CHARLESTON, W.Va., April 17 /PRNewswire-FirstCall/ -- City Holding Company, "the Company" , a $2.5 billion bank holding company headquartered in Charleston, today announced net income for the first quarter of $12.9 million, or diluted earnings per share of $0.71 compared to $11.7 million, or $0.69 per diluted share in the first quarter of 2005, a 2.9% increase. For the first quarter of 2006, the Company achieved a return on assets of 2.06%, a return on equity of 17.4%, a net interest margin of 4.71%, and an efficiency ratio of 45.3%.
Key components of the increase in net income were increases in net interest income of $3.6 million and non-interest income (principally service charge revenue) of $1.0 million. These increases were partially offset by provision for loan losses of $1.0 million in the first quarter of 2006, as compared to no provision for loan losses in the first quarter of 2005 and non- interest expense of $1.5 million (principally salaries and benefits). Additionally, the Company incurred an expense of $0.3 million in the first quarter of 2006 associated with redemption of some of its outstanding trust preferred securities. Also, during the first quarter of 2005, the Company reported income on bank owned life insurance $0.5 million higher associated with the settlement of an insured claim.
Charles Hageboeck, Chief Executive Officer and President, stated, "I am very pleased with City's continuing success during the first quarter of 2006. The Company's diluted earnings per share increased from $0.69 to $0.71 despite the impact of the provision, lower interest income associated with previously securitized loans, and lower revenues associated with bank owned life insurance. Our net interest income rose by 5.0% exclusive of the loss in net interest income associated with lower previously securitized loan balances and the positive impact from the acquisition of Classic Bancshares, Inc. (Classic), parent company of Classic Bank in Ashland, Kentucky, during the second quarter of 2005. Our net interest margin increased 25 basis points as compared to the first quarter of 2005. Loans and deposits both grew meaningfully in an economic environment that has been somewhat challenging for banks. Branch service charges (excluding the impact of the Classic acquisition) increased approximately 8% as compared to the first quarter of 2005. Non-interest expenses remained flat after considering the impact of the Classic acquisition and the costs associated with early redemption of some of our outstanding trust preferred securities. Asset quality, as measured by non-performing assets remained stable and at very desirable levels as compared to many of our peers. The bank is extremely well capitalized and highly liquid.
"In summary, the Company is performing well against all measures. As a result, our Board of Directors recently approved an increase of 12% in our quarterly dividend to 28 cents per share. This follows an increase in the dividend rate of nearly 14% in 2005 and 10% in 2004. Additionally, the Company used some of its profits to repurchase 300,000 shares of common stock during the first quarter, which will have a positive impact on the earnings of all remaining shareholders. Based on our continued success in the first quarter of 2006, we believe that the Company remains well positioned to maintain our solid performance on behalf of our shareholders throughout the remainder of the year."
Net Interest Income
The Company's tax equivalent net interest income increased $3.6 million, or 16.0%, from $22.5 million during the first quarter of 2005 to $26.1 million during the first quarter of 2005. The increase was attributable to the acquisition of Classic ($2.5 million) as well as a widening of the net interest margin and growth in the Company's traditional loan portfolio. Exclusive of the Classic acquisition, net interest income increased $1.1 million, or 5.0%, from the first quarter of 2005 to the first quarter of 2006. This increase was due primarily to an increase of $112 million, or 8.7%, in the average balances of traditional loans outstanding (residential real estate, home equity, commercial and installment loans) and a 67 basis points increase in the yield on such loans. These increases were partially offset by increased interest expense and a decline in interest income attributable to previously securitized loans. Interest expense increased $1.8 million due to a 51 basis point increase in the rate paid on interest bearing liabilities from the first quarter of 2005. Interest income from previously securitized loans decreased $0.4 million from the first quarter of 2005. This decrease was related to a decrease in the average balance of previously securitized loans from $54.9 million for the quarter ended March 31, 2005, to $28.1 million for the quarter ended March 31, 2006. However, this reduction was partially mitigated as the yield on these loans rose from 22.8% from the first quarter of 2005 to 39.1% for the first quarter of 2006 (see Previously Securitized Loans section for further discussion).
Credit Quality
At March 31, 2006, the Allowance for Loan Losses ("ALLL") was $16.8 million or 1.04% of total loans outstanding and 504% of non-performing loans compared to $16.3 million or 1.22% of loans outstanding and 490% of non- performing loans at March 31, 2005, and $16.8 million or 1.04% of loans outstanding and 402% of non-performing loans at December 31, 2005. As a result of the Company's quarterly analysis of the adequacy of the ALLL, the Company recorded a provision for loan losses of $1.0 million in the first quarter of 2006. The increase in the provision for loan losses from $0.8 million in the fourth quarter of 2005 was due to recent loss trends in the consumer and home equity portfolios within City and national trends. While the Company increased its provision from the fourth quarter of 2005 to the first quarter of 2006, the amount of provision recorded was favorably impacted by continued improvement in the quality of the loan portfolio. Specifically, two problem credits were repaid/reduced during the first quarter. As a result, the amounts applicable to these credits were no longer required, favorably impacting the provision required by $340,000 for the first quarter.
The Company had net charge-offs of $1.0 million for the first quarter of 2006, with depository accounts representing $0.5 million of this total. While charge-offs on depository accounts are appropriately taken against the ALLL, the revenue associated with depository accounts is reflected in service charges and has been steadily growing as the core base of checking accounts has grown. Net charge-offs on installment loans, commercial loans, and real estate loans were $0.2 million, $0.1 million, and $0.2 million, respectively, for the quarter ended March 31, 2006.
Due to a number of strategic initiatives to strengthen the loan portfolio implemented by management in recent years, including tightening credit standards, changing the overall mix of the portfolio to include a higher proportion of real estate secured loans, and identifying and charging off or resolving problem loans, the quality of the Company's loan portfolio remains solid. At March 31, 2006, non-performing assets as a percentage of loans and other real estate owned were 0.24%. Average non-performing assets as a percentage of loans and other real estate owned for the Company's peer group for the most recently reported quarter ended December 31, 2005, was 0.68%. Another contributing factor that has enabled the Company to maintain its allowance at lower levels than peers is the composition of the Company's loan portfolio, which is weighted more toward residential mortgage loans and less toward non-real estate secured commercial loans than its peers. As a result, the Company's ALLL as a percentage of loans outstanding is 1.04% at March 31, 2006, compared to the average of the Company's peer group of 1.21% for the most recently reported quarter. 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 for loan losses that is directionally consistent with changes in asset quality and loss experience.
Non-interest Income
Net of investment securities gains, non-interest income increased $1.0 million, or 8.3%, to $12.4 million in the first quarter of 2006 as compared to $11.4 million in the first quarter of 2005. The largest source of non- interest income is service charges from depository accounts, which increased $1.5 million, or 16.8%, from $8.4 million during the first quarter of 2005 to $9.9 million during the first quarter of 2006. This increase was partially due to the Classic acquisition, which accounted for $0.8 million, as well as an increase in the utilization of services by the Company's expanding customer base. Excluding of the impact of Classic, service charge income increased 7.9% from the first quarter of 2005. The Company also experienced a $0.5 million decrease in bank-owned life insurance as the result of a settlement of an insured claim during the first quarter of 2005.
Non-interest Expenses
Non-interest expenses increased $1.5 million from $16.0 million in the first quarter of 2005 to $17.5 million in the first quarter of 2006. The Classic acquisition accounted for $1.3 million of the increased expenses during the first quarter of 2006. Excluding the impact of the Classic acquisition, non-interest expenses increased by $0.2 million in the first quarter of 2006 as compared to the first quarter of 2005 primarily as a result of a $0.3 million charge related to the redemption of some of its trust preferred securities during the period.
The Company's efficiency ratio improved from 47.4% for the quarter ended March 31, 2005 to 45.3% for the quarter ended March 31, 2006, reflecting ongoing strength in managing expenses while increasing revenues. The average efficiency ratio for the Company's peer group for the most recently reported quarter ended December 31, 2005, was 60.1%.
Balance Sheet Trends
As compared to December 31, 2005, loans have increased $10.3 million at March 31, 2006. The primary reasons for this growth were increases in targeted areas of commercial loans of $13.6 million, home equity loans of $2.8 million and residential real estate loans of $2.6 million. These increases were partially offset by decreases in installment loans of $4.4 million and previously securitized loans of $4.3 million (see discussion below). The Company was successful in increasing residential real estate loans and home equity loans despite the difficulties imposed by the flat yield curve that has resulted in borrowers refinancing into fixed rate mortgages. Total average depository balances increased $21.5 million, or 4.6% on an annualized basis, from the quarter ended December 31, 2005 to the quarter ended March 31, 2006. This growth was primarily in time deposits, which increased $21.4 million from the quarter ended December 31, 2005.
Previously Securitized Loans
Between 1997 and 1999, the Company originated and securitized $760 million in 125% loan to value junior-lien underlying mortgages in six separate pools. The Company had a retained interest in the residual cash flows associated with these underlying mortgages after satisfying priority claims. Principal amounts owed to investors in the securitizations were evidenced by notes that were subject to redemption under certain circumstances. When the notes were redeemed during 2003 and 2004, the Company became the beneficial owner of the mortgage loans and recorded the loans as "Previously Securitized Loans" within the loan portfolio. At March 31, 2006, the Company reported "Previously Securitized Loans" of $25.9 million compared to $50.6 million and $30.3 million at March 31, 2005 and December 31, 2005, respectively, representing a decrease of 48.8% and 14.3%, respectively.
Because the carrying value of the previously securitized loans incorporates discounts for expected prepayment and default rates, the carrying value of the loans is generally less than the contractual outstanding balance of the loans. As of March 31, 2006, the contractual outstanding balances of the mortgages securitized were $43.5 million while the carrying value of these assets was $25.9 million. The difference between the carrying value and the contractual outstanding balance of previously securitized loans is accreted into interest income over the life of the loans. An impairment charge on previously securitized loans would be provided through the Company's provision and allowance for loan losses if the discounted present value of estimated future cash flows declines below the recorded value of previously securitized loans.
The Company estimates the net carrying value of previously securitized loan balances and related interest income to decrease as shown below:
12/31 Balance Annualized Interest Effective
(in millions)* Income (in millions)* Annualized
Yield*
2005 $30.3 $11.4 27 %
2006 19.1 9.6 40 %
2007 13.9 6.7 40 %
2008 10.3 4.9 40 %
2009 7.6 3.6 40 %
* - 2005 amounts are based on actual results. 2006 amounts are based on
actual results through 3/31/06 and estimated amounts for the remainder of
the year. 2007, 2008 and 2009 amounts are based on estimated amounts.
Note: The amounts reflected in the table above require management to make
significant assumptions based on estimated future default, prepayment, and
discount rates. Actual performance could be different from that assumed,
which could result in the actual results being materially different from
the amounts estimated above.
The yield on the previously securitized loans was 39.1% for the quarter ended March 31, 2006, compared to 31.0% for the quarter ended December 31, 2005, and 22.8% for the quarter ended March 31, 2005. The yield on the previously securitized loans has increased due to improved cash flows from default rates being less than previously estimated. The lower default rates resulted from the Company's assumption of the servicing of all of the pool balances during the second quarter of 2005. This favorably impacted the yield realized on the previously securitized loans by eliminating the servicing fees previously being paid to the external servicing agent and increased internal collection efforts that have resulted in enhanced levels of recoveries on previously charged-off loans. Subsequent to our assumption of the servicing of these loans, the Company has averaged net increased cash flows of $465,000 per month. These factors have increased the projected cash flows from the previously securitized loans and the Company now estimates that the yield on these loans will be in the range of 39% to 41% in the future.
Capitalization and Liquidity
One of the Company's strengths is that it is highly profitable while maintaining strong liquidity and capital. With respect to liquidity, the Company's loan to deposit ratio was 82.7% and the loan to asset ratio was 64.0% at March 31, 2006. The Company maintained investment securities totaling 25.1% of assets as of this date. Further, the Company's deposit mix is weighted heavily toward checking and saving accounts that fund 44.0% of assets at March 31, 2006. Time deposits fund 33.4% of assets at March 31, 2006, but very few of these deposits are in accounts that have balances of more than $150,000, reflecting the core retail orientation of the Company.
The Company is also strongly capitalized. Capitalization (as measured by average equity to average assets) was 11.9% for the quarter ended March 31, 2006 as a result of the Company's strong earnings. The Company's tangible equity ratio was 9.2% at March 31, 2006 compared with a tangible equity ratio of 9.5% at March 31, 2005. With respect to regulatory capital, at March 31, 2006, the Company's Leverage Ratio is 10.76%, the Tier I Capital ratio is 15.02%, and the Total Risk-Based Capital ratio is 15.98%. These regulatory capital ratios are significantly above levels required to be considered "well capitalized," which is the highest possible regulatory designation.
Other Events of Interest
On March 29, 2006, the Board approved a 12% increase in the quarterly cash dividend to 28 cents per share payable April 30, 2006 to shareholders of record as of April 15, 2006. During the first quarter of 2006, the Company repurchased 300,572 common shares at a weighted average price of $36.26 as part of a 1 million share repurchase plan authorized by the Board of Directors in June 2005. As a result of these repurchases, the Company's average outstanding shares decreased 110,000 shares during the quarter, providing the Company's shareholders increased earnings capacity as shares repurchased improve earnings per share on the remaining shares outstanding.
On March 27, 2006, the Company opened its new downtown Charleston, West Virginia, banking facility at 10 Hale Street. The new 5,200 square foot facility provides a base for commercial lending, trust and investment management, and executive banking, as well as being a full-service retail banking center.
City Holding Company is the parent company of City National Bank of West Virginia. City National operates 66 branches across West Virginia, Eastern Kentucky and Southern Ohio.
Forward-Looking Information
This news release contains certain forward-looking statements that are included pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such information involves risks and uncertainties that could result in the Company's actual results differing from those projected in the forward-looking statements. Important factors that could cause actual results to differ materially from those discussed in such forward-looking statements include, but are not limited to, (1) the Company may incur additional loan loss provision due to negative credit quality trends in the future that may lead to a deterioration of asset quality; (2) the Company may incur increased charge-offs in the future; (3) the Company may experience increases in the default rates on previously securitized loans that would result in impairment losses or lower the yield on such loans; (4) the Company may continue to benefit from strong recovery efforts on previously securitized loans resulting in improved yields on these assets; (5) the Company could have adverse legal actions of a material nature; (6) the Company may face competitive loss of customers; (7) the Company may be unable to manage its expense levels; (8) the Company may have difficulty retaining key employees; (9) changes in the interest rate environment may have results on the Company's operations materially different from those anticipated by the Company's market risk management functions; (10) changes in general economic conditions and increased competition could adversely affect the Company's operating results; (11) changes in other regulations and government policies affecting bank holding companies and their subsidiaries, including changes in monetary policies, could negatively impact the Company's operating results; and (12) the Company may experience difficulties growing loan and deposit balances. 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.
CITY HOLDING COMPANY AND SUBSIDIARIES
Financial Highlights
(Unaudited)
Three Months Ended
March 31 March 31 Percent
2006 2005 Change
Earnings ($000s, except per
share data):
Net Interest Income (FTE) $26,105 $22,496 16.04%
Net Income 12,866 11,678 10.17%
Earnings per Basic Share 0.71 0.70 1.43%
Earnings per Diluted Share 0.71 0.69 2.90%
Key Ratios (percent):
Return on Average Assets 2.06% 2.11% (2.23)%
Return on Average Equity 17.37% 20.92% (16.97)%
Net Interest Margin 4.71% 4.46% 5.65%
Efficiency Ratio 45.28% 47.36% (4.39)%
Average Shareholders' Equity to
Average Assets 11.87% 10.08% 17.75%
Consolidated Risk Based Capital
Ratios (a):
Tier I 15.02% 15.92% (5.65)%
Total 15.98% 16.99% (5.94)%
Average Tangible Equity to Average
Tangible Assets 9.24% 9.52% (3.00)%
Common Stock Data:
Cash Dividends Declared per Share $0.28 $0.25 12.00%
Book Value per Share 16.16 13.20 22.43%
Tangible Book Value per Share 12.83 12.82 0.03%
Market Value per Share:
High 37.64 36.61 2.81%
Low 35.26 29.01 21.54%
End of Period 36.79 29.54 24.54%
Price/Earnings Ratio (b) 12.95 10.55 22.79%
(a) March 31, 2006 risk-based capital ratios are estimated.
(b) March 31, 2006 price/earnings ratio computed based on annualized
first quarter 2006 earnings.
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
2002 $8.92 $9.40 $9.64 $9.93 $12.04 $30.20
2003 10.10 10.74 11.03 11.46 25.50 37.15
2004 12.09 11.89 12.70 13.03 27.30 37.58
2005 13.20 15.56 15.99 16.14 27.57 39.21
2006 16.16 35.26 37.64
Earnings per Basic Share
Quarter Ended
March 31 June 30 September 30 December 31 Year-to-Date
2002 $0.38 $0.45 $0.53 $0.56 $1.92
2003 0.56 0.73 0.69 0.64 2.63
2004 0.66 0.80 0.66 0.67 2.79
2005 0.70 0.72 0.73 0.72 2.87
2006 0.71 0.71
Earnings per Diluted Share
Quarter Ended
March 31 June 30 September 30 December 31 Year-to-Date
2002 $0.38 $0.45 $0.52 $0.55 $1.90
2003 0.55 0.72 0.68 0.63 2.58
2004 0.65 0.79 0.65 0.66 2.75
2005 0.69 0.71 0.72 0.72 2.84
2006 0.71 0.71
CITY HOLDING COMPANY AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited) ($ in 000s, except per share data)
Three Months Ended March 31,
2006 2005
Interest Income
Interest and fees on loans $29,564 $22,190
Interest on investment securities:
Taxable 7,260 7,646
Tax-exempt 467 435
Interest on deposits in depository
institutions 150 18
Interest on federal funds sold - 4
Total Interest Income 37,441 30,293
Interest Expense
Interest on deposits 9,201 5,868
Interest on short-term borrowings 1,127 577
Interest on long-term debt 1,260 1,585
Total Interest Expense 11,588 8,030
Net Interest Income 25,853 22,263
Provision for loan losses 1,000 -
Net Interest Income After Provision
for Loan Losses 24,853 22,263
Non-Interest Income
Investment securities gains - 3
Service charges 9,862 8,443
Insurance commissions 614 592
Trust and investment management fee
income 566 591
Bank owned life insurance 537 991
Other income 810 824
Total Non-Interest Income 12,389 11,444
Non-Interest Expense
Salaries and employee benefits 8,632 7,920
Occupancy and equipment 1,599 1,475
Depreciation 1,050 944
Professional fees and litigation
expense 395 565
Postage, delivery, and statement
mailings 644 653
Advertising 774 705
Telecommunications 476 473
Bankcard expenses 543 525
Insurance and regulatory 388 366
Office supplies 383 203
Repossessed asset (gains) losses, net
of expenses 4 1
Loss on early extinguishment of debt 282 -
Other expenses 2,327 2,183
Total Non-Interest Expense 17,497 16,013
Income Before Income Taxes 19,745 17,694
Income tax expense 6,879 6,016
Net Income $12,866 $11,678
Basic earnings per share $0.71 $0.70
Diluted earnings per share $0.71 $0.69
Average Common Shares Outstanding:
Basic 18,006 16,605
Diluted 18,067 16,812
CITY HOLDING COMPANY AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
(Unaudited) ($ in 000s)
Three Months Ended
March 31, 2006 March 31, 2005
Balance at January 1 $292,141 $216,080
Net income 12,866 11,678
Other comprehensive income:
Change in unrealized gain on
securities available-for-sale (917) (4,746)
Change in derivative instruments (509) -
Cash dividends declared ($0.28/share) (4,988) -
Cash dividends declared ($0.25/share) - (4,155)
Issuance of 6,700 stock award shares 167 -
Issuance of 4,800 stock award shares - 147
Exercise of 26,875 stock options 357 -
Exercise of 23,350 stock options - 298
Purchase of 300,572 common shares of
treasury (10,914) -
Balance at March 31 $288,203 $219,302
CITY HOLDING COMPANY AND SUBSIDIARIES
Condensed Consolidated Quarterly Statements of Income
(Unaudited) ($ in 000s, except per share data)
Quarter Ended
March 31 Dec. 31 Sept. 30 June 30 March 31
2006 2005 2005 2005 2005
Interest income $37,441 $36,639 $35,910 $32,676 $30,293
Taxable equivalent adjustment 252 269 273 241 233
Interest income (FTE) 37,693 36,908 36,183 32,917 30,526
Interest expense 11,588 11,064 10,290 9,054 8,030
Net interest income 26,105 25,844 25,893 23,863 22,496
Provision for loan losses 1,000 800 600 - -
Net interest income after
provision for loan losses 25,105 25,044 25,293 23,863 22,496
Noninterest income 12,389 13,537 13,012 12,098 11,444
Noninterest expense 17,497 18,339 17,922 16,839 16,013
Income before income taxes 19,997 20,242 20,383 19,122 17,927
Income tax expense 6,879 6,884 6,938 6,532 6,016
Taxable equivalent adjustment 252 269 273 241 233
Net income $12,866 $13,089 $13,172 $12,349 $11,678
Basic earnings per share $0.71 $0.72 $0.73 $0.72 $0.70
Diluted earnings per share 0.71 0.72 0.72 0.71 0.69
Cash dividends declared per
share 0.28 0.25 0.25 0.25 0.25
Average Common Share (000s):
Outstanding 18,006 18,127 18,052 17,268 16,605
Diluted 18,067 18,211 18,238 17,477 16,812
Net Interest Margin 4.71% 4.55% 4.51% 4.42% 4.46%
CITY HOLDING COMPANY AND SUBSIDIARIES
Non-Interest Income and Non-Interest Expense
(Unaudited) ($ in 000s)
Quarter Ended
March 31 Dec. 31 Sept. 30 June 30 March 31
2006 2005 2005 2005 2005
Non-Interest Income:
Service charges $9,862 $10,530 $10,433 $9,685 $8,443
Insurance commissions 614 620 595 545 592
Trust fee income 566 504 468 462 591
Bank owned life insurance 537 691 552 545 991
Other income 810 1,067 959 843 824
Subtotal 12,389 13,412 13,007 12,080 11,441
Investment security gains - 125 5 18 3
Total Non-Interest Income $12,389 $13,537 $13,012 $12,098 $11,444
Non-Interest Expense:
Salaries and employee
benefits $8,632 $8,416 $8,739 $8,404 $7,920
Occupancy and equipment 1,599 1,569 1,687 1,564 1,475
Depreciation 1,050 1,062 1,096 994 944
Professional fees and
litigation expense 395 486 456 514 565
Postage, delivery, and
statement mailings 644 728 670 615 653
Advertising 774 710 764 762 705
Telecommunications 476 560 702 513 473
Bankcard expenses 543 540 512 560 525
Insurance and regulatory 388 380 385 365 366
Office supplies 383 388 327 275 203
Repossessed asset (gains)
losses, net of expenses 4 (28) (35) (16) 1
Loss on early extinguishment
of debt 282 - - - -
Other expenses 2,327 3,528 2,619 2,289 2,183
Total Non-Interest Expense $17,497 $18,339 $17,922 $16,839 $16,013
Employees (Full Time
Equivalent) 764 770 768 767 689
Branch Locations 66 67 67 67 56
CITY HOLDING COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
($ in 000s)
March 31 December 31
2006 2005
(Unaudited)
Assets
Cash and due from banks $52,530 $81,822
Interest-bearing deposits in
depository institutions 29,106 4,451
Cash and cash equivalents 81,636 86,273
Investment securities available-for-
sale, at fair value 580,477 549,966
Investment securities held-to-
maturity, at amortized cost 55,088 55,397
Total investment securities 635,565 605,363
Gross Loans 1,623,126 1,612,827
Allowance for loan losses (16,818) (16,790)
Net loans 1,606,308 1,596,037
Bank owned life insurance 53,505 52,969
Premises and equipment 42,212 42,542
Accrued interest receivable 11,995 13,134
Net deferred tax assets 28,330 27,929
Intangible assets 59,378 59,559
Other assets 18,001 18,791
Total Assets $2,536,930 $2,502,597
Liabilities
Deposits:
Noninterest-bearing $355,525 $376,076
Interest-bearing:
Demand deposits 443,932 437,639
Savings deposits 316,483 302,571
Time deposits 847,838 812,134
Total deposits 1,963,778 1,928,420
Short-term borrowings 156,337 152,255
Long-term debt 93,980 98,425
Other liabilities 34,632 31,356
Total Liabilities 2,248,727 2,210,456
Stockholders' Equity
Preferred stock, par value $25 per
share: 500,000 shares authorized;
none issued - -
Common stock, par value $2.50 per
share: 50,000,000 shares authorized;
18,499,282 shares issued at March 31,
2006 and December 31, 2005 less
662,462 and 395,465 shares in
treasury, respectively 46,249 46,249
Capital surplus 103,727 104,435
Retained earnings 168,625 160,747
Cost of common stock in treasury (20,960) (11,278)
Accumulated other comprehensive
(loss) income:
Unrealized loss on securities
available-for-sale (5,756) (4,839)
Unrealized loss on derivative
instruments (509) -
Underfunded pension liability (3,173) (3,173)
Total Accumulated Other Comprehensive
(Loss) Income (9,438) (8,012)
Total Stockholders' Equity 288,203 292,141
Total Liabilities and Stockholders'
Equity $2,536,930 $2,502,597
CITY HOLDING COMPANY AND SUBSIDIARIES
Loan Portfolio
(Unaudited) ($ in 000s)
March 31 Dec. 31 Sept. 30 June 30 March 31
2006 2005 2005 2005 2005
Residential real
estate $595,093 $592,521 $596,184 $596,893 $463,869
Home equity 304,559 301,728 306,448 307,354 302,262
Commercial,
financial, and
agriculture 643,269 629,670 621,345 584,164 485,549
Installment loans
to individuals 54,287 58,652 63,134 70,904 40,979
Previously
securitized
loans 25,918 30,256 35,599 41,670 50,588
Gross Loans $1,623,126 $1,612,827 $1,622,710 $1,600,985 $1,343,247
CITY HOLDING COMPANY AND SUBSIDIARIES
Consolidated Average Balance Sheets, Yields, and Rates
(Unaudited) ($ in 000s)
Three Months Ended March 31,
2006
Average Yield/ Average
Balance Interest Rate Balance
Assets:
Loan portfolio:
Residential real estate $593,131 $8,380 5.73% $466,011
Home equity 302,265 5,594 7.51% 306,354
Commercial, financial, and
agriculture 635,249 11,293 7.21% 477,462
Installment loans to
individuals 56,546 1,593 11.43% 43,734
Previously securitized loans 28,051 2,704 39.09% 54,928
Total loans 1,615,242 29,564 7.42% 1,348,489
Securities:
Taxable 574,195 7,260 5.13% 657,240
Tax-exempt 44,303 719 6.58% 37,306
Total securities 618,498 7,979 5.23% 694,546
Deposits in depository
institutions 14,888 150 4.09% 3,714
Federal funds sold - - - 583
Total interest-earning
assets 2,248,628 37,693 6.80% 2,047,332
Cash and due from banks 53,252 43,866
Bank premises and equipment 42,529 34,333
Other assets 168,035 106,588
Less: Allowance for
loan losses (16,851) (17,480)
Total assets $2,495,593 $2,214,639
Liabilities:
Interest-bearing demand deposits 444,126 1,259 1.15% 413,224
Savings deposits 306,314 732 0.97% 277,116
Time deposits 830,866 7,210 3.52% 657,546
Short-term borrowings 151,728 1,127 3.01% 144,069
Long-term debt 95,296 1,260 5.36% 148,836
Total interest-bearing
liabilities 1,828,330 11,588 2.57% 1,640,791
Noninterest-bearing demand
deposits 342,482 321,648
Other liabilities 28,564 28,951
Stockholders' equity 296,217 223,249
Total liabilities and
stockholders' equity $2,495,593 $2,214,639
Net interest income $26,105
Net yield on earning assets 4.71%
CITY HOLDING COMPANY AND SUBSIDIARIES
Consolidated Average Balance Sheets, Yields, and Rates
(Unaudited) ($ in 000s)
Three Months Ended March 31,
2005
Yield/
Interest Rate
Assets:
Loan portfolio:
Residential real estate $6,520 5.67%
Home equity 4,273 5.66%
Commercial, financial, and
agriculture 6,982 5.93%
Installment loans to individuals 1,333 12.36%
Previously securitized loans 3,082 22.76%
Total loans 22,190 6.67%
Securities:
Taxable 7,646 4.72%
Tax-exempt 668 7.26%
Total securities 8,314 4.85%
Deposits in depository institutions 18 1.97%
Federal funds sold 4 2.78%
Total interest-earning
assets 30,526 6.05%
Cash and due from banks
Bank premises and equipment
Other assets
Less: Allowance for loan losses
Total assets
Liabilities:
Interest-bearing demand deposits 716 0.70%
Savings deposits 355 0.52%
Time deposits 4,797 2.96%
Short-term borrowings 577 1.62%
Long-term debt 1,585 4.32%
Total interest-bearing liabilities 8,030 1.98%
Noninterest-bearing demand deposits
Other liabilities
Stockholders' equity
Total liabilities and
stockholders' equity
Net interest income $22,496
Net yield on earning assets 4.46%
CITY HOLDING COMPANY AND SUBSIDIARIES
Analysis of Risk-Based Capital
(Unaudited) ($ in 000s)
March 31 Dec. 31 Sept. 30
2006 (a) 2005 2005
Tier I Capital:
Stockholders' equity $288,203 $292,141 $290,432
Goodwill and other intangibles (59,378) (59,559) (59,742)
Accumulated other comprehensive income 9,438 8,012 4,106
Qualifying trust preferred stock 25,500 28,000 28,000
Excess deferred tax assets (1,954) (1,071) -
Total tier I capital $261,809 $267,523 $262,796
Total Risk-Based Capital:
Tier I capital $261,809 $267,523 $262,796
Qualifying allowance for loan losses 16,818 16,790 17,768
Total risk-based capital $278,627 $284,313 $280,564
Net risk-weighted assets $1,743,243 $1,735,538 $1,758,566
Ratios:
Average stockholders' equity to
average assets 11.87% 11.87% 11.47%
Tangible capital ratio 9.24% 9.52% 9.32%
Risk-based capital ratios:
Tier I capital 15.02% 15.41% 14.94%
Total risk-based capital 15.98% 16.38% 15.95%
Leverage capital 10.76% 10.97% 10.68%
(a) March 31, 2006 risk-based capital
ratios are estimated.
CITY HOLDING COMPANY AND SUBSIDIARIES
Analysis of Risk-Based Capital
(Unaudited) ($ in 000s)
June 30 March 31
2005 2005
Tier I Capital:
Stockholders' equity $279,624 $219,302
Goodwill and other intangibles (61,578) (6,204)
Accumulated other comprehensive
income 3,334 5,890
Qualifying trust preferred stock 28,000 28,000
Excess deferred tax assets - (4,524)
Total tier I capital $249,380 $242,464
Total Risk-Based Capital:
Tier I capital $249,380 $242,464
Qualifying allowance for loan losses 18,298 16,325
Total risk-based capital $267,678 $258,789
Net risk-weighted assets $1,734,653 $1,522,881
Ratios:
Average stockholders' equity to
average assets 10.57% 10.08%
Tangible capital ratio 8.91% 9.52%
Risk-based capital ratios:
Tier I capital 14.38% 15.92%
Total risk-based capital 15.43% 16.99%
Leverage capital 10.83% 11.00%
(a) March 31, 2006 risk-based capital
ratios are estimated.
CITY HOLDING COMPANY AND SUBSIDIARIES
Intangibles
(Unaudited) ($ in 000s)
As of and for the Quarter Ended
March 31 Dec 31. Sept. 30 June 30 March 31
2006 2005 2005 2005 2005
Intangibles, net $59,378 $59,559 $59,742 $61,578 $6,204
Intangibles amortization
expense 181 183 183 95 51
CITY HOLDING COMPANY AND SUBSIDIARIES
Summary of Loan Loss Experience
(Unaudited) ($ in 000s)
Quarter Ended
March 31 Dec. 31 Sept. 30
2006 2005 2005
Balance at beginning of period $16,790 $17,768 $18,298
Allowance acquired through acquisition - - -
Charge-offs:
Commercial, financial, and
agricultural 185 527 54
Real estate-mortgage 296 302 208
Installment loans to individuals 368 664 476
Overdraft deposit accounts 958 996 1,012
Total charge-offs 1,807 2,489 1,750
Recoveries:
Commercial, financial, and
agricultural 32 30 135
Real estate-mortgage 105 188 53
Installment loans to individuals 198 163 136
Overdraft deposit accounts 500 330 296
Total recoveries 835 711 620
Net charge-offs 972 1,778 1,130
Provision for loan losses 1,000 800 600
Balance at end of period $16,818 $16,790 $17,768
Loans outstanding $1,623,126 $1,612,827 $1,622,710
Average loans outstanding 1,615,242 1,618,711 1,612,344
Allowance as a percent of loans
outstanding 1.04% 1.04% 1.09%
Allowance as a percent of non-
performing loans 504% 402% 487%
Net charge-offs (annualized) as a
percent of average loans outstanding 0.24% 0.44% 0.28%
Net charge-offs, excluding overdraft
deposit accounts, (annualized) as a
percent of average loans outstanding 0.13% 0.27% 0.10%
CITY HOLDING COMPANY AND SUBSIDIARIES
Summary of Loan Loss Experience
(Unaudited) ($ in 000s)
Quarter Ended
June 30 March 31
2005 2005
Balance at beginning of period $16,325 $17,815
Allowance acquired through
acquisition 3,265 -
Charge-offs:
Commercial, financial, and
agricultural 663 429
Real estate-mortgage 323 658
Installment loans to individuals 263 308
Overdraft deposit accounts 832 744
Total charge-offs 2,081 2,139
Recoveries:
Commercial, financial, and
agricultural 345 95
Real estate-mortgage 25 37
Installment loans to individuals 175 205
Overdraft deposit accounts 244 312
Total recoveries 789 649
Net charge-offs 1,292 1,490
Provision for loan losses - -
Balance at end of period $18,298 $16,325
Loans outstanding $1,600,985 $1,343,247
Average loans outstanding 1,473,880 1,348,489
Allowance as a percent of loans
outstanding 1.14% 1.22%
Allowance as a percent of non-
performing loans 464% 490%
Net charge-offs (annualized) as a
percent of average loans outstanding 0.35% 0.44%
Net charge-offs, excluding overdraft
deposit accounts, (annualized) as a percent
of average loans outstanding 0.19% 0.31%
CITY HOLDING COMPANY AND SUBSIDIARIES
Summary of Non-Performing Assets
(Unaudited) ($ in 000s)
March 31 Dec. 31 Sept. 30 June 30 March 31
2006 2005 2005 2005 2005
Nonaccrual loans $2,743 $2,785 $2,468 $2,709 $2,641
Accruing loans past due
90 days or more 512 1,124 1,003 936 322
Previously securitized loans past
due 90 days or more 85 268 174 299 372
Total non-performing loans 3,340 4,177 3,645 3,944 3,335
Other real estate owned, excluding
property associated with previously
securitized loans 403 135 117 471 463
Other real estate owned associated
with previously
securitized loans 306 - - - -
Other real estate owned 709 135 117 471 463
Total non-performing assets $4,049 $4,312 $3,762 $4,415 $3,798
Non-performing assets as a percent
of loans and other real estate
owned 0.25% 0.27% 0.23% 0.28% 0.28%
