay its Capital Securities on December 17, 2018 at a price of 100.00% of the principal amount. These securities were issued on March 27, 2008 and were callable in whole any time after June 15, 2013. The Company estimates that the redemption of the debentures and trust preferred securities will reduce the Company’s interest expense by approximately $1.0 million annually through 2038. After giving effect to the redemption of the trust preferred securities, the Company anticipates it will remain “Well Capitalized” as defined by the banking regulators (Total Risk-based capital of at least 10%, Tier I Capital ratio of at least 6% and a leverage ratio of at least 5%).
Credit Quality
The Company’s ratio of nonperforming assets to total loans and other real estate owned improved modestly from 0.53% at June 30, 2018 to 0.50% at September 30, 2018. Total nonperforming assets decreased from $16.9 million at June 30, 2018 to $15.7 million at September 30, 2018. Total past due loans decreased from $8.2 million, or 0.26% of total loans outstanding, at June 30, 2018 to $6.9 million, or 0.22% of total loans outstanding, at September 30, 2018.
As a result of the Company’s quarterly analysis of the adequacy of the Allowance for Loan Losses (“ALLL”), the Company recorded no provision for loan losses in the third quarter of 2018, compared to $1.4 million for the comparable period in 2017 and a recovery of $2.1 million for the second quarter of 2018. The Company did not record a provision for loan losses in the third quarter of 2018 due to continued improvement in the Company’s historical loss rates used to compute the allowance not specifically allocated to individual credits and changes in the quality of the portfolio in general. During September 2018, Hurricane Florence brought historic flooding to many parts of North and South Carolina. The Company has a loan production office in Charlotte, NC and has commercial real estate loans on properties in areas affected by the flooding. Based on management’s review, the Company does not anticipate any losses related to this flooding. The Company will work closely with any of its customers to help ensure the best outcome for all parties. Changes in the amount of the provision and related allowance are based on the Company’s detailed systematic methodology and are directionally consistent with changes in the composition and quality of the Company’s loan portfolio. The Company believes its methodology for determining the adequacy of its ALLL adequately provides for probable losses inherent in the loan portfolio and produces a provision and allowance for loan losses that is directionally consistent with changes in asset quality and loss experience.
Non-interest Income
Non-interest income increased from $14.6 million for the third quarter of 2017 to $15.8 million for the third quarter of 2018. This increase was mainly due to an increase in other income of $0.4 million due to unrealized fair market value gains in equity securities, an increase in bankcard revenues of $0.4 million, or 9.0%, and an increase in service charges of $0.2 million, or 2.5%.
Non-interest Expenses
Non-interest expenses increased $0.7 million, from $24.3 million in the third quarter of 2017 to $25.0 million in the third quarter of 2018. This increase was primarily due to an increase in salaries and employee benefits of $1.0 million due to annual salary adjustments. This increase was partially offset by a decrease in other expenses of $0.3 million.
Balance Sheet Trends
Loan balances have increased $19.3 million (0.6%) from December 31, 2017 to $3.15 billion at September 30, 2018. Residential real estate loans increased $17.5 million (1.2%), commercial and industrial loans increased $5.3 million (2.6%) and home equity junior lien loans increased $4.0 million (2.9%). These increases were partially offset by a decrease in commercial real estate loans ($9.5 million).
Total average depository balances remained stable at $3.43 billion during the quarter ended June 30, 2018 and the quarter ended September 30, 2018. The Company experienced an increase in time deposits ($18.2 million) that was essentially offset by decreases in interest-bearing demand deposits ($8.9 million) and noninterest-bearing demand deposits ($7.1 million).
Income Tax Expense
The Company’s effective income tax rate for the third quarter of 2018 was 21.3% compared to 40.2% for the year ended December 31, 2017, and 33.5% for the quarter ended September 30, 2017. On December 22, 2017, the President signed the Tax Cuts and Jobs Act (“TCJA”) into law. Among other things, the TCJA reduced the corporate income tax rate from 35% to 21%, effective January 1, 2018. As a result of this decrease in the corporate income tax rate, the Company reassessed its deferred tax assets and liabilities, which resulted in a charge to earnings in the fourth quarter of 2017 of $7.1 million. Exclusive of this item, the Company’s tax rate from operations was 32.7% for the year ended December 31, 2017. The effective rate for the third quarter of 2018 is based upon the Company’s expected tax rate for the year ended December 31, 2018.
Capitalization and Liquidity
The Company’s loan to deposit ratio was 91.4% and the loan to asset ratio was 71.2% at September 30, 2018. The Company maintained investment securities totaling 14.7% of assets as of the same date. The Company’s deposit mix is weighted toward checking and saving accounts that fund 51.9% of assets at September 30, 2018. Time deposits fund 26.0% of assets at September 30, 2018, but very few of these deposits are in accounts that have balances of more than $250,000, reflecting the core retail orientation of the Company.
The Company is also strongly capitalized. The Company’s tangible equity ratio declined from 10.5% at December 31, 2017 to 10.0% at September 30, 2018. At September 30, 2018, City National Bank’s Leverage Ratio was 9.39%, its Common Equity Tier I ratio was 14.00%, its Tier I Capital ratio was 14.00%, and its Total Risk-Based Capital ratio was 14.59%. These regulatory capital ratios are significantly above levels required to be considered “well capitalized,” which is the highest possible regulatory designation.
On September 26, 2018, the Board approved a quarterly cash dividend of 53 cents per share payable October 31, 2018, to shareholders of record as of October 15, 2018. This dividend increase represents a 15.2% increase from the 46 cents per share paid on July 31, 2018. During the quarter ended September 30, 2018, the Company repurchased 7,000 common shares at a weighted average price of $77.18 per share as part of a one million share repurchase plan authorized by the Board of Directors in September 2014. As of September 30, 2018, the Company could repurchase approximately 181,000 shares under the current plan.
City Holding Company is the parent company of City National Bank of West Virginia. City National Bank operates 87 branches across West Virginia, Virginia, Kentucky and Ohio.
On July 11, 2018 the Company announced that it had concurrently executed two separate definitive agreements to acquire Poage Bankshares, Inc. (“Poage”) of Ashland, Kentucky and its principal banking subsidiary, Town Square Bank, and Farmers Deposit Bancorp, Inc. (“Farmers Deposit”) of Cynthiana, Kentucky and its principal banking subsidiary, Farmers Deposit Bank. The proposed mergers are expected
to close in the fourth quarter of 2018 and the core data system conversions are also targeted to occur in the fourth quarter of 2018. City has received all regulatory approvals for both Poage and Farmers Deposit. Consummation of the respective mergers is subject to approval by the shareholders of Poage and Farmers Deposit and the completion of other customary closing conditions. The Poage and Farmers Deposit transactions are not conditional upon each other.
Important Information for Investors and Poage Shareholders
This press release does not constitute an offer to sell or the solicitation of an offer to buy securities of City or a solicitation of any vote or approval. City has filed a registration statement on Form S-4 and will file other documents regarding the proposed transaction referenced in this press release related to the Poage merger with the Securities and Exchange Commission (“SEC”) to register the shares of City’s common stock to be issued to the shareholders of Poage. The registration statement includes a proxy statement/prospectus, which was sent to the shareholders of Poage in advance of its special meeting of shareholders to be held to consider the proposed Poage merger. Before making any voting or investment decision, investors and security holders are urged to read the proxy statement/prospectus and any other relevant documents to be filed with the SEC in connection with the proposed Poage transaction because they contain important information about the City, Poage and the proposed transaction. Shareholders are also urged to carefully review and consider each of City’s and Poage’s public filings with the SEC, including, but not limited to, their Annual Reports on Form 10-K, their Quarterly Reports on Form 10-Q, their Current Reports on Form 8-K and their proxy statements. Investors and security holders may obtain a free copy of these documents (when available) through the website maintained by the SEC at www.sec.gov. These documents may also be obtained, without charge, from City at www.bankatcity.com under the tab “Investors” or by directing a request to City Holding Company, 25 Gatewater Road P.O. Box 7520, Charleston, West Virginia 25356, Attn.: Investor Relations, or from Poage at www.townswquarebank.com under the tab “Investor Relations” or by directing a request to Poage Bankshares, Inc., 1500 Carter Avenue, Ashland, Kentucky 41101, Attn.: Investor Relations. Poage and certain of its directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of Poage in connection with the proposed Poage merger. Information about the directors and executive officers of Poage is set forth in the proxy statement for Poage’s 2018 annual meeting of shareholders, as filed with the SEC on a Schedule 14A on April 13, 2018. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the proxy statement/prospectus regarding the proposed Poage merger. Free copies of this document may be obtained as described in the preceding paragraph.
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) 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; (12) 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; (13) the impact of new minimum capital thresholds established as a part of the implementation of Basel III; (14) the businesses of City Holding Company, City National Bank of West Virginia, Poage Bankshares, Inc., Town Square Bank, Farmer's Deposit Bancorp, Inc. and Farmers Deposit Bank may not integrate successfully or such integration may take longer to accomplish than expected (15) the expected cost savings and any revenue synergies from the merger of City Holding Company, City National Bank of West Virginia, Poage Bankshares, Inc., Town Square Bank, Farmer's Deposit Bancorp, Inc. and Farmers Deposit Bank may not be fully realized within the expected time frames; (16) the disruption from the merger of City Holding Company, City National Bank of West Virginia, Poage Bankshares, Inc., Town Square Bank, Farmer's Deposit Bancorp, Inc. may make it more difficult to maintain relationships with clients, associates, or suppliers; and (17) 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, 2017. 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 September 30, 2018 Form 10-Q. The Company will continue to evaluate the impact of any subsequent events on the preliminary September 30, 2018 results and will adjust the amounts if necessary.
CITY HOLDING COMPANY AND SUBSIDIARIES
Financial Highlights
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||||||||
September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | September 30, | ||||||||||||||||
2018 | 2018 | 2018 | 2017 | 2017 | 2018 | 2017 | ||||||||||||||||
Earnings | ||||||||||||||||||||||
Net Interest Income (FTE) | $ | 35,745 | $ | 33,760 | $ | 32,834 | $ | 32,760 | $ | 32,384 | $ | 102,339 | $ | 94,822 | ||||||||
Net Income available to common shareholders | 20,692 | 20,979 | 17,616 | 9,669 | 13,932 | 59,283 | 44,646 | |||||||||||||||
Per Share Data | ||||||||||||||||||||||
Earnings per share available to common shareholders: | ||||||||||||||||||||||
Basic | $ | 1.34 | $ | 1.36 | $ | 1.13 | $ | 0.62 | $ | 0.89 | $ | 3.82 | $ | 2.87 | ||||||||
Diluted | 1.33 | 1.35 | 1.13 | 0.62 | 0.89 | 3.82 | 2.86 | |||||||||||||||
Weighted average number of shares: | ||||||||||||||||||||||
Basic | 15,340 | 15,326 | 15,414 | 15,472 | 15,485 | 15,360 | 15,391 | |||||||||||||||
Diluted | 15,358 | 15,345 | 15,436 | 15,497 | 15,505 | 15,380 | 15,415 | |||||||||||||||
Period-end number of shares | 15,449 | 15,452 | 15,439 | 15,618 | 15,618 | 15,449 | 15,618 | |||||||||||||||
Cash dividends declared | $ | 0.53 | $ | 0.46 | $ | 0.46 | $ | 0.46 | $ | 0.44 | $ | 1.45 | $ | 1.32 | ||||||||
Book value per share (period-end) | 33.14 | 32.60 | 31.86 | 32.17 | 32.03 | 33.14 | 32.03 | |||||||||||||||
Tangible book value per share (period-end) | 28.08 | 27.53 | 26.78 | 27.14 | 26.99 | 28.08 | 26.99 | |||||||||||||||
Market data: | ||||||||||||||||||||||
High closing price | $ | 82.79 | $ | 78.44 | $ | 72.87 | $ | 73.98 | $ | 71.91 | $ | 82.79 | $ | 72.78 | ||||||||
Low closing price | 75.54 | 67.95 | 65.03 | 65.5 | 59.94 | 65.03 | 59.94 | |||||||||||||||
Period-end closing price | 76.80 | 75.23 | 68.56 | 67.47 | 71.91 | 76.80 | 71.91 | |||||||||||||||
Average daily volume | 54 | 60 | 56 | 66 | 54 | 57 | 55 | |||||||||||||||
Treasury share activity: | ||||||||||||||||||||||
Treasury shares repurchased | 7 | 10 | 204 | — | — | 221 | — | |||||||||||||||
Average treasury share repurchase price | $ | 77.18 | $ | 69.26 | $ | 68.5 | $ | — | $ | — | $ | 68.81 | $ | — | ||||||||
Common share issuance: | ||||||||||||||||||||||
Common shares issued (in thousands) | — | — | — | — | — | — | 441 | |||||||||||||||
Average common share issue price (a) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 64.48 | ||||||||
Key Ratios (percent) | ||||||||||||||||||||||
Return on average assets | 1.90 | % | 2.00 | % | 1.69 | % | 0.94 | % | 1.37 | % | 1.86 | % | 1.46 | % | ||||||||
Return on average tangible equity | 18.90 | % | 19.90 | % | 16.70 | % | 9.00 | % | 13.20 | % | 18.50 | % | 14.60 | % | ||||||||
Yield on interest earning assets | 4.25 | % | 4.15 | % | 4.05 | % | 3.95 | % | 3.92 | % | 4.13 | % | 3.90 | % | ||||||||
Cost of interest bearing liabilities | 0.92 | % | 0.76 | % | 0.69 | % | 0.64 | % | 0.61 | % | 0.79 | % | 0.57 | % | ||||||||
Net Interest Margin | 3.54 | % | 3.52 | % | 3.51 | % | 3.46 | % | 3.45 | % | 3.52 | % | 3.46 | % | ||||||||
Non-interest income as a percent of total revenue | 30.70 | % | 31.70 | % | 30.70 | % | 32.20 | % | 31.30 | % | 31.10 | % | 31.80 | % | ||||||||
Efficiency Ratio (a) | 48.60 | % | 50.40 | % | 52.60 | % | 47.70 | % | 51.80 | % | 50.50 | % | 52.90 | % | ||||||||
Price/Earnings Ratio (b) | 14.37 | 13.88 | 15.17 | 27.30 | 20.20 | 15.07 | 18.80 | |||||||||||||||
Capital (period-end) | ||||||||||||||||||||||
Average Shareholders' Equity to Average Assets | 11.81 | % | 11.88 | % | 12.05 | % | 12.34 | % | 12.29 | % | ||||||||||||
Tangible equity to tangible assets | 9.99 | % | 9.90 | % | 10.03 | % | 10.45 | % | 10.49 | % | ||||||||||||
Consolidated City Holding Company risk based capital ratios (c): | ||||||||||||||||||||||
CET I | 15.94 | % | 15.49 | % | 15.08 | % | 15.10 | % | 15.08 | % | ||||||||||||
Tier I | 16.49 | % | 16.05 | % | 15.64 | % | 15.66 | % | 15.65 | % | ||||||||||||
Total | 17.08 | % | 16.65 | % | 16.31 | % | 16.34 | % | 16.40 | % | ||||||||||||
Leverage | 11.01 | % | 11.13 | % | 10.90 | % | 11.00 | % | 11.05 | % | ||||||||||||
City National Bank risk based capital ratios (c): | ||||||||||||||||||||||
CET I | 14.00 | % | 13.26 | % | 12.59 | % | 11.93 | % | 12.74 | % | ||||||||||||
Tier I | 14.00 | % | 13.26 | % | 12.59 | % | 11.93 | % | 12.74 | % | ||||||||||||
Total | 14.59 | % | 13.87 | % | 13.25 | % | 12.61 | % | 13.44 | % | ||||||||||||
Leverage | 9.39 | % | 9.24 | % | 8.81 | % | 8.43 | % | 9.04 | % | ||||||||||||
Other | ||||||||||||||||||||||
Branches | 87 | 86 | 86 | 86 | 86 | |||||||||||||||||
FTE | 846 | 849 | 832 | 839 | 835 | |||||||||||||||||
Assets per FTE | $ | 5,226 | $ | 5,152 | $ | 5,048 | $ | 4,925 | $ | 4,910 | ||||||||||||
Deposits per FTE | 4,070 | 4,030 | 4,143 | 3,952 | 3,900 | |||||||||||||||||
(a) The common share issue price is presented net of commissions and excludes one-time offering costs. | ||||||||||||||||||||||
(b) The price/earnings ratio is computed based on annualized quarterly earnings. | ||||||||||||||||||||||
(c) September 30, 2018 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 | Nine Months Ended | |||||||||||||||||||||
September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | September 30, | ||||||||||||||||
2018 | 2018 | 2018 | 2017 | 2017 | 2018 | 2017 | ||||||||||||||||
Interest Income | ||||||||||||||||||||||
Interest and fees on loans | $ | 36,872 | $ | 34,292 | $ | 32,918 | $ | 32,529 | $ | 32,004 | $ | 104,082 | $ | 93,223 | ||||||||
Interest on investment securities: | ||||||||||||||||||||||
Taxable | 4,216 | 4,117 | 3,981 | 3,797 | 3,666 | 12,314 | 10,591 | |||||||||||||||
Tax-exempt | 701 | 710 | 703 | 692 | 665 | 2,114 | 2,014 | |||||||||||||||
Interest on deposits in depository institutions | 940 | 61 | 42 | 35 | 31 | 1,043 | 51 | |||||||||||||||
Total Interest Income | 42,729 | 39,180 | 37,644 | 37,053 | 36,366 | 119,553 | 105,879 | |||||||||||||||
Interest Expense | ||||||||||||||||||||||
Interest on deposits | 5,497 | 4,918 | 4,326 | 3,941 | 3,796 | 14,741 | 10,885 | |||||||||||||||
Interest on short-term borrowings | 1,435 | 459 | 460 | 522 | 349 | 2,354 | 693 | |||||||||||||||
Interest on long-term debt | 239 | 230 | 211 | 201 | 195 | 680 | 565 | |||||||||||||||
Total Interest Expense | 7,171 | 5,607 | 4,997 | 4,664 | 4,340 | 17,775 | 12,143 | |||||||||||||||
Net Interest Income | 35,558 | 33,573 | 32,647 | 32,389 | 32,026 | 101,778 | 93,736 | |||||||||||||||
Provision for loan losses | (27 | ) | (2,064 | ) | 181 | 422 | 1,393 | (1,910 | ) | 2,584 | ||||||||||||
Net Interest Income After Provision for Loan Losses | 35,585 | 35,637 | 32,466 | 31,967 | 30,633 | 103,688 | 91,152 | |||||||||||||||
Non-Interest Income | ||||||||||||||||||||||
Gains on sale of investment securities | — | — | — | 200 | — | — | 4,276 | |||||||||||||||
Service charges | 7,598 | 7,323 | 6,862 | 7,355 | 7,415 | 21,783 | 21,219 | |||||||||||||||
Bankcard revenue | 4,677 | 4,532 | 4,334 | 4,316 | 4,291 | 13,543 | 12,804 | |||||||||||||||
Trust and investment management fee income | 1,579 | 1,645 | 1,568 | 1,800 | 1,471 | 4,792 | 4,469 | |||||||||||||||
Bank owned life insurance | 813 | 722 | 821 | 1,241 | 774 | 2,356 | 2,972 | |||||||||||||||
Other income | 1,086 | 1,389 | 907 | 655 | 660 | 3,382 | 2,303 | |||||||||||||||
Total Non-Interest Income | 15,753 | 15,611 | 14,492 | 15,567 | 14,611 | 45,856 | 48,043 | |||||||||||||||
Non-Interest Expense | ||||||||||||||||||||||
Salaries and employee benefits | 13,576 | 13,551 | 13,241 | 11,845 | 12,580 | 40,368 | 38,783 | |||||||||||||||
Occupancy related expense | 2,323 | 2,346 | 2,404 | 2,195 | 2,426 | 7,073 | 7,361 | |||||||||||||||
Equipment and software related expense | 1,965 | 1,895 | 1,831 | 1,897 | 1,940 | 5,691 | 5,835 | |||||||||||||||
FDIC insurance expense | 315 | 313 | 315 | 318 | 328 | 943 | 1,031 | |||||||||||||||
Advertising | 808 | 849 | 787 | 711 | 689 | 2,444 | 2,203 | |||||||||||||||
Bankcard expenses | 1,134 | 1,064 | 1,076 | 960 | 1,051 | 3,274 | 2,964 | |||||||||||||||
Postage, delivery, and statement mailings | 537 | 515 | 578 | 518 | 517 | 1,630 | 1,576 | |||||||||||||||
Office supplies | 364 | 329 | 313 | 355 | 377 | 1,006 | 1,082 | |||||||||||||||
Legal and professional fees | 453 | 475 | 450 | 563 | 504 | 1,378 | 1,393 | |||||||||||||||
Telecommunications | 408 | 441 | 500 | 517 | 494 | 1,349 | 1,470 | |||||||||||||||
Repossessed asset losses, net of expenses | 156 | 112 | 370 | 145 | 107 | 638 | 589 | |||||||||||||||
Other expenses | 3,001 | 3,021 | 3,072 | 2,869 | 3,296 | 9,098 | 8,799 | |||||||||||||||
Total Non-Interest Expense | 25,040 | 24,911 | 24,937 | 22,893 | 24,309 | 74,892 | 73,086 | |||||||||||||||
Income Before Income Taxes | 26,298 | 26,337 | 22,021 | 24,641 | 20,935 | 74,652 | 66,109 | |||||||||||||||
Income tax expense | 5,606 | 5,358 | 4,405 | 14,972 | 7,003 | 15,369 | 21,463 | |||||||||||||||
Net Income Available to Common Shareholders | $ | 20,692 | $ | 20,979 | $ | 17,616 | $ | 9,669 | $ | 13,932 | $ | 59,283 | $ | 44,646 | ||||||||
Distributed earnings allocated to common shareholders | $ | 8,109 | $ | 7,039 | $ | 7,023 | $ | 7,106 | $ | 6,797 | $ | 22,184 | $ | 20,391 | ||||||||
Undistributed earnings allocated to common shareholders | 12,382 | 13,729 | 10,398 | 2,454 | 6,981 | 36,522 | 23,767 | |||||||||||||||
Net earnings allocated to common shareholders | $ | 20,491 | $ | 20,768 | $ | 17,421 | $ | 9,560 | $ | 13,778 | $ | 58,706 | $ | 44,158 | ||||||||
Average common shares outstanding | 15,340 | 15,326 | 15,414 | 15,472 | 15,485 | 15,360 | 15,391 | |||||||||||||||
Shares for diluted earnings per share | 15,358 | 15,345 | 15,436 | 15,497 | 15,505 | 15,380 | 15,415 | |||||||||||||||
Basic earnings per common share | $ | 1.34 | $ | 1.36 | $ | 1.13 | $ | 0.62 | $ | 0.89 | $ | 3.82 | $ | 2.87 | ||||||||
Diluted earnings per common share | $ | 1.33 | $ | 1.35 | $ | 1.13 | $ | 0.62 | $ | 0.89 | $ | 3.82 | $ | 2.86 | ||||||||
CITY HOLDING COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
($ in 000s)
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||
September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||
2018 | 2018 | 2018 | 2017 | 2017 | |||||||||||
Assets | |||||||||||||||
Cash and due from banks | $ | 49,806 | $ | 43,466 | $ | 39,340 | $ | 54,450 | $ | 54,281 | |||||
Interest-bearing deposits in depository institutions | 256,104 | 222,058 | 84,438 | 28,058 | 28,884 | ||||||||||
Cash and cash equivalents | 305,910 | 265,524 | 123,778 | 82,508 | 83,165 | ||||||||||
Investment securities available-for-sale, at fair value | 563,003 | 552,603 | 545,628 | 550,389 | 525,633 | ||||||||||
Investment securities held-to-maturity, at amortized cost | 57,812 | 60,030 | 62,277 | 64,449 | 66,989 | ||||||||||
Other securities | 28,875 | 28,920 | 22,165 | 14,147 | 15,988 | ||||||||||
Total investment securities | 649,690 | 641,553 | 630,070 | 628,985 | 608,610 | ||||||||||
Gross loans | 3,146,697 | 3,155,468 | 3,137,681 | 3,127,410 | 3,105,912 | ||||||||||
Allowance for loan losses | (16,311 | ) | (16,876 | ) | (18,381 | ) | (18,836 | ) | (19,554 | ) | |||||
Net loans | 3,130,386 | 3,138,592 | 3,119,300 | 3,108,574 | 3,086,358 | ||||||||||
Bank owned life insurance | 105,372 | 104,773 | 104,052 | 103,440 | 102,706 | ||||||||||
Premises and equipment, net | 72,484 | 72,482 | 72,920 | 72,682 | 72,334 | ||||||||||
Accrued interest receivable | 11,449 | 9,348 | 9,528 | 9,223 | 9,236 | ||||||||||
Net deferred tax assets | 15,653 | 14,528 | 14,467 | 11,913 | 22,355 | ||||||||||
Intangible assets | 78,215 | 78,342 | 78,468 | 78,595 | 78,730 | ||||||||||
Other assets | 51,643 | 49,241 | 47,432 | 36,361 | 36,060 | ||||||||||
Total Assets | $ | 4,420,802 | $ | 4,374,383 | $ | 4,200,015 | $ | 4,132,281 | $ | 4,099,554 | |||||
Liabilities | |||||||||||||||
Deposits: | |||||||||||||||
Noninterest-bearing | $ | 672,042 | $ | 684,614 | $ | 703,209 | $ | 666,639 | $ | 669,876 | |||||
Interest-bearing: | |||||||||||||||
Demand deposits | 802,490 | 785,933 | 816,976 | 769,245 | 711,121 | ||||||||||
Savings deposits | 821,390 | 817,547 | 816,245 | 796,275 | 799,592 | ||||||||||
Time deposits | 1,147,709 | 1,133,684 | 1,110,532 | 1,083,475 | 1,075,945 | ||||||||||
Total deposits | 3,443,631 | 3,421,778 | 3,446,962 | 3,315,634 | 3,256,534 | ||||||||||
Short-term borrowings | |||||||||||||||
Federal Funds purchased | 170,000 | 181,375 | — | 54,000 | 79,800 | ||||||||||
Customer repurchase agreements | 220,124 | 196,635 | 195,375 | 198,219 | 201,664 | ||||||||||
Long-term debt | 16,495 | 16,495 | 16,495 | 16,495 | 16,495 | ||||||||||
Other liabilities | 58,526 | 54,346 | 49,306 | 45,426 | 44,746 | ||||||||||
Total Liabilities | 3,908,776 | 3,870,629 | 3,708,138 | 3,629,774 | 3,599,239 | ||||||||||
Stockholders' Equity | |||||||||||||||
Preferred stock | — | — | — | — | — | ||||||||||
Common stock | 47,619 | 47,619 | 47,619 | 47,619 | 47,619 | ||||||||||
Capital surplus | 140,450 | 140,091 | 140,547 | 140,960 | 140,381 | ||||||||||
Retained earnings | 484,017 | 471,515 | 457,650 | 444,481 | 441,001 | ||||||||||
Cost of common stock in treasury | (136,783 | ) | (136,520 | ) | (137,420 | ) | (124,909 | ) | (124,909 | ) | |||||
Accumulated other comprehensive loss: | |||||||||||||||
Unrealized gain on securities available-for-sale | (18,244 | ) | (13,918 | ) | (11,486 | ) | (611 | ) | 883 | ||||||
Underfunded pension liability | (5,033 | ) | (5,033 | ) | (5,033 | ) | (5,033 | ) | (4,660 | ) | |||||
Total Accumulated Other Comprehensive Loss | (23,277 | ) | (18,951 | ) | (16,519 | ) | (5,644 | ) | (3,777 | ) | |||||
Total Stockholders' Equity | 512,026 | 503,754 | 491,877 | 502,507 | 500,315 | ||||||||||
Total Liabilities and Stockholders' Equity | $ | 4,420,802 | $ | 4,374,383 | $ | 4,200,015 | $ | 4,132,281 | $ | 4,099,554 | |||||
Regulatory Capital | |||||||||||||||
Total CET 1 capital | $ | 457,580 | $ | 444,869 | $ | 430,044 | $ | 430,154 | $ | 426,057 | |||||
Total tier 1 capital | 473,580 | 460,869 | 446,044 | 446,154 | 442,057 | ||||||||||
Total risk-based capital | 490,307 | 478,255 | 464,936 | 465,292 | 463,198 | ||||||||||
Total risk-weighted assets | 2,871,241 | 2,871,561 | 2,851,330 | 2,842,453 | 2,824,751 | ||||||||||
CITY HOLDING COMPANY AND SUBSIDIARIES
Loan Portfolio
(Unaudited) ($ in 000s)
September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||
2018 | 2018 | 2018 | 2017 | 2017 | |||||||||||
Residential real estate (1) | $ | 1,485,823 | $ | 1,472,916 | $ | 1,465,215 | $ | 1,468,278 | $ | 1,465,942 | |||||
Home equity - junior liens | 143,540 | 139,245 | 138,477 | 139,499 | 139,702 | ||||||||||
Commercial and industrial | 213,815 | 213,687 | 204,592 | 208,484 | 204,722 | ||||||||||
Commercial real estate (2) | 1,268,052 | 1,294,489 | 1,296,304 | 1,277,576 | 1,260,906 | ||||||||||
Consumer | 31,869 | 31,137 | 29,570 | 29,162 | 30,323 | ||||||||||
DDA overdrafts | 3,598 | 3,994 | 3,523 | 4,411 | 4,317 | ||||||||||
Gross Loans | $ | 3,146,697 | $ | 3,155,468 | $ | 3,137,681 | $ | 3,127,410 | $ | 3,105,912 | |||||
Construction loans included in: | |||||||||||||||
(1) - Residential real estate loans | $ | 17,628 | $ | 21,662 | $ | 26,610 | $ | 25,270 | $ | 19,849 | |||||
(2) - Commercial real estate loans | 24,110 | 28,567 | 30,857 | 28,871 | 24,318 | ||||||||||
Secondary Mortgage Loan Activity | |||||||||||||||
Mortgage loans originated | $ | 3,417 | $ | 3,263 | $ | 2,606 | $ | 2,593 | $ | 4,474 | |||||
Mortgage loans sold | 3,590 | 3,137 | 2,874 | 2,975 | 4,732 | ||||||||||
Mortgage loans gain on loans sold | 86 | 84 | 79 | 79 | 128 | ||||||||||
CITY HOLDING COMPANY AND SUBSIDIARIES
Asset Quality Information
(Unaudited) ($ in 000s)
Three Months Ended | Nine Months Ended | |||||||||||||||||||||
September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | September 30, | ||||||||||||||||
2018 | 2018 | 2018 | 2017 | 2017 | 2018 | 2017 | ||||||||||||||||
Allowance for Loan Losses | ||||||||||||||||||||||
Balance at beginning of period | $ | 16,876 | $ | 18,381 | $ | 18,836 | $ | 19,554 | $ | 19,063 | $ | 18,836 | $ | 19,730 | ||||||||
Charge-offs: | ||||||||||||||||||||||
Commercial and industrial | — | (385 | ) | (339 | ) | (250 | ) | (40 | ) | (724 | ) | (150 | ) | |||||||||
Commercial real estate | (74 | ) | (118 | ) | (157 | ) | (156 | ) | (282 | ) | (349 | ) | (564 | ) | ||||||||
Residential real estate | (244 | ) | (96 | ) | (124 | ) | (342 | ) | (411 | ) | (464 | ) | (1,295 | ) | ||||||||
Home equity | (108 | ) | (33 | ) | (78 | ) | (147 | ) | (17 | ) | (219 | ) | (256 | ) | ||||||||
Consumer | (206 | ) | (255 | ) | (99 | ) | (13 | ) | (18 | ) | (560 | ) | (47 | ) | ||||||||
DDA overdrafts | (704 | ) | (636 | ) | (636 | ) | (725 | ) | (718 | ) | (1,976 | ) | (1,989 | ) | ||||||||
Total charge-offs | (1,336 | ) | (1,523 | ) | (1,433 | ) | (1,633 | ) | (1,486 | ) | (4,292 | ) | (4,301 | ) | ||||||||
Recoveries: | ||||||||||||||||||||||
Commercial and industrial | 147 | 1,476 | 2 | 1 | 2 | 1,625 | 57 | |||||||||||||||
Commercial real estate | 166 | 149 | 223 | 20 | 60 | 538 | 92 | |||||||||||||||
Residential real estate | 116 | 53 | 106 | 8 | 130 | 275 | 286 | |||||||||||||||
Home equity | — | — | — | — | 45 | — | 45 | |||||||||||||||
Consumer | 25 | 59 | 46 | 17 | 21 | 130 | 46 | |||||||||||||||
DDA overdrafts | 344 | 345 | 420 | 447 | 326 | 1,109 | 1,016 | |||||||||||||||
Total recoveries | 798 | 2,082 | 797 | 493 | 584 | 3,677 | 1,542 | |||||||||||||||
Net charge-offs | (538 | ) | 559 | (636 | ) | (1,140 | ) | (903 | ) | (615 | ) | (2,759 | ) | |||||||||
Provision for (recovery of) acquired loans | (27 | ) | (13 | ) | — | 122 | — | (40 | ) | 39 | ||||||||||||
Provision for loan losses | — | (2,051 | ) | 181 | 300 | 1,393 | (1,870 | ) | 2,544 | |||||||||||||
Balance at end of period | $ | 16,311 | $ | 16,876 | $ | 18,381 | $ | 18,836 | $ | 19,554 | $ | 16,311 | $ | 19,554 | ||||||||
Loans outstanding | $ | 3,146,697 | $ | 3,155,468 | $ | 3,137,681 | $ | 3,127,410 | $ | 3,105,912 | ||||||||||||
Allowance as a percent of loans outstanding | 0.52 | % | 0.53 | % | 0.59 | % | 0.60 | % | 0.63 | % | ||||||||||||
Allowance as a percent of non-performing loans | 142.1 | % | 127.6 | % | 189.9 | % | 178.4 | % | 182.8 | % | ||||||||||||
Average loans outstanding | $ | 3,149,320 | $ | 3,138,146 | $ | 3,133,804 | $ | 3,110,084 | $ | 3,089,793 | $ | 3,140,480 | $ | 3,073,132 | ||||||||
Net charge-offs (annualized) as a percent of average loans outstanding | 0.07 | % | (0.07 | )% | 0.08 | % | 0.15 | % | 0.12 | % | 0.03 | % | 0.12 | % | ||||||||
CITY HOLDING COMPANY AND SUBSIDIARIES
Asset Quality Information, Continued
(Unaudited) ($ in 000s)
September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||
2018 | 2018 | 2018 | 2017 | 2017 | |||||||||||
Nonaccrual Loans | |||||||||||||||
Residential real estate | $ | 3,029 | $ | 3,783 | $ | 3,331 | $ | 2,814 | $ | 2,556 | |||||
Home equity | — | 168 | 135 | 168 | 92 | ||||||||||
Commercial and industrial | 818 | 863 | 1,063 | 1,345 | 1,325 | ||||||||||
Commercial real estate | 7,599 | 7,707 | 5,061 | 5,970 | 6,700 | ||||||||||
Consumer | 1 | 557 | — | — | — | ||||||||||
Total nonaccrual loans | 11,447 | 13,078 | 9,590 | 10,297 | 10,673 | ||||||||||
Accruing loans past due 90 days or more | 35 | 145 | 91 | 262 | 22 | ||||||||||
Total non-performing loans | 11,482 | 13,223 | 9,681 | 10,559 | 10,695 | ||||||||||
Other real estate owned | 4,259 | 3,636 | 3,912 | 3,585 | 3,995 | ||||||||||
Total non-performing assets | $ | 15,741 | $ | 16,859 | $ | 13,593 | $ | 14,144 | $ | 14,690 | |||||
Non-performing assets as a percent of loans and other real estate owned | 0.50 | % | 0.53 | % | 0.43 | % | 0.45 | % | 0.47 | % | |||||
Past Due Loans | |||||||||||||||
Residential real estate | $ | 4,657 | $ | 5,998 | $ | 5,641 | $ | 6,718 | $ | 5,295 | |||||
Home equity | 468 | 583 | 616 | 851 | 873 | ||||||||||
Commercial and industrial | 187 | 624 | 61 | 692 | 304 | ||||||||||
Commercial real estate | 934 | 402 | 1,520 | 2,086 | 520 | ||||||||||
Consumer | 39 | 34 | 21 | 42 | 26 | ||||||||||
DDA overdrafts | 582 | 525 | 432 | 575 | 551 | ||||||||||
Total past due loans | $ | 6,867 | $ | 8,166 | $ | 8,291 | $ | 10,964 | $ | 7,569 | |||||
Total past due loans as a percent of loans outstanding | 0.22 | % | 0.26 | % | 0.26 | % | 0.35 | % | 0.24 | % | |||||
Troubled Debt Restructurings ("TDRs") (period-end) | |||||||||||||||
Accruing: | |||||||||||||||
Residential real estate | $ | 20,414 | $ | 20,424 | $ | 20,786 | $ | 21,005 | $ | 20,741 | |||||
Home equity | 2,941 | 3,156 | 3,015 | 3,047 | 2,947 | ||||||||||
Commercial and industrial | 108 | 119 | 125 | 135 | 31 | ||||||||||
Commercial real estate | 8,231 | 8,279 | 8,324 | 8,381 | 8,427 | ||||||||||
Consumer | — | — | — | — | — | ||||||||||
Total accruing TDRs | $ | 31,694 | $ | 31,978 | $ | 32,250 | $ | 32,568 | $ | 32,146 | |||||
Non-Accruing | |||||||||||||||
Residential real estate | $ | 175 | $ | 307 | 256 | $ | 84 | $ | 47 | ||||||
Home equity | — | 40 | 40 | 50 | — | ||||||||||
Commercial and industrial | — | — | — | — | — | ||||||||||
Commercial real estate | — | — | — | — | — | ||||||||||
Consumer | — | — | — | — | — | ||||||||||
Total non-accruing TDRs | $ | 175 | $ | 347 | $ | 296 | $ | 134 | $ | 47 | |||||
Total TDRs | $ | 31,869 | $ | 32,325 | $ | 32,546 | $ | 32,702 | $ | 32,193 | |||||
CITY HOLDING COMPANY AND SUBSIDIARIES
Consolidated Average Balance Sheets, Yields, and Rates
(Unaudited) ($ in 000s)
Three Months Ended | ||||||||||||||||||||||||
September 30, 2018 | June 30, 2018 | September 30, 2017 | ||||||||||||||||||||||
Average | Yield/ | Average | Yield/ | Average | Yield/ | |||||||||||||||||||
Balance | Interest | Rate | Balance | Interest | Rate | Balance | Interest | Rate | ||||||||||||||||
Assets: | ||||||||||||||||||||||||
Loan portfolio (1): | ||||||||||||||||||||||||
Residential real estate (2) | $ | 1,618,829 | $ | 17,653 | 4.33 | % | $ | 1,602,103 | $ | 16,951 | 4.24 | % | $ | 1,598,037 | $ | 16,117 | 4.00 | % | ||||||
Commercial, financial, and agriculture (2) | 1,494,666 | 18,460 | 4.90 | % | 1,501,618 | 16,578 | 4.43 | % | 1,457,821 | 14,975 | 4.08 | % | ||||||||||||
Installment loans to individuals (2), (3) | 35,825 | 584 | 6.47 | % | 34,425 | 516 | 6.01 | % | 33,935 | 558 | 6.52 | % | ||||||||||||
Previously securitized loans (4) | *** | 175 | *** | *** | 246 | *** | *** | 353 | *** | |||||||||||||||
Total loans | 3,149,320 | 36,872 | 4.64 | % | 3,138,146 | 34,291 | 4.38 | % | 3,089,793 | 32,003 | 4.11 | % | ||||||||||||
Securities: | ||||||||||||||||||||||||
Taxable | 554,157 | 4,216 | 3.02 | % | 541,990 | 4,117 | 3.05 | % | 507,106 | 3,666 | 2.87 | % | ||||||||||||
Tax-exempt (5) | 90,596 | 888 | 3.89 | % | 91,135 | 898 | 3.95 | % | 91,276 | 1,024 | 4.45 | % | ||||||||||||
Total securities | 644,753 | 5,104 | 3.14 | % | 633,125 | 5,015 | 3.18 | % | 598,382 | 4,690 | 3.11 | % | ||||||||||||
Deposits in depository institutions | 210,994 | 940 | 1.77 | % | 29,164 | 61 | 0.84 | % | 31,517 | 31 | 0.39 | % | ||||||||||||
Total interest-earning assets | 4,005,067 | 42,916 | 4.25 | % | 3,800,435 | 39,367 | 4.15 | % | 3,719,692 | 36,724 | 3.92 | % | ||||||||||||
Cash and due from banks | 49,933 | 92,426 | 62,723 | |||||||||||||||||||||
Premises and equipment, net | 72,733 | 72,889 | 72,756 | |||||||||||||||||||||
Other assets | 256,834 | 255,719 | 247,076 | |||||||||||||||||||||
Less: Allowance for loan losses | (17,247 | ) | (18,215 | ) | (20,038 | ) | ||||||||||||||||||
Total assets | $ | 4,367,320 | $ | 4,203,254 | $ | 4,082,209 | ||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||
Interest-bearing demand deposits | $ | 778,639 | $ | 526 | 0.27 | % | $ | 787,554 | $ | 445 | 0.23 | % | $ | 700,625 | $ | 159 | 0.09 | % | ||||||
Savings deposits | 816,597 | 537 | 0.26 | % | 817,187 | 453 | 0.22 | % | 821,949 | 321 | 0.15 | % | ||||||||||||
Time deposits (2) | 1,141,461 | 4,434 | 1.54 | % | 1,123,261 | 4,020 | 1.44 | % | 1,070,941 | 3,316 | 1.23 | % | ||||||||||||
Short-term borrowings | 350,832 | 1,435 | 1.62 | % | 208,939 | 459 | 0.88 | % | 230,030 | 349 | 0.60 | % | ||||||||||||
Long-term debt | 16,495 | 239 | 5.75 | % | 16,495 | 230 | 5.59 | % | 16,495 | 195 | 4.69 | % | ||||||||||||
Total interest-bearing liabilities | 3,104,024 | 7,171 | 0.92 | % | 2,953,436 | 5,607 | 0.76 | % | 2,840,040 | 4,340 | 0.61 | % | ||||||||||||
Noninterest-bearing demand deposits | 697,485 | 704,546 | 698,106 | |||||||||||||||||||||
Other liabilities | 50,093 | 45,933 | 42,202 | |||||||||||||||||||||
Stockholders' equity | 515,718 | 499,339 | 501,861 | |||||||||||||||||||||
Total liabilities and | ||||||||||||||||||||||||
stockholders' equity | $ | 4,367,320 | $ | 4,203,254 | $ | 4,082,209 | ||||||||||||||||||
Net interest income | $ | 35,745 | $ | 33,760 | $ | 32,384 | ||||||||||||||||||
Net yield on earning assets | 3.54 | % | 3.56 | % | 3.45 | % | ||||||||||||||||||
(1) For purposes of this table, non-accruing loans have been included in average balances and the following amounts (in thousands) of loan fees have been included in interest income: | ||||||||||||||||||||||||
Loan fees | $ | 1,365 | $ | 152 | $ | 162 | ||||||||||||||||||
(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 | $ | 110 | $ | 130 | $ | 122 | ||||||||||||||||||
Commercial, financial, and agriculture | 157 | 238 | 235 | |||||||||||||||||||||
Installment loans to individuals | 3 | 4 | 3 | |||||||||||||||||||||
$ | 270 | $ | 372 | $ | 360 | |||||||||||||||||||
(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 $0. | ||||||||||||||||||||||||
(5) Computed on a fully federal tax-equivalent basis assuming a tax rate of approximately 21% for the periods ending September 30, 2018 & June 30, 2018 and 35% for the period ending September 30, 2017. | ||||||||||||||||||||||||
CITY HOLDING COMPANY AND SUBSIDIARIES
Consolidated Average Balance Sheets, Yields, and Rates
(Unaudited) ($ in 000s)
Nine Months Ended | ||||||||||||||||
September 30, 2018 | September 30, 2017 | |||||||||||||||
Average | Yield/ | Average | Yield/ | |||||||||||||
Balance | Interest | Rate | Balance | Interest | Rate | |||||||||||
Assets: | ||||||||||||||||
Loan portfolio (1): | ||||||||||||||||
Residential real estate (2) | $ | 1,607,396 | $ | 51,083 | 4.25 | % | $ | 1,591,403 | $ | 47,329 | 3.98 | % | ||||
Commercial, financial, and agriculture (2) | 1,498,612 | 50,646 | 4.52 | % | 1,446,849 | 43,121 | 3.98 | % | ||||||||
Installment loans to individuals (2), (3) | 34,472 | 1,604 | 6.22 | % | 34,881 | 1,688 | 6.47 | % | ||||||||
Previously securitized loans (4) | *** | 748 | *** | *** | 1,086 | *** | ||||||||||
Total loans | 3,140,480 | 104,081 | 4.43 | % | 3,073,132 | 93,224 | 4.06 | % | ||||||||
Securities: | ||||||||||||||||
Taxable | 544,351 | 12,314 | 3.02 | % | 481,372 | 10,591 | 2.94 | % | ||||||||
Tax-exempt (5) | 91,147 | 2,677 | 3.93 | % | 88,484 | 3,099 | 4.68 | % | ||||||||
Total securities | 635,498 | 14,991 | 3.15 | % | 569,856 | 13,690 | 3.21 | % | ||||||||
Deposits in depository institutions | 116,532 | 1,043 | 1.2 | % | 25,822 | 51 | 0.26 | % | ||||||||
Total interest-earning assets | 3,892,510 | 120,115 | 4.13 | % | 3,668,811 | 106,965 | 3.9 | % | ||||||||
Cash and due from banks | 45,268 | 92,159 | ||||||||||||||
Premises and equipment, net | 72,780 | 73,686 | ||||||||||||||
Other assets | 252,798 | 249,700 | ||||||||||||||
Less: Allowance for loan losses | (18,286 | ) | (19,999 | ) | ||||||||||||
Total assets | $ | 4,245,070 | $ | 4,064,357 | ||||||||||||
Liabilities: | ||||||||||||||||
Interest-bearing demand deposits | $ | 782,883 | $ | 1,327 | 0.23 | % | $ | 706,355 | $ | 476 | 0.09 | % | ||||
Savings deposits | 811,818 | 1,331 | 0.22 | % | 844,375 | 998 | 0.16 | % | ||||||||
Time deposits (2) | 1,120,459 | 12,083 | 1.44 | % | 1,063,137 | 9,411 | 1.18 | % | ||||||||
Short-term borrowings | 265,877 | 2,355 | 1.18 | % | 208,419 | 693 | 0.44 | % | ||||||||
Long-term debt | 16,495 | 680 | 5.51 | % | 16,495 | 565 | 4.58 | % | ||||||||
Total interest-bearing liabilities | 2,997,532 | 17,776 | 0.79 | % | 2,838,781 | 12,143 | 0.57 | % | ||||||||
Noninterest-bearing demand deposits | 694,453 | 697,231 | ||||||||||||||
Other liabilities | 47,498 | 41,159 | ||||||||||||||
Stockholders' equity | 505,587 | 487,186 | ||||||||||||||
Total liabilities and | ||||||||||||||||
stockholders' equity | $ | 4,245,070 | $ | 4,064,357 | ||||||||||||
Net interest income | $ | 102,339 | $ | 94,822 | ||||||||||||
Net yield on earning assets | 3.52 | % | 3.46 | % | ||||||||||||
(1) For purposes of this table, non-accruing loans have been included in average balances and the following amounts (in thousands) of loan fees have been included in interest income: | ||||||||||||||||
Loan fees | $ | 1,635 | $ | 383 | ||||||||||||
(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 | $ | 350 | $ | 404 | ||||||||||||
Commercial, financial, and agriculture | 545 | 907 | ||||||||||||||
Installment loans to individuals | 17 | 17 | ||||||||||||||
Time deposits | — | 16 | ||||||||||||||
$ | 912 | $ | 1,344 | |||||||||||||
(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 $0. | ||||||||||||||||
(5) Computed on a fully federal tax-equivalent basis assuming a tax rate of approximately 21% for the nine months ended September 30, 2018 and 35% for the nine months ended September 30, 2017. | ||||||||||||||||
CITY HOLDING COMPANY AND SUBSIDIARIES
Non-GAAP Reconciliations
(Unaudited) ($ in 000s)
Three Months Ended | Nine Months Ended | |||||||||||||||||||||
September 30, | June 30, | March 31, | December 31, | September 30, | September 30, | September 30, | ||||||||||||||||
2018 | 2018 | 2018 | 2017 | 2017 | 2018 | 2017 | ||||||||||||||||
Net Interest Income/Margin | ||||||||||||||||||||||
Net interest income ("GAAP") | $ | 35,558 | $ | 33,573 | $ | 32,647 | $ | 32,389 | $ | 32,026 | $ | 101,778 | $ | 93,736 | ||||||||
Taxable equivalent adjustment | 187 | 187 | 187 | 371 | 358 | 561 | 1,086 | |||||||||||||||
Net interest income, fully taxable equivalent | $ | 35,745 | $ | 33,760 | $ | 32,834 | $ | 32,760 | $ | 32,384 | $ | 102,339 | $ | 94,822 | ||||||||
Average interest earning assets | $ | 4,005,067 | $ | 3,800,435 | $ | 3,791,888 | $ | 3,759,675 | $ | 3,719,692 | $ | 3,892,510 | $ | 3,668,811 | ||||||||
Net Interest Margin | 3.54 | % | 3.56 | % | 3.51 | % | 3.46 | % | 3.45 | % | 3.52 | % | 3.46 | % | ||||||||
Accretion related to fair value adjustments | (0.03 | )% | (0.04 | )% | (0.03 | )% | (0.06 | )% | (0.04 | )% | (0.03 | )% | (0.05 | )% | ||||||||
Net Interest Margin (excluding accretion) | 3.51 | % | 3.52 | % | 3.48 | % | 3.39 | % | 3.42 | % | 3.48 | % | 3.41 | % | ||||||||
Tangible Equity Ratio (period end) | ||||||||||||||||||||||
Equity to assets ("GAAP") | 11.58 | % | 11.52 | % | 11.71 | % | 12.16 | % | 12.2 | % | ||||||||||||
Effect of goodwill and other intangibles, net | (1.59 | )% | (1.61 | )% | (1.68 | )% | (1.7 | )% | (1.72 | )% | ||||||||||||
Tangible common equity to tangible assets | 9.99 | % | 9.9 | % | 10.03 | % | 10.45 | % | 10.49 | % | ||||||||||||
Return on tangible equity ("GAAP") | 18.92 | % | 19.94 | % | 16.66 | % | 8.99 | % | 13.17 | % | 18.5 | % | 14.58 | % | ||||||||
Impact of effective tax rate decrease on deferred taxes | — | % | — | % | — | % | 6.57 | % | — | % | — | % | — | % | ||||||||
Return on tangible equity, excluding impact of effective tax rate decrease on deferred taxes | 18.92 | % | 19.94 | % | 16.66 | % | 15.56 | % | 13.17 | % | 18.5 | % | 14.58 | % | ||||||||
Return on assets ("GAAP") | 1.90 | % | 2.00 | % | 1.69 | % | 0.94 | % | 1.37 | % | 1.86 | % | 1.46 | % | ||||||||
Impact of effective tax rate decrease on deferred taxes | — | % | — | % | — | % | 0.68 | % | — | % | — | % | — | % | ||||||||
Return on Assets, excluding impact of effective tax rate decrease on deferred taxes | 1.90 | % | 2.00 | % | 1.69 | % | 1.62 | % | 1.37 | % | 1.86 | % | 1.46 | % | ||||||||
Effective Income Tax Rate | ||||||||||||||||||||||
Effective tax rate ("GAAP") | 21.3 | % | 20.3 | % | 20.0 | % | 60.8 | % | 33.5 | % | 20.6 | % | 32.5 | % | ||||||||
Impact of FIN 48 adjustments | — | % | — | % | — | % | 1.34 | % | — | % | — | % | — | % | ||||||||
Impact of effective tax rate decrease on deferred taxes | — | % | — | % | — | % | (28.69 | )% | — | % | — | % | — | % | ||||||||
Effective tax rate, excluding FIN 48 and impact of effective tax rate decrease on deferred taxes | 21.3 | % | 20.3 | % | 20.0 | % | 33.4 | % | 33.5 | % | 20.6 | % | 32.5 | % | ||||||||