SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended Commission File Number
September 30, 1996 0-11733
CITY HOLDING COMPANY
(Exact name of registrant as specified in its charter)
West Virginia 55-0619957
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3601 MacCorkle Avenue, Southeast
Charleston, West Virginia 25304
(Address of principal offices)
Registrant's telephone number, including area code: (304) 925-6611
Indicate by check mark whether the registrant has (1) filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such report(s), and (2) has been subject to such filing
requirements for the past 90 days.
Yes xx No
The number of shares outstanding of the issuer's common stock as of November 12,
1996:
Common Stock, $2.50 Par Value -- 5,588,487 shares
THIS REPORT CONTAINS 29 PAGES.
EXHIBIT INDEX IS LOCATED ON PAGE 28 .
PAGE 1 OF 29
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Index
City Holding Company and Subsidiaries
PART I FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets -- September 30, 1996
(unaudited) and December 31, 1995
Consolidated Statements of Income (unaudited) -- Nine
months ended September 30, 1996 and 1995 and the
three months ended September 30, 1996 and 1995
Consolidated Statements of Changes in Stockholders'
Equity (unaudited) -- Nine months ended September 30,
1996 and 1995
Consolidated Statements of Cash Flows (unaudited)
--Nine months ended September 30, 1996 and 1995
Notes to Consolidated Financial Statements (unaudited) --
September 30, 1996
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Part II. Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signature
Exhibit Index
PAGE 2 OF 29
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PART I. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
CITY HOLDING COMPANY AND SUBSIDIARIES
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Item I. SEPTEMBER 30 DECEMBER 31
1996 1995
------------ -----------
ASSETS (unaudited)
Cash and due from banks $ 34,118,000 $ 28,460,000
Federal funds sold 61,000 0
Securities available for sale, at fair value 115,101,000 143,649,000
Investment securities (approximate market values:
September 30, 1996--$45,010,000; December 31, 1995--$52,183,000) 44,506,000 50,719,000
Loans:
Gross loans 689,108,000 664,886,000
Unearned income (7,220,000) (8,125,000)
Allowance for possible loan losses (6,836,000) (6,566,000)
------------ -----------
NET LOANS 675,052,000 650,195,000
Loans held for sale 164,608,000 122,222,000
Bank premises and equipment 29,267,000 23,651,000
Accrued interest receivable 7,448,000 8,031,000
Other assets 15,054,000 14,042,000
------------ -----------
TOTAL ASSETS $ 1,085,215,000 $ 1,040,969,000
============= =============
LIABILITIES
Deposits:
Noninterest-bearing $ 120,368,000 $ 116,992,000
Interest-bearing 705,206,000 680,423,000
------------ -----------
TOTAL DEPOSITS 825,574,000 797,415,000
Short-term borrowings 145,817,000 141,309,000
Long-term debt 25,750,000 20,000,000
Other liabilities 10,774,000 9,106,000
------------- -----------
TOTAL LIABILITIES 1,007,915,000 967,830,000
STOCKHOLDERS' EQUITY Preferred stock, par value $25 a share:
Authorized-500,000 shares; none issued
Common stock, par value $2.50 a share: authorized
20,000,000 shares; issued and outstanding 5,600,090 shares as of September 30,
1996 and 5,092,046 shares as of December 31, 1995, including 11,603 and 13,640
shares in treasury at September 30, 1996 and
December 31, 1995, respectively. 14,000,000 12,730,000
Capital surplus 36,357,000 25,942,000
Retained earnings 27,727,000 34,432,000
Cost of common stock in treasury (306,000) (360,000)
Net unrealized (loss) gain on securities available for sale,
net of deferred income taxes (478,000) 395,000
------------- ------------
TOTAL STOCKHOLDERS' EQUITY 77,300,000 73,139,000
------------- ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 1,085,215,000 $ 1,040,969,000
============== ==============
See notes to consolidated financial statements
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PAGE 3 OF 29
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CONSOLIDATED STATEMENTS OF INCOME
CITY HOLDING COMPANY AND SUBSIDIARIES
NINE MONTH PERIOD ENDED
SEPTEMBER 30
1996 1995
------------ -----------
INTEREST INCOME
Interest and fees on loans $ 56,347,000 $ 43,447,000
Interest and dividends on securities:
Taxable 6,181,000 9,002,000
Tax-exempt 1,527,000 1,751,000
Other interest income 26,000 70,000
------------ -----------
TOTAL INTEREST INCOME 64,081,000 54,270,000
INTEREST EXPENSE
Interest on deposits 21,880,000 19,818,000
Interest on short-term borrowings 5,944,000 3,811,000
Interest on long-term debt 1,217,000 459,000
------------ ------------
TOTAL INTEREST EXPENSE 29,041,000 24,088,000
NET INTEREST INCOME 35,040,000 30,182,000
PROVISION FOR POSSIBLE LOAN LOSSES 943,000 711,000
------------ -----------
NET INTEREST INCOME AFTER
PROVISION FOR POSSIBLE LOAN LOSSES 34,097,000 29,471,000
OTHER INCOME
Securities gains 68,000 9,000
Service charges 2,692,000 2,444,000
Other 3,826,000 2,182,000
------------ -----------
TOTAL OTHER INCOME 6,586,000 4,635,000
OTHER EXPENSES
Salaries and employee benefits 15,440,000 12,958,000
Net occupancy expense 4,448,000 3,754,000
Other 9,415,000 8,175,000
------------ -----------
TOTAL OTHER EXPENSES 29,303,000 24,887,000
INCOME BEFORE INCOME TAXES 11,380,000 9,219,000
INCOME TAXES 3,810,000 2,911,000
----------- -----------
NET INCOME $ 7,570,000 $ 6,308,000
========== ==========
Net income per common share $ 1.36 $ 1.11
========== ==========
Average common shares outstanding 5,586,163 5,672,134
========== ==========
</TABLE>
See notes to consolidated financial statements
PAGE 4 OF 29
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CONSOLIDATED STATEMENTS OF INCOME
CITY HOLDING COMPANY AND SUBSIDIARIES
THREE MONTH PERIOD ENDED
SEPTEMBER 30
1996 1995
------------ -----------
INTEREST INCOME
Interest and fees on loans $ 19,029,000 $ 15,827,000
Interest and dividends on securities:
Taxable 1,954,000 2,829,000
Tax-exempt 495,000 595,000
Other interest income 7,000 5,000
------------ -----------
TOTAL INTEREST INCOME 21,485,000 19,256,000
INTEREST EXPENSE
Interest on deposits 7,293,000 7,065,000
Interest on short-term borrowings 2,195,000 1,546,000
Interest on long-term debt 435,000 231,000
------------ ------------
TOTAL INTEREST EXPENSE 9,923,000 8,842,000
NET INTEREST INCOME 11,562,000 10,414,000
PROVISION FOR POSSIBLE LOAN LOSSES 382,000 302,000
------------ -----------
NET INTEREST INCOME AFTER
PROVISION FOR POSSIBLE LOAN LOSSES 11,180,000 10,112,000
OTHER INCOME
Securities gains 5,000 7,000
Service charges 908,000 945,000
Other 1,652,000 762,000
------------ -----------
TOTAL OTHER INCOME 2,565,000 1,714,000
OTHER EXPENSES
Salaries and employee benefits 4,984,000 4,541,000
Net occupancy expense 1,572,000 1,217,000
Other 3,362,000 2,885,000
------------ -----------
TOTAL OTHER EXPENSES 9,918,000 8,643,000
INCOME BEFORE INCOME TAXES 3,827,000 3,183,000
INCOME TAXES 1,284,000 1,040,000
------------ -----------
NET INCOME $ 2,543,000 $ 2,143,000
============ ============
Net income per common share $ .46 $ .38
============ ============
Average common shares outstanding 5,586,148 5,650,758
============ ============
</TABLE>
See notes to consolidated financial statements
PAGE 5 OF 29
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STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
CITY HOLDING COMPANY AND SUBSIDIARIES
Nine Months Ended September 30, 1996
NET
UNREALIZED
GAIN/(LOSS)
SECURITIES TOTAL
COMMON CAPITAL RETAINED AVAILABLE TREASURY STOCKHOLDERS'
STOCK SURPLUS EARNINGS FOR SALE STOCK EQUITY
---------- ----------- ----------- ----------- ---------- -----------
Balances
at December 31, 1995 $12,730,000 $25,942,000 $34,432,000 $395,000 (360,000) $73,139,000
Net income 7,570,000 7,570,000
Cash dividends
declared ($.46/share) (2,590,000) (2,590,000)
Change in unrealized gain/(loss),
net of income taxes of $582,000 (873,000) (873,000)
Issuance of 2,251 shares of
treasury stock 54,000 54,000
Issuance of 10% stock dividend 1,270,000 10,415,000 (11,685,000)
---------- ----------- ----------- ----------- ---------- -----------
Balances
at September 30, 1996 $14,000,000 $36,357,000 $27,727,000 ($478,000) ($306,000) $77,300,000
---------- ----------- ----------- ----------- ---------- -----------
NET
UNREALIZED
Nine Months Ended September 30, 1995 GAIN/(LOSS)
SECURITIES TOTAL
COMMON CAPITAL RETAINED AVAILABLE TREASURY STOCKHOLDERS'
STOCK SURPLUS EARNINGS FOR SALE STOCK EQUITY
---------- ----------- ----------- ----------- ---------- -----------
Balances
at December 31, 1994 $11,753,000 $18,366,000 $39,075,000 ($2,863,000) ($ 32,000) $66,299,000
Net income 6,308,000 6,308,000
Cash dividends declared ($.40/share) (1,990,000) (1,990,000)
Cash dividends of acquired
subsidiary (150,000) (150,000)
Changes in net unrealized
gain/(loss), net of income
taxes of $1,719,000 2,548,000 2,548,000
Cost of 86,665 shares of common
stock acquired for treasury (2,286,000) (2,286,000)
Issuance of 233 shares of
treasury stock 7,000 7,000
Retirement of 66,539 shares of
common stock held in treasury (174,000) (1,612,000) 1,786,000 0
Issuance of 10% stock dividend 1,151,000 9,208,000 (10,359,000)
---------- ----------- ----------- ----------- ---------- -----------
Balances
at September 30, 1995 $12,730,000 $25,962,000 $32,884,000 $(315,000) $ (525,000) $70,736,000
----------- ----------- ----------- ------------ ------------ -----------
See notes to consolidated financial statements
PAGE 6 OF 29
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CONSOLIDATED STATEMENTS OF CASH FLOWS
CITY HOLDING COMPANY AND SUBSIDIARIES
NINE MONTH PERIOD ENDED
SEPTEMBER 30
1996 1995
------------ ------------
OPERATING ACTIVITIES
Net Income $7,570,000 $6,308,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Net amortization 749,000 828,000
Provision for depreciation 2,494,000 1,823,000
Provision for loan losses 943,000 711,000
Realized securities gains (68,000) (9,000)
Loans originated for sale (91,749,000) (50,104,000)
Purchases of loans held for sale (834,664,000) (386,586,000)
Proceeds from loans sold 884,715,000 365,111,000
Realized gains on loans sold (688,000) (165,000)
Decrease (increase) in accrued interest receivable 583,000 (842,000)
Decrease in other assets (1,085,000) (2,135,000)
Increase (decrease) in other liabilities 1,668,000 (629,000)
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (29,532,000) (65,689,000)
INVESTING ACTIVITIES
Proceeds from sales of securities available for sale 30,522,000 8,047,000
Proceeds from maturities of securities available for sale 41,207,000 36,272,000
Purchases of securities available for sale (44,496,000) (34,637,000)
Proceeds from maturities of securities 131,026,000 26,687,000
Purchases of securities (124,979,000) (3,238,000)
Net increase in loans (25,800,000) (92,782,000)
Purchases of premises and equipment (8,110,000) (2,854,000)
------------ ------------
NET CASH PROVIDED BY USED IN INVESTING ACTIVITIES (630,000) (62,505,000)
FINANCING ACTIVITIES
Net increase in noninterest bearing deposits 3,376,000 22,761,000
Net increase in interest-bearing deposits 24,783,000 24,781,000
Net increase in short-term borrowings 4,508,000 70,557,000
Proceeds from long-term-debt 5,750,000 12,525,000
Repayment of long-term debt 0 (4,400,000)
Purchases of treasury stock 0 (2,318,000)
Proceeds from sales of treasury stock 54,000 7,000
Cash dividends paid (2,590,000) (2,140,000)
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 35,881,000 121,773,000
------------ -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,719,000 (6,421,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 28,460,000 34,284,000
------------ -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $34,179,000 $27,863,000
============ ===========
See notes to consolidated financial statements
</TABLE>
PAGE 7 OF 29
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
September 30, 1996
NOTE A - BASIS OF PRESENTATION
The accompanying consolidated financial statements, which are unaudited,
include all the accounts of City Holding Company (the Parent Company) and its
wholly owned subsidiaries (collectively, the Company). All material intercompany
transactions have been eliminated. The consolidated financial statements include
all adjustments which, in the opinion of management, are necessary for a fair
presentation of the results of operations and financial condition for each of
the periods presented. Such adjustments are of a normal recurring nature. The
results of operations for the nine months ended September 30, 1996, are not
necessarily indicative of the results of operations that can be expected for the
year ending December 31, 1996. The Company's accounting and reporting policies
conform with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Such policies require management to make estimates and develop assumptions
that affect the amounts reported in the consolidated financial statements and
related footnotes. Actual results could differ from management's estimates. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the City Holding Company annual report on Form
10-K for the year ended December 31, 1995.
NOTE B - PENDING MERGER
In August 1996, the Company signed a definitive agreement to acquire
The Old National Bank of Huntington, Huntington, West Virginia ("Old National").
Under the agreement signed by the parties, the Company will exchange
approximately 5.7 shares of its common stock, approximately 418,000 shares in
total, for each of the outstanding shares of Old National. It is anticipated
that the transaction will be accounted for under the pooling of interests method
of accounting. It is expected that the merger will be consummated in the first
quarter of 1997.
The acquisition will bring assets of $45.2 million and deposits of
$40.4 million to the Company, giving the Company total assets of $1.1 billion
and total deposits of $856.9 million, on a proforma basis as of September 30,
1996.
PAGE 8 OF 29
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NOTE C - PER SHARE INFORMATION
On October 21, 1996, the Company declared a special 10% stock dividend
payable on November 30, 1996, to shareholders of record as of November 1, 1996.
All per share information for the current quarter and prior periods has been
adjusted accordingly to reflect this stock dividend. An amount equal to the fair
value of the additional shares issued was transferred from retained earnings to
the common stock and capital accounts.
NOTE D - INCOME TAXES
The consolidated provision for income taxes is based upon financial
statement earnings. The effective tax rate for the nine months ended September
30, 1996, of 33.48% varied from the statutory federal income tax rate primarily
due to state income taxes and the tax effects of nontaxable interest income and
the amortization of goodwill.
NOTE E - COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, there are various commitments and
contingent liabilities, such as commitments to extend credit and standby letters
of credit, that are not included in the consolidated financial statements. These
commitments approximate $70,089,000 at September 30, 1996. These arrangements,
consisting principally of unused lines of credit issued in the normal course of
business, have credit risks essentially the same as that involved in extending
loans to customers and are subject to the Company's standard credit policies.
Standby letters of credit, which total $4,031,000, have historically expired
unfunded.
NOTE F - NEW ACCOUNTING PRONOUNCEMENTS
On January 1, 1996, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 122, "Accounting for Mortgage Servicing Rights,"
which requires that entities recognize rights to service mortgage loans for
others as separate assets, whether those rights are acquired through loan
origination or purchase activities. Additionally, management must periodically
assess its capitalized mortgage servicing rights for impairment based on the
fair value of those rights. As of September 30, 1996, the Company had recorded
$221,000 in originated mortgage servicing rights.
PAGE 9 OF 29
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In June 1996, the Financial Accounting Standards Board (FASB) issued
SFAS No. 125 "Accounting for Transfers and Servicing of Assets and
Extinguishment of Liabilities," which is effective for years after December 31,
1996. The Company has not yet completed the complex analysis required to
estimate the impact of this new rule and does not expect the implementation to
have a material impact on the Company's financial results.
NOTE G - LONG-TERM BORROWINGS
Long-term debt includes a $23,000,000 revolving line of credit of the
Parent Company with a variable rate based on the lesser of the adjusted LIBOR
rate plus 1.875% per annum or the lender's base rate less .25% per annum
(7.3125% at September 30, 1996) due on July 31, 1997. As of September 30, 1996,
the outstanding balance was equal to $20,750,000. Interest on this obligation is
payable quarterly, and the Parent Company has pledged the common stock of The
City National Bank of Charleston, The Peoples Bank of Point Pleasant, First
State Bank and Trust, Merchants National Bank and The Home National Bank of
Sutton as security for the loan.
Additionally, a subsidiary maintains long-term financing with the
Federal Home Loan Bank (FHLB) in the form of a Long-Term LIBOR Floater with
maximum available credit of $5 million. At September 30, 1996, $5 million was
outstanding with an interest rate of 5.71156%. The agreement matures in
December, 1998.
PAGE 10 OF 29
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Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
HIGHLIGHTS
FINANCIAL POSITION
Total assets increased $44.2 million or approximately 4.25% during the
first nine months of 1996. Total securities have decreased $34.8 million due
primarily to maturities and/or calls. Proceeds from called or matured securities
were used primarily to fund the increase in loans. Net loans increased $24.9
million or 3.8%. Loans held for sale, consisting primarily of loans received
through the Company's participation in a whole loan bulk purchasing program,
increased $42.4 million or 34.7%. As of September 30, 1996, program loans owned
by the Company had an outstanding principal balance of approximately $114.4
million. See LOAN PORTFOLIO. The Company earned interest income of approximately
$9,730,000 on program loans during the nine months ended September 30, 1996. See
NET INTEREST INCOME. The increases in net loans held for sale were also funded
by an increase in deposits and short-term borrowings of $28.2 million and $4.5
million, respectively. Net stockholders' equity increased $4.2 million during
the first nine months of 1996 representing the Company's retained net profits.
QUARTER ENDED SEPTEMBER 30, 1996, COMPARED TO QUARTER ENDED
SEPTEMBER 30, 1995.
The Company reported net income of $2,543,000 for the three months ended
September 30, 1996 compared to net income of $2,143,000 for the quarter ended
September 30, 1995. This increase of $400,000, or 18.67%, was primarily due to
an increase of $853,000 in the Company's total other income (excluding
securities transactions) during the third quarter of 1996 as compared to the
same period of 1995. This increase is attributable to fees generated from the
increase in mortgage loan servicing and the originated mortgage servicing rights
recorded in the third quarter of 1996.
Non-interest expenses increased $1,275,000 or 15% during the third
quarter of 1996 as compared to the same period of 1995, primarily due to the
Company's expansion of its Operations Center to facilitate the growth of
mortgage servicing. In addition, the Company accrued a one-time pre-tax charge
of $250,000 for the contribution to the recapitalization of the Savings
Association Insurance Fund ("SAIF"). On September 30, 1996, legislation became
effective requiring an assessment of 65.7 cents per $100 in domestic
SAIF-insured deposits held as of March 31, 1995. At that date the Company held
$49.1 million in SAIF-insured deposits. The assessment is payable December 1,
1996. The legislation also reduced the deposit insurance premium for
SAIF-insurance deposits to 6.44 cents per $100.
Net income for the third quarter also benefitted from an increase of
$1,148,000 in the Company's net interest income during the third quarter of 1996
as compared to the same
PAGE 11 OF 29
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period of 1995. See NET INTEREST INCOME for further discussion. Earnings per
share were $.46 and $.38 for the third quarter of 1996 and 1995, respectively.
NINE MONTHS ENDED SEPTEMBER 30, 1996, COMPARED TO NINE MONTHS
ENDED SEPTEMBER 30, 1995
The Company reported net income of $7,570,000 for the nine months ended
September 30, 1996 compared to net income of $6,308,000 for the nine months
ended September 30, 1995. This increase of $1,262,000 or 20%, was primarily due
to an increase in the Company's net interest income earned during the first nine
months of 1996 as compared to the same period of 1995. See NET INTEREST INCOME.
Total non-interest expense increased $4,416,000 of 17.74% during the first nine
months of 1996 as compared to the same period of 1995, due to increases in
salaries and employee benefits related to the Company's growth as well as the
expansion of its Operation Center as discussed above. Earnings per share were
$1.36 and $1.11 for the nine months ended September 30, 1996 and 1995,
respectively.
SELECTED RATIOS
The return on average assets (ROA) for the third quarter of 1996 was
.94% compared to .88% in the third quarter of 1995. The return on average
shareholder's equity (ROE) for the third quarter of 1996 was 13.13% compared to
12.02% ROE for the third quarter of 1995. For the first nine months of 1996, ROA
was .94% compared to .90% for the nine months ended September 30, 1995. ROE was
13.32% and 12.18% for the first nine months of 1996 and 1995, respectively.
The dividend payout ratio of 33.59% for the quarter ended September 30,
1996 represents a decrease of 10.39% from the dividend payout ratio of 37.08%
for the quarter ended
PAGE 12 OF 29
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September 30, 1995. The dividend payout ratio was 34.09% and 36.45% for the nine
months ended September 30, 1996 and 1995, respectively. Since 1988, the Company
has paid dividends on a quarterly basis, and expects to continue to do so in the
future.
LOAN PORTFOLIO
The composition of the Company's loan portfolio is presented in the
following table:
LOAN PORTFOLIO BY TYPE
(Dollars in Thousands)
September 30 December 31
1996 1995
-------- --------
Commercial, financial and
agricultural $217,898 $214,304
Real Estate-Mortgage 302,407 277,608
Real Estate-Construction 25,979 27,240
Installment and other 142,824 145,734
Unearned Income (7,220) (8,125)
-------- --------
TOTAL $681,888 $656,761
======== ========
Loans Held for Sale
Program loans $ 114,421 $101,843
Loans Originated for Sale 50,187 20,379
-------- --------
TOTAL $ 164,608 $ 122,222
======== ========
The Company grants loans to customers generally within the market areas
of its subsidiaries. While loans have been trending up significantly over the
past two years primarily due to the Company's more active solicitation of
commercial business, introduction of new loan products, and continued expansion,
a downward trend in the installment loan portfolio is representative of the
increased level of mortgage refinancing during the first nine months of 1996
that historically is not typical. The rate environment during this period was
conducive to consumers refinancing their total indebtedness with a fixed rate
secondary market product through our mortgage company. There have been no
significant changes in the Company's loan policy or credit standards. The
Company continues to shift its marketing efforts more towards direct loan
business. There are no significant concentrations of credit and speculative or
highly leveraged transactions are insignificant. Also, in order to increase the
repricing frequency of the loan portfolio, the Company has significantly
increased its portfolio of variable rate commercial and residential mortgage
loans.
PAGE 13 OF 29
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ASSET QUALITY AND ALLOWANCE FOR LOAN LOSSES
The following table summarizes the Company's risk elements for the
periods ending September 30, 1996 and December 31, 1995. The Company's coverage
ratio of nonperforming assets and potential problem loans continues to be strong
at 120% as of September 30, 1996.
Management is of the opinion that the allowance for loan losses is
adequate to provide for probable future losses inherent in the portfolio.
<TABLE>
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RISK ELEMENTS
(in thousands)
Nine Months
Ended Year Ended
September 30 December 31
1996 1995
---- ----
ALLOWANCE FOR LOAN LOSSES
Balance at beginning of period $6,566 $ 6,477
Charge-offs (920) (1,331)
Recoveries 247 316
------ -------
Net charge-offs (673) (1,015)
Provision for loan possible losses 943 1,104
------ ------
Balance at end of period $6,836 $6,566
===== =====
AS A PERCENT OF AVERAGE TOTAL LOANS
Net charge-offs 0.10% 0.17%
Provision for possible loan losses 0.14% 0.18%
Allowance for loan losses 1.04% 1.08%
September 30 December 31
1996 1995
---- ----
NON -PERFORMING ASSETS
Other real estate owned $1,212 $1,027
Non-accrual loans 1,811 2,525
Accruing loans past due 90 days
or more 2,191 1,421
Restructured loans 249 141
------ ------
Total Non-performing Assets $5,463 $5,114
POTENTIAL PROBLEM LOANS $243 $266
AS A PERCENT OF NON-PERFORMING ASSETS
AND POTENTIAL PROBLEM LOANS
Allowance for loan losses 119.80% 122.04%
ACCRUING LOANS PAST DUE 90 DAYS OR MORE
AS A PERCENT OF AVERAGE TOTAL LOANS 0.33% 0.23%
</TABLE>
PAGE 14 OF 29
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LIQUIDITY AND INTEREST RATE SENSITIVITY
The Company's cash and cash equivalents, represented by cash and due
from banks and overnight federal funds sold, is a product of its operating,
investing and financing activities. These activities are set forth in the City
Holding Company Consolidated Statements of Cash Flows included elsewhere herein.
Cash was used in operating activities in each period presented, primarily from
loans originated for sale and purchases of loans held for sale. Net cash was
used in investing activities during the third quarter of 1995 funding the
Company's loan growth. Net cash was also used in investing activities during the
third quarter of 1996 due primarily to the purchase of securities. The net cash
provided by financing activities in the respective periods is a result of an
increase in interest-bearing deposits. For the first nine months of 1995,
financing activities also provided cash due to the increase in short-term
borrowings.
The Company seeks to maintain a strong liquidity position to reduce
interest rate risk, which is the susceptibility of assets and liabilities to
decline in value as a result of changes in general market interest rates. The
Company minimizes this risk through asset and liability management, where the
goal is to optimize earnings while managing interest rate risk. The Company
measures this interest rate risk through interest sensitivity gap analysis as
illustrated in the following table. At September 30, 1996, the one year period
shows a negative gap (liability sensitive) of $294 million. This analysis is a
"static gap" presentation and movements in deposit rates offered by the
Company's subsidiary banks lag behind movements in the prime rate. Such time
lags affect the repricing frequency of many items on the Company's balance
sheet. Accordingly, the sensitivity of deposits to changes in market rates may
differ significantly from the related contractual terms. The table is first
presented without adjustment for expected repricing behavior. Then, as presented
in the "management adjustment" line, these balances have been notionally
distributed over the first three periods to reflect those portions of such
PAGE 15 OF 29
<PAGE>
accounts that are expected to reprice fully with market rates over the
respective periods. The distribution of the balances over the repricing periods
represents an aggregation of such allocations by each of the affiliate banks,
and is based upon historical experience with their individual markets and
customers. Management expects to continue the same pricing methodology in
response to future market rate changes; however, management adjustments may
change as customer preferences, competitive market conditions, liquidity, and
loan growth change. Also presented in the management adjustment line are loan
prepayment assumptions which may differ from the related contractual term of the
loans. These balances have been distributed over the four periods to reflect
those loans that are expected to be repaid in full prior to their maturity date
over the respected periods. After management adjustments, the table shows a
negative gap in the one year period of $84 million. A negative gap position is
advantageous when interest rates are falling because interest-bearing
liabilities are being repriced at lower rates and in greater volume, which has a
positive effect on net interest income. Consequently, the Company has
experienced an increase in its net interest margin during the past year and is
somewhat vulnerable to a rapid rise in interest rates during 1996. This increase
in net interest margin did not translate into a decline in net interest income
because of increases in the volume of interest-earning assets.
There are no known trends, demands, commitments or uncertainties that
have resulted or are reasonably likely to result in material changes in
liquidity.
PAGE 16 OF 29
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
INTEREST RATE SENSITIVITY GAPS
(in thousands)
1 to 3 3 to 12 1 to 5 Over 5
Months Months Years Years Total
------- --------- --------- ------- ---------
ASSETS
Gross loans $155,718 $ 106,264 $334,081 $ 91,234 $687,297
Loans held for sale 164,608 0 0 0 164,608
Securities 23,030 20,166 85,093 31,318 159,607
Federal funds sold 61 0 0 0 61
------- --------- --------- ------- ---------
Total interest earning assets 343,417 126,430 419,174 122,552 1,011,573
------- --------- --------- ------- ---------
LIABILITIES
Savings and NOW Accounts 335,779 0 0 0 335,779
All other interest bearing deposits 85,933 170,536 112,508 451 369,428
Short term and other borrowings 145,817 0 0 0 145,817
Long term borrowings 25,750 0 0 0 25,750
------- --------- --------- ------- ---------
Total interest bearing liabilities $593,279 $ 170,536 $112,508 $ 451 $ 876,774
------- --------- --------- ------- ---------
Interest sensitivity gap ($249,862) ($ 44,106) $306,666 $122,101 $134,799
------- --------- --------- ------- ---------
Cumulative sensitivity gap ($249,862) ($293,968) ($ 12,698) $134,799
======= ======= ======== =======
Management adjustments $298,450 ($ 88,489) ($199,080) ($ 10,881)
------- ------- ------- -------
Cumulative management adjusted gap $ 48,588 ($ 84,007) $ 23,579 $134,799
======== ======= ======== =======
</TABLE>
The table above includes various assumptions and estimates by management as to
maturity and repricing patterns. Future interest margins will be impacted by
balances and rates which are subject to change periodically throughout the year.
PAGE 17 OF 29
<PAGE>
CAPITAL RESOURCES
As a bank holding company, City Holding Company is subject to regulation
by the Federal Reserve Board under the Bank Holding Company Act of 1956. In
January 1989, the Federal Reserve published risk-based capital guidelines in
final form which are applicable to bank holding companies. Such guidelines
define items in the calculation of risk-weighted assets. At September 30, 1996,
the regulatory minimum ratio of qualified total capital to riskweighted assets
(including certain off-balance-sheet items, such as standby letters of credit)
is 8 percent. At least half of the total capital is to be comprised of "Tier 1
capital", or the Company's common stockholders' equity, and minority interest in
consolidated subsidiary, net of intangibles. The remainder ("Tier 2 capital")
may consist of certain other prescribed instruments and a limited amount of loan
loss reserves.
In addition, the Federal Reserve Board has established minimum leverage
ratio (Tier 1 capital to quarterly average tangible assets) guidelines for bank
holding companies. These guidelines provide for a minimum ratio of 3 percent for
bank holding companies that meet certain specified criteria, including that they
have the highest regulatory rating. All other bank holding companies will be
required to maintain a leverage ratio of 3 percent plus an additional cushion of
a least 100 to 200 basis points. The guidelines also provide that banking
organizations experiencing internal growth or making acquisitions will be
expected to maintain strong capital positions substantially above the minimum
supervisory levels, without significant reliance on intangible assets.
The following table presents comparative capital ratios and related
dollar amounts of capital for the Company:
PAGE 18 OF 29
<PAGE>
Dollars in Thousands
September 30 December 31
1996 1995
---- ----
Capital Components
Tier 1 risk-based capital $71,420 $66,260
Total risk-based capital 78,256 72,826
Capital Ratios
Tier 1 risk-based 9.32% 8.87%
Total risk-based 10.21 9.75
Leverage 6.61 6.45
Regulatory Minimum
Tier 1 risk-based (dollar/ratio) $30,649/4.00% $29,888/4.00%
Total risk-based (dollar/ratio) 61,297/8.00 59,776/8.00
Leverage (dollar/ratio) 32,407/3.00 30,801/3.00
The strong capital position of the Company is indicative of management's
emphasis on asset quality and a history of retained net income. The ratios
enable the Company to continually pursue acquisitions and other growth
opportunities. Improvements in operating results and a consistent dividend
program, coupled with an effective management of credit risk, have been, and
will be, the key elements in maintaining the Company's present capital position.
The Company does not anticipate any material capital expenditures in
1996. The continued expansion of the Company's Operations Center will be funded
by the Company's long-term debt. SEE NOTE E. Earnings from subsidiary bank
operations are expected to remain adequate to fund payment of stockholders'
dividends and normal internal growth. In management's opinion, subsidiary banks
have the capability to upstream sufficient dividends to meet the normal cash
requirements of the Company.
PAGE 19 OF 29
<PAGE>
NET INTEREST INCOME
Net interest income, on a fully federal tax-equivalent basis, improved
from the third quarter of 1995 to the third quarter of 1996 by approximately
$1,096,000 due to an increase in net earning assets. Net yield on earning assets
decreased between the respective periods from 4.72% to 4.69%, as earning asset
yields remained consistent at 8.62% and the cost of interest-bearing liabilities
increased 3 basis points to 4.50%. The $1,638,000 decrease in net interest
income due to rate, as shown in the following table, was coupled with a
$2,734,000 increase in net interest income due to volume. The major component of
this favorable volume change was increased average loans and average loans held
for sale.
Net interest income, on a fully federal tax-equivalent basis, improved
from the nine months ended September 30, 1995 to the nine months ended September
30, 1996 by approximately $4,743,000 million due to an increase in net earning
assets. Net yield on earning assets increased between periods from 4.76% to
4.79%, as earning asset yields increased 23 basis points to 8.67%, and the cost
of interest bearing liabilities increased 20 basis points to 4.45%. The $447,000
increase in net interest income due to rate, as shown in the following table,
was coupled with a $4,296,000 increase in net interest income due to volume. The
major component of this favorable volume change was increased average loans held
for sale.
A significant part of the increase in net earning assets for the third
quarter of 1996 and the nine months ended September 30, 1996, is attributable to
the Company's participation in a whole-loan bulk purchasing program. Under the
program, the Company purchases from a third party whole loans secured by
residential mortgages and partially insured by the Federal Housing Association.
The loans typically have balances of less than $25,000 and are not concentrated
geographically. Additionally, the program permits the Company to require the
seller to repurchase or replace certain non-conforming loans. The loans are
generally
PAGE 20 OF 29
<PAGE>
repurchased from the Company within 30 to 90 days. Although the loans usually
are located outside the Company's primary market areas, management believes that
these loans pose no greater risk than similar "in-market" loans because of the
Company's review of the loans, the insurance reserve associated with the loans
and the other terms of the program. The loans are generally serviced by third
parties and the Company earns a fixed rate of return on the loans. The Company
earned approximately $3,194,000 in interest income on program loans for the
quarter ended September 30, 1996 on an average balance of approximately $138.9
million compared to $1.2 million in interest income for the same period in 1995.
The Company earned approximately $9,730,000 in interest income on an average
balance of approximately $142.0 million for the nine months ended September 30,
1996 compared to $2.46 million in interest income for the same period in 1995.
These loans are being funded through short-term secured and unsecured
borrowings.
PAGE 20 OF 29
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
EARNING ASSETS AND INTEREST-BEARING LIABILITIES
(in thousands)
Quarter Ended
September 30
1996 1995
---- ----
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
-----------------------------------------------------------------------------------
EARNING ASSETS:
Loans (1)
Commercial and industrial $ 212,285 $4,905 9.24% $ 192,114 $4,527 9.43%
Real estate 321,733 7,846 9.75 291,554 6,269 8.60
Consumer obligations 134,717 3,279 9.74 141,666 3,539 9.99
-----------------------------------------------------------------------------------
Total loans 668,735 16,030 9.59 625,334 14,335 9.17
Loans held for sale 179,620 2,999 6.68 66,402 1,492 8.99
Securities
Taxable 123,956 1,954 6.31 179,530 2,829 6.30
Tax-exempt (2) 35,595 750 8.43 36,345 902 9.93
----------------------------------------------------------------------------------
Total securities 159,551 2,704 6.78 215,875 3,731 6.91
Federal funds sold 591 7 4.74 333 5 6.01
------------------------------------------------------------------------------------
Total earning assets 1,008,497 21,740 8.62 907,944 19,563 8.62
Cash and due from banks 32,301 25,800
Bank premises and equipment 29,351 22,129
Other assets 22,740 21,101
Less: allowance for possible
loan losses (6,755) (6,461)
--------------------------------------------------------------------------------------
Total assets $1,086,134 $970,513
======================================================================================
INTEREST BEARING LIABILITIES
Demand deposits $ 111,797 $ 766 2.74% $104,572 $ 754 2.88%
Savings deposits 222,251 1,589 2.86 222,036 1,709 3.08
Time deposits 366,876 4,938 5.38 346,805 4,602 5.31
Short-term borrowings 156,015 2,195 5.63 106,546 1,546 5.80
Long-term debt 24,217 435 7.19 11,587 231 7.97
--------------------------------------------------------------------------------------
Total interest-bearing liabilities 881,156 9,923 4.50 791,546 8,842 4.47
Demand deposits 115,863 102,673
Other liabilities 11,656 5,005
Stockholders' equity 77,459 71,289
--------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $1,086,134 $970,513
======================================================================================
Net interest income $11,817 $10,721
======================================================================================
Net yield on earning assets 4.69% 4.72%
======================================================================================
</TABLE>
(1) For purposes of this table, nonaccruing loans have been included in average
balances and loan fees, which are immaterial, have been included in interest
income.
(2) Computed on a fully federal tax-equivalent basis assuming a tax rate of 34%
in all years.
PAGE 22 OF 29
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
RATE VOLUME ANALYSIS OF
CHANGES IN INTEREST INCOME AND EXPENSE
(in thousands)
Quarter Ended
September 30
1996 VS. 1995
Increase (Decrease)
Due to Change In:
INTEREST INCOME FROM: Volume Rate Net
Loans
Commercial and industrial $ 913 $ (535) $ 378
Real estate 687 890 1,577
Consumer obligations (171) (89) (260)
--------------------------------------------------
Total loans 1,429 266 1,695
Loans held for sale 3,975 (2,468) 1,507
Securities
Taxable (882) 7 (875)
Tax-exempt (1) ( 18) (134) (152)
--------------------------------------------------
Total Securities (900) (127) (1,027)
Federal funds sold 8 (6) 2
--------------------------------------------------
Total interest-earning assets $ 4,512 $(2,335) $ 2,177
INTEREST EXPENSE ON:
Demand deposits 181 (169) 12
Savings deposits 11 (131) (120)
Time deposits 269 67 336
Short-term borrowings 962 (313) 649
Long-term debt 355 (151) 204
--------------------------------------------------
Total interest-bearing liabilities $ 1,778 $ (697) $ 1,081
--------------------------------------------------
NET INTEREST INCOME $ 2,734 $(1,638) $ 1,096
==================================================
</TABLE>
(1) Fully federal taxable equivalent using a tax rate of 34% in all years.
PAGE 23 OF 29
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
EARNING ASSETS AND INTEREST-BEARING LIABILITIES
(in thousands)
Nine Months Ended
September 30
1996 1995
---- ----
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
-----------------------------------------------------------------------------------
EARNING ASSETS:
Loans (1)
Commercial and industrial $ 211,156 $14,551 9.19% $ 181,771 $12,614 9.25%
Real estate 311,752 21,096 9.02 276,723 17,529 8.45
Consumer obligations 134,304 9,891 9.82 136,529 10,147 9.91
-----------------------------------------------------------------------------------
Total loans 657,212 45,538 9.24 595,023 40,290 9.03
Loans held for sale 171,546 10,809 8.40 46,988 3,157 8.96
Securities
Taxable 130,805 6,181 6.30 187,981 9,002 6.39
Tax-exempt (2) 37,808 2,314 8.16 40,029 2,653 8.84
----------------------------------------------------------------------------------
Total securities 168,613 8,495 6.72 228,010 11,655 6.82
Federal funds sold 669 26 5.18 1,593 70 5.86
------------------------------------------------------------------------------------
Total earning assets 998,040 64,868 8.67 871,614 55,172 8.44
Cash and due from banks 30,292 25,302
Bank premises and equipment 26,685 22,013
Other assets 22,694 21,054
Less: allowance for possible
loan losses (6,684) (6,446)
--------------------------------------------------------------------------------------
Total assets $1,071,027 $933,537
=========================================================================================
INTEREST BEARING LIABILITIES
Demand deposits $ 101,706 $ 2,309 3.03% $105,454 $ 2,266 2.87%
Savings deposits 227,800 5,088 2.98 228,719 5,256 3.06
Time deposits 365,088 14,483 5.29 327,124 12,296 5.01
Short-term borrowings 152,649 5,944 5.19 87,568 3,811 5.80
Long-term debt 22,650 1,217 7.16 7,095 459 8.63
--------------------------------------------------------------------------------------
Total interest-bearing liabilities 869,893 29,041 4.45 755,960 24,088 4.25
Demand deposits 115,121 99,386
Other liabilities 10,242 9,160
Stockholders' equity 75,771 69,031
--------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $1,071,027 $933,537
=========================================================================================
Net interest income $35,827 $31,084
=========================================================================================
Net yield on earning assets 4.79% 4.76%
=========================================================================================
</TABLE>
(1) For purposes of this table, nonaccruing loans have been included in average
balances and loan fees, which are immaterial, have been included in interest
income.
(2) Computed on a fully federal tax-equivalent basis assuming a tax rate of 34%
in all years.
PAGE 24 OF 29
<PAGE>
RATE VOLUME ANALYSIS OF
CHANGES IN INTEREST INCOME AND EXPENSE
(in thousands)
Nine Months Ended
September 30
1996 VS. 1995
Increase (Decrease)
Due to Change In:
INTEREST INCOME FROM: Volume Rate Net
---------------------------------------
Loans
Commercial and industrial $ 2,082 $ (145) $ 1,937
Real estate 2,317 1,250 3,567
Consumer obligations (164) (92) (256)
---------------------------------------
Total loans 4,235 1,013 5,248
Loans held for sale 7,988 (336) 7,652
Securities
Taxable (2,703) (118) (2,821)
Tax-exempt (1) (142) (197) (339)
---------------------------------------
Total Securities (2,845) (315) (3,160)
Federal funds sold (37) (7) (44)
---------------------------------------
Total interest-earning assets $ 9,341 $ 355 $ 9,696
INTEREST EXPENSE ON:
Demand deposits (115) 158 43
Savings deposits (21) (147) (168)
Time deposits 1,480 707 2,187
Short-term borrowings 2,805 (672) 2,133
Long-term debt 896 (138) 758
---------------------------------------
Total interest-bearing liabilities $ 5,045 $ (92) $ 4,953
---------------------------------------
NET INTEREST INCOME $ 4,296 $ 447 $ 4,743
=======================================
(1) Fully federal taxable equivalent using a tax rate of 34% in all years.
PAGE 25 OF 29
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings - Not Applicable
Item 2. Changes in Securities - Not Applicable
Item 3. Defaults Upon Seller Securities - Not Applicable
Item 4. Submission of Matters to a Vote
of Security Holders -
On June 27, 1996, the Cmnpany held its Annual Meeting of Shareholders. Two
matters were submitted to the shareholders for consideration:
1. Election of five Class I directors; and
2. Ratification of the Board of Directors' appointment of Ernst & Young LLP as
auditors for the Company for 1995.
The vote tabulation for each matter was as follows:
1. Election of five Class I directors:
Authority
Directors For Withheld Abstain
- --------- --- -------- -------
Samuel M. Bowling 3,603,006 4,078 0
Steven J. Day 3.604,569 2,515 0
Jack E. Fruth 3,604,568 2,516 0
Otis L. O'Connor 3,604,569 2,515 0
Bob F. Richmond 3,604,569 2,515 0
Continuing directors whose terms did not expire at the annual meeting were:
J. Goldman, C. Dallas Keyser, Robert D. Fisher, George F. Davis, C. Scott
Briers, Carlin K. Harmon, Dale Nibert, Mark Schaul and Van R. Thorn.
2. Ratification of Appointment of Ernst & Young LLP:
For Against Abstain
--- ------- -------
3,569,364 6,728 30,992
Item 5. Other Information - Not Applicable
Item 6. Exhibits and Reports on 8-K - Not Applicable
The Company did not file any reports on Form 8-K during the
three months ended September 30, 1996.
PAGE 26 OF 29
<PAGE>
S I G N A T U R E
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CITY HOLDING COMPANY
November 13, 1996 By /s/ Dawn Woolsey
--------------------------------
Dawn Woolsey,
Chief Accounting Officer
(Principal Accounting Officer)
PAGE 27 OF 29
<PAGE>
EXHIBIT INDEX
Exhibit
Index
27 Financial Data Schedule for the nine months ending September 30, 1996
PAGE 28 OF 29
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM CITY HOLDING COMPANY'S UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS AS OF SEPTEMBER 30, 1996, AND THE NINE MONTHS THEN
ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 34,118
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 61
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 115,101
<INVESTMENTS-CARRYING> 44,506
<INVESTMENTS-MARKET> 45,010
<LOANS> 681,888
<ALLOWANCE> 6,836
<TOTAL-ASSETS> 1,085,215
<DEPOSITS> 825,574
<SHORT-TERM> 145,817
<LIABILITIES-OTHER> 10,774
<LONG-TERM> 25,750
0
0
<COMMON> 14,000
<OTHER-SE> 77,300
<TOTAL-LIABILITIES-AND-EQUITY> 1,085,215
<INTEREST-LOAN> 56,347
<INTEREST-INVEST> 7,708
<INTEREST-OTHER> 26
<INTEREST-TOTAL> 64,081
<INTEREST-DEPOSIT> 21,880
<INTEREST-EXPENSE> 29,041
<INTEREST-INCOME-NET> 35,040
<LOAN-LOSSES> 943
<SECURITIES-GAINS> 68
<EXPENSE-OTHER> 29,303
<INCOME-PRETAX> 11,380
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,570
<EPS-PRIMARY> 1.36
<EPS-DILUTED> 1.36
<YIELD-ACTUAL> 4.79
<LOANS-NON> 1,811
<LOANS-PAST> 2,191
<LOANS-TROUBLED> 249
<LOANS-PROBLEM> 243
<ALLOWANCE-OPEN> 6,566
<CHARGE-OFFS> (920)
<RECOVERIES> 247
<ALLOWANCE-CLOSE> 6,836
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
