City Holding Company (“Company” or “City”) (NASDAQ:CHCO), a $4.9 billion bank holding company headquartered in Charleston, West Virginia, today announced quarterly net income of $21.6 million and diluted earnings of $1.30 per share for the quarter ended March 31, 2019. For the first quarter of 2019, the Company achieved a return on assets of 1.76% and a return on tangible equity of 17.7%. In addition, reported net interest income increased $7.4 million (22.7%) from the quarter ended March 31, 2018, while net interest income exclusive of accretion from fair value adjustments from acquisitions increased $7.2 million (22.2%) from the quarter ended March 31, 2018.

Net Interest Income

The Company’s net interest income increased from $36.4 million during the fourth quarter of 2018 to $40.1 million during the first quarter of 2019. During the first quarter of 2019, the Company’s tax equivalent net interest income increased $3.6 million, or 10.0%, from $36.6 million for the fourth quarter of 2018 to $40.3 million for the first quarter of 2019. The acquisitions of Poage and Farmers Deposit accounted for $3.0 million of this increase. In addition, higher loan yields (22 basis points) increased net interest income by $1.1 million while higher average loan balances ($59.1 million) increased net interest income by $0.6 million. These increases were partially offset by an increase in rates paid on deposits ($0.5 million) and decreased income from deposits in depository institutions ($0.4 million). The Company’s reported net interest margin increased from 3.55% for the fourth quarter of 2018 to 3.66% for the first quarter of 2019. Excluding the favorable impact of the accretion from fair value adjustments, the net interest margin would have been 3.61% for the quarter ended March 31, 2019 and 3.50% for the quarter ended December 31, 2018.

Credit Quality

The Company’s ratio of nonperforming assets to total loans and other real estate owned improved from 0.54% at December 31, 2018 to 0.43% at March 31, 2019. Total nonperforming assets decreased from $19.4 million at December 31, 2018 to $15.4 million at March 31, 2019. Excluded from this ratio are purchased credit-impaired loans for which the Company estimated cash flows and estimated a credit mark. Such loans would be considered nonperforming loans if the loan’s performance deteriorates below the Company’s initial expectations. Total past due loans decreased from $13.1 million, or 0.37% of total loans outstanding, at December 31, 2018 to $11.0 million, or 0.31% of total loans outstanding, at March 31, 2019.

As a result of the Company’s quarterly analysis of the adequacy of the allowance for loan losses (“ALLL”), the Company recorded a recovery of loan loss provision of $0.8 million in the first quarter of 2019, compared to a provision for loan loss provision of $0.2 million for the comparable period in 2018 and a recovery of loan loss provision of $0.4 million for the fourth quarter of 2018. The recovery of loan loss provision recorded in the first quarter of 2019 reflects a general improvement in the Company’s historical loss rates used to compute the allowance not specifically allocated to individual credits and a modest decline in loans outstanding from December 31, 2018. 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 was $15.9 million for the first quarter of 2019 as compared to $14.5 million for the first quarter of 2018. During the first quarter of 2019, the Company realized a security gain of $0.1 million due to the call of a security and $0.1 million of unrealized fair value gains on the Company’s equity securities compared to $0.3 million of unrealized fair value gains on the Company’s equity securities in the first quarter of 2018. The Company’s portfolio of equity securities is comprised primarily of equity investments in community bank holding companies and perpetual preferred securities of national bank holding companies. As of April 17, 2019, the Company’s portfolio of community bank holding company equities consists primarily of the following: First National Corporation (FXNC) (4.0% ownership); Eagle Financial Services, Inc. (EFSI) (1.5% ownership); Summit Financial Corporation (SMMF) (<1% ownership); Potomac Bancshares, Inc. (PTBS) (<1% ownership). Exclusive of these gains, non-interest income increased from $14.2 million for the first quarter of 2018 to $15.8 million for the first quarter of 2019. This increase was largely attributable to an increase of $0.6 million, or 14.7%, in bankcard revenues and an increase of $0.5 million, or 6.7%, in service charges, with $0.4 million and $0.3 million, respectively, attributable to the acquisitions of Poage and Farmers Deposit. In addition, bank owned life insurance revenues increased $0.2 million due to death benefit proceeds received in the first quarter of 2019 and other income increased $0.2 million.

Non-interest Expenses

During the quarter ended March 31, 2019, the Company incurred an additional $0.3 million of acquisition and integration expenses associated with the acquisitions of Poage and Farmers Deposit. Excluding this expense, non-interest expenses increased $4.2 million (16.9% increase), from $24.9 million in the first quarter of 2018 to $29.2 million in the first quarter of 2019. This increase was primarily due to an increase in salaries and employee benefits of $2.0 million due primarily to the acquisitions of Poage and Farmers Deposit ($0.9 million) and annual salary adjustments ($0.7 million). In addition, other expenses increased $1.1 million, equipment and software related expenses increased $0.4 million and occupancy related expenses increased $0.3 million. These increases were primarily attributable to the acquisitions of Poage and Farmers Deposit.

Balance Sheet Trends

Loans decreased $28.3 million (0.8%) from December 31, 2018 to $3.56 billion at March 31, 2019. Commercial real estate loans decreased $18.8 million (1.3%), residential real estate loans decreased $9.7 million (0.6%), and home equity loans decreased $1.2 million (0.8%). These decreases were partially offset by an increase in commercial and industrial loans of $3.0 million (1.1%).

Total average depository balances increased $380.0 million, or 10.5%, from the quarter ended December 31, 2018 to the quarter ended March 31, 2019. This growth was primarily attributable to deposits acquired from Poage and Farmers Deposit ($472.0 million) that were outstanding for the entire quarter ended March 31, 2019, as compared to less than one month during the quarter ended December 31, 2018. Exclusive of this contribution, average time deposit balances increased $28.5 million, and average savings deposit balances increased $15.1 million. These increases were partially offset by lower noninterest-bearing demand deposit balances of $12.6 million.

Income Tax Expense

The Company’s effective income tax rate for the first quarter of 2019 was 21.2% compared to 20.5% for the year ended December 31, 2018, and 20.0% for the quarter ended March 31, 2018.

Capitalization and Liquidity

The Company’s loan to deposit ratio was 88.0% and the loan to asset ratio was 72.4% at March 31, 2019. The Company maintained investment securities totaling 17.0% of assets as of the same date. The Company’s deposit mix is weighted heavily toward checking and saving accounts, which fund 54.1% of assets at March 31, 2019. Time deposits fund 28.1% of assets at March 31, 2019, 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 increased from 10.0% at December 31, 2018 to 10.4% at March 31, 2019. At March 31, 2019, City National Bank’s Leverage Ratio was 9.45%, its Common Equity Tier I ratio was 13.89%, its Tier I Capital ratio was 13.89%, and its Total Risk-Based Capital ratio was 14.36%. These regulatory capital ratios are significantly above levels required to be considered “well capitalized,” which is the highest possible regulatory designation.

On March 27, 2019, the Board of Directors of the Company approved a quarterly cash dividend of $0.53 per share payable April 30, 2019, to shareholders of record as of April 15, 2019. On February 27, 2019, the Company announced that the Board of Directors authorized the Company to buy back up to 1,000,000 shares of its common stock (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 terminated its previous repurchase program that was approved in September 2014. The Company had repurchased 888,243 shares under the 2014 program. During the quarter ended March 31, 2019, the Company repurchased 55,000 common shares at a weighted average price of $74.69. As of March 31, 2019, the Company could repurchase approximately 945,000 additional shares under the current program.

City Holding Company is the parent company of City National Bank of West Virginia. City National Bank operates 97 branches across West Virginia, Kentucky, Virginia, and Ohio.

Forward-Looking Information

This news release contains certain forward-looking statements that are included pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements express only management’s beliefs regarding future results or events and are subject to inherent uncertainty, risks, and changes in circumstances, many of which are outside of management’s control. Uncertainty, risks, changes in circumstances and other factors could cause the Company’s actual results to differ materially from those projected in the forward-looking statements. Factors that could cause actual results to differ from those discussed in such forward-looking statements include, but are not limited to those set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 under “ITEM 1A Risk Factors” and the following: (1) general economic conditions, especially in the communities and markets in which we conduct our business; (2) credit risk, including risk that negative credit quality trends may lead to a deterioration of asset quality, risk that our allowance for loan losses may not be sufficient to absorb actual losses in our loan portfolio, and risk from concentrations in our loan portfolio; (3) changes in the real estate market, including the value of collateral securing portions of our loan portfolio; (4) changes in the interest rate environment; (5) operational risk, including cybersecurity risk and risk of fraud, data processing system failures, and network breaches; (6) changes in technology and increased competition, including competition from non-bank financial institutions; (7) changes in consumer preferences, spending and borrowing habits, demand for our products and services, and customers’ performance and creditworthiness; (8) difficulty growing loan and deposit balances; (9) our ability to effectively execute our business plan, including with respect to future acquisitions; (10) changes in regulations, laws, taxes, government policies, monetary policies and accounting policies affecting bank holding companies and their subsidiaries; (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; (12) regulatory enforcement actions and adverse legal actions; (13) difficulty attracting and retaining key employees; (14) 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, Farmers Deposit Bancorp, Inc. and Farmers Deposit Bank may not be fully realized within the expected time frames; (15) the disruption from the merger of City Holding Company, City National Bank of West Virginia, Poage Bankshares, Inc., Town Square Bank, Farmers Deposit Bancorp, Inc. and Farmers Deposit Bank may make it more difficult to maintain relationships with clients, associates, or suppliers; and (16) other economic, competitive, technological, operational, governmental, regulatory, and market factors affecting our operations. Forward-looking statements made herein reflect management's expectations as of the date such statements are made. Such information is provided to assist stockholders and potential investors in understanding current and anticipated financial operations of the Company and is included pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances that arise after the date such statements are made. Further, the Company is required to evaluate subsequent events through the filing of its March 31, 2019 Form 10-Q. The Company will continue to evaluate the impact of any subsequent events on the preliminary March 31, 2019 results and will adjust the amounts if necessary.

 
CITY HOLDING COMPANY AND SUBSIDIARIES
Financial Highlights
(Unaudited)
         
Three Months Ended
March 31, 2019   December 31, 2018   September 30, 2018   June 30, 2018   March 31, 2018
 
Earnings
Net Interest Income (fully taxable equivalent) $ 40,274 $ 36,625 $ 35,745 $ 33,760 $ 32,834
Net Income available to common shareholders 21,619 10,713 20,692 20,979 17,616
 
Per Share Data
Earnings per share available to common shareholders:
Basic $ 1.31 $ 0.68 $ 1.34 $ 1.36 $ 1.13
Diluted 1.30 0.68 1.33 1.35 1.13
Weighted average number of shares (in thousands):
Basic 16,411 15,603 15,340 15,326 15,414
Diluted 16,429 15,618 15,358 15,345 15,436
Period-end number of shares (in thousands) 16,484 16,555 15,449 15,452 15,439
Cash dividends declared $ 0.53 $ 0.53 $ 0.53 $ 0.46 $ 0.46
Book value per share (period-end) $ 37.57 $ 36.29 $ 33.14 $ 32.60 $ 31.86
Tangible book value per share (period-end) 30.18 28.87 28.08 27.53 26.78
Market data:
High closing price $ 80.21 $ 77.94 $ 82.79 $ 78.44 $ 72.87
Low closing price 67.58 66.36 75.54 67.95 65.03
Period-end closing price 76.19 67.59 76.80 75.23 68.56
Average daily volume (in thousands) 54 66 54 60 56
Treasury share activity:
Treasury shares repurchased (in thousands) 55 69 7 10 204
Average treasury share repurchase price $ 74.69 $ 72.89 $ 77.18 $ 69.26 $ 68.50
 
Key Ratios (percent)
Return on average assets 1.76 % 0.96 % 1.90 % 2.00 % 1.69 %
Return on average tangible equity 17.7 % 9.6 % 18.9 % 19.9 % 16.7 %
Yield on interest earning assets 4.46 % 4.32 % 4.25 % 4.15 % 4.05 %
Cost of interest bearing liabilities 1.04 % 1.00 % 0.92 % 0.76 % 0.69 %
Net Interest Margin 3.66 % 3.55 % 3.54 % 3.52 % 3.51 %
Non-interest income as a percent of total revenue 28.3 % 28.8 % 30.7 % 31.7 % 30.7 %
Efficiency Ratio

51.2

%

47.6

%

48.3

%

50.7

%

52.7

%

Price/Earnings Ratio (a)

14.58 24.82 14.37 13.88 15.17
 
Capital (period-end)
Average Shareholders' Equity to Average Assets 12.49 % 12.05 % 11.81 % 11.88 % 12.05 %
Tangible equity to tangible assets 10.37 % 10.01 % 9.99 % 9.90 % 10.03 %

Consolidated City Holding Company risk based capital ratios (b):

CET I 15.55 % 15.07 % 15.94 % 15.49 % 15.08 %
Tier I 15.67 % 15.20 % 16.49 % 16.05 % 15.64 %
Total 16.13 % 15.69 % 17.08 % 16.65 % 16.31 %
Leverage 10.62 % 11.36 % 11.01 % 11.13 % 10.90 %

City National Bank risk based capital ratios (b):

CET I 13.89 % 13.05 % 14.00 % 13.26 % 12.59 %
Tier I 13.89 % 13.05 % 14.00 % 13.26 % 12.59 %
Total 14.36 % 13.55 % 14.59 % 13.87 % 13.25 %
Leverage 9.45 % 9.81 % 9.39 % 9.24 % 8.81 %
 
Other (period-end)
Branches 97 100 87 86 86
FTE 927 939 846 849 832
 
Assets per FTE (in thousands) $ 5,305 $ 5,498 $ 5,226 $ 5,152 $ 5,048
Deposits per FTE (in thousands) 4,361 4,462 4,070 4,030 4,143
 
 

(a) The price/earnings ratio is computed based on annualized quarterly earnings.

(b) March 31, 2019 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
March 31, 2019   December 31, 2018   September 30, 2018   June 30, 2018   March 31, 2018
 
Interest Income
Interest and fees on loans $ 42,279 $ 37,973 $ 36,872 $ 34,292 $ 32,918
Interest on investment securities:
Taxable 5,689 5,023 4,216 4,117 3,981
Tax-exempt 779 729 701 710 703
Interest on deposits in depository institutions   186       623       940       61       42
Total Interest Income 48,933 44,348 42,729 39,180 37,644
 
Interest Expense
Interest on deposits 7,767 6,656 5,497 4,918 4,326
Interest on short-term borrowings 1,052 1,061 1,435 459 460
Interest on long-term debt   48       200       239       230       211
Total Interest Expense   8,867       7,917       7,171       5,607       4,997
Net Interest Income 40,066 36,431 35,558 33,573 32,647
(Recovery of) provision for loan losses   (849 )     (400 )     (27 )     (2,064 )     181
Net Interest Income After (Recovery of) Provision for Loan Losses 40,915 36,831 35,585 35,637 32,466
 
Non-Interest Income
Net gains on sale of investment securities 88 - - - -
Unrealized gains (losses) recognized on securities still held 75 (1,246 ) 384 492 280
Service charges 7,321 7,921 7,598 7,323 6,862
Bankcard revenue 4,969 4,826 4,677 4,532 4,334
Trust and investment management fee income 1,642 1,737 1,579 1,645 1,568
Bank owned life insurance 1,016 734 813 722 821
Other income   814       734       702       897       627
Total Non-Interest Income 15,925 14,706 15,753 15,611 14,492
 
Non-Interest Expense
Salaries and employee benefits 15,243 14,017 13,576 13,551 13,241
Occupancy related expense 2,732 2,250 2,323 2,346 2,404
Equipment and software related expense 2,191 2,038 1,965 1,895 1,831
FDIC insurance expense 291 308 315 313 315
Advertising 869 530 808 849 787
Bankcard expenses 1,182 1,229 1,134 1,064 1,076
Postage, delivery, and statement mailings 624 527 537 515 578
Office supplies 386 313 364 329 313
Legal and professional fees 521 469 453 475 450
Telecommunications 726 401 408 441 500
Repossessed asset losses, net of expenses 216 207 156 112 370
Merger related expenses 250 13,015 242 - -
Other expenses   4,180       2,874       2,759       3,021       3,072
Total Non-Interest Expense   29,411       38,178       25,040       24,911       24,937
Income Before Income Taxes 27,429 13,359 26,298 26,337 22,021
Income tax expense   5,810       2,646       5,606       5,358       4,405
Net Income Available to Common Shareholders $ 21,619     $ 10,713     $ 20,692     $ 20,979     $ 17,616
 
Distributed earnings allocated to common shareholders $ 8,661 $ 8,695 $ 8,109 $ 7,039 $ 7,023
Undistributed earnings allocated to common shareholders   12,772       1,928       12,382       13,729       10,398
Net earnings allocated to common shareholders $ 21,433     $ 10,623     $ 20,491     $ 20,768     $ 17,421
 
Average common shares outstanding 16,411 15,603 15,340 15,326 15,414
Shares for diluted earnings per share 16,429 15,618 15,358 15,345 15,436
 
Basic earnings per common share $ 1.31 $ 0.68 $ 1.34 $ 1.36 $ 1.13
Diluted earnings per common share $ 1.30 $ 0.68 $ 1.33 $ 1.35 $ 1.13
 
 
CITY HOLDING COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
($ in 000s)
 
  (Unaudited)     (Unaudited)   (Unaudited)   (Unaudited)
March 31, 2019   December 31, 2018   September 30, 2018   June 30, 2018   March 31, 2018
 
Assets
Cash and due from banks $ 50,522 $ 55,016 $ 49,806 $ 43,466 $ 39,340
Interest-bearing deposits in depository institutions   93,328       67,975       256,104       222,058       84,438  
Cash and cash equivalents 143,850 122,991 305,910 265,524 123,778
 
Investment securities available-for-sale, at fair value 755,081 723,254 563,003 552,603 545,628
Investment securities held-to-maturity, at amortized cost 55,326 60,827 57,812 60,030 62,277
Other securities   26,182       28,810       28,875       28,920       22,165  
Total investment securities 836,589 812,891 649,690 641,553 630,070
 
Gross loans 3,559,322 3,587,608 3,146,697 3,155,468 3,137,681
Allowance for loan losses   (14,646 )     (15,966 )     (16,311 )     (16,876 )     (18,381 )
Net loans 3,544,676 3,571,642 3,130,386 3,138,592 3,119,300
 
Bank owned life insurance 114,256 113,544 105,372 104,773 104,052
Premises and equipment, net 78,747 78,383 72,484 72,482 72,920
Accrued interest receivable 13,657 12,424 11,449 9,348 9,528
Net deferred tax assets 12,734 17,338 15,653 14,528 14,467
Intangible assets 121,790 122,848 78,215 78,342 78,468
Other assets   51,309       46,951       51,643       49,241       47,432  
Total Assets $ 4,917,608     $ 4,899,012     $ 4,420,802     $ 4,374,383     $ 4,200,015  
 
Liabilities
Deposits:
Noninterest-bearing $ 793,633 $ 789,119 $ 672,042 $ 684,614 $ 703,209
Interest-bearing:
Demand deposits 879,279 899,568 802,490 785,933 816,976
Savings deposits 988,182 934,218 821,390 817,547 816,245
Time deposits   1,381,913       1,352,654       1,147,709       1,133,684       1,110,532  
Total deposits 4,043,007 3,975,559 3,443,631 3,421,778 3,446,962
Short-term borrowings
Federal Funds purchased - 40,000 170,000 181,375 -
Customer repurchase agreements 194,683 221,911 220,124 196,635 195,375
Long-term debt 4,053 4,053 16,495 16,495 16,495
Other liabilities   56,624       56,725       58,526       54,346       49,306  
Total Liabilities 4,298,367 4,298,248 3,908,776 3,870,629 3,708,138
 
Stockholders' Equity
Preferred stock - - - - -
Common stock 47,619 47,619 47,619 47,619 47,619
Capital surplus 170,215 169,555 140,450 140,091 140,547
Retained earnings 498,847 485,967 484,017 471,515 457,650
Cost of common stock in treasury (91,589 ) (87,895 ) (136,783 ) (136,520 ) (137,420 )
Accumulated other comprehensive loss:
Unrealized gain (loss) on securities available-for-sale 20 (8,611 ) (18,244 ) (13,918 ) (11,486 )
Underfunded pension liability   (5,871 )     (5,871 )     (5,033 )     (5,033 )     (5,033 )
Total Accumulated Other Comprehensive Loss   (5,851 )     (14,482 )     (23,277 )     (18,951 )     (16,519 )
Total Stockholders' Equity   619,241       600,764       512,026       503,754       491,877  
Total Liabilities and Stockholders' Equity $ 4,917,608     $ 4,899,012     $ 4,420,802     $ 4,374,383     $ 4,200,015  
 
Regulatory Capital
Total CET 1 capital $ 504,148 $ 492,526 $ 457,580 $ 444,869 $ 430,044
Total tier 1 capital 508,148 496,526 473,580 460,869 446,044
Total risk-based capital 523,053 512,801 490,307 478,255 464,936
Total risk-weighted assets 3,241,989 3,267,357 2,871,241 2,871,561 2,851,330
 
 
CITY HOLDING COMPANY AND SUBSIDIARIES
Loan Portfolio
(Unaudited) ($ in 000s)
         
 
March 31, 2019   December 31, 2018   September 30, 2018   June 30, 2018   March 31, 2018
 
Residential real estate (1) $ 1,625,647 $ 1,635,338 $ 1,485,823 $ 1,472,916 $ 1,465,215
Home equity - junior liens 152,251 153,496 143,540 139,245 138,477
Commercial and industrial 289,327 286,314 213,815 213,687 204,592
Commercial real estate (2) 1,436,190 1,454,942 1,268,052 1,294,489 1,296,304
Consumer 52,483 51,190 31,869 31,137 29,570
DDA overdrafts   3,424     6,328     3,598     3,994     3,523
Gross Loans $ 3,559,322   $ 3,587,608   $ 3,146,697   $ 3,155,468   $ 3,137,681
 
Construction loans included in:
(1) - Residential real estate loans $ 22,635 $ 21,834 $ 17,628 $ 21,662 $ 26,610
(2) - Commercial real estate loans 56,282 37,869 24,110 28,567 30,857
 
 
CITY HOLDING COMPANY AND SUBSIDIARIES
Asset Quality Information
(Unaudited) ($ in 000s)
         
Three Months Ended
March 31, 2019   December 31, 2018   September 30, 2018   June 30, 2018   March 31, 2018
Allowance for Loan Losses
Balance at beginning of period $ 15,966 $ 16,311 $ 16,876 $ 18,381 $ 18,836
 
Charge-offs:
Commercial and industrial - (9 ) - (385 ) (339 )
Commercial real estate (45 ) (20 ) (74 ) (118 ) (157 )
Residential real estate (328 ) (218 ) (244 ) (96 ) (124 )
Home equity (46 ) - (108 ) (33 ) (78 )
Consumer (185 ) (209 ) (206 ) (255 ) (99 )
DDA overdrafts   (625 )     (725 )     (704 )     (636 )     (636 )
Total charge-offs (1,229 ) (1,181 ) (1,336 ) (1,523 ) (1,433 )
 
Recoveries:
Commercial and industrial 135 528 147 1,476 2
Commercial real estate 32 194 166 149 223
Residential real estate 75 92 116 53 106
Home equity - - - - -
Consumer 97 36 25 59 46
DDA overdrafts   419       386       344       345       420  
Total recoveries 758 1,236 798 2,082 797
                 
Net recoveries/(charge-offs) (471 ) 55 (538 ) 559 (636 )
(Recovery of) provision for loan losses   (849 )     (400 )    

(27

)

   

(2,064

)     181  
Balance at end of period $ 14,646     $ 15,966     $ 16,311     $ 16,876     $ 18,381  
 
Loans outstanding $ 3,559,322 $ 3,587,608 $ 3,146,697 $ 3,155,468 $ 3,137,681
Allowance as a percent of loans outstanding 0.41 % 0.45 % 0.52 % 0.53 % 0.59 %
Allowance as a percent of non-performing loans 119.9 % 107.8 % 142.1 % 127.6 % 189.9 %
 
Average loans outstanding $ 3,576,984 $ 3,252,939 $ 3,149,320 $ 3,138,146 $ 3,133,804
Net (recoveries) charge-offs (annualized) as a percent of average loans outstanding 0.05 % -0.01 % 0.07 % -0.07 % 0.08 %
 
 
 
CITY HOLDING COMPANY AND SUBSIDIARIES
Asset Quality Information, continued
(Unaudited) ($ in 000s)
 
March 31, 2019   December 31, 2018   September 30, 2018   June 30, 2018   March 31, 2018
Nonaccrual Loans
Residential real estate $ 3,263 $ 4,275 $ 3,029 $ 3,783 $ 3,331
Home equity 41 138 - 168 135
Commercial and industrial 1,526 1,676 818 863 1,063
Commercial real estate 7,282 8,461 7,599 7,707 5,061
Consumer   1       1       1       557       -  
Total nonaccrual loans 12,113 14,551 11,447 13,078 9,590
Accruing loans past due 90 days or more   106       257       35       145       91  
Total non-performing loans 12,219 14,808 11,482 13,223 9,681
Other real estate owned   3,186       4,608       4,259       3,636       3,912  
Total non-performing assets $ 15,405     $ 19,416     $ 15,741     $ 16,859     $ 13,593  
 
Non-performing assets as a percent of loans and other real estate owned 0.43 % 0.54 % 0.50 % 0.53 % 0.43 %
 
Past Due Loans
Residential real estate $ 7,972 $ 9,991 $ 4,657 $ 5,998 $ 5,641
Home equity 720 1,275 468 583 616
Commercial and industrial 101 497 187 624 61
Commercial real estate 1,414 585 934 402 1,520
Consumer 264 295 39 34 21
DDA overdrafts   535       488       582       525       432  
Total past due loans $ 11,006     $ 13,131     $ 6,867     $ 8,166     $ 8,291  
 
Total past due loans as a percent of loans outstanding 0.31 % 0.37 % 0.22 % 0.26 % 0.26 %
 
Troubled Debt Restructurings ("TDRs")
Accruing:
Residential real estate $ 23,017 $ 22,863 $ 20,414 $ 20,424 $ 20,786
Home equity 3,013 3,025 2,941 3,156 3,015
Commercial and industrial 89 98 108 119 125
Commercial real estate 8,164 8,205 8,231 8,279 8,324
Consumer   -       -       -       -       -  
Total accruing TDRs $ 34,283     $ 34,191     $ 31,694     $ 31,978     $ 32,250  
 
Non-Accruing
Residential real estate $ 464 $ 658 $ 175 $ 307 $ 256
Home equity 5 5 - 40 40
Commercial and industrial - - - - -
Commercial real estate - - - - -
Consumer   -       -       -       -       -  
Total non-accruing TDRs $ 469     $ 663     $ 175     $ 347     $ 296  
 
Total TDRs $ 34,752     $ 34,854     $ 31,869     $ 32,325     $ 32,546  
 
 
CITY HOLDING COMPANY AND SUBSIDIARIES
Consolidated Average Balance Sheets, Yields, and Rates
(Unaudited) ($ in 000s)
                 
Three Months Ended
March 31, 2019 December 31, 2018 March 31, 2018
Average Yield/ Average Yield/ Average Yield/
Balance   Interest   Rate   Balance   Interest   Rate   Balance   Interest   Rate
 
Assets:
Loan portfolio (1):
Residential real estate (2) $ 1,806,233 $ 20,451 4.59 % $ 1,683,388 $ 18,681 4.40 % $ 1,603,911 $ 16,479 4.17 %
Commercial, financial, and agriculture (2) 1,715,524 20,845 4.93 % 1,526,658 18,335 4.76 % 1,496,817 15,608 4.23 %
Installment loans to individuals (2), (3) 55,227 840 6.17 % 42,893 745 6.89 % 33,076 504 6.18 %
Previously securitized loans (4) ***       144     ***     ***       212   ***     ***       327   ***  
Total loans 3,576,984 42,280 4.79 % 3,252,939 37,973 4.63 % 3,133,804 32,918 4.26 %
Securities:
Taxable 714,413 5,689 3.23 % 602,966 5,023 3.31 % 536,714 3,981 3.01 %
Tax-exempt (5)   102,375       986     3.91 %     92,833       922   3.94 %     91,722       890   3.94 %
Total securities 816,788 6,675 3.31 % 695,799 5,945 3.39 % 628,436 4,871 3.14 %
Deposits in depository institutions   72,723       186     1.04 %     141,246       623   1.75 %     29,648       42   0.57 %
Total interest-earning assets 4,466,495 49,141 4.46 % 4,089,984 44,541 4.32 % 3,791,888 37,831 4.05 %
Cash and due from banks 52,561 54,367 71,480
Premises and equipment, net 78,220 74,430 72,716
Goodwill and intangible assets 122,605 93,090 78,547
Other assets 195,954 181,249 167,174
Less: Allowance for loan losses   (16,182 )               (16,780 )               (19,420 )          
Total assets $ 4,899,653               $ 4,476,340               $ 4,162,385            
 
Liabilities:
Interest-bearing demand deposits $ 886,833 $ 933 0.43 % $ 822,087 $ 787 0.38 % $ 782,499 $ 357 0.19 %
Savings deposits 947,337 1,066 0.46 % 846,162 802 0.38 % 801,504 341 0.17 %
Time deposits (2) 1,368,465 5,768 1.71 % 1,208,415 5,067 1.66 % 1,096,157 3,628 1.34 %
Short-term borrowings 237,616 1,052 1.80 % 263,022 1,060 1.60 % 236,605 460 0.79 %
Long-term debt   4,053       48     4.80 %     14,743       200   5.38 %     16,495       211   5.19 %
Total interest-bearing liabilities 3,444,304 8,867 1.04 % 3,154,429 7,916 1.00 % 2,933,260 4,997 0.69 %
Noninterest-bearing demand deposits 788,109 734,066 681,150
Other liabilities 55,372 48,553 46,426
Stockholders' equity   611,868                 539,292                 501,549            

Total liabilities and stockholders' equity

 $ 4,899,653               $ 4,476,340               $ 4,162,385            
Net interest income       $ 40,274                 $ 36,625               $ 32,834      
Net yield on earning assets           3.66 %             3.55 %             3.51 %
 
(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 $ 96 $ 221 $ 118
 

(2) Included in the above table are the following amounts (in thousands) for the accretion of the fair value adjustments related to the Company's acquisitions:

 
 
Residential real estate $ 32 $ 57 $ 110
Commercial, financial, and agriculture 190 449 150
Installment loans to individuals (6 ) 2 10
Time deposits   (256 )   -   -
$

472

 

$ 508 $ 270
 
(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%.
 
 
CITY HOLDING COMPANY AND SUBSIDIARIES
Non-GAAP Reconciliations
(Unaudited) ($ in 000s, except per share data)
         
Three Months Ended
March 31, 2019   December 31, 2018   September 30, 2018   June 30, 2018   March 31, 2018
Net Interest Income/Margin
Net interest income ("GAAP") $ 40,066 $ 36,431 $ 35,558 $ 33,573 $ 32,647
Taxable equivalent adjustment   208       194       187       187       187  
Net interest income, fully taxable equivalent $ 40,274     $ 36,625     $ 35,745     $ 33,760     $ 32,834  
 
Average interest earning assets $ 4,466,495 $ 4,089,984 $ 4,005,067 $ 3,800,435 $ 3,791,888
 
Net Interest Margin 3.66 % 3.55 % 3.54 % 3.56 % 3.51 %
Accretion related to fair value adjustments  

-0.05

%     -0.05 %     -0.03 %     -0.04 %     -0.03 %
Net Interest Margin (excluding accretion)  

3.61

%     3.50 %     3.51 %     3.52 %     3.48 %
 
Tangible Equity Ratio (period end)
Equity to assets ("GAAP") 12.59 % 12.26 % 11.58 % 11.52 % 11.71 %
Effect of goodwill and other intangibles, net   -2.22 %     -2.26 %     -1.59 %     -1.61 %     -1.68 %
Tangible common equity to tangible assets   10.37 %     10.01 %     9.99 %     9.90 %     10.03 %
 
Return on tangible equity ("GAAP") 17.67 % 9.60 % 18.92 % 19.94 % 16.66 %
Impact of merger related expenses   0.16 %     9.23 %     0.29 %     0.00 %     0.00 %

Return on tangible equity, excluding merger related expenses

  17.84 %     18.83 %     19.21 %     19.94 %     16.66 %
 
Return on assets ("GAAP") 1.76 % 0.96 % 1.90 % 2.00 % 1.69 %
Impact of merger related expenses   0.02 %     0.92 %     0.02 %     0.00 %     0.00 %

Return on Assets, excluding merger related expenses

  1.78 %     1.88 %     1.92 %     2.00 %     1.69 %
 
Effective Income Tax Rate
Effective tax rate ("GAAP") 21.2 % 19.8 % 21.3 % 20.3 % 20.0 %
Impact of FIN 48 adjustments   0.00 %     2.97 %     0.00 %     0.00 %     0.00 %

Effective tax rate, excluding FIN 48 adjustments

  21.2 %     22.8 %     21.3 %     20.3 %     20.0 %