EX-9.1 3 ex99-1.htm EXHIBIT 99.1, PRESS RELEASE AND TABLES ex99-1.htm
Exhibit 99.1



NEWS RELEASE

For Immediate Release
July 27, 2009

For Further Information Contact:
Charles R. Hageboeck, Chief Executive Officer and President
(304) 769-1102

City Holding Company Announces Second Quarter Results

Charleston, West Virginia – City Holding Company, “the Company” (NASDAQ:CHCO), a $2.6 billion bank holding company headquartered in Charleston, today announced net income per diluted share for the second quarter of $0.64 compared to $0.83 per diluted share in the second quarter of 2008.  Net income for the second quarter of 2009 was $10.1 million compared to $13.4 million in the second quarter of 2008.  For the second quarter of 2009, the Company achieved a return on assets of 1.55%, a return on tangible equity of 17.6%, a net interest margin of 4.12%, and an efficiency ratio of 53.1%.  Net income for the first six months of 2009 was $21.1 million compared to $26.4 million in the first six months of 2008.  For the first six months of 2009, the Company achieved a return on assets of 1.63%, a return on tangible equity of 18.4%, a net interest margin of 4.29%, and an efficiency ratio of 50.4%.

City’s CEO Charles Hageboeck stated that, “Due to the recession that the U.S. economy is experiencing, City’s earnings are lower than historical levels, but continue to hold up relatively well as compared to many of our peers in the banking industry. In particular, our earnings were down significantly in the 2nd quarter due to the costs of a special assessment from the FDIC – a cost borne by City, but created by losses at other banking institutions.   Additionally, historically low interest rates are squeezing City’s net interest income – as they have most retail-deposit focused banking franchises. Nevertheless, City remains one of the most profitable, most liquid, and best capitalized publicly traded banks in the U.S.  While our asset quality is stronger than many banks in other parts of the country, we have not been entirely unscathed, as non-performing assets increased slightly during the second quarter of 2009 as compared to the first quarter of 2009.  City’s most significant asset quality problems continue to be non-owner occupied residential construction at the Greenbrier Resort in White Sulphur Springs, West Virginia.  These properties accounted for approximately half of City’s net charge-offs in the second quarter of 2009.  City also experienced increases in its non-performing residential real estate properties during the second quarter of 2009.  However, past-due loans were down as compared to the first quarter. Charge-offs were elevated, as we charged off loans that had been previously provided for through our loan loss provision.”

 
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Net Interest Income

The Company’s tax equivalent net interest income decreased $2.0 million, or 7.9%, from $25.7 million during the second quarter of 2008 to $23.7 million during the second quarter of 2009, as interest income from loans and investments decreased more quickly than interest expense on deposits and other interest bearing liabilities. Due to a decrease in the Company’s yield on loans of 106 basis points from the second quarter of 2008, interest income related to loans declined $4.0 million.  In addition, interest income declined $0.8 million from the second quarter of 2008 due to a decline in the yield on investments. Deposit growth also increased interest expense by $1.1 million.  Partially offsetting these decreases in net interest income was a decline in interest expense on deposits of $2.5 million due to a decline of 49 basis points on interest bearing deposits.  In addition, higher average balances of loans and investments increased interest income by $0.9 million.  The Company’s reported net interest margin decreased from 4.65% for the quarter ended June 30, 2008 to 4.12% for the quarter ended June 30, 2009.

Compared to the first quarter of 2009, the Company’s tax equivalent net interest income declined $1.3 million.  This decrease was primarily driven by lower interest income from loans ($1.0 million) and investments ($1.0 million) due to lower yields.  Loan yields were down by 30 basis points as compared to the first quarter of 2009 due to the repricing of prime-based loans during the first quarter of 2009 and increases in non-performing assets, while investment yields decreased due to lower rates on short-term money-market investments.  Partially offsetting these decreases was lower interest expense on interest bearing liabilities due to lower rates as the cost of interest bearing liabilities declined by 11 basis points from the first quarter of 2009. While loan balances were down on average by $4 million, time deposit balances were up by $35 million. Although this improved the Company’s liquidity position, the rate paid on time deposits exceeded the rate earned on the funds, which were predominantly employed in short-term money market investments.  As a result of these factors, the Company’s reported net interest margin decreased from 4.46% for the first quarter of 2009 to 4.12% for the second quarter of 2009.

During the third and fourth quarters of 2008, the Company sold $450 million of interest rate floors.  The gain from sales of these interest rate floors of $16.7 million will be recognized over the remaining lives of the various hedged loans – predominantly prime-based commercial and home equity loans.  During the second quarter of 2009, the Company recognized $2.7 million of interest income compared to $2.9 million and $2.3 million of interest income recognized in the first quarter of 2009 and the second quarter of 2008, respectively, from the interest rate floors.

Credit Quality

At June 30, 2009, the Allowance for Loan Losses (“ALLL”) was $21.0 million or 1.17% of total loans outstanding and 97% of non-performing loans compared to $18.0 million or 1.03% of loans outstanding and 123% of non-performing loans at June 30, 2008, and $22.3 million or 1.23% of loans outstanding and 86% of non-performing loans at December 31, 2008.

 
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As a result of the Company’s quarterly analysis of the adequacy of the ALLL, the Company recorded a provision for loan losses of $2.15 million in the second quarter of 2009 compared to $0.85 million for the comparable period in 2008.  The provision for loan losses recorded during the second quarter of 2009 reflects the difficulties of certain commercial borrowers of the Company during the quarter, the downgrade of their related credits, and management’s assessment of the impact of these difficulties on the ultimate collectability of the loans.  Additionally, the Company’s nonperforming residential real estate loans increased during the second quarter of 2009.  This increase was not restricted to a particular geographical market that the Company serves; rather this deterioration appears to be associated with the overall downturn in the economy.  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.

The Company’s ratio of non-performing assets to total loans and other real estate owned increased from 1.53% at March 31, 2008 to 1.76% at June 30, 2009, and compares to 1.64% at December 31, 2008.  The Company’s ratio of non-performing assets to total loans and other real estate owned compares very favorably to peers. The Company’s non-performing asset ratio of 1.76% at June 30, 2009 is only 43% of the 4.06% non-performing asset ratio reported by the Company’s peer group (bank holding companies with total assets between $1 and $5 billion) as of the most recently reported quarter ended March 31, 2009.    The Company’s non-performing assets are disproportionately tied to two sub-sectors within the loan portfolio, as discussed below.

Approximately 45% of the Company’s non-performing assets at June 30, 2009 were associated with a $14.3 million portfolio of loans to builders of speculative homes at the Greenbrier Resort in White Sulphur Springs, West Virginia. These loans are considered to be commercial loans due to the dollar amount of the borrowings, although the loans were used to purchase lots and to construct upper-scale single-family residences at the Greenbrier Resort.  Construction loan terms were originally interest-only for 12 months.  All loans are collateralized by completed homes and eight residential lots.  The original loan balances associated with these credits totaled $18.6 million. At June 30, 2009 the book balance of loans not charged-off totaled $7.6 million with $6.7 million recorded in the Company’s Other Real Estate Owned category. The Company has specifically reserved $2.2 million of the ALLL against the outstanding loan balances of $7.6 million. During May 2009, the Justice Family Group purchased the financially troubled Greenbrier Resort from CSX Corporation. While this announcement sheds some light on the future of the Greenbrier, the Company has considered the uncertainty of the situation at the Greenbrier Resort and believes that based on our analysis, the specific allowance allocated to the non-performing and substandard loans, after considering the value of the collateral securing such loans, is adequate to cover losses that may result from these loans as of June 30, 2009.

24% of the Company’s non-performing assets are associated with real estate in what is known as the “Eastern Panhandle” of West Virginia – inclusive of Jefferson, Berkeley, and Morgan counties. These three counties are distant suburbs of the Washington D.C. MSA and have experienced explosive growth in the last 10 years. While this is a relatively

 
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small part of the Company’s entire franchise, the downturn that has gripped the nation’s mortgage and construction industry has had disproportionately more impact upon the Company’s asset quality and provision in this region than in the remainder of the Company.  Exclusive of loans to speculative builders at the Greenbrier or loans in the Eastern Panhandle, other loans throughout the Company account for 31% of the Company’s non-performing assets.

Past due loans declined slightly from the first quarter of 2009 to $10.3 million or 0.58% of total loans outstanding.  Home equity past dues increased by $0.6 million, or 38.9%, however this increase was primarily related to one large loan that was between 30 and 60 days past due, but believed to be well secured.

The Company had net charge-offs of $3.2 million for the second quarter of 2009. Net charge-offs on commercial and residential loans were $2.2 and $0.5 million, respectively, for the second quarter.  Charge-offs for commercial loans were primarily related to three specific credits that had been appropriately considered in establishing the allowance for loans losses in prior periods, including specific charge-offs of $1.6 million related to a Greenbrier loan.  In addition, net charge-offs for depository accounts were $0.4 million for the second quarter of 2009.  While charge-offs on depository accounts are appropriately taken against the ALLL, the revenue associated with depository accounts is reflected in service charges.

 Investment Securities

Based on management’s assessment of the securities the Company owns, the seniority position of the securities within the pools, the level of defaults and deferred payments within the pools, and a review of the financial strength of the banks within the respective pools, management concluded that no impairment charges on investment securities were necessary for the quarter ended June 30, 2009.

Non-interest Income

Exclusive of investment losses, non-interest income increased $0.4 million to $14.6 million in the second quarter of 2009 as compared to $14.2 million in the second quarter of 2008.  Bank owned life insurance revenues increased $0.2 million as the result of proceeds from a death benefit while insurance commission revenues increased $0.2 million on the strength of new business.  Despite a general nationwide decline in consumer spending, service charges from depository accounts remained flat as compared to the second quarter of 2008.


 
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Non-interest Expenses

Non-interest expenses increased $1.6 million from $18.7 million in the second quarter of 2008 to $20.3 million in the second quarter of 2009.  Insurance and regulatory expenses increased $1.2 million from the second quarter of 2008 due to a special assessment levied by the Federal Deposit Insurance Corporation (“FDIC”) to rebuild the Deposit Insurance Fund and to help maintain public confidence in the banking system.  The special assessment was primarily based on the asset size of the Company’s federally insured depository institution.  The Company historically expenses approximately $0.1 million per quarter in association with FDIC insurance premiums.  Advertising expenses rose $0.3 million from the second quarter of 2008 as the Company refocused its attention on gathering core deposits.  In addition, salaries and employee benefits increased $0.3 million, or 2.9%, from the second quarter of 2008 while occupancy and equipment expenses increased $0.2 million from the second quarter of 2008.  Partially offsetting these increases was a decline in other expenses of $0.6 million due primarily to increased special charitable contributions during the second quarter of 2008.

Balance Sheet Trends

As compared to December 31, 2008, loans have decreased $26.0 million (1.4%) at June 30, 2009 due to decreases in commercial loans of $20.4 million (2.7%) and residential real estate loans of $15.0 million (2.5%).  The Company has experienced growth in commercial lending activity as it has added new customers and new loans with existing customers. However, as the economy has slowed, various lines of credit to commercial customers have had balance reductions totaling $11 million. Additionally, a total of $11 million in commercial loans have been transferred to OREO since December 31, 2008.  These decreases were partially offset by an increase in home equity loans of $8.4 million (2.2%).

Total average depository balances increased $71.8 million, or 3.4%, from the quarter ended March 31, 2009 to the quarter ended June 30, 2009.  This growth was attributable to increases in time deposits ($35.0 million), savings deposits ($13.6 million), interest bearing demand deposits ($12.7 million) and noninterest bearing demand deposits ($10.4 million).

Income Tax Expense

The Company’s effective income tax rate for the second quarter of 2009 was 33.4% compared to 25.2% for the year ended December 31, 2008, and 33.3% for the quarter ended June 30, 2008.  The effective rate is based upon the Company’s expected tax rate for the year ending December 31, 2009.


 
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Capitalization and Liquidity

One of the Company’s strengths is that it is highly profitable while maintaining strong liquidity and capital.  With respect to liquidity, the Company’s loan to deposit ratio was 83.3% and the loan to asset ratio was 68.0% at June 30, 2009.  The Company maintained investment securities totaling 20.2% of assets as of this date.  Further, the Company’s deposit mix is weighted heavily toward checking and saving accounts that fund 42.8% of assets at June 30, 2009.  Time deposits fund 38.8% of assets at June 30, 2009, but very few of these deposits are in accounts that have balances of more than $150,000, reflecting the core retail orientation of the Company.

The Company is also strongly capitalized. With respect to regulatory capital, at June 30, 2009, the Company’s Leverage Ratio is 9.47%, the Tier I Capital ratio is 12.63%, and the Total Risk-Based Capital ratio is 13.73%.  These regulatory capital ratios are significantly above levels required to be considered “well capitalized,” which is the highest possible regulatory designation.

On June 24, 2009, the Board approved a quarterly cash dividend to 34 cents per share payable July 31, 2009, to shareholders of record as of July 15, 2009.  The Company’s tangible equity ratio was 9.1% at June 30, 2009 compared with a tangible equity ratio of 8.8% at December 31, 2008.

City Holding Company is the parent company of City National Bank of West Virginia.  City National operates 69 branches across West Virginia, Eastern Kentucky and Southern Ohio.

Forward-Looking Information

This news release contains certain forward-looking statements that are included pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Such information involves risks and uncertainties that could result in the Company's actual results differing from those projected in the forward-looking statements. Important factors that could cause actual results to differ materially from those discussed in such forward-looking statements include, but are not limited to, (1) the Company may incur additional loan loss provision due to negative credit quality trends in the future that may lead to a deterioration of asset quality; (2) the Company may incur increased charge-offs in the future; (3) the Company may experience increases in the default rates on previously securitized loans that would result in impairment losses or lower the yield on such loans; (4) the Company may not continue to benefit from strong recovery efforts on previously securitized loans resulting in improved yields on these assets; (5)  the Company could have adverse legal actions of a material nature; (6) the Company may face competitive loss of customers; (7) the Company may be unable to manage its expense levels; (8) the Company may have difficulty retaining key employees; (9) changes in the interest rate environment may have results on the Company’s operations materially different from those anticipated by the Company’s market risk management functions; (10) changes in general economic conditions and increased competition could adversely affect the Company’s operating results; (11) changes in other regulations and government policies affecting bank holding companies and their subsidiaries, including changes in monetary policies, could negatively impact the Company’s operating results; (12) the Company may experience

 
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difficulties growing loan and deposit balances; (13) the current economic environment poses significant challenges for us and could adversely affect our  financial condition and results of operations; (14) continued deterioration in the financial condition of the U.S. banking system may impact the valuations of investments the Company has made in the securities of other financial institutions resulting in either actual losses or other than temporary impairments on such investments; and (15) the United States government’s plan to purchase large amounts of illiquid, mortgage-backed and other securities from financial institutions may not be effective and/or it may not be available to us.  Forward-looking statements made herein reflect management's expectations as of the date such statements are made. Such information is provided to assist stockholders and potential investors in understanding current and anticipated financial operations of the Company and is included pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances that arise after the date such statements are made.


 
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Financial Highlights
                  
(Unaudited)
                  
                   
                   
   
Three Months Ended June 30,
    
Percent
  
   
2009
    
2008
    
Change
  
                   
Earnings ($000s, except per share data):
                  
Net Interest Income (FTE)
   $ 23,656     $ 25,678       (7.87 )%
Net Income
     10,146       13,379       (24.16 )%
Earnings per Basic Share
     0.64       0.83       (22.89 )%
Earnings per Diluted Share
     0.64       0.83       (22.89 )%
                         
                         
Key Ratios (percent):
                        
Return on Average Assets
     1.55 %     2.14 %     (27.24 )%
Return on Average Tangible Equity
     17.63 %     21.03 %     (16.15 )%
Net Interest Margin
     4.12 %     4.65 %     (11.45 )%
Efficiency Ratio
     53.13 %     46.86 %     13.38 %
Average Shareholders' Equity to Average Assets
     11.00 %     12.46 %     (11.72 )%
                         
Consolidated Risk Based Capital Ratios (a):
                        
Tier I
     12.63 %     14.18 %     (10.93 )%
Total
     13.73 %     15.15 %     (9.37 )%
                         
Tangible Equity to Tangible Assets
     9.11 %     10.02 %     (9.12 )%
                         
                         
Common Stock Data:
                        
Cash Dividends Declared per Share
   $ 0.34     $ 0.34       0.00 %
Book Value per Share
     18.24       18.72       (2.57 )%
Tangible Book Value per Share
     14.66       15.13       (3.16 )%
Market Value per Share:
                        
High
     33.78       44.15       (23.49 )%
Low
     27.02       37.29       (27.54 )%
End of Period
     30.88       40.77       (24.26 )%
                         
   
Six Months Ended June 30,
    
Percent
  
   
2009
    
2008
    
Change
  
                         
Earnings ($000s, except per share data):
                        
Net Interest Income (FTE)
   $ 48,629     $ 49,814       (2.38 )%
Net Income
     21,070       26,417       (20.24 )%
Earnings per Basic Share
     1.32       1.64       (19.51 )%
Earnings per Diluted Share
     1.32       1.63       (19.02 )%
                         
                         
Key Ratios (percent):
                        
Return on Average Assets
     1.63 %     2.11 %     (23.07 )%
Return on Average Tangible Equity
     18.36 %     21.28 %     (13.73 )%
Net Interest Margin
     4.29 %     4.53 %     (5.28 )%
Efficiency Ratio
     50.36 %     47.57 %     5.85 %
Average Shareholders' Equity to Average Assets
     11.06 %     12.25 %     (9.66 )%
                         
                         
Common Stock Data:
                        
Cash Dividends Declared per Share
   $ 0.68     $ 0.68       0.00 %
Market Value per Share:
                        
High
     33.78       44.15       (23.49 )%
Low
     20.88       32.51       (35.77 )%
                         
Price/Earnings Ratio (b)
     11.70       12.43       (5.90 )%
                         
                         
(a) June 30, 2009 risk-based capital ratios are estimated
                  
(b) June 30, 2009 price/earnings ratio computed based on annualized second quarter 2009 earnings
          
 
 
                         
Financial Highlights
                                
(Unaudited)
                                    
                                     
                                     
                                     
Book Value and Market Price Range per Share
                          
                           
Market Price
  
   
Book Value per Share
    
Range per Share
  
   
March 31
    
June 30
    
September 30
    
December 31
    
Low
    
High
  
                                     
2005
   $ 13.20     $ 15.56     $ 15.99     $ 16.14     $ 27.57     $ 39.21  
2006
     16.17       16.17       16.99       17.46       34.53       41.87  
2007
     17.62       17.40       17.68       18.14       31.16       41.54  
2008
     18.92       18.72       17.61       17.58       29.08       42.88  
2009
     17.69       18.24                       27.02       33.78  
                                                 
                                                 
Earnings per Basic Share
                                          
                                                 
   
Quarter Ended
          
   
March 31
    
June 30
    
September 30
    
December 31
    
Year-to-Date
          
                                                 
2005
   $ 0.70     $ 0.72     $ 0.73     $ 0.72     $ 2.87          
2006
     0.71       0.78       0.78       0.74       3.00          
2007
     0.76       0.72       0.76       0.78       3.02          
2008
     0.81       0.83       (0.16 )     0.26       1.74          
2009
     0.69       0.64                       1.32          
                                                 
                                                 
Earnings per Diluted Share
                                          
                                                 
   
Quarter Ended
          
   
March 31
    
June 30
    
September 30
    
December 31
    
Year-to-Date
          
                                                 
2005
   $ 0.69     $ 0.71     $ 0.72     $ 0.72     $ 2.84          
2006
     0.71       0.77       0.77       0.74       2.99          
2007
     0.76       0.72       0.76       0.78       3.01          
2008
     0.80       0.83       (0.16 )     0.26       1.74          
2009
     0.69       0.64                       1.32          
                                                 
 
 
 
           
Consolidated Statements of Income
            
(Unaudited) ($ in 000s, except per share data)
            
             
   
Three Months Ended June 30,
  
   
2009
    
2008
  
             
Interest Income
            
Interest and fees on loans
   $ 26,946     $ 30,416  
Interest on investment securities:
                
Taxable
     5,612       6,120  
Tax-exempt
     403       381  
Interest on deposits in depository institutions
     3       51  
Total Interest Income
     32,964       36,968  
                 
Interest Expense
                
Interest on deposits
     9,184       10,519  
Interest on short-term borrowings
     111       663  
Interest on long-term debt
     231       312  
Total Interest Expense
     9,526       11,494  
Net Interest Income
     23,438       25,474  
Provision for loan losses
     2,150       850  
Net Interest Income After Provision for Loan Losses
     21,288       24,624  
                 
Non-Interest Income
                
Investment securities (losses)
     (332 )     -  
Service charges
     11,261       11,269  
Insurance commissions
     1,325       1,168  
Trust and investment management fee income
     497       449  
Bank owned life insurance
     992       750  
Other income
     544       559  
Total Non-Interest Income
     14,287       14,195  
                 
Non-Interest Expense
                
Salaries and employee benefits
     9,797       9,517  
Occupancy and equipment
     1,880       1,701  
Depreciation
     1,184       1,087  
Professional fees
     397       427  
Postage, delivery, and statement mailings
     698       618  
Advertising
     927       643  
Telecommunications
     514       440  
Bankcard expenses
     686       640  
Insurance and regulatory
     1,578       333  
Office supplies
     470       504  
Repossessed asset losses, net of expenses
     86       91  
Other expenses
     2,119       2,760  
Total Non-Interest Expense
     20,336       18,761  
Income Before Income Taxes
     15,239       20,058  
Income tax expense
     5,093       6,679  
Net Income
   $ 10,146     $ 13,379  
                 
Basic earnings per share
   $ 0.64     $ 0.83  
Diluted earnings per share
   $ 0.64     $ 0.83  
Average Common Shares Outstanding:
                
Basic
     15,908       16,103  
Diluted
     15,949       16,167  
 
 
           
Consolidated Statements of Income
            
(Unaudited) ($ in 000s, except per share data)
            
             
   
Six months ended June 30,
  
   
2009
    
2008
  
             
Interest Income
            
Interest and fees on loans
   $ 55,004     $ 61,408  
Interest on investment securities:
                
Taxable
     11,674       12,184  
Tax-exempt
     812       780  
Interest on deposits in depository institutions
     8       116  
Interest on federal funds sold
     -       -  
Total Interest Income
     67,498       74,488  
                 
Interest Expense
                
Interest on deposits
     18,557       22,534  
Interest on short-term borrowings
     264       1,808  
Interest on long-term debt
     485       753  
Total Interest Expense
     19,306       25,095  
Net Interest Income
     48,192       49,393  
Provision for loan losses
     3,800       2,733  
Net Interest Income After Provision for Loan Losses
     44,392       46,660  
                 
Non-Interest Income
                
Investment securities (losses) gains
     (2,407 )     2  
Service charges
     21,696       22,543  
Insurance commissions
     3,258       2,206  
Trust and investment management fee income
     1,204       1,081  
Bank owned life insurance
     1,724       1,426  
VISA IPO Gain
     -       3,289  
Other income
     1,245       966  
Total Non-Interest Income
     26,720       31,513  
                 
Non-Interest Expense
                
Salaries and employee benefits
     19,380       18,880  
Occupancy and equipment
     3,789       3,298  
Depreciation
     2,395       2,220  
Professional fees
     850       794  
Postage, delivery, and statement mailings
     1,416       1,272  
Advertising
     1,790       1,260  
Telecommunications
     934       858  
Bankcard expenses
     1,334       1,261  
Insurance and regulatory
     1,954       671  
Office supplies
     1,001       961  
Repossessed asset losses (gains), net of expenses
     215       123  
Loss on early extinguishment of debt
     -       1,208  
Other expenses
     4,112       5,854  
Total Non-Interest Expense
     39,170       38,660  
Income Before Income Taxes
     31,942       39,513  
Income tax expense
     10,872       13,096  
Net Income
   $ 21,070     $ 26,417  
                 
Basic earnings per share
   $ 1.32     $ 1.64  
Diluted earnings per share
   $ 1.32     $ 1.63  
Average Common Shares Outstanding:
                
Basic
     15,903       16,124  
Diluted
     15,941       16,186  
 
 
           
Consolidated Statements of Changes in Stockholders' Equity
            
(Unaudited) ($ in 000s)
            
             
             
   
Three Months Ended
  
   
June 30, 2009
    
June 30, 2008
  
             
Balance at April 1
   $ 281,505     $ 304,841  
                 
Net income
     10,146       13,379  
Other comprehensive income:
                
Change in unrealized gain (loss) on securities available-for-sale
     6,641       (6,914 )
Change in unrealized (loss) on interest rate floors
     (1,783 )     (4,084 )
Cash dividends declared ($0.34/share)
     (5,426 )     (5,489 )
Issuance of stock award shares, net
     99       67  
Exercise of 12,375 stock options
     -       239  
Excess tax benefits on stock compensation
     -       17  
Balance at June 30
   $ 291,182     $ 302,056  
                 
                 
                 
   
Six Months Ended
  
   
June 30, 2009
    
June 30, 2008
  
                 
Balance at January 1
   $ 280,429     $ 293,994  
                 
Net income
     21,070       26,417  
Other comprehensive income:
                
Change in unrealized gain (loss) on securities available-for-sale
     4,953       (5,166 )
Change in unrealized (loss) gain on interest rate floors
     (3,569 )     815  
Cash dividends declared ($0.68/share)
     (10,836 )     -  
Cash dividends declared ($0.68/share)
     -       (10,965 )
Issuance of stock award shares, net
     374       340  
Exercise of 300 stock options
     3       -  
Exercise of 18,075 stock options
     -       315  
Excess tax benefits on stock compensation
     -       23  
Purchase of 49,363 common shares of treasury
     (1,242 )     -  
Purchase of 104,960 common shares of treasury
     -       (3,717 )
Balance at June 30
   $ 291,182     $ 302,056  
 
 
 
                   
Condensed Consolidated Quarterly Statements of Income
              
(Unaudited) ($ in 000s, except per share data)
                    
                               
   
Quarter Ended
  
   
June 30
    
March 31
    
December 31
    
September 30
    
June 30
  
   
2009
    
2009
    
2008
    
2008
    
2008
  
                               
Interest income
   $ 32,964     $ 34,534     $ 36,663     $ 36,522     $ 36,968  
Taxable equivalent adjustment
     219       220       200       200       204  
Interest income (FTE)
     33,183       34,754       36,863       36,722       37,172  
Interest expense
     9,526       9,780       10,582       10,241       11,494  
Net interest income
     23,657       24,974       26,281       26,481       25,678  
Provision for loan losses
     2,150       1,650       5,340       2,350       850  
Net interest income after provision
                                        
for loan losses
     21,507       23,324       20,941       24,131       24,828  
                                         
Noninterest income
     14,287       12,433       3,181       (12,758 )     14,195  
Noninterest expense
     20,336       18,834       17,766       19,246       18,761  
Income (Loss) before income taxes
     15,458       16,923       6,356       (7,873 )     20,262  
Income tax expense (benefit)
     5,093       5,779       1,907       (5,516 )     6,679  
Taxable equivalent adjustment
     219       220       200       200       204  
Net income (loss)
   $ 10,146     $ 10,924     $ 4,249     $ (2,557 )   $ 13,379  
                                         
                                         
                                         
Basic earnings (loss) per share
   $ 0.64     $ 0.69     $ 0.26     $ (0.16 )   $ 0.83  
Diluted earnings (loss) per share
     0.64       0.69       0.26       (0.16 )     0.83  
Cash dividends declared per share
     0.34       0.34       0.34       0.34       0.34  
                                         
                                         
Average Common Share (000s):
                                        
Outstanding
     15,908       15,921       16,078       16,142       16,103  
Diluted
     15,949       15,933       16,100       16,195       16,167  
                                         
Net Interest Margin
     4.12 %     4.46 %     4.73 %     4.78 %     4.65 %
                                         
 
 
 
                             
Non-Interest Income and Non-Interest Expense
                              
(Unaudited) ($ in 000s)
                              
                               
   
Quarter Ended
  
   
June 30
    
March 31
    
December 31
    
September 30
    
June 30
  
   
2009
    
2009
    
2008
    
2008
    
2008
  
                               
Non-Interest Income:
                              
Service charges
   $ 11,261     $ 10,435     $ 11,459     $ 11,993     $ 11,269  
Insurance commissions
     1,325       1,933       981       1,025       1,168  
Trust and investment management fee income
     497       707       518       640       449  
Bank owned life insurance
     992       732       739       767       750  
Other income
     544       701       284       284       559  
Subtotal
     14,619       14,508       13,981       14,709       14,195  
Investment securities (losses) gains
     (332 )     (2,075 )     (10,800 )     (27,467 )     -  
Total Non-Interest Income
   $ 14,287     $ 12,433     $ 3,181     $ (12,758 )   $ 14,195  
                                         
Non-Interest Expense:
                                        
Salaries and employee benefits
   $ 9,797     $ 9,583     $ 8,845     $ 9,538     $ 9,517  
Occupancy and equipment
     1,880       1,909       1,773       1,800       1,701  
Depreciation
     1,184       1,211       1,193       1,110       1,087  
Professional fees
     397       453       451       435       427  
Postage, delivery, and statement mailings
     698       718       641       636       618  
Advertising
     927       863       818       821       643  
Telecommunications
     514       420       562       496       440  
Bankcard expenses
     686       648       711       717       640  
Insurance and regulatory
     1,578       376       363       354       333  
Office supplies
     470       531       533       527       504  
Repossessed asset losses, net of expenses
     86       129       87       314       91  
Other expenses
     2,119       1,993       1,789       2,498       2,760  
Total Non-Interest Expense
   $ 20,336     $ 18,834     $ 17,766     $ 19,246     $ 18,761  
                                         
                                         
                                         
                                         
Employees (Full Time Equivalent)
     831       830       827       812       817  
Branch Locations
     69       69       69       69       68  
                                         
 
 
 
           
Consolidated Balance Sheets
            
($ in 000s)
            
   
June 30
    
December 31
  
   
2009
    
2008
  
   
(Unaudited)
        
Assets
            
Cash and due from banks
   $ 48,058     $ 55,511  
Interest-bearing deposits in depository institutions
     4,912       4,118  
Cash and cash equivalents
     52,970       59,629  
                 
Investment securities available-for-sale, at fair value
     502,286       424,214  
Investment securities held-to-maturity, at amortized cost
     29,029       29,067  
Total investment securities
     531,315       453,281  
                 
Gross loans
     1,786,335       1,812,344  
Allowance for loan losses
     (20,975 )     (22,254 )
Net loans
     1,765,360       1,790,090  
                 
Bank owned life insurance
     71,874       70,400  
Premises and equipment
     63,425       60,138  
Accrued interest receivable
     8,936       9,024  
Net deferred tax assets
     45,694       48,462  
Intangible assets
     57,244       57,479  
Other assets
     29,499       33,943  
Total Assets
   $ 2,626,317     $ 2,582,446  
                 
Liabilities
                
Deposits:
                
Noninterest-bearing
   $ 315,278     $ 298,530  
Interest-bearing:
                
Demand deposits
     430,113       420,554  
Savings deposits
     379,848       354,956  
Time deposits
     1,018,594       967,090  
Total deposits
     2,143,833       2,041,130  
Short-term borrowings
     136,421       194,463  
Long-term debt
     18,002       19,047  
Other liabilities
     36,879       47,377  
Total Liabilities
     2,335,135       2,302,017  
                 
Stockholders' Equity
                
Preferred stock, par value $25 per share: 500,000 shares authorized; none issued
     -       -  
Common stock, par value $2.50 per share: 50,000,000 shares authorized;
                
    18,499,282 shares issued at June 30, 2009 and December 31, 2008
                
    less 2,536,563 and 2,548,538 shares in treasury, respectively
     46,249       46,249  
Capital surplus
     101,658       102,895  
Retained earnings
     240,847       230,613  
Cost of common stock in treasury
     (88,357 )     (88,729 )
Accumulated other comprehensive (loss):
                
Unrealized loss on securities available-for-sale
     (10,676 )     (15,628 )
Unrealized gain on derivative instruments
     5,719       9,287  
Underfunded pension liability
     (4,258 )     (4,258 )
Total Accumulated Other Comprehensive (Loss)
     (9,215 )     (10,599 )
Total Stockholders' Equity
     291,182       280,429  
Total Liabilities and Stockholders' Equity
   $ 2,626,317     $ 2,582,446  
 
 
 
CITY HOLDING COMPANY AND SUBSIDIARIES
                    
Investment Portfolio
                        
(Unaudited) ($ in 000s)
                        
                         
   
Original Cost
    
Other Than Temporary Impairment Charges through June 30, 2009
    
Unrealized Gains (Losses)
    
Carrying Value
  
                         
FNMA & FHLMC Preferred Stock
   $ 22,679     $ (21,089 )   $ (986 )   $ 604  
Mortgage Backed Securities
     292,808       -       6,215       299,023  
Municipal Bonds
     49,257       -       (440 )     48,817  
Pooled Bank Trust Preferreds
     27,088       (18,337 )     (5,351 )     3,400  
Single Issuer Bank Trust Preferreds,
                                
Subdebt of Financial Institutions, and
                                
Bank Holding Company Preferred Stocks
     110,804       (1,000 )     (14,030 )     95,774  
Money Markets and Mutual Funds
     64,797       -       (24 )     64,773  
Federal Reserve Bank and FHLB stock
     13,036       -       -       13,036  
Community Bank Equity Positions
     8,866       -       (2,978 )     5,888  
Total Investments
   $ 589,335     $ (40,426 )   $ (17,594 )   $ 531,315  
 
 
 
CITY HOLDING COMPANY AND SUBSIDIARIES
                    
Loan Portfolio
                              
(Unaudited) ($ in 000s)
                              
                               
   
June 30
    
March 31
    
December 31
    
September 30
    
June 30
  
   
2009
    
2009
    
2008
    
2008
    
2008
  
                               
Residential real estate
   $ 596,925     $ 599,692     $ 611,962     $ 620,951     $ 612,676  
Home equity
     392,751       389,453       384,320       377,919       371,537  
Commercial, financial, and agriculture
     747,886       753,234       768,255       729,613       715,196  
Installment loans to individuals
     45,550       45,175       43,585       44,728       45,385  
Previously securitized loans
     3,223       3,754       4,222       4,520       5,253  
Gross Loans
   $ 1,786,335     $ 1,791,308     $ 1,812,344     $ 1,777,731     $ 1,750,047  
                                         
                                         
                                         
                                         
                                         
                                         
CITY HOLDING COMPANY AND SUBSIDIARIES
                          
Previously Securitized Loans
                                  
(Unaudited) ($ in millions)
                                        
                   
Annualized
    
Effective
          
           
December 31
    
Interest
    
Annualized
          
   
Year Ended:
    
Balance (a)
    
Income (a)
    
Yield (a)
          
                                         
   
2008
     $ 4.2     $ 5.6       108 %        
   
2009
       3.6       4.0       118 %        
   
2010
       3.2       3.3       118 %        
   
2011
       2.8       2.9       118 %        
   
2012
       2.4       2.5       118 %        
                                         
a - 2008 amounts are based on actual results. 2009 amounts are based on actual results through June 30, 2009 and estimated amounts for the remainder of the year. 2010, 2011, and 2012 amounts are based on estimated amounts.
  
 
   
Note: The amounts reflected in the table above require management to make significant assumptions based on estimated future default, prepayment, and discount rates. Actual performance could be significantly different from that assumed, which could result in the actual results being materially different from the amounts estimated above.
  
 
 
 
                   
Consolidated Average Balance Sheets, Yields, and Rates
                    
(Unaudited) ($ in 000s)
                                    
                                     
   
Three Months Ended June 30,
  
         
2009
                
2008
        
   
Average
          
Yield/
    
Average
          
Yield/
  
   
Balance
    
Interest
    
Rate
    
Balance
    
Interest
    
Rate
  
                                     
Assets:
                                    
Loan portfolio:
                                    
Residential real estate
   $ 598,122     $ 8,545       5.73 %   $ 598,924     $ 9,348       6.28 %
Home equity
     390,361       6,050       6.22 %     360,041       6,493       7.25 %
Commercial, financial, and agriculture
     752,157       10,311       5.50 %     708,607       11,707       6.64 %
Installment loans to individuals
     49,956       1,057       8.49 %     55,667       1,398       10.10 %
Previously securitized loans
     3,426       984       115.20 %     5,370       1,471       110.17 %
Total loans
     1,794,022       26,947       6.02 %     1,728,609       30,417       7.08 %
Securities:
                                                
Taxable
     466,341       5,612       4.83 %     446,625       6,120       5.51 %
Tax-exempt
     38,179       621       6.52 %     35,994       585       6.54 %
Total securities
     504,520       6,233       4.96 %     482,619       6,705       5.59 %
Deposits in depository institutions
     5,224       3       0.23 %     9,266       50       2.17 %
Total interest-earning assets
     2,303,766       33,183       5.78 %     2,220,494       37,172       6.73 %
Cash and due from banks
     51,774                       54,906                  
Bank premises and equipment
     62,775                       56,002                  
Other assets
     215,907                       193,346                  
Less:  Allowance for loan losses
     (22,229 )                     (18,726 )                
       Total assets
   $ 2,611,993                     $ 2,506,022                  
                                                 
Liabilities:
                                                
Interest-bearing demand deposits
     429,381       446       0.42 %     413,467       613       0.60 %
Savings deposits
     374,375       463       0.50 %     361,244       831       0.93 %
Time deposits
     1,017,984       8,276       3.26 %     909,421       9,075       4.01 %
Short-term borrowings
     125,436       111       0.35 %     139,787       663       1.91 %
Long-term debt
     18,998       231       4.88 %     21,401       312       5.86 %
   Total interest-bearing liabilities
     1,966,174       9,527       1.94 %     1,845,320       11,494       2.51 %
Noninterest-bearing demand deposits
     334,735                       323,123                  
Other liabilities
     23,680                       25,214                  
Stockholders' equity
     287,404                       312,365                  
Total liabilities and
                                                
stockholders' equity
   $ 2,611,993                     $ 2,506,022                  
Net interest income
           $ 23,656                     $ 25,678          
Net yield on earning assets
                     4.12 %                     4.65 %
 
 
 
                   
Consolidated Average Balance Sheets, Yields, and Rates
                    
(Unaudited) ($ in 000s)
                                    
                                     
   
Six Months Ended June 30,
  
         
2009
                
2008
        
   
Average
          
Yield/
    
Average
          
Yield/
  
   
Balance
    
Interest
    
Rate
    
Balance
    
Interest
    
Rate
  
                                     
Assets:
                                    
Loan portfolio:
                                    
Residential real estate
   $ 600,929     $ 17,325       5.81 %   $ 600,262     $ 18,763       6.29 %
Home equity
     388,517       12,193       6.33 %     351,850       12,876       7.36 %
Commercial, financial, and agriculture
     754,168       21,186       5.66 %     704,381       23,941       6.84 %
Loans to depository institutions
     -       -       0.00 %     2,335       35       3.01 %
Installment loans to individuals
     48,768       2,175       8.99 %     51,648       2,743       10.68 %
Previously securitized loans
     3,645       2,125       117.56 %     5,895       3,050       104.05 %
Total loans
     1,796,027       55,004       6.18 %     1,716,371       61,408       7.19 %
Securities:
                                                
Taxable
     448,636       11,674       5.25 %     451,137       12,184       5.43 %
Tax-exempt
     37,871       1,249       6.65 %     36,865       1,200       6.55 %
Total securities
     486,507       12,923       5.36 %     488,002       13,384       5.52 %
Deposits in depository institutions
     5,026       8       0.32 %     8,982       116       2.60 %
Total interest-earning assets
     2,287,560       67,935       5.99 %     2,213,355       74,908       6.81 %
Cash and due from banks
     52,090                       60,174                  
Bank premises and equipment
     61,800                       55,355                  
Other assets
     213,467                       189,810                  
Less:  Allowance for loan losses
     (22,395 )                     (18,282 )                
       Total assets
   $ 2,592,522                     $ 2,500,412                  
                                                 
Liabilities:
                                                
Interest-bearing demand deposits
     423,073       909       0.43 %     411,606       1,325       0.65 %
Savings deposits
     367,595       969       0.53 %     360,916       1,934       1.08 %
Time deposits
     1,000,562       16,679       3.36 %     921,462       19,274       4.21 %
Short-term borrowings
     136,412       264       0.39 %     133,790       1,808       2.72 %
Long-term debt
     19,015       485       5.14 %     21,953       753       6.90 %
   Total interest-bearing liabilities
     1,946,657       19,306       2.00 %     1,849,727       25,094       2.73 %
Noninterest-bearing demand deposits
     329,563                       317,504                  
Other liabilities
     29,506                       26,991                  
Stockholders' equity
     286,796                       306,190                  
Total liabilities and
                                                
stockholders' equity
   $ 2,592,522                     $ 2,500,412                  
Net interest income
           $ 48,629                     $ 49,814          
Net yield on earning assets
                     4.29 %                     4.53 %
 
 
 
                             
Analysis of Risk-Based Capital
                              
(Unaudited) ($ in 000s)
                              
                               
   
June 30
    
March 31
    
December 31
    
September 30
    
June 30
  
   
2009 (a)
    
2009
    
2008
    
2008
    
2008
  
                               
Tier I Capital:
                              
Stockholders' equity
   $ 291,182     $ 281,505     $ 280,429     $ 284,912     $ 302,056  
Goodwill and other intangibles
     (57,046 )     (57,165 )     (57,479 )     (57,600 )     (57,893 )
Accumulated other comprehensive loss (income)
     9,215       14,073       10,599       14,477       3,718  
Qualifying trust preferred stock
     16,000       16,000       16,000       16,000       16,000  
Unrealized Loss on AFS securities
     (3,988 )     (4,401 )     (3,342 )     (761 )     (712 )
Excess deferred tax assets
     (14,804 )     (15,796 )     (23,841 )     (15,470 )     -  
Total tier I capital
   $ 240,559     $ 234,215     $ 222,366     $ 241,558     $ 263,169  
                                         
                                         
Total Risk-Based Capital:
                                        
Tier I capital
   $ 240,559     $ 234,215     $ 222,366     $ 241,558     $ 263,169  
Qualifying allowance for loan losses
     20,975       21,980       22,254       18,879       17,959  
Total risk-based capital
   $ 261,534     $ 256,195     $ 244,620     $ 260,437     $ 281,128  
                                         
Net risk-weighted assets
   $ 1,904,383     $ 1,901,377     $ 1,875,934     $ 1,842,684     $ 1,855,401  
                                         
                                         
Ratios:
                                        
Average stockholders' equity to average assets
     11.00 %     11.12 %     11.53 %     12.45 %     12.46 %
Tangible capital ratio
     9.11 %     8.87 %     8.83 %     9.44 %     10.02 %
Risk-based capital ratios:
                                        
Tier I capital
     12.63 %     12.32 %     11.85 %     13.11 %     14.18 %
Total risk-based capital
     13.73 %     13.47 %     13.04 %     14.13 %     15.15 %
Leverage capital
     9.47 %     9.37 %     9.14 %     9.97 %     10.75 %
                                         
                                         
(a) June 30, 2009 risk-based capital ratios are estimated
                                  
                                         
                                         
                                         
                                         
CITY HOLDING COMPANY AND SUBSIDIARIES
                                        
Intangibles
                                        
(Unaudited) ($ in 000s)
                                        
                                         
   
As of and for the Quarter Ended
  
   
June 30
    
March 31
    
December 31
    
September 30
    
June 30
  
   
2009
    
2009
    
2008
    
2008
    
2008
  
                                         
Intangibles, net
   $ 57,244     $ 57,362     $ 57,479     $ 57,600     $ 57,893  
Intangibles amortization expense
     117       117       121       173       172  
                                         
 
 
 
                             
Summary of Loan Loss Experience
                              
(Unaudited) ($ in 000s)
                              
                               
   
Quarter Ended
  
   
June 30
    
March 31
    
December 31
    
September 30
    
June 30
  
   
2009
    
2009
    
2008
    
2008
    
2008
  
                               
Balance at beginning of period
   $ 21,980     $ 22,254     $ 18,879     $ 17,959     $ 18,567  
                                         
Charge-offs:
                                        
Commercial, financial, and agricultural
     2,332       1,479       1,073       563       1,022  
Real estate-mortgage
     507       394       603       523       190  
Installment loans to individuals
     73       69       29       62       77  
Overdraft deposit accounts
     690       664       779       783       604  
Total charge-offs
     3,602       2,606       2,484       1,931       1,893  
                                         
Recoveries:
                                        
Commercial, financial, and agricultural
     91       29       14       (30 )     41  
Real estate-mortgage
     (9 )     81       79       69       48  
Installment loans to individuals
     35       55       45       71       72  
Overdraft deposit accounts
     330       517       381       391       274  
Total recoveries
     447       682       519       501       435  
                                         
Net charge-offs
     3,155       1,924       1,965       1,430       1,458  
Provision for loan losses
     2,150       1,650       5,340       2,350       850  
Balance at end of period
   $ 20,975     $ 21,980     $ 22,254     $ 18,879     $ 17,959  
                                         
Loans outstanding
   $ 1,786,335     $ 1,791,308     $ 1,812,344     $ 1,777,731     $ 1,750,047  
Average loans outstanding
     1,794,022       1,798,054       1,787,861       1,754,183       1,728,609  
Allowance as a percent of loans outstanding
     1.17 %     1.23 %     1.23 %     1.06 %     1.03 %
Allowance as a percent of non-performing loans
     96.80 %     107.44 %     86.07 %     135.92 %     122.89 %
Net charge-offs (annualized) as a
                                        
percent of average loans outstanding
     0.70 %     0.43 %     0.44 %     0.33 %     0.34 %
Net charge-offs, excluding overdraft deposit
                                        
accounts, (annualized) as a percent of average loans outstanding
     0.62 %     0.40 %     0.35 %     0.24 %     0.26 %
 
 
 
                             
Summary of Non-Performing Assets
                              
(Unaudited) ($ in 000s)
                              
                               
   
June 30
    
March 31
    
December 31
    
September 30
    
June 30
  
   
2009
    
2009
    
2008
    
2008
    
2008
  
                               
Nonaccrual loans
   $ 20,956     $ 20,007     $ 25,224     $ 13,709     $ 14,018  
Accruing loans past due 90 days or more
     680       386       623       141       431  
Previously securitized loans past due 90 days or more
     32       64       10       40       165  
Total non-performing loans
     21,668       20,457       25,857       13,890       14,614  
Other real estate owned, excluding property associated
                                        
with previously securitized loans
     9,840       6,686       3,469       3,332       6,164  
Other real estate owned associated with previously
                                        
securitized loans
     189       374       400       417       321  
Other real estate owned
     10,029       7,060       3,869       3,749       6,485  
Total non-performing assets
   $ 31,697     $ 27,517     $ 29,726     $ 17,639     $ 21,099  
                                         
Non-performing assets as a percent of loans and
                                        
other real estate owned
     1.76 %     1.53 %     1.64 %     0.99 %     1.20 %
                                         
                                         
                                         
CITY HOLDING COMPANY AND SUBSIDIARIES
                                        
Summary of Total Past Due Loans
                                        
(Unaudited) ($ in 000s)
                                        
                                         
   
June 30
    
March 31
    
December 31
    
September 30
    
June 30
  
   
2009
    
2009
    
2008
    
2008
    
2008
  
                                         
Residential real estate
   $ 5,029     $ 5,882     $ 6,179     $ 3,636     $ 5,487  
Home equity
     2,019       1,454       1,243       1,400       1,316  
Commercial, financial, and agriculture
     1,754       2,044       1,679       1,741       1,166  
Installment loans to individuals
     118       192       241       216       290  
Previously securitized loans
     878       818       999       598       632  
Overdraft deposit accounts
     526       410       592       491       485  
Total past due loans
   $ 10,324     $ 10,800     $ 10,933     $ 8,082     $ 9,376