Document

Charleston, West Virginia – City Holding Company (“Company” or “City”) (NASDAQ:CHCO), a $4.9 billion bank holding company headquartered in Charleston, West Virginia, today announced net income of $70.0 million and diluted earnings of $4.49 per share for the year ended December 31, 2018. The results for the year ending December 31, 2018, include $13.3 million, or $0.67 diluted per share on an after tax basis, of acquisition and integration expenses related to the acquisitions of Poage Bankshares, Inc. (“Poage”) and its principal banking subsidiary, Town Square Bank of Ashland, Kentucky, and Farmers Deposit Bancorp, Inc. (“Farmers Deposit”) of Cynthiana, Kentucky and its principal banking subsidiary, Farmers Deposit Bank of Cynthiana, Kentucky, which were completed on December 7, 2018.

City’s CEO Charles Hageboeck stated that, “2018 was a very successful year for City with reported earnings of $4.49 per diluted share, despite merger related expenses of $13.3 million ($0.67 per diluted share on an after tax basis). Excluding these costs, earnings for 2018 would have been $5.16 per diluted share. As a result of the acquisitions of Poage and Farmers Deposit, we were able to strengthen our market presence in the Ashland, Kentucky area and expand our market presence in Lexington, Kentucky and surrounding areas. The acquisitions also added $362 million in loans and $472 million in deposits to City. Although Poage and Farmers Deposit were only part of our 2018 results for less than a month, we were pleased with their contributions and expect them to contribute approximately $10 million on an after tax basis in 2019. To complete the acquisition of Poage, 1.17 million shares of Company stock were issued, while the Company paid $24.9 million in cash to complete the Farmers Deposit acquisition. Similar to previous acquisitions, the acquisitions of Poage and Farmers Deposit produced a decline in our credit metrics. We have plans in place for our credit and lending teams to workout problem loans and implement our credit culture with new members of our lending team during 2019.”

“In addition to the successful acquisitions in 2018, City also produced positive results in many other ways. Excluding our acquisitions, reported net interest income grew $10.7 million, or 8.5%, due to both improvements in our net interest margin and loan growth, while noninterest income exclusive of security gains and (losses) improved $1.5 million, or 2.6%. We also continued to judiciously manage our capital in 2018. We repurchased 290,000 shares of our common stock during 2018 and repaid our trust preferred securities in December 2018. In addition, City’s Board approved an increase in our quarterly cash dividend to 53 cents per share in the third quarter of 2018 (a 15.2% increase from the dividend paid in the second quarter of 2018). I am incredibly proud of the efforts of our exceptional employees that made 2018 a highly successful year in many ways and look forward to continuing to take advantage of the opportunities in the future.”

The Company’s net interest income increased from $126.1 million for the year ended December 31, 2017 to $138.2 million for the year ended December 31, 2018. The Company’s tax equivalent net interest income increased $11.4 million, or 8.9%, from $127.6 million for the year ended December 31, 2017 to $139.0 million for the year ended December 31, 2018. Exclusive of the impact of the acquisitions of Poage and Farmers Deposit, increased yields on commercial and residential real estate loans increased net interest income $7.8 million and $4.8 million, respectively, while higher average balances on commercial loans ($40.0 million) and residential real estate loans ($20.4 million) increased interest income by $1.6 million and $0.8 million, respectively, as compared to the year ended December 31, 2017. In addition, higher average investment balances ($68.6 million) increased investment income by $2.0 million, while interest income from deposits in depository institutions also increased $1.6 million as the Company elected to improve its on-balance sheet liquidity during the year ended December 31, 2018. These increases were partially offset by increased interest expense on interest bearing liabilities ($7.7 million), primarily due to an increase in the cost of funds. The Company’s reported net interest margin increased from 3.46% for the year ended December 31, 2017 to 3.52% for the year ended December 31, 2018. Excluding the favorable impact of the accretion from the fair value adjustments, the net interest margin would have been 3.49% for the year ended December 31, 2018 and 3.40% for the year ended December 31, 2017.

The Company’s net interest income increased from $35.6 million during the third quarter of 2018 to $36.4 million during the fourth quarter of 2018. During the fourth quarter of 2018, the Company’s tax equivalent net interest income increased $0.9 million, or 2.5%, to $36.6 million from $35.7 million during the third quarter of 2018. The acquisitions of Poage and Farmers Deposit added $1.4 million of net interest income during the quarter ended December 31, 2018. In addition, investment income increased $0.8 million and increased loan yields added $0.5 million to net interest income. These increases were partially offset by lower loan prepayment fees of $1.1 million during the quarter ended December 31, 2018, and increased interest expense of $0.8 million as a result of higher interest rates on interest bearing liabilities. The Company’s reported net interest margin increased from 3.54% for the third quarter of 2018 to 3.55% for the fourth quarter of 2018. Excluding the favorable impact of the accretion from the fair value adjustments, the net interest margin would have been 3.50% for the quarter ended December 31, 2018 and 3.51% for the quarter ended September 30, 2018.

The Company’s ratio of nonperforming assets to total loans and other real estate owned increased from 0.45% at December 31, 2017 to 0.54% at December 31, 2018. Total nonperforming assets increased from $14.1 million at December 31, 2017 to $19.4 million at December 31, 2018. Excluded from this ratio are purchased credit-impaired loans in 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 increased from $11.0 million, or 0.35% of total loans outstanding, at December 31, 2017 to $13.1 million, or 0.37% of total loans outstanding, at December 31, 2018. Acquired past due loans from Poage and Farmers Deposit represent approximately 37% of total past dues at December 31, 2018.

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 losses of $0.4 million in the fourth quarter of 2018 and $2.3 million for the year ended December 31, 2018, compared to a provision for loan losses of $0.4 million and $3.0 million for the comparable periods in 2017. During the year ended December 31, 2018, City National Bank of West Virginia ("City National"), the Company’s primary banking subsidiary, liquidated repossessed assets associated with the Kentucky Fuels Corporation credit. As a result of the proceeds from this liquidation, City National recovered $1.3 million related to this credit. Additionally, as a result of this recovery, the historical loss rate used to compute the allowance not specifically allocated to individual credits in the Company's commercial and industrial mining and energy sector (per the North American Industry Classification System ("NAICS")) improved and an additional release of reserve of $1.7 million was recognized during the year ended December 31, 2018. The Company also received a $0.4 million recovery through a settlement from a commercial customer during the quarter ending December 31, 2018. Changes in the amount of the allowance and related provision 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 was $14.7 million during the quarter ended December 31, 2018 as compared to $15.6 million during the quarter ended December 31, 2017. During the fourth quarter of 2017, the Company realized investment gains of $0.2 million which represented partial recoveries of impairment charges previously recognized on pools of trust preferred securities. Exclusive of this gain, non-interest income decreased from $15.4 million for the fourth quarter of 2017 to $14.7 million for the fourth quarter of 2018. This decrease was mainly due to unrealized fair value losses on the Company’s equity securities of $1.2 million during the fourth quarter of 2018 and a decrease of $0.5 million in bank owned life insurance revenues due to lower death benefit proceeds from the fourth quarter of 2017. These decreases were partially offset by an increase of $0.6 million, or 7.7%, in service charges and an increase of $0.5 million, or 11.8%, in bankcard revenues from the fourth quarter of 2017.

During 2018, the Company recognized $13.3 million of acquisition and integration expenses associated with the completed acquisitions of Poage and Farmers Deposit. Excluding these expenses, non-interest expenses increased from $96.0 million for 2017 to $99.8 million for 2018. This increase was primarily due to an increase in salaries and employee benefits of $3.4 million that was largely attributable to annual salary adjustments, including an adjustment to wages for approximately 50% of the Company’s employees late in the first quarter of 2018 to make salaries more competitive in the current employment environment. Additionally, the Company experienced increases in bankcard expenses of $0.6 million and other expenses of $0.4 million.

The Company’s effective income tax rate for the quarter and year ended December 31, 2018 was 19.8% and 20.5%, respectively, compared to 60.8% and 40.2% for the comparable periods in 2017. On December 22, 2017, the President signed the TCJA into law. Among other things, the Tax Cuts and Jobs Act (“TCJA”) reduced the corporate income tax rate from 35% to 21%, effective January 1, 2018. As a result of this decrease in the corporate income tax rate, the Company reassessed its deferred tax assets and liabilities, which resulted in a charge to earnings in the fourth quarter of 2017 of $7.1 million. In addition, during the years ended December 31, 2018 and December 31, 2017, the Company reduced income tax expense by $0.4 million and $0.3 million, respectively, due to the recognition of previously unrecognized tax positions subsequent to the close of the statute of limitations for previous tax years. Exclusive of these items, the Company’s tax rate from operations was 22.8% and 20.9% for the quarter and year ended December 31, 2018, respectively, compared to 33.4% and 32.7% for the comparable periods in 2017.

This news release contains certain forward-looking statements that are included pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such information involves risks and uncertainties that could result in the Company's actual results differing materially from those projected in the forward-looking statements. Important factors that could cause actual results to differ materially from those discussed in such forward-looking statements include, but are not limited to, (1) the Company may incur additional loan loss provision due to negative credit quality trends in the future that may lead to a deterioration of asset quality; (2) the Company may incur increased charge-offs in the future; (3) the Company could have adverse legal actions of a material nature; (4) the Company may face competitive loss of

customers; (5) the Company may be unable to manage its expense levels; (6) the Company may have difficulty retaining key employees; (7) changes in the interest rate environment may have results on the Company’s operations materially different from those anticipated by the Company’s market risk management functions; (8) changes in general economic conditions and increased competition could adversely affect the Company’s operating results; (9) changes in regulations and government policies affecting bank holding companies and their subsidiaries, including changes in monetary policies, could negatively impact the Company’s operating results; (10) the Company may experience difficulties growing loan and deposit balances; (11) deterioration in the financial condition of the U.S. banking system may impact the valuations of investments the Company has made in the securities of other financial institutions resulting in either actual losses or other than temporary impairments on such investments; (12) the effects of the Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and the regulations promulgated and to be promulgated thereunder, which may subject the Company and its subsidiaries to a variety of new and more stringent legal and regulatory requirements which adversely affect their respective businesses; (13) the impact of new minimum capital thresholds established as a part of the implementation of Basel III; (14) the 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 risk factors relating to the banking industry or the Company as detailed from time to time in the Company’s reports filed with the Securities and Exchange Commission, including those risk factors included in the disclosures under the heading “ITEM 1A Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017. Forward-looking statements made herein reflect management's expectations as of the date such statements are made. Such information is provided to assist stockholders and potential investors in understanding current and anticipated financial operations of the Company and is included pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances that arise after the date such statements are made. Further, the Company is required to evaluate subsequent events through the filing of its Form 10-K for the fiscal year ended December 31, 2018. The Company will continue to evaluate the impact of any subsequent events on the preliminary December 31, 2018 results and will adjust the amounts if necessary.


	Three Months Ended																					Twelve Months Ended
	December 31,			September 30,			June 30,			March 31,			December 31,			December 31,			December 31,
	2018			2018			2018			2018			2017			2018			2017

Earnings
Net Interest Income (FTE)	$	36,625		$	35,745		$	33,760		$	32,834		$	32,760		$	138,965		$	127,582
Net Income available to common shareholders	10,713			20,692			20,979			17,616			9,669			70,002			54,310

Per Share Data
Earnings per share available to common shareholders:
Basic	$	0.68		$	1.34		$	1.36		$	1.13		$	0.62		$	4.50		$	3.49
Diluted	0.68			1.33			1.35			1.13			0.62			4.49			3.48
Weighted average number of shares:
Basic	15,603			15,340			15,326			15,414			15,472			15,421			15,412
Diluted	15,618			15,358			15,345			15,436			15,497			15,439			15,436
Period-end number of shares	16,555			15,449			15,452			15,439			15,618			16,555			15,618
Cash dividends declared	$	0.53		$	0.53		$	0.46		$	0.46		$	0.46		$	1.98		$	1.78
Book value per share (period-end)	36.46			33.14			32.6			31.86			32.17			36.46			32.17
Tangible book value per share (period-end)	28.88			28.08			27.53			26.78			27.14			28.88			27.14
Market data:
High closing price	$	77.94		$	82.79		$	78.44		$	72.87		$	73.98		$	82.79		$	73.98
Low closing price	66.36			75.54			67.95			65.03			65.50			65.03			59.94
Period-end closing price	67.59			76.8			75.23			68.56			67.47			67.59			67.47
Average daily volume	66			54			60			56			66			59			58
Treasury share activity:
Treasury shares repurchased	69			7			10			204			—			290			—
Average treasury share repurchase price	$	72.89		$	77.18		$	69.26		$	68.50		$	—		$	69.78		$	—
Common share issuance:
Common shares issued (in thousands)	—			—			—			—			—			—			441
Average common share issue price (a)	$	—		$	—		$	—		$	—		$	—		$	—		$	64.48

Key Ratios (percent)
Return on average assets	0.96		%	1.90		%	2.00		%	1.69		%	0.94		%	1.63		%	1.33		%
Return on average tangible equity	9.60		%	18.90		%	19.90		%	16.70		%	9.00		%	16.20		%	13.10		%
Yield on interest earning assets	4.32		%	4.25		%	4.15		%	4.05		%	3.95		%	4.18		%	3.91		%
Cost of interest bearing liabilities	1.00		%	0.92		%	0.76		%	0.69		%	0.64		%	0.85		%	0.59		%
Net Interest Margin	3.55		%	3.54		%	3.52		%	3.51		%	3.46		%	3.52		%	3.46		%


Non-interest income as a percent of total revenue	28.80		%	30.70		%	31.70		%	30.70		%	32.20		%	30.50	%	31.90	%
Efficiency Ratio (a)	49.00		%	48.60		%	50.40		%	52.60		%	47.70		%	50.00	%	51.50	%
Price/Earnings Ratio (b)	24.82			14.37			13.88			15.17			27.30			15.03		19.36



Capital (period-end)
Average Shareholders' Equity to Average Assets	12.05		%	11.81		%	11.88		%	12.05		%	12.34		%
Tangible equity to tangible assets	10.01		%	9.99		%	9.90		%	10.03		%	10.45		%
Consolidated City Holding Company risk based capital ratios (c):
CET I	15.07		%	15.94		%	15.49		%	15.08		%	15.10		%
Tier I	15.20		%	16.49		%	16.05		%	15.64		%	15.66		%
Total	15.69		%	17.08		%	16.65		%	16.31		%	16.34		%
Leverage	11.36		%	11.01		%	11.13		%	10.90		%	11.00		%
City National Bank risk based capital ratios (c):
CET I	13.05		%	14.00		%	13.26		%	12.59		%	11.93		%
Tier I	13.05		%	14.00		%	13.26		%	12.59		%	11.93		%
Total	13.55		%	14.59		%	13.87		%	13.25		%	12.61		%
Leverage	9.81		%	9.39		%	9.24		%	8.81		%	8.43		%

Other
Branches	100			87			86			86			86
FTE	891			846			849			832			839

Assets per FTE	$	5,500		$	5,226		$	5,152		$	5,048		$	4,925
Deposits per FTE	4,462			4,070			4,030			4,143			3,952

(a) The common share issue price is presented net of commissions and excludes one-time offering costs.
(b) The price/earnings ratio is computed based on annualized quarterly earnings.
(c) December 31, 2018 risk-based capital ratios are estimated.


	Three Months Ended														Twelve Months Ended
	December 31,		September 30,		June 30,		March 31,		December 31,		December 31,		December 31,
	2018		2018		2018		2018		2017		2018		2017
Interest Income
Interest and fees on loans	$	37,973	$	36,872	$	34,292	$	32,918	$	32,529	$	142,055	$	125,752
Interest on investment securities:
Taxable	5,023		4,216		4,117		3,981		3,797		17,337		14,387
Tax-exempt	729		701		710		703		692		2,843		2,706
Interest on deposits in depository institutions	623		940		61		42		35		1,666		85
Total Interest Income	44,348		42,729		39,180		37,644		37,053		163,901		142,930

Interest Expense
Interest on deposits	6,656		5,497		4,918		4,326		3,941		21,397		14,826
Interest on short-term borrowings	1,061		1435		459		460		522		3,415		1214
Interest on long-term debt	200		239		230		211		201		880		765
Total Interest Expense	7,917		7,171		5,607		4,997		4,664		25,692		16,805
Net Interest Income	36,431		35,558		33,573		32,647		32,389		138,209		126,125
(Recovery of) provision for loan losses	(400)		(27)		(2064)		181		422		(2,310)		3,006
Net Interest Income After (Recovery of) Provision for Loan Losses	36,831		35,585		35,637		32,466		31,967		140,519		123,119

Non-Interest Income
Net gains (losses) on sale of investment securities	—		—		—		—		200		—		4,476
Unrealized gains (losses) recognized on securities still held	(1,246)		384		492		280		—		(90)		—
Service charges	7,921		7,598		7,323		6,862		7,355		29,704		28,574
Bankcard revenue	4,826		4,677		4,532		4,334		4,316		18,369		17,120
Trust and investment management fee income	1,737		1,579		1,645		1,568		1,800		6,529		6,269
Bank owned life insurance	734		813		722		821		1241		3,090		4,212
Other income	734		702		897		627		655		2,962		2,956
Total Non-Interest Income	14,706		15,753		15,611		14,492		15,567		60,564		63,607

Non-Interest Expense
Salaries and employee benefits	14,017		13,576		13,551		13,241		11,845		54,385		51,014
Occupancy related expense	2,250		2,323		2,346		2,404		2,195		9,323		9,557
Equipment and software related expense	2,038		1,965		1,895		1,831		1,897		7,729		7,732
FDIC insurance expense	308		315		313		315		318		1251		1,348
Advertising	530		808		849		787		711		2,974		2,914
Bankcard expenses	1,229		1,134		1,064		1076		960		4,503		3,924


Postage, delivery, and statement mailings	527		537		515		578		518		2,157		2,094
Office supplies	313		364		329		313		355		1,319		1,437
Legal and professional fees	469		453		475		450		563		1,847		1,956
Telecommunications	401		408		441		500		517		1,750		1,988
Repossessed asset losses, net of expenses	207		156		112		370		145		845		735
Merger related expenses	13,015		242		—		—		—		13,257		—
Other expenses	2,874		2,759		3,021		3,072		2,869		11,726		11,282
Total Non-Interest Expense	38,178		25,040		24,911		24,937		22,893		113,066		95,981
Income Before Income Taxes	13,359		26,298		26,337		22,021		24,641		88,017		90,745
Income tax expense	2,646		5,606		5,358		4,405		14,972		18,015		36,435
Net Income Available to Common Shareholders	$	10,713	$	20,692	$	20,979	$	17,616	$	9,669	$	70,002	$	54,310

Distributed earnings allocated to common shareholders	$	8,695	$	8,109	$	7,039	$	7,023	$	7,106	$	32,483	$	27,497
Undistributed earnings allocated to common shareholders	1,928		12,382		13,729		10,398		2,454		36,865		26,222
Net earnings allocated to common shareholders	$	10,623	$	20,491	$	20,768	$	17,421	$	9,560	$	69,348	$	53,719


Average common shares outstanding	15,603		15,340		15,326		15,414		15,472		15,421		15,412
Shares for diluted earnings per share	15,618		15,358		15,345		15,436		15,497		15,439		15,436

Basic earnings per common share	$	0.68	$	1.34	$	1.36	$	1.13	$	0.62	$	4.50	$	3.49
Diluted earnings per common share	$	0.68	$	1.33	$	1.35	$	1.13	$	0.62	$	4.49	$	3.48


	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
	December 31,		September 30,		June 30,		March 31,		December 31,
	2018		2018		2018		2018		2017
Assets
Cash and due from banks	$	55,016	$	49,806	$	43,466	$	39,340	$	54,450
Interest-bearing deposits in depository institutions	67,975		256,104		222,058		84,438		28,058
Cash and cash equivalents	122,991		305,910		265,524		123,778		82,508

Investment securities available-for-sale, at fair value	723,254		563,003		552,603		545,628		550,389
Investment securities held-to-maturity, at amortized cost	60,827		57,812		60,030		62,277		64,449
Other securities	28,810		28,875		28,920		22,165		14,147
Total investment securities	812,891		649,690		641,553		630,070		628,985

Gross loans	3,587,081		3,146,697		3,155,468		3,137,681		3,127,410
Allowance for loan losses	(15,966)		(16,311)		(16,876)		(18,381)		(18,836)
Net loans	3,571,115		3,130,386		3,138,592		3,119,300		3,108,574

Bank owned life insurance	113,544		105,372		104,773		104,052		103,440
Premises and equipment, net	78,383		72,484		72,482		72,920		72,682
Accrued interest receivable	12,424		11,449		9,348		9,528		9,223
Net deferred tax assets	17,122		15,653		14,528		14,467		11,913
Intangible assets	125,504		78,215		78,342		78,468		78,595
Other assets	46,951		51,643		49,241		47,432		36,361
Total Assets	$	4,900,925	$	4,420,802	$	4,374,383	$	4,200,015	$	4,132,281

Liabilities
Deposits:
Noninterest-bearing	$	789,119	$	672,042	$	684,614	$	703,209	$	666,639
Interest-bearing:
Demand deposits	899,568		802,490		785,933		816,976		769,245
Savings deposits	934,218		821,390		817,547		816,245		796,275
Time deposits	1,352,654		1,147,709		1,133,684		1,110,532		1,083,475
Total deposits	3,975,559		3,443,631		3,421,778		3,446,962		3,315,634
Short-term borrowings
Federal Funds purchased	40,000		170,000		181375		—		54,000
Customer repurchase agreements	221,911		220,124		196,635		195,375		198,219
Long-term debt	4,053		16,495		16,495		16,495		16,495
Other liabilities	55,797		58,526		54,346		49,306		45,426
Total Liabilities	4,297,320		3,908,776		3,870,629		3,708,138		3,629,774


Stockholders' Equity
Preferred stock	—		—		—		—		—
Common stock	47,619		47,619		47,619		47,619		47,619
Capital surplus	170,790		140,450		140,091		140,547		140,960
Retained earnings	485,967		484,017		471,515		457,650		444,481
Cost of common stock in treasury	(87,002)		(136,783)		(136,520)		(137,420)		(124,909)
Accumulated other comprehensive loss:
Unrealized gain (loss) on securities available-for-sale	(8,611)		(18,244)		(13,918)		(11486)		(611)
Underfunded pension liability	(5,158)		(5,033)		(5,033)		(5,033)		(5,033)
Total Accumulated Other Comprehensive Loss	(13,769)		(23,277)		(18,951)		(16,519)		(5,644)
Total Stockholders' Equity	603,605		512,026		503,754		491,877		502,507
Total Liabilities and Stockholders' Equity	$	4,900,925	$	4,420,802	$	4,374,383	$	4,200,015	$	4,132,281

Regulatory Capital
Total CET 1 capital	$	492,526	$	457,580	$	444,869	$	430,044	$	430,154
Total tier 1 capital	496,526		473,580		460,869		446,044		446,154
Total risk-based capital	512,801		490,307		478,255		464,936		465,292
Total risk-weighted assets	3,267,357		2,871,241		2,871,561		2,851,330		2,842,453


	December 31,		September 30,		June 30,		March 31,		December 31,
	2018		2018		2018		2018		2017

Residential real estate ⁽¹⁾	$	1,657,306	$	1,485,823	$	1,472,916	$	1,465,215	$	1,468,278
Home equity - junior liens	153,273		143,540		139,245		138,477		139,499
Commercial and industrial	286,395		213,815		213,687		204,592		208,484
Commercial real estate ⁽²⁾	1,432,492		1,268,052		1,294,489		1,296,304		1,277,576
Consumer	51,287		31,869		31,137		29,570		29,162
DDA overdrafts	6,328		3,598		3,994		3,523		4,411
Gross Loans	$	3,587,081	$	3,146,697	$	3,155,468	$	3,137,681	$	3,127,410

Construction loans included in:
(1) - Residential real estate loans	$	21,834	$	17,628	$	21,662	$	26,610	$	25,270
(2) - Commercial real estate loans	37,869		24,110		28,567		30,857		28,871


Secondary Mortgage Loan Activity
Mortgage loans originated	$	5,910	$	3,417	$	3,263	$	2,606	$	2,593
Mortgage loans sold	4,392		3,590		3,137		2,874		2,975
Mortgage loans gain on loans sold	102		86		84		79		79


	Three Months Ended																					Twelve Months Ended
	December 31,			September 30,			June 30,			March 31,			December 31,			December 31,			December 31,
	2018			2018			2018			2018			2017			2018			2017
Allowance for Loan Losses
Balance at beginning of period	$	16,311		$	16,876		$	18,381		$	18,836		$	19,554		$	18,836		$	19,730

Charge-offs:
Commercial and industrial	(9)			—			(385)			(339)			(250)			(733)			(400)
Commercial real estate	(20)			(74)			(118)			(157)			(156)			(369)			(720)
Residential real estate	(218)			(244)			(96)			(124)			(342)			(682)			(1,637)
Home equity	—			(108)			(33)			(78)			(147)			(219)			(403)
Consumer	(209)			(206)			(255)			(99)			(13)			(769)			(60)
DDA overdrafts	(725)			(704)			(636)			(636)			(725)			(2,701)			(2,714)
Total charge-offs	(1,181)			(1,336)			(1,523)			(1,433)			(1,633)			(5,473)			(5,934)

Recoveries:
Commercial and industrial	528			147			1476			2			1			2,153			58
Commercial real estate	194			166			149			223			20			732			112
Residential real estate	92			116			53			106			8			367			294
Home equity	—			—			—			—			—			—			45
Consumer	36			25			59			46			17			166			63
DDA overdrafts	386			344			345			420			447			1,495			1,463
Total recoveries	1236			798			2082			797			493			4,913			2,035

Net charge-offs	55			(538)			559			(636)			(1140)			(560)			(3,899)
Provision for (recovery of) acquired loans	—			(27)			(13)			—			122			(40)			161
Provision for loan losses	(400)			—			(2051)			181			300			(2,270)			2,845
Balance at end of period	$	15,966		$	16,311		$	16,876		$	18,381		$	18,836		$	15,966		$	18,836

Loans outstanding	$	3,587,081		$	3,146,697		$	3,155,468		$	3,137,681		$	3,127,410
Allowance as a percent of loans outstanding	0.45		%	0.52		%	0.53		%	0.59		%	0.60		%
Allowance as a percent of non-performing loans	107.8		%	142.1		%	127.6		%	189.9		%	178.4		%

Average loans outstanding	$	3,252,934		$	3,149,320		$	3,138,146		$	3,133,804		$	3,110,084		$	3,168,825		$	3,082,448
Net charge-offs (annualized) as a percent of average loans outstanding	(0.01)		%	0.07		%	(0.07)		%	0.08		%	0.15		%	0.02		%	0.13		%


	December 31,			September 30,			June 30,			March 31,			December 31,
	2018			2018			2018			2018			2017
Nonaccrual Loans
Residential real estate	$	4,275		$	3,029		$	3,783		$	3,331		$	2,814
Home equity	138			—			168			135			168
Commercial and industrial	1676			818			863			1,063			1,345
Commercial real estate	8,461			7,599			7,707			5,061			5,970
Consumer	1			1			557			—			—
Total nonaccrual loans	14,551			11,447			13,078			9,590			10,297
Accruing loans past due 90 days or more	257			35			145			91			262
Total non-performing loans	14,808			11,482			13,223			9,681			10,559
Other real estate owned	4,608			4,259			3,636			3,912			3,585
Total non-performing assets	$	19,416		$	15,741		$	16,859		$	13,593		$	14,144

Non-performing assets as a percent of loans and other real estate owned	0.54		%	0.50		%	0.53		%	0.43		%	0.45		%

Past Due Loans
Residential real estate	$	9,991		$	4,657		$	5,998		$	5,641		$	6,718
Home equity	1275			468			583			616			851
Commercial and industrial	497			187			624			61			692
Commercial real estate	585			934			402			1,520			2086
Consumer	295			39			34			21			42
DDA overdrafts	488			582			525			432			575
Total past due loans	$	13,131		$	6,867		$	8,166		$	8,291		$	10,964

Total past due loans as a percent of loans outstanding	0.37		%	0.22		%	0.26		%	0.26		%	0.35		%

Troubled Debt Restructurings ("TDRs") (period-end)
Accruing:
Residential real estate	$	22,863		$	20,414		$	20,424		$	20,786		$	21,005
Home equity	3,025			2,941			3,156			3,015			3,047
Commercial and industrial	98			108			119			125			135
Commercial real estate	8,205			8,231			8,279			8,324			8,381
Consumer	—			—			—			—			—
Total accruing TDRs	$	34,191		$	31,694		$	31,978		$	32,250		$	32,568


	Three Months Ended
	December 31, 2018										September 30, 2018								December 31, 2017
	Average				Yield/		Average				Yield/		Average				Yield/
	Balance		Interest		Rate		Balance		Interest		Rate		Balance		Interest		Rate
Assets:
Loan portfolio ⁽¹⁾:
Residential real estate ⁽²⁾	$	1,683,389	$	18,681	4.40	%	$	1,618,829	$	17,653	4.33	%	$	1,608,509	$	16,321	4.03	%
Commercial, financial, and agriculture ⁽²⁾	1,526,651		18,335		4.76	%	1,494,666		18,460		4.90	%	1,468,701		15,360		4.15	%
Installment loans to individuals ^{(2), (3)}	42,894		745		6.89	%	35,825		584		6.47	%	32,874		588		7.10	%
Previously securitized loans ⁽⁴⁾	***		212		***		***		175		***		***		260		***
Total loans	3,252,934		37,973		4.63	%	3,149,320		36,872		4.64	%	3,110,084		32,529		4.15	%
Securities:
Taxable	602,966		5,023		3.31	%	554,157		4,216		3.02	%	526,645		3,797		2.86	%
Tax-exempt ⁽⁵⁾	92,833		922		3.94	%	90,596		888		3.89	%	91,886		1,064		4.59	%
Total securities	695,799		5,945		3.39	%	644,753		5,104		3.14	%	618,531		4,861		3.12	%
Deposits in depository institutions	141,246		623		1.75	%	210,994		940		1.77	%	31,060		35		0.45	%
Total interest-earning assets	4,089,979		44,541		4.32	%	4,005,067		42,916		4.25	%	3,759,675		37,425		3.95	%
Cash and due from banks	54,367						49,933						65,636
Premises and equipment, net	74,430						72,733						73,109
Goodwill and intangible assets	93,096						78,294						78,679
Other assets	181,246						178,540						169,008
Less: Allowance for loan losses	(16,780)						(17,247)						(20,981)
Total assets	$	4,476,338					$	4,367,320					$	4,125,126

Liabilities:
Interest-bearing demand deposits	$	822,087	$	787	0.38	%	$	778,639	$	526	0.27	%	$	702,614	$	167	0.09	%
Savings deposits	846,162		802		0.38	%	816,597		537		0.26	%	797,311		313		0.16	%
Time deposits ⁽²⁾	1,208,415		5,067		1.66	%	1,141,461		4,434		1.54	%	1,079,179		3,462		1.27	%
Short-term borrowings	263,022		1,060		1.60	%	350,832		1435		1.62	%	296,139		522		0.70	%
Long-term debt	14,743		200		5.38	%	16,495		239		5.75	%	16,495		201		4.83	%
Total interest-bearing liabilities	3,154,429		7,916		1.00	%	3,104,024		7,171		0.92	%	2,891,738		4,665		0.64	%
Noninterest-bearing demand deposits	734,066						697,485						681,554
Other liabilities	48,543						50,093						42,896
Stockholders' equity	539,300						515,718						508,938
Total liabilities and
stockholders' equity	$	4,476,338					$	4,367,320					$	4,125,126
Net interest income			$	36,625					$	35,745					$	32,760
Net yield on earning assets					3.55	%					3.54	%					3.46	%

(1) For purposes of this table, non-accruing loans have been included in average balances and the following amounts (in thousands) of loan fees have been included in interest income:

Loan fees			$	221					$	1,365					$	175



(2) Included in the above table are the following amounts (in thousands) for the accretion of the fair value adjustments related to the acquisitions of Virginia Savings Bancorp ("Virginia Savings"), Community Financial Corporation ("Community") and American Founders Banks, Inc. ("AFB"):
Residential real estate	$	57	$	110	$	126
Commercial, financial, and agriculture	449		157		438
Installment loans to individuals	2		3		27
	$	508	$	270	$	591

(3) Includes the Company’s consumer and DDA overdrafts loan categories.
(4) Effective January 1, 2012, the carrying value of the Company's previously securitized loans was reduced to $0.
(5) Computed on a fully federal tax-equivalent basis assuming a tax rate of approximately 21% for the periods ending December 31, 2018 & September 30, 2018 and 35% for the period ending December 31, 2017.


	Twelve Months Ended
	December 31, 2018										December 31, 2017
	Average				Yield/		Average				Yield/
	Balance		Interest		Rate		Balance		Interest		Rate
Assets:
Loan portfolio ⁽¹⁾:
Residential real estate ⁽²⁾	$	1,629,950	$	69,765	4.28	%	$	1,598,579	$	63,649	3.98	%
Commercial, financial, and agriculture ⁽²⁾	1,501,665		68,981		4.59	%	1,450,144		58,482		4.03	%
Installment loans to individuals ^{(2), (3)}	37,210		2,349		6.31	%	33,725		2,275		6.75	%
Previously securitized loans ⁽⁴⁾	***		960		***		***		1,346		***
Total loans	3,168,825		142,055		4.48	%	3,082,448		125,752		4.08	%
Securities:
Taxable	559,125		17,337		3.1	%	492,783		14,387		2.92	%
Tax-exempt ⁽⁵⁾	91,572		3,598		3.93	%	89,341		4,163		4.66	%
Total securities	650,697		20,935		3.22	%	582,124		18,550		3.19	%
Deposits in depository institutions	122,761		1,666		1.36	%	27,142		85		0.31	%
Total interest-earning assets	3,942,283		164,656		4.18	%	3,691,714		144,387		3.91	%
Cash and due from banks	47,562						85,473
Premises and equipment, net	73,196						73,540
Goodwill and intangible assets	82,119						78,881
Other assets	176,109						170,312
Less: Allowance for loan losses	(17,906)						(20,246)
Total assets	$	4,303,363					$	4,079,674

Liabilities:
Interest-bearing demand deposits	$	792,765	$	2,114	0.27	%	$	705,412	$	643	0.09	%
Savings deposits	820,474		2,133		0.26	%	832,512		1311		0.16	%
Time deposits ⁽²⁾	1,142,629		17,149		1.5	%	1,067,181		12,872		1.21	%
Short-term borrowings	265,157		3,415		1.29	%	230,529		1214		0.53	%
Long-term debt	16,053		880		5.48	%	16,495		765		4.64	%
Total interest-bearing liabilities	3,037,078		25,691		0.85	%	2,852,129		16,805		0.59	%
Noninterest-bearing demand deposits	704,438						693,280
Other liabilities	47,762						41,597
Stockholders' equity	514,085						492,668
Total liabilities and
stockholders' equity	$	4,303,363					$	4,079,674
Net interest income			$	138,965					$	127,582
Net yield on earning assets					3.52	%					3.46	%

(1) For purposes of this table, non-accruing loans have been included in average balances and the following amounts (in thousands) of loan fees have been included in interest income:

Loan fees			$	1,856					$	558



(2) Included in the above table are the following amounts (in thousands) for the accretion of the fair value adjustments related to the acquisitions of Virginia Savings Bancorp ("Virginia Savings"), Community Financial Corporation ("Community") and American Founders Banks, Inc. ("AFB"):

Residential real estate	$	407	$	530
Commercial, financial, and agriculture	994		1345
Installment loans to individuals	19		44
Time deposits	—		16
	$	1,420	$	1,935

(3) Includes the Company’s consumer and DDA overdrafts loan categories.
(4) Effective January 1, 2012, the carrying value of the Company's previously securitized loans was reduced to $0.
(5) Computed on a fully federal tax-equivalent basis assuming a tax rate of approximately 21% for the twelve months ended December 31, 2018 and 35% for the twelve months ended December 31 , 2017.


	Three Months Ended																					Twelve Months Ended
	December 31,			September 30,			June 30,			March 31,			December 31,			December 31,			December 31,
	2018			2018			2018			2018			2017			2018			2017
Net Interest Income/Margin
Net interest income ("GAAP")	$	36,431		$	35,558		$	33,573		$	32,647		$	32,389		$	138,209		$	126,125
Taxable equivalent adjustment	194			187			187			187			371			756			1,456
Net interest income, fully taxable equivalent	$	36,625		$	35,745		$	33,760		$	32,834		$	32,760		$	138,965		$	127,581

Average interest earning assets	$	4,089,979		$	4,005,067		$	3,800,435		$	3,791,888		$	3,759,675		$	3,942,283		$	3,691,714

Net Interest Margin	3.55		%	3.54		%	3.56		%	3.51		%	3.46		%	3.52		%	3.46		%
Accretion related to fair value adjustments	(0.05)		%	(0.03)		%	(0.04)		%	(0.03)		%	(0.06)		%	(0.04)		%	(0.05)		%
Net Interest Margin (excluding accretion)	3.50		%	3.51		%	3.52		%	3.48		%	3.39		%	3.49		%	3.40		%

Tangible Equity Ratio (period end)
Equity to assets ("GAAP")	12.32		%	11.58		%	11.52		%	11.71		%	12.16		%
Effect of goodwill and other intangibles, net	(2.30)		%	(1.59)		%	(1.61)		%	(1.68)		%	(1.70)		%
Tangible common equity to tangible assets	10.01		%	9.99		%	9.90		%	10.03		%	10.45		%

Return on tangible equity ("GAAP")	9.60		%	18.92		%	19.94		%	16.66		%	8.99		%	16.21		%	13.13		%
Impact of effective tax rate decrease on deferred taxes	—		%	—		%	—		%	—		%	6.57		%	—		%	1.63		%
Impact of merger related expenses	9.23		%	0.29		%	—		%	—		%	—		%	2.43		%	—		%
Return on tangible equity, excluding extraordinary items	18.83		%	19.21		%	19.94		%	16.66		%	15.56		%	18.63		%	14.75		%

Return on assets ("GAAP")	0.96		%	1.90		%	2.00		%	1.69		%	0.94		%	1.63		%	1.33		%
Impact of effective tax rate decrease on deferred taxes	—		%	—		%	—		%	—		%	0.68		%	—		%	0.17		%
Impact of merger related expenses	0.92		%	0.02		%	—		%	—		%	—		%	0.24		%	—		%
Return on Assets, excluding extraordinary items	1.88		%	1.92		%	2.00		%	1.69		%	1.62		%	1.87		%	1.50		%

Effective Income Tax Rate
Effective tax rate ("GAAP")	19.8		%	21.3		%	20.3		%	20.0		%	60.8		%	20.5		%	40.2		%
Impact of FIN 48 adjustments	2.97		%	—		%	—		%	—		%	1.34		%	0.45		%	0.36		%
Impact of effective tax rate decrease on deferred taxes	—		%	—		%	—		%	—		%	(28.69)		%	—		%	(7.79)		%
Effective tax rate, excluding FIN 48 and impact of effective tax rate decrease on deferred taxes	22.8		%	21.3		%	20.3		%	20.0		%	33.4		%	20.9		%	32.7		%


Non-Accruing
Residential real estate	$	658	$	175	307		$	256	$	84
Home equity	5		—		40		40		50
Commercial and industrial	—		—		—		—		—
Commercial real estate	—		—		—		—		—
Consumer	—		—		—		—		—
Total non-accruing TDRs	$	663	$	175	$	347	$	296	$	134

Total TDRs	$	34,854	$	31,869	$	32,325	$	32,546	$	32,702