-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SEaBUq5ZFyn5cv9BbNL+v27LRnS3xsuAlysw5QQ0jv9Hwmvgyepk7pLKRZb5D0Z1 xKGIDA5R7hrajM6xQfm3ug== 0001127264-02-000007.txt : 20020414 0001127264-02-000007.hdr.sgml : 20020414 ACCESSION NUMBER: 0001127264-02-000007 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20020123 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020130 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CITY HOLDING CO CENTRAL INDEX KEY: 0000726854 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 550619957 STATE OF INCORPORATION: WV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-11733 FILM NUMBER: 02521988 BUSINESS ADDRESS: STREET 1: 25 GATEWATER ROAD STREET 2: P O BOX 7520 CITY: CHARLESTON STATE: WV ZIP: 25313 BUSINESS PHONE: 3047691100 MAIL ADDRESS: STREET 1: 25 GATEWATER ROAD STREET 2: P O BOX 7520 CITY: CHARLESTON STATE: WV ZIP: 25313 8-K 1 city_8k.txt FORM 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): January 23, 2002 CITY HOLDING COMPANY (Exact name of registrant as specified in its charter) West Virginia 0-17733 55-0619957 ------------- ------- ---------- (State or other jurisdiction of (Commission File No.) (IRS Employer incorporation or organization) Identification Number) 25 Gatewater Road Charleston, West Virginia, 25313 (Address of principal executive officers) (304) 769-1100 (Registrant's telephone number, including area code) Not applicable (Former name, former address and former fiscal year, if changed since last report) Item 5. Other Events On January 23, 2002, City Holding Company ("the Company") issued a news release, attached as Exhibit 99, announcing the Company's earnings for the fourth quarter of 2001. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (a) Financial Statements None (b) Pro Forma Financial Information None (c) Exhibits 99 News Release issued on January 23, 2002 Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CITY HOLDING COMPANY Date: January 30, 2002 By: /s/ Michael D. Dean ---------------------------------- Michael D. Dean Senior Vice President - Finance, Chief Accounting Officer and Duly Authorized Officer EX-99 3 ex_99.txt PRESS RELEASE Exhibit 99 NEWS RELEASE For Immediate Release January 23, 2002 For Further Information Contact: Jerry Francis, President & CEO (304) 769-1101 City Holding Company Announces Fourth Quarter Results and Earnings Turnaround Charleston, West Virginia - City Holding Company, "the Company" (NASDAQ:CHCO), a $2.1 billion bank holding company headquartered in Charleston, today announced net income for the fourth quarter of 2001 of $7.6 million, or $0.45 per share, compared with a net loss of $41.8 million, or a loss of $2.47 per share, in the fourth quarter of 2000. These were the first positive earnings reported by the Company since the second quarter of 2000. During the fourth quarter of 2001, the Company completed the sale of its' California banking affiliates. The Company received $23 million in proceeds from the sale that were used to completely pay off the Company's debt with another financial institution. As a result of the sale, the Company's total assets decreased by $195 million, loan balances decreased by $149 million, and deposit balances decreased by $175 million. The Company recorded a pre-tax gain on the sale of $4.7 million. During 2001, the California banking franchises contributed net interest income of $6.8 million and net income of $1.8 million. This divestiture completed the Company's goal of returning to its core banking franchise in West Virginia. Excluding the book gain recorded on the sale of the California banks, after-tax net income would have been $4.8 million, or $0.29 per share for the fourth quarter. Also after excluding the gain, the return on assets during the fourth quarter was 0.86%, the return on equity was 13.3%, and the efficiency ratio was 68.1%. For the twelve months ended December 31, 2001, the Company recorded a loss of $8.0 million, or $0.47 per share, excluding the effect of a change in accounting. This compares to a reported loss of $38.4 million, or $2.27 per share, during 2000. As previously announced, the Company recorded a $18.0 million after-tax charge on April 1, 2001, in conjunction with the adoption of new accounting guidance (EITF 99-20) related to its retained interests in securitized loans. As a result of the cumulative effect of the accounting change, the Company had a net loss during 2001 of $26.0 million, or $1.54 per share. "The Company entered 2001 with significant challenges", stated Jerry Francis, President and CEO of City Holding Company and its primary subsidiary City National Bank of West Virginia (the "Bank"). "The bank's primary regulator, the Office of the Comptroller of the Currency ("OCC") had entered into a formal agreement with the Bank's Board in June of 2000 requiring the Board and Management to take steps to address problems in the bank's loan portfolio and other operating practices. There were concerns about the quality of the loan portfolio, and the Company was burdened by unsuccessful ventures into various non-core activities including two banking subsidiaries in California, an Internet Service Provider ("ISP"), a printing and direct mail company, mortgage origination units in California, Atlanta and Maryland, a collections company in Dallas, and a mortgage servicing business. The Company's operating expenses were significantly above peer levels; it had a portfolio of problem loans; and there was insufficient revenue. The price of the Company's common shares at the end of 2000 had fallen to $5.75. The prospects for returning the Company to a stable and profitable position were not clear." "We ended 2001 a changed Company. The Board and Management take great pride in the accomplishments that have been achieved across the Company through the extraordinary efforts of all our officers and staff. With the Board's full support, management and staff have taken dramatic action to address difficulties arising out of previous business strategies and transactions that provide to be unprofitable for the company. These difficulties included loan quality problems, ventures beyond the traditional business focus of the Company, and associated operational problems that arose within the Company. We have sold the bank's ISP, the printing and direct mail company, and the Company's two banking subsidiaries in California. We exited the mortgage servicing business, and continued the process, begun in 2000, to cease originating mortgages outside the West Virginia and contiguous markets. We have improved service charge revenue to a level commensurate with our competitors and worked to identify opportunities to operate more efficiently." "As we begin a new year, we believe that City Holding Company has turned the corner. We anticipate stronger and steadier performance during 2002. We continue to have challenges in managing the bank's problem loans and in achieving high levels of operating efficiency. But, we believe that the organization now has the will, direction, and the resources to get the job done. We have evaluated the risk inherent in the Bank's loan portfolio, and believe that we have adequately provided for probable losses within our Allowance for Loan Losses. We have identified strategies to bring our operating expenses into line with other community banks of our size and structure. Our net interest income is strong and non-interest income (primarily branch service charges, trust fees, and insurance revenues) is at a high and sustainable level. The Provision for Loan Losses and operating expenses remain higher than our peers, but are issues that we can, and will, continue to address during 2002. Given the Company's financial performance in the fourth quarter, and based upon our assumptions regarding such things as loan quality and the default rate on the Company's retained interests in securitized mortgages, the Company believes that it should be able to achieve earnings per share of $1.25 to $1.50 during 2002." "The year has been rewarding for holders of common shares of City Holding Company. Common shares of City Holding Company closed the year at $12.04, after hitting a high of $13.40 on December 26th. At a price of $12.04, this represents 110% appreciation in 2001 for our loyal shareholders. As a Board and management team, we hope to continue to earn and reward the confidence that our shareholders have placed in us. " "We believe that West Virginia offers the Company significant opportunity to operate a strong deposit-focused franchise, and we look forward to competing aggressively to increase our market share in what we believe are key markets and products. Unlike our other large market-share competitors, City National is truly a community bank with its roots firmly embedded in West Virginia, and its focus now appropriately re-directed to individuals and business within our markets." Credit Quality During the fourth quarter of 2001, the Company recorded a $1.8 million Provision for Loan Losses. For the year ended December 31, 2001, the Provision for Loan Losses was $32.2 million. Net Charge-offs during the fourth quarter were $8.3 million, and $22.1 million for the year. The Allowance for Loan Losses ("ALLL") increased from $40.6 million at December 31, 2000 to $48.6 million at December 31, 2001. At December 31, 2001 the ALLL represented 3.50% of average loans outstanding compared to an ALLL of 2.06% of average loans outstanding at December 31, 2000. The ALLL to average loan ratio increased during the fourth quarter due to the sale of the California subsidiaries, which had an ALLL of $2.1 million and loans of $147.4 million. In fact, the ALLL to average loan ratio for City National Bank remained flat during the fourth quarter. The Net Charge offs "NCO" to average loans outstanding for the year 2001 were 1.26% as compared to .61% for the full year 2000. Net Charge-offs during 2001 were $13.0 million in commercial lending, $3.6 million in mortgage, and $5.5 million in consumer installment lending. During the fourth quarter, the Bank sold four of its largest commercial loans that were deemed to pose significant credit risk to the Company. These loans had outstanding balances of $17.6 million, resulting in a charge-off of $3.5 million. Of these loans, $2.4 million were non-accruing, and $15.4 million were performing. Despite significant charge-offs, non-performing loans remain at high levels. The Bank also elected to charge-off all loans managed as commercial relationships (including some real-estate mortgage loans managed by commercial lenders) with outstanding balances less than $60,000 that were more than 90 days past due. This is consistent with the Bank's treatment of past due installment loans. As a result, charge-offs during the fourth quarter were relatively high. While the ALLL as a percent of average loans outstanding is high compared to other banks, management believes that the ALLL correctly reflects the risk inherent in the Bank's loan portfolio as demonstrated by the level of charge-offs and the level of non-performing loans ("NPL's"). For December 31, 2001, the ratio of non-performing loans to total loans and Other Real Estate Owned ("OREO") was 2.47% compared to 1.21% at December 31, 2000. Managing problem loans will continue to be one of the Company's highest priorities for 2002. To that end, Management has retained the services of a team of commercial lenders with strong loan workout experience. Their efforts will be devoted to reducing the Bank's levels of problem loans through remedial action to restructure credits, loan sales, and other efforts to remove problem loans from the Bank's balance sheet. The Company recognizes that the current weakness in the U.S.economy poses a threat to the credit quality of bank's loan portfolios, and that no assurance can be given that the ALLL is sufficient to provide for unforeseen developments in the economy. However, management believes that West Virginia's economy is less sensitive to the current recessionary trends, and believes that the Bank's ALLL is sufficient given what is currently known about the Bank's loan portfolio and customer base. Net Interest Income The Company recorded fully taxable net interest income of $24.6 million in the fourth quarter of 2001, compared to $21.2 million in the fourth quarter of 2000, an increase of $3.4 million or 16%. For the year ended December 31, 2001, fully taxable net interest income was $92.9 million, compared to $91.6 million for 2000, an increase of $1.3 million. Accruals on the Bank's retained interests in securitized loans accounted for $2.6 million of the increase in the fourth quarter and $7.4 million of the increase for the full year. In accordance with the adoption of new accounting guidance (EITF 99-20) on April 1, 2001, the Bank reinstituted the accrual of interest income on its retained interests using the effective yield method. As a result, the Bank accrued interest at a rate of 10.40% and 15.12% for the twelve and three month periods ending December 31, 2001, respectively. Fully taxable net interest income increased $0.8 million in the fourth quarter of 2001 compared to the fourth quarter of 2000 excluding the impact of the accrual on the retained interests, and despite a decrease in the quarterly average loan balances of 22%. This increase in net interest income despite smaller balance sheet size can be attributed to lower interest rates in the later part of 2001, which in turn, allowed management to tightly control rates paid on certain depository accounts. Further, the decrease in loan balances allowed management to eliminate reliance on brokered deposits and significantly reduce outstanding CD balances that were added at high rates of interest during 2000. As a result of reduced funding costs and the accrual on the Bank's retained interests in securitized loans, the Bank's net interest margin increased substantially from 3.42% in the fourth quarter of 2000 to 4.67% in the fourth quarter of 2001. For the year ended December 31, 2001, fully taxable net interest income decreased by $6.0 million excluding the impact for the accrual of income on the retained interests. This decline in net interest income for 2001 can be attributed to the decline in loan balances outstanding as loan balances were down, on average, 11% during 2001. The net interest margin increased from 3.66% during 2000 to 4.12% during 2001 due to the reasons noted above for the fourth quarter increase. Balance Sheet Trends Total assets at December 31, 2001 were $2.116 billion, compared with $2.672 billion at December 31, 2000. Net loan balances outstanding decreased from $1.928 billion at December 31, 2000 to $1.342 billion at December 31, 2001, a decrease of $586 million or 30%. $147 million of the decline in net loan balances can be attributed to the sale of the California banking subsidiaries. Between December 31, 2000 and December 31, 2001 residential real estate loans were down $262 million or 29%, commercial real estate loans were down $68 million or 19%, other commercial loans were down $139 million or 49%, installment loans were down $94 million or 43%, and indirect installment loans were down $49 million or 36%. During this period, only home equity loans and credit cards were up, $31 million or 47%, and $2 million respectively. Allowing loan balances to decline has been part of the Company's strategic plan for several reasons. First, credit quality has been less than acceptable in some broad lending areas such as installment lending, indirect lending and commercial lending. Secondly, the Company's exit from the mortgage banking business impacted the Bank's ability to generate residential mortgage loans. Third, the bank's liquidity position during 2000 was a primary concern for the OCC. Liquidity has improved dramatically since 2000 due to decreases in loan balances outstanding, which has in turn allowed the Bank to virtually eliminate its reliance on brokered deposits and other borrowed funds. Total deposits were $1.691 bllion at December 31, 2001 compared to $2.084 billion at December 31, 2000, a decline of $393 million or 19%. Of this amount, $175 million can be directly attributed to the sale of the California banking subsidiaries. The remaining decrease in deposit balances came from the non-renewal of certificates of deposit that were at high rates of interest. The run-off of these very high cost deposits was part of the plan that has improved liquidity without significantly impacting net interest income. Checking and Savings deposit balances were down at December 31, 2001 by $18 million or 2% from December 31, 2000. However, the checking and savings deposit balances at the California banks totaled $66 million at the time of the sale. Retained Interests in Securitized Loans Between 1997 and 1999, the company originated and securitized $760 million in 125% loan to value second mortgages in six separate pools. The Company retained an interest in the final cash flows associated with the underlying mortgages in these pools with the earliest cash flows associated with each pool being attributed to the purchasers of the securitized loan pools. At November 30, 2001, the outstanding principal balances of the mortgages securitized was $378.4 million. The outstanding obligation to the purchasers of the priority claims was $268.8 million. As a result, the Company has an interest in $109.6 million in mortgage balances outstanding. However, to the extent that defaults occur within these portfolios, the Company will receive less than the full amount. The Company determines the value of the retained interests using assumptions regarding default rates, prepayment rates, and an appropriate discount rate for assets of similar characteristics (which was established at 14%). At December 31, 2001 the Company estimates the fair value of these assets to be $77.7 million, compared to the book value of $71.3 million. On April 1, 2001, the Company recorded an $18.0 million after-tax charge, in conjunction with the adoption of new accounting guidance (EITF 99-20) related to its retained interests in these securitized loans. During the first quarter of 2001, the Company had increased its projected cumulative default assumptions due to the economic forecasts released during the first quarter and the completion of the Company's sale of the loan servicing responsibilities for its securitized loans to an independent third part. As a result, the value of the retained interests decreased and upon adopting EITF 99-20, the unrealized losses on the retained interests was reflected as a cumulative effect adjustment due to a change in accounting in the Company's Consolidated Statement of Income. EITF 99-20 requires the bank to accrete the excess of the estimated future cash flows over the retained interests' carrying value as interest income over the life of the investment using the effective yield method. Therefore, the loans were accruing at the rate of 15.12% during the fourth quarter, rather than the 14% accrual rate established at April 1, 2001. It should be noted that no cash has been received by the Company for these assets. Their value is accrued toward the expectation of when, and how much, cash will be received in the future, once priority claims are satisfied. At present the Company estimates that it will receive its first amount of cash on one of the outstanding pools in March of 2003. Were the estimated value of the retained interests to fall below the book value of the assets, the bank would be required, under EITF 99-20, to immediately reduce the book value of the assets to their estimated fair value. Given that these loans are geographically dispersed throughout the United States, and given the economic recession currently being experienced, there can be no assurances regarding when, or how much, cash will eventually be received for these assets. However, at December 31, 2001, management believes that its assumptions were appropriate given the information available regarding default rates and prepayment rates on the six individual pools outstanding. Non-Interest Income Non-Interest Income in the fourth quarter of 2001 was $13.4 million, and included a gain on the sale of the California banks of $4.7 million. This compares to $5.7 million during the same period in 2000, which included investment security losses of $5.0 million. Non-interest income for the year ended December 31, 2001 was $42.9 million, compared to $41.0 million during 2000 despite the significant decline in non-interest income from the mortgage banking business. Beginning in 2000, the Company began an exit of out-of-market mortgage origination and servicing activities that drove much of the Company's non-interest revenue. Overall, mortgage banking revenues were $17.7 million in 2000, but only $4.0 million in 2001. Given the dramatic shift in the Company's business, it is difficult to compare non-interest income between 2000 and 2001. However, it is much easier to focus on changes in individual sources of non-interest income. With the decline in mortgage banking revenue, non-interest revenue is driven primarily by service charges associated with retail deposit accounts. Service charge revenue was up significantly during the fourth quarter of 2001 to $5.8 million as compared to $2.9 million for the same period in 2000, a 200% increase, and up to $17.9 million for the year ended December 31, 2001 compared to $10.8 million for the year ended December 31, 2000, a 166% increase. During 2001, the Bank implemented policy changes that resulted in substantially higher collection rates of service charges and fees and initiated fee increases to match competitor pricing. Other non-interest income includes trust and insurance revenues. During 2001, the Bank recognized income on investment security gains and losses of $2.4 million. This gain was primarily capital gains on an investment in a mutual fund oriented toward producing capital gains to offset a capital loss carry-forward that the Company has from a prior period. Following the significant increases in service charges, in the fourth quarter of 2001, non-interest income, excluding the gain on the sale of the California banks, represented 27% of total revenues, in line with peer bank averages. As previously mentioned, increasing these revenues was a primary objective of management during 2001. Non-Interest Expenses The non-core banking activities of the Company historically produced significant non-interest income, but also entailed considerable non-interest expense. Management spent a significant amount of time and energy to reduce these expenses and bring the level of non-interest expense closer to peer average. As a result, non-interest expense fell in the fourth quarter to $22.5 million from the $68.3 million recorded in the fourth quarter of 2000. However, special charges were recorded in the fourth quarter of 2000 related to the following: $27.4 million to write-down the Company's Specialty Finance Loan Origination division, the internet service provider, and the direct mail/printing division; a $14 million write-down on the California banking subsidiaries; and a $5 million write down on an investment in two Small Business Investment Corporations. For the full year ended December 31, 2001, non-interest expenses fell to $114 million from $159 million for the year ended December 31, 2000, a 28% decrease. For the fourth quarter of 2001, salaries & other employee benefits were down $1.0 million or 9.4% from the fourth quarter of 2000. There were unusual expenses associated with severances paid to employees of the California subsidiaries during the fourth quarter ($0.6 million) and the cost of paying certain employees to whom the Company had become obligated for unused vacation time ($0.3 million). During the third quarter, the Company embarked upon a project to establish "Best Practice" operating procedures and policies throughout the Company, allowing the Company to staff at levels comparable to similarly sized institutions. Excluding reductions in staffing achieved as a result of exiting out-of-market and non-bank operations, this effort resulted in the elimination of approximately 300 positions through attrition and a severance program. The Bank took a $2.2 million charge for severance costs related to approximately 160 employees severed in August and September. The elimination of these positions was expected to produce savings of $7 million annually. These expense reductions are reflected in the level of salary and benefit expense incurred in the fourth quarter 2001. For the fourth quarter of 2001, occupancy expense was down $0.4 million or 16% from the fourth quarter of 2000. During 2001, the Bank consolidated its operations in Charleston and exited several operational facilities and branch bank locations. For the fourth quarter of 2001, depreciation decreased $1.5 million or 45% from the fourth quarter of 2000. Depreciation expense was down markedly due to disposal of equipment no longer used in the Company's operations during 2001, and the sale of the internet, direct mail and other subsidiaries. For the fourth quarter of 2001, telecommunication expense was down $0.4 million from the fourth quarter of 2000 due to the discontinuation of the Company's activities in California and the extensive communication expenses that were entailed in those operations. For the fourth quarter of 2001 the Company incurred no advisory fees for loan production office expenses as compared to $0.6 million incurred in the fourth quarter of 2000. These expenses were eliminated as the bank refocused on the core West Virginia banking market and exited the mortgage banking business. For the fourth quarter of 2001, the Company incurred $1.5 million in professional fees and litigation expense, similar to the amount incurred in the fourth quarter of 2000. For the year, the Company incurred $9.2 million in professional fees and litigation expenses compared to $4.9 million for 2000. Professional fees and litigation expenses include accounting fees, legal fees, actual and estimated legal settlements, and other consulting fees. As previously disclosed, the Company accrued $3 million of litigation expense in the third quarter to reflect developments that increased the probability of an unfavorable outcome related to operations the Company has either sold or closed. The Company also incurred significant expenses associated with assessing and implementing necessary steps to improve the Company's operations throughout 2001. For the fourth quarter of 2001, the Company incurred $0.5 million in loss on disposal and impairment of fixed assets, as compared with $4.4 million during the fourth quarter of 2000. For the year ended December 31, 2001, the Company incurred a loss of $4.0 million on the disposal and impairment of fixed assets as compared to $4.8 million during 2000. These fixed assets included facilities written down to market value as well as equipment used in business lines that the Company had chosen to exit. For the fourth quarter of 2001, the Company incurred $0.3 million on repossessed asset losses and expenses as compared to $1.2 million during the fourth quarter of 2000. For the year ended December 31, 2001, these expenses totaled $2.6 million, flat against the prior year. These expenses are associated with either the costs of managing, or losses on sale, of real estate, autos, and other consumer collateral acquired through repossession. Management has made every effort to correctly value assets at the time that they are repossessed with losses being charged to the ALLL so there will not be significant losses on the sale of real estate or other repossesses property in the future. For the fourth quarter of 2001, the Company incurred insurance and regulatory expense of $0.5 million, similar in the amount recorded in the fourth quarter of 2000. FDIC insurance costs account for approximately 50% of these expenses, and are high due to the bank's formal agreement with the OCC. In the best case, the Company does not expect that its FDIC insurance costs will reach normal levels until 2003. Other expenses were $3.8 million in the fourth quarter of 2001, as compared to $6.4 million in the fourth quarter of 2000. For the full year of 2001, Other expenses were $19.9 million as compared to $21.5 million in 2000. Examples of Other Expenses include the costs of depository losses, expenses of originating loans, travel and entertainment, amortization of intangibles, and data processing expenses. Amortization of Goodwill during 2001 was $0.6 million. Capitalization At December 31, 2001 the Company's Tier I Capital ratio was 9.2%, the Total Risk based Capital Ratio was 12.9%, and the Leverage Ratio was 6.9%. As such, capital ratios of both the Company and its lead bank, City National Bank of West Virginia ("City National"), remain above regulatory requirements to be classified as "well capitalized." Effective January 1, 2002 the Company is subject to new regulatory capital requirements related to the bank's investment in retained interest in securitized mortgages. Had the Company been required to comply with those capital ratio's at December 31, 2001 both the Bank and the Company would have continued to have been well capitalized. The Company estimates that it would have had a Tier I Capital ratio of 7.6%, a Total Risk-based Capital Ratio of 11.4%, and a Leverage Ratio of 5.6%. It is the policy of the Federal Reserve (which regulates the Company) that dividends (common or preferred) should be funded by net income available to common shareholders over the past year. It is the policy of the OCC (which regulates the Bank) that approval by the Comptroller shall be required if dividends are proposed which exceed the current year's net income plus the retained net income of the prior two years. Given the Company's significant losses in 2000 and 2001, OCC policy restricts dividends through at least the end of 2002 without the approval of the Comptroller. The Company believes that if it can demonstrate stable and sustainable net income during 2002, it can achieve regulatory approval in order to pay preferred shareholders the accumulated cumulative dividends at some time during 2002. . The Company has previously announced that dividends on the Trust Preferred Securities will not be paid in April. Regulatory Environment The Company's principal banking subsidiary, City National of West Virginia, remains under a formal agreement with the Office of the Comptroller of the Currency ("OCC"). The Company believes that the bank continues to make strong progress is meeting and complying with the OCC's requirements which are now principally focused on commercial lending policies and procedures. The most significant impact of the formal agreement on the Company and its shareholders are the higher costs associated with deposit insurance, the staff burden of regulatory compliance, and limitations on capital management strategies such as dividend payments. For your information and assistance in analyzing the financial performance of City Holding Company over the prior 4 quarters, we provide the following summary of unusual pre-tax revenues or expenses previously disclosed in the financial statements: 2000: Fourth Quarter o $27.4 million to write-down the Company's Specialty Finance Loan Origination division, the internet service provider, and the direct mail/printing division. o $14 million write-down on the California banking subsidiaries o $ 5 million write down on an investment in two Small Business Investment Corporations 2001: First Quarter o $2.2 million fair value adjustment to the Company's retained interest in securitized loans o $1.9 million recognizing a contractual obligation to FNMA to repurchase a loan servicing portfolio previously acquired and then sold. (The Company has been able to partially offset this expense with excess servicing fees paid to FNMA that have been taken into income in subsequent quarters. However, given the company's exit from the loan servicing business, there can be no assurance that the Company will be able to continue to have income from this particular source). o $2.0 million to reflect the estimated market value of the direct mail/marketing business. o $1.3 million in severance costs for departing executive management. o $0.5 million in miscellaneous unusual expenses 2001: Second Quarter o $30 million pre-tax charge in conjunction with the required adoption of new accounting guidance (EITF 99-20) related to its retained interest in securitized loans. o a $3.4 million recovery on the sale of the Company's Internet service provider and direct mail divisions against the book value of those assets, which had been previously written down to their estimated fair values. o a $1.6 million write-down on facilities that the Company will exit o a $1.4 million write-off of software 2001: Third Quarter o severance charges of $2.2 million o legal reserve of $3 million o a $1.3 million charge for the repurchase of loans sold or securitized without credit recourse upon which the Company is obliged to compensate the purchaser for deficiencies in documentation previously warranted by the Company. 0 A $0.6 million write-down in Other Real Estate Owned to reflect current market values in a weakening economy. 2001: Fourth Quarter o Net Income included a book gain on the sale of two California banking subsidiaries of $4.7 million. City Holding Company is the parent company of City National Bank of West Virginia. In addition to the Bank, City National Bank operates CityInsurance Professionals, an insurance agency offering a full range of insurance products and services. 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 forward-looking statements involve certain risk and uncertainties, including a variety of factors that may cause the actual results of the Company to differ materially from the anticipated results or other expectations expressed in such forward-looking statements. Factors that might cause such a difference include, but are not limited to: (1) the formal agreement with the Comptroller of the Currency may have effects on the Company's business that are not currently anticipated, including effects on operating results; (2) competitive pressures may increase significantly; (3) general economic or business conditions, either nationally or in the states or regions in which the companies do business may be less favorable than expected, resulting in, among other things, a deterioration in credit quality or a reduced demand for credit; (4) legislative or regulatory changes may adversely affect the businesses in which the companies are engaged; (5) changes may occur in the securities markets; (6) the Allowance for Loan Losses may prove inadequate and additional provision may be required in subsequent periods; (7) assumptions made regarding the Company's retained interests in securitized mortgages may prove to be inaccurate resulting in the need to take additional charges to write down those assets; (8) the Company may incur expenses associated with risks of unforeseen litigation. CITY HOLDING COMPANY AND SUBSIDIARIES Financial Highlights (unaudited)
- ---------------------------------------------------------- ------------------------------------ -------------- Three Months Ended December 31, December 31, Percent 2001 2000 Change ------------------ ----------------- -------------- Earnings ($000s except per share): Net Interest Income (FTE) $24,600 $21,232 15.9% Net Income 7,595 (41,766) N/A Earnings per Share 0.45 (2.47) N/A Earnings per Diluted Share 0.45 (2.47) N/A - ---------------------------------------------------------- ------------------ ----------------- -------------- Key Ratios (percent): Return on Average Assets 1.34% (6.12)% N/A Return on Average Equity 20.93 (84.04) N/A Net Interest Margin 4.67 3.42 36.5 Efficiency Ratio 60.88 218.07 (72.1) Average Shareholders' Equity to Average Assets 6.42 7.28 (11.8) Risk-Based Capital Ratios (a): Tier I 9.22% 9.05% 1.9 Total 12.89% 11.61% 11.0 - ---------------------------------------------------------- ------------------ ----------------- -------------- Common Stock Data: Cash Dividends Declared per Share - $0.08 (100.0) Book Value per Share 8.67 9.68 (10.4) Market Price per Share: High 13.40 7.25 84.8 Low 9.25 4.88 89.5 End of Period 12.04 5.75 109.39 Price/Earnings Ratio (b) 6.69 N/A N/A (a) December 31, 2001 risk based capital ratios are estimated. (b) December 31, 2001 price/earnings ratio computed based on annualized fourth quarter 2001 earnings. - ---------------------------------------------------------- ------------------------------------ -------------- Twelve Months Ended December 31, December 31, Percent 2001 2000 Change ------------------ ----------------- ------------ Earnings ($000s except per share): Net Interest Income (FTE) $92,863 $91,637 1.3% Net Income (26,000) (38,373) N/A Earnings per Share (1.54) (2.27) N/A Earnings per Diluted Share (1.54) (2.27) N/A - ---------------------------------------------------------- ------------------ ----------------- -------------- Key Ratios (percent): Return on Average Assets (1.07)% (1.38)% 22.5 Return on Average Equity (16.85) (19.22) 12.3 Net Interest Margin 4.12 3.66 12.6 Efficiency Ratio 86.98 117.46 (25.9) Average Shareholders' Equity to Average Assets 6.34 7.19 (11.8) - ---------------------------------------------------------- ------------------ ----------------- -------------- Common Stock Data: Cash Dividends Declared per Share - $0.44 (100.0) Market Price per Share: High 13.40 16.19 (17.2) Low 5.38 4.88 10.2 - ---------------------------------------------------------- ------------------ ----------------- --------------
CITY HOLDING COMPANY AND SUBSIDIARIES 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 -------------- --------------- -------------- --------------- -------------- --------------- 1996 (a) $14.63 $14.83 $13.83 $14.21 $19.77 $26.25 1997 (a) 13.90 14.41 16.18 16.56 25.75 43.25 1998 (a) 17.18 18.72 18.56 13.09 30.00 51.00 1999 13.07 12.85 12.80 11.77 12.50 32.75 2000 11.76 11.72 11.72 9.68 4.88 16.19 2001 8.82 8.70 8.37 8.67 5.38 13.40 - ------------------------------------------------ --------------- -------------- --------------- -------------- Earnings per Share Quarter Ended Year - to - March 31 June 30 September 30 December 31 Date --------------- -------------- --------------- -------------- --------------- 1996 (a) $ 0.44 $ 0.46 $ 0.45 $ 0.46 $ 1.81 1997 (a) 0.47 0.52 0.57 0.47 2.03 1998 (a) 0.48 0.49 0.56 (0.89) 0.31 1999 0.31 0.42 0.14 (0.49) 0.37 2000 0.24 0.02 (0.05) (2.47) (2.27) 2001 (0.34) (1.19) (0.46) 0.45 (1.54) - ------------------------------------------------ --------------- -------------- --------------- -------------- Earnings per Diluted Share Quarter Ended Year - to - March 31 June 30 September 30 December 31 Date --------------- -------------- --------------- -------------- --------------- 1996 (a) $ 0.44 $ 0.46 $ 0.45 $ 0.46 $ 1.81 1997 (a) 0.47 0.52 0.57 0.46 2.02 1998 (a) 0.48 0.48 0.56 (0.89) 0.31 1999 0.31 0.42 0.14 (0.49) 0.37 2000 0.24 0.02 (0.05) (2.47) (2.27) 2001 (0.34) (1.19) (0.46) 0.45 (1.54)
(a) Per share amounts reported in 1996, 1997, and through September 30, 1998 are as previously reported by City Holding Company and have not been restated to include the operations of Horizon Bancorp, Inc. CITY HOLDING COMPANY AND SUBSIDIARIES Consolidated Statements of Income (unaudited) ($ in 000's)
Three Months Ended December 31 2001 2000 --------------------------------- Interest Income Interest and fees on loans $32,104 $43,992 Interest on investment securities: Taxable 3,989 4,600 Tax-exempt 770 1,104 Interest on retained interests 2,628 48 Interest on federal funds sold 394 49 --------------------------------- Total Interest Income 39,885 49,793 Interest Expense Interest on deposits 11,988 22,166 Interest on short-term borrowings 1,128 4,698 Interest on long-term debt 497 287 Interest on trust preferred securities 2,087 2,004 --------------------------------- Total Interest Expense 15,700 29,155 --------------------------------- Net Interest Income 24,185 20,638 Provision for loan losses 1,820 17,030 --------------------------------- Net Interest Income After Provision for Loan Losses 22,365 3,608 Non-Interest Income Investment securities gains (losses) 565 (5,017) Service charges 5,759 2,878 Mortgage loan servicing fees 88 2,668 Net origination fees on junior-lien mortgages - 120 Gain on sale of loans 160 904 Other income 6,837 4,125 --------------------------------- Total Non-Interest Income 13,409 5,678 Non-Interest Expense Salaries and employee benefits 9,175 10,130 Occupancy and equipment 2,200 2,633 Depreciation 1,805 3,283 Advertising 528 508 Telecommunications 765 1,144 Office supplies 725 539 Postage and delivery 713 629 Loan production office advisory fees - 571 Professional fees and litigation expense 1,547 1,516 Loss on disposal and impairment of fixed assets 469 4,355 Repossessed asset losses and expenses 326 1,168 Insurance and regulatory 507 588 Retained interest impairment - - Goodwill impairment - 34,832 Other expenses 3,784 6,431 --------------------------------- Total Non-Interest Expense 22,544 68,327 --------------------------------- Income (Loss) Before Income Taxes and Cumulative Effect of Accounting Change 13,230 (59,041) Income Tax Expense (Benefit) 5,635 (17,275) --------------------------------- Income (Loss) Before Cumulative Effect of Accounting Change 7,595 (41,766) Cumulative effect of accounting change, net of tax - - --------------------------------- Net Income (Loss) $7,595 $ (41,766) --------------------------------- Basic Income (Loss) per Share Income (Loss) before cumulative effect of accounting change $ 0.45 $ (2.47) Cumulative effect of accounting change - - --------------------------------- Net Income (Loss) $ 0.45 $ (2.47) --------------------------------- Diluted Income (Loss) per Share Income (Loss) before cumulative effect of accounting change $ 0.45 $ (2.47) Cumulative effect of accounting change - - --------------------------------- Net Income (Loss) $ 0.45 $ (2.47) --------------------------------- Average Common Shares Outstanding: Basic 16,888 16,888 --------------------------------- Diluted 16,961 16,888 ---------------------------------
CITY HOLDING COMPANY AND SUBSIDIARIES Consolidated Statements of Income (unaudited) ($ in 000's)
Twelve Months Ended December 31 2001 2000 -------------------------------------- Interest Income Interest and fees on loans $150,036 $180,513 Interest on investment securities: Taxable 15,518 17,389 Tax-exempt 3,340 4,608 Interest on retained interests 7,430 185 Interest on federal funds sold 1,156 217 -------------------------------------- Total Interest Income 177,480 202,912 Interest Expense Interest on deposits 67,543 82,756 Interest on short-term borrowings 8,604 18,996 Interest on long-term debt 2,147 3,987 Interest on trust preferred securities 8,121 8,017 -------------------------------------- Total Interest Expense 86,415 113,756 -------------------------------------- Net Interest Income 91,065 89,156 Provision for loan losses 32,178 25,480 -------------------------------------- Net Interest Income After Provision for Loan Losses 58,887 63,676 Non-Interest Income Investment securities gains (losses) 2,382 (5,015) Service charges 17,905 10,778 Mortgage loan servicing fees 383 16,962 Net origination fees on junior-lien mortgages 598 2,331 Gain (loss) on sale of loans 3,039 (1,596) Other income 18,545 17,573 -------------------------------------- Total Non-Interest Income 42,852 41,033 Non-Interest Expense Salaries and employee benefits 42,758 47,957 Occupancy and maintenance 9,377 11,363 Depreciation 8,777 12,291 Advertising 2,465 3,788 Telecommunications 4,054 5,133 Office supplies 2,234 1,764 Postage and delivery 2,563 2,006 Loan production office advisory fees 2,198 4,021 Professional fees and litigation expense 9,248 4,901 Loss on disposal and impairment of fixed assets 3,951 4,805 Repossessed asset losses and expenses 2,557 2,541 Insurance and regulatory 2,134 1,908 Retained interest impairment 2,182 - Goodwill impairment - 34,832 Other expenses 19,907 21,502 -------------------------------------- Total Non-Interest Expense 114,405 158,812 -------------------------------------- Loss Before Income Taxes and Cumulative Effect of Accounting Change (12,666) (54,103) Income tax benefit (4,651) (15,730) -------------------------------------- Loss Before Cumulative Effect of Accounting Change (8,015) (38,373) Cumulative effect of accounting change, net of tax (17,985) - -------------------------------------- Net Loss $(26,000) $ (38,373) -------------------------------------- Basic Loss per Share Loss before cumulative effect of accounting change $ (0.47) $(2.27) Cumulative effect of accounting change (1.07) - -------------------------------------- Net Loss $ (1.54) $(2.27) -------------------------------------- Diluted Loss per Share Loss before cumulative effect of accounting change $ (0.47) $(2.27) Cumulative effect of accounting change (1.07) - -------------------------------------- Net Loss Income $ (1.54) $(2.27) -------------------------------------- Average Common Shares Outstanding: Basic 16,888 16,882 -------------------------------------- Diluted 16,888 16,882 --------------------------------------
CITY HOLDING COMPANY AND SUBSIDIARIES Consolidated Statements of Changes in Stockholders' Equity (unaudited) ($ in 000's)
- ------------------------------------------------------------------ ------------------------------------------ Three Months Ended December 31, 2001 December 31, 2000 --------------------- -------------------- Balance at September 30 $141,363 $197,905 Net Income (Loss) 7,595 (41,766) Other Comprehensive Income: Change in Unrealized (Loss) Gain on Securities Available for Sale (2,609) 3,713 Change in Unrealized Gains on Retained Interests in Securitized Mortgages - 4,956 Cash Dividends Declared - (1,351) --------------------- -------------------- Balance at December 31 $146,349 $163,457 --------------------- -------------------- - ------------------------------------------------------------------ ------------------------------------------ Twelve Months Ended December 31, 2001 December 31, 2000 --------------------- -------------------- Balance at January 1 $163,457 $198,542 Net (Loss) (26,000) (38,373) Other Comprehensive Income: Change in Unrealized Gains on Securities Available for Sale 2,407 5,566 Change in Unrealized Gains on Retained Interests in Securitized Mortgages 6,485 4,956 Cash Dividends Declared - (7,426) Issuance of Contingently-issuable Shares of Common Stock - 192 --------------------- -------------------- Balance at December 31 $146,349 $163,457 --------------------- -------------------- - ------------------------------------------------------------------ --------------------- --------------------
CITY HOLDING COMPANY AND SUBSIDIARIES Condensed Consolidated Quarterly Statements of Income (unaudited) ($000's)
Quarter Ended ------------- -------------- -------------- ------------- ------------- Dec. 31 Sept. 30 June 30 March 31 Dec. 31 2001 2001 2001 2001 2000 ------------- -------------- -------------- ------------- ------------- Interest Income $39,885 $ 44,198 $ 45,953 $ 47,444 $49,793 Taxable Equivalent Adjustment 415 432 460 491 594 ------------- -------------- -------------- ------------- ------------- Interest Income (FTE) 40,300 44,630 46,413 47,935 50,387 Interest Expense 15,700 20,496 23,383 26,836 29,155 ------------- -------------- -------------- ------------- ------------- Net Interest Income 24,600 24,134 23,030 21,099 21,232 Provision for Loan Losses 1,820 14,348 10,280 5,730 17,030 ------------- -------------- -------------- ------------- ------------- Net Interest Income After Provision for Loan Losses 22,780 9,786 12,750 15,369 4,202 Non-Interest Income (a) 13,409 8,209 12,520 8,714 363 Non-Interest Expense 22,544 30,574 28,410 32,877 63,012 ------------- -------------- -------------- ------------- ------------- Income (Loss) Before Income Taxes 13,645 (12,579) (3,140) (8,794) (58,447) Income Taxes 5,635 (5,216) (1,530) (3,540) (17,275) Taxable Equivalent Adjustment 415 432 460 491 594 ------------- -------------- -------------- ------------- ------------- Net Income (Loss) 7,595 (7,795) (2,070) (5,745) (41,766) Cumulative Effect of Change in Accounting Principle, Net - - (17,985) - - ------------- -------------- -------------- ------------- ------------- Net Income (Loss) $7,595 $(7,795) $(20,055) $(5,745) $(41,766) ------------- -------------- -------------- ------------- ------------- (a) Includes a gain of approximately $4.67 million recognized on the sale of Del Amo Savings Bank and Frontier State Bank completed on November 30, 2001. - ------------------------------------- ------------- -------------- -------------- ------------- ------------- Earnings per Share 0.45 (0.46) (1.19) (0.34) (2.47) Diluted Earnings per Share 0.45 (0.46) (1.19) (0.34) (2.47) Cash Dividends Declared per Share - - - - 0.08 - ------------------------------------- ------------- -------------- -------------- ------------- ------------- Average Common Shares (000's): Outstanding 16,888 16,888 16,888 16,888 16,888 Diluted 16,961 16,888 16,888 16,888 16,888 ------------- -------------- -------------- ------------- ------------- Net Interest Margin 4.67% 4.35% 4.05% 3.49% 3.42% ------------- -------------- -------------- ------------- ------------- - ------------------------------------- ------------- -------------- -------------- ------------- -------------
CITY HOLDING COMPANY AND SUBSIDIARIES Non-Interest Income and Non-Interest Expense (unaudited) ($ in 000's)
Quarter Ended ------------- ------------- ------------- ------------- ------------- Dec. 31 Sept. 30 June 30 March 31 Dec. 31 2001 2001 2001 2001 2000 ------------- ------------- ------------- ------------- ------------- Non-Interest Income: Service charges $ 5,759 $ 4,851 $ 4,361 $ 2,934 $ 2,878 Mortgage loan servicing fees 88 50 213 32 2,668 Net origination fees on junior-lien mortgage loans - - 58 540 120 Gain (loss) on sale of loans 160 311 1,363 1,205 904 Other income 6,837 2,422 6,104 3,182 4,125 ------------- ------------- ------------- ------------- ------------- Subtotal 12,844 7,634 12,099 7,893 10,695 Investment security gains (losses) 565 575 421 821 (5,017) ------------- ------------- ------------- ------------- ------------- Total Non-Interest Income $13,409 $ 8,209 $12,520 $ 8,714 $5,678 ------------- ------------- ------------- ------------- ------------- Non-Interest Expense: Salaries and employee benefits $ 9,175 $ 11,897 $ 10,235 $ 11,451 $ 10,130 Occupancy and maintenance 2,200 2,218 2,491 2,468 2,633 Depreciation 1,805 2,079 2,416 2,477 3,283 Advertising 528 568 772 597 508 Telecommunications 765 685 1,081 1,523 1,144 Office supplies 725 468 368 673 539 Postage and delivery 713 775 656 419 629 Loan production office advisory - 2 889 1,307 571 fees Professional fees 1,547 5,249 1,162 1,290 1,516 Loss on disposal and impairment of fixed assets 469 322 3,160 - 4,355 Repossessed asset losses and 326 1,312 486 433 1,168 expenses Insurance and regulatory 507 581 503 543 588 Retained interest impairment - - - 2,182 - Goodwill impairment - - - - 34,832 Other Expenses 3,784 4,418 4,191 7,514 6,431 ------------- ------------- ------------- ------------- ------------- Total Non-Interest Expense $22,544 $30,574 $28,410 $32,877 $ 68,327 ------------- ------------- ------------- ------------- ------------- Employees 840 905 1,252 1,284 1,352 Branch Locations 55 59 59 62 62
CITY HOLDING COMPANY AND SUBSIDIARIES Consolidated Balance Sheets ($ in 000's)
December 31 December 31 2001 2000 ------------------------------------------ (Unaudited) Assets Cash and due from banks $ 81,827 $ 87,990 Federal funds sold 88,500 2,638 ------------------------------------------ Cash and Cash Equivalents 170,327 90,628 Securities available for sale, at fair value 383,552 385,462 Loans: Residential real estate 631,103 892,734 Home equity 98,100 66,723 Commercial real estate 284,759 353,026 Other commercial 145,989 284,844 Installment 125,236 218,825 Indirect 86,474 135,589 Credit card 18,594 16,418 ------------------------------------------ Gross Loans 1,390,255 1,968,159 Allowance for loan losses (48,635) (40,627) ------------------------------------------ Net Loans 1,341,620 1,927,532 Loans held for sale - 17,900 Retained interests 71,271 85,206 Premises and equipment 43,178 56,924 Accrued interest receivable 12,422 18,242 Other assets 93,925 89,606 ------------------------------------------ Total Assets $2,116,295 $2,671,500 ------------------------------------------ Liabilities Deposits: Noninterest-bearing $ 284,649 $ 271,358 Interest-bearing: Demand deposits 392,258 394,615 Savings deposits 272,885 301,844 Time deposits 741,503 1,116,124 ------------------------------------------ Total Deposits 1,691,295 2,083,941 Short-term borrowings 127,204 248,766 Long-term debt 29,328 34,832 Corporation-obligated mandatorily redeemable capital securities of subsidiary trusts holding solely subordinated debentures of City 87,500 87,500 Holding Company Other liabilities 34,619 53,004 ------------------------------------------ Total Liabilities 1,969,946 2,508,043 Stockholders' Equity Preferred stock, par value $25 per share: authorized - 500,000 shares: none issued Common stock, par value $2.50 per share: 50,000,000 shares authorized; 16,892,913 shares issued and outstanding at December 31, 2001 and 2000, including 4,979 in treasury 42,232 42,232 Capital surplus 59,174 59,174 Retained earnings 41,152 67,152 Cost of common stock in treasury (136) (136) Accumulated other comprehensive income (loss) 3,927 (4,965) ------------------------------------------ Total Stockholders' Equity 146,349 163,457 ------------------------------------------ Total Liabilities and Stockholders' Equity $2,116,295 $2,671,500 ------------------------------------------
CITY HOLDING COMPANY AND SUBSIDIARIES Loan Portfolio (unaudited) ($ in 000s)
Dec. 31 Sept. 30 June 30 March 31 Dec. 31 2001 (a) 2001 2001 2001 2000 --------------- --------------- --------------- --------------- --------------- Residential real estate $ 631,103 $ 767,018 $ 817,082 $ 866,194 $ 892,734 Home equity 98,100 71,350 66,728 66,440 66,723 Commercial real estate 284,759 334,503 343,425 344,877 353,026 Other commercial 145,989 221,822 257,344 272,229 284,844 Installment 125,236 153,220 176,223 196,943 218,825 Indirect 86,474 98,109 110,279 123,203 135,589 Credit Card 18,594 16,912 15,234 15,416 16,418 --------------- --------------- --------------- --------------- --------------- Gross Loans $1,390,255 $1,662,934 $1,786,315 $1,885,302 $1,968,159 --------------- --------------- --------------- --------------- ---------------
(a) On November 30, 2001, the Company completed the sale of Del Amo Savings Bank and Frontier State Bank, including approximately $149 million in outstanding loan balances. CITY HOLDING COMPANY AND SUBSIDIARIES Consolidated Average Balance Sheets, Yields, and Rates (unaudited) ($ in 000's)
Three months ended December 31, 2001 2000 Average Yield/ Average Yield/ Balance Interest Rate Balance Interest Rate ---------------------------------------------------------------- Assets Loan portfolio (1) $1,552,323 $32,104 8.27% $1,997,658 $43,992 8.81% Loans held for sale - - - 17,660 Securities: Taxable 354,324 3,989 4.50 298,933 4,600 6.16 Tax-exempt (2) 61,405 1,185 7.72 89,480 1,698 7.59 ---------------------------------------------------------------- Total securities 415,729 5,174 4.98 388,413 6,298 6.49 Retained interest in securitized loans 69,542 2,628 15.12 76,969 48 0.25 Federal funds sold 69,204 394 2.28 3,608 49 5.43 ---------------------------------------------------------------- Total earning assets 2,106,798 $40,300 7.65% 2,484,308 $50,387 8.11% Cash and due from banks 56,656 71,144 Bank premises and equipment 45,119 65,498 Other assets 107,460 137,753 Less: allowance for possible loan losses (56,015) (26,958) ---------------------------------------------------------------- Total assets $2,260,018 $2,731,745 ---------------------------------------------------------------- Liabilities Demand deposits $ 413,932 $ 888 0.86% $ 402,172 $ 3,138 3.12% Savings deposits 292,197 1,167 1.60 292,815 2,634 3.60 Time deposits 846,938 9,933 4.69 1,126,690 16,394 5.82 Short-term borrowings 135,288 1,128 3.34 293,061 4,698 6.41 Long-term debt 29,511 497 6.74 26,840 287 4.28 Trust preferred securities 90,900 2,087 9.18 87,500 2,004 9.16 ---------------------------------------------------------------- Total interest-bearing liabilities 1,808,766 15,700 3.47 2,229,078 29,155 5.23 Demand deposits 273,946 253,224 Other liabilities 32,175 50,656 Stockholders' equity 145,131 198,787 ---------------------------------------------------------------- Total liabilities and stockholders' equity $2,260,018 $2,731,745 ---------------------------------------------------------------- Net interest income $24,600 $21,232 ---------------------------------------------------------------- Net yield on earning assets 4.67% 3.42% ----------------------------------------------------------------
CITY HOLDING COMPANY AND SUBSIDIARIES Consolidated Average Balance Sheets, Yields, and Rates (unaudited) ($ in 000's)
Twelve months ended December 31, 2001 2000 Average Yield/ Average Yield/ Balance Interest Rate Balance Interest Rate ---------------------------------------------------------------- Assets Loan portfolio (1) $1,758,834 $148,974 8.47% $1,969,785 $171,473 8.71% Loans held for sale 12,942 1,062 8.21 82,228 9,040 10.99 Securities: Taxable 303,746 15,518 5.11 278,584 17,389 6.24 Tax-exempt (2) 66,688 5,138 7.70 91,663 7,089 7.73 ---------------------------------------------------------------- Total securities 370,434 20,656 5.58 370,247 24,278 6.61 Retained interest in securitized loans 71,459 7,430 10.40 76,958 185 0.24 Federal funds sold 39,935 1,156 2.89 3,755 217 5.78 ---------------------------------------------------------------- Total earning assets 2,253,604 $179,278 7.96% 2,502,973 $205,393 8.21% Cash and due from banks 60,441 73,282 Bank premises and equipment 51,785 64,003 Other assets 111,947 164,040 Less: allowance for possible loan losses (45,428) (27,279) ---------------------------------------------------------------- Total assets $2,432,349 $2,777,019 ---------------------------------------------------------------- Liabilities Demand deposits $ 416,281 $ 9,161 2.20% $ 408,681 $ 12,514 3.06% Savings deposits 291,072 7,300 2.51 312,940 10,792 3.45 Time deposits 962,671 51,082 5.31 1,083,228 59,450 5.49 Short-term borrowings 173,974 8,604 4.95 309,330 18,996 6.14 Long-term debt 31,854 2,147 6.74 69,508 3,987 5.74 Trust preferred securities 88,592 8,121 9.17 87,500 8,017 9.16 ---------------------------------------------------------------- Total interest-bearing liabilities 1,964,444 86,415 4.40 2,271,187 113,756 5.01 Demand deposits 274,220 248,979 Other liabilities 39,373 57,151 Stockholders' equity 154,312 199,702 ---------------------------------------------------------------- Total liabilities and stockholders' equity $2,432,349 $2,777,019 ---------------------------------------------------------------- Net interest income $92,863 $91,637 ---------------------------------------------------------------- Net yield on earning assets 4.12% 3.66% ----------------------------------------------------------------
CITY HOLDING COMPANY AND SUBSIDIARIES Analysis of Risk-Based Capital (unaudited) ($ in 000's)
Dec. 31 Sept. 30 June 30 March 31 Dec. 31 2001 (a) 2001 2001 2001 2000 ------------- ------------- ------------- ------------- ------------- Tier I Capital: Stockholders' Equity $146,349 $141,364 $146,874 $148,925 $163,457 Goodwill and Other Intangibles (7,041) (7,430) (7,683) (7,970) (8,243) Unrealized Losses (Gains) (3,927) (6,536) (4,253) 13,752 4,965 Qualifying Trust Preferred Stock 47,474 44,938 47,536 54,220 56,135 Excess Deferred Tax Assets (29,003) (29,718) (35,445) (30,724) - ------------- ------------- ------------- ------------- ------------- Total Tier I Capital $153,852 $142,616 $147,029 $178,203 $216,314 ------------- ------------- ------------- ------------- ------------- - ------------------------------------- ------------- ------------- ------------- ------------- ------------- Total Risk-Based Capital: Tier I Capital $153,852 $142,616 $147,029 $178,203 $216,314 Qualifying Allowance for Loan Losses 21,204 24,440 25,183 28,197 30,021 Qualifying Trust Preferred Stock 40,026 42,562 39,964 33,280 31,365 ------------- ------------- ------------- ------------- ------------- Total Risk-Based Capital $215,082 $209,618 $212,176 $239,680 $277,700 ------------- ------------- ------------- ------------- ------------- Net Risk-Weighted Assets $1,668,897 $1,922,434 $1,994,109 $2,248,329 $2,377,799 ------------- ------------- ------------- ------------- ------------- - ------------------------------------- ------------- ------------- ------------- ------------- ------------- Ratios: Average Stockholders' Equity to Average Assets 6.42% 6.29% 6.10% 6.30% 7.28% Risk-Based Ratios: Tier I Capital 9.22% 7.43% 7.13% 7.91% 9.05% Total Risk-Based Capital 12.89% 10.91% 10.33% 10.64% 11.61% Leverage Capital 6.92% 6.08% 6.07% 6.93% 7.94% ------------- ------------- ------------- ------------- ------------- (a) December 31, 2001 risk-based capital ratios are estimated - ------------------------------------- ------------- ------------- ------------- ------------- ------------- CITY HOLDING COMPANY AND SUBSIDIARIES Intangibles (unaudited) ($ in 000's) As of and for the Quarter Ended Dec. 31 Sept. 30 June 30 March 31 Dec. 31 2001 2001 2001 2001 2000 ------------- ------------- ------------- ------------- ------------- Intangibles, net 7,041 7,430 7,683 7,970 8,243 Intangibles Amortization Expense 230 253 287 273 1,583
CITY HOLDING COMPANY AND SUBSIDIARIES Summary of Loan Loss Experience (unaudited) ($ in 000's)
Quarter Ended --------------------------------------------------------------------- Dec. 31 Sept. 30 June 30 March 31 Dec. 31 2001 2001 2001 2001 2000 ------------- ------------- ------------- ------------- ------------- Balance at beginning of period $57,196 $45,748 $38,848 $40,627 $27,219 Charge-offs: Commercial 5,870 1,823 1,833 5,621 2,195 Real estate - mortgage 1,989 472 886 797 268 Installment 1,582 2,094 1,584 1,789 2,103 ------------- ------------- ------------- ------------- ------------- Total charge-offs 9,441 4,389 4,303 8,207 4,566 Recoveries: Commercial 503 1,003 527 112 520 Real estate - mortgage 241 84 187 43 Installment 362 402 396 399 381 ------------- ------------- ------------- ------------- ------------- Total recoveries 1,106 1,489 923 698 944 ------------- ------------- ------------- ------------- ------------- Net charge-offs 8,335 2,900 3,380 7,509 3,622 Provision for loan losses 1,820 14,348 10,280 5,730 17,030 Balance of institutions sold (2,046) - - - - ------------- ------------- ------------- ------------- ------------- Balance at end of period $48,635 $57,196 $45,748 $38,848 $40,627 ------------- ------------- ------------- ------------- ------------- Loans Outstanding 1,390,255 1,662,934 1,786,315 1,885,302 1,968,159 ------------- ------------- ------------- ------------- ------------- Average Loans Outstanding 1,552,323 1,726,843 1,841,321 1,929,375 1,997,658 ------------- ------------- ------------- ------------- ------------- Allowance as a Percent of Loans Outstanding 3.50% 3.44% 2.56% 2.06% 2.06% ------------- ------------- ------------- ------------- ------------- Net Charge-offs (annualized) as a Percent of Average Loans Outstanding 2.15% 0.67% 0.73% 1.56% 0.73% ------------- ------------- ------------- ------------- -------------
CITY HOLDING COMPANY AND SUBSIDIARIES Summary of Non-Performing Assets (unaudited) ($ in 000's)
Dec. 31 Sept. 30 June 30 March 31 Dec. 31 2001 2001 2001 2001 2000 ------------- ------------- ------------- ------------- ------------- Nonaccrual Loans $23,777 $28,044 $29,787 $16,917 $16,676 Accruing Loans Past Due 90 Days or More 4,915 3,916 6,316 3,172 3,350 Restructured Loans 167 902 483 486 300 ------------- ------------- ------------- ------------- ------------- Total Non-Performing Loans 31,558 32,862 36,586 20,575 20,326 Other Real Estate Owned 2,866 2,836 3,971 3,726 3,488 ------------- ------------- ------------- ------------- ------------- Total Non-Performing Assets $34,424 $35,698 $40,557 $24,301 $23,814 ------------- ------------- ------------- ------------- ------------- Non-Performing Assets as a Percent of Loans and Other Real Estate 2.47% 2.14% 2.27% 1.29% 1.21% Owned ------------- ------------- ------------- ------------- -------------
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