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
March 31, 1998 0-1173
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.)
25 Gatewater Road
Cross Lanes, West Virginia 25313
(Address of principal offices)
Registrant's telephone number, including area code: (304) 769-1100.
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 May 14, 1998.
Common Stock, $2.50 Par Value - 6,755,357 shares
THIS REPORT CONTAINS 37 PAGES.
EXHIBIT INDEX IS LOCATED ON PAGE 32.
<PAGE>
Index
City Holding Company and Subsidiaries
This form 10-Q may include forward-looking financial
information within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Such forward-looking
information is identified by phrases such as the Company "expects" or
"anticipates" and words of similar effect. The Company's actual results achieved
may differ materially from those projected in the forward-looking information.
Factors that could cause such a difference include, among others: changes in
interest rates and economic and other market conditions generally and in the
Company's principal markets; competition for origination and servicing of
mortgage loans, particularly loans with high loan-to-value ratios or retail
originations; termination of the Company's participation in its whole loan
purchasing program announced on May 11, 1998, or disruption of retail
originations; and changes in regulations and government policies affecting banks
and their subsidiaries, including changes in monetary policies. The
forward-looking financial information is provided to assist investors and
Company stockholders in understanding anticipated future financial operations of
the Company and are included pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Further, the Company disclaims
any intent or obligation to update this forward-looking financial information.
PART I FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets -- March 31, 1998 (unaudited) and
December 31, 1997
Consolidated Statements of Income (unaudited) -- Three months
ended March 31, 1998 and 1997
Consolidated Statements of Changes in Stockholders' Equity
(unaudited) -- Three months ended March 31, 1998 and 1997
Consolidated Statements of Cash Flows (unaudited) -- Three
months ended March 31, 1998 and 1997
Notes to Consolidated Financial Statements (unaudited) --
March 31, 1998
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
<PAGE>
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>
PART I. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
CITY HOLDING COMPANY AND SUBSIDIARIES
(in thousands)
<TABLE>
<CAPTION>
Item I. MARCH 31 DECEMBER
1998 1997
<S> <C>
ASSETS (unaudited)
Cash and due from banks $ 61,794 $ 47,207
Federal funds sold 137 40,028
------------ ------------
CASH AND CASH EQUIVALENTS 61,931 87,235
Securities available for sale, at fair value Loans: 162,346 162,912
Gross loans 797,068 787,716
Unearned income (7,000) (7,354)
Allowance for possible loan losses (7,696) (7,673)
----------- ------------
NET LOANS 782,372 772,689
Loans held for sale 237,052 134,990
Bank premises and equipment 46,181 36,635
Accrued interest receivable 10,977 8,677
Other assets 100,071 63,005
------------ -------------
TOTAL ASSETS $ 1,400,930 $ 1,266,143
=========== ===========
LIABILITIES
Deposits:
Noninterest-bearing $ 138,408 $ 136,842
Interest-bearing 823,687 801,656
------------- ------------
TOTAL DEPOSITS 962,095 938,498
Short-term borrowings 175,958 130,191
Long-term borrowings 98,400 68,400
Other liabilities 23,189 22,799
------------- -----------
TOTAL LIABILITIES 1,259,642 1,159,888
Corporation - obligated mandatorily redeemable capital securities of subsidiary
trust holding solely subordinated debentures of City Holding
Company ("Trust Preferred Securities") 30,000 0
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
6,488,481 shares as of March 31, 1998 and 6,427,309 shares as of December
31, 1997, including 11,128 and 11,130 shares in treasury at March 31, 1998
and December 31, 1997, respectively. 16,222 16,067
Capital surplus 51,600 48,769
Retained earnings 42,260 40,374
Cost of common stock in treasury (310) (310)
Accumulated other comprehensive income 1,516 1,355
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 111,288 106,255
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,400,930 $ 1,266,143
=========== ===========
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
CITY HOLDING COMPANY AND SUBSIDIARIES
(In thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTH PERIOD ENDED
MARCH 31
1998 1997
---- ----
<S> <C>
INTEREST INCOME
Interest and fees on loans $ 23,186 $ 18,656
Interest on investment securities:
Taxable 2,100 2,167
Tax-exempt 412 486
Other interest income 211 56
------------ ---------
TOTAL INTEREST INCOME 25,909 21,365
INTEREST EXPENSE
Interest on deposits 8,858 7,704
Interest on short-term borrowings 1,975 1,262
Interest on long-term debt 1,475 592
------------ --------
TOTAL INTEREST EXPENSE 12,308 9,558
NET INTEREST INCOME 13,601 11,807
PROVISION FOR POSSIBLE LOAN LOSSES 520 388
------------- --------
NET INTEREST INCOME AFTER
PROVISION FOR POSSIBLE LOAN LOSSES 13,081 11,419
OTHER INCOME
Investment securities gains 10 28
Service charges 1,125 948
Mortgage loan servicing fees 3,883 2,627
Gain on sale of loans 2,558 810
Other 5,320 744
------------- --------
TOTAL OTHER INCOME 12,896 5,157
OTHER EXPENSES
Salaries and employee benefits 9,008 6,667
Occupancy, excluding depreciation 1,169 853
Depreciation 1,682 1,115
Other expenses 9,233 3,478
------------- ---------
TOTAL OTHER EXPENSES 21,092 12,113
INCOME BEFORE INCOME TAXES 4,885 4,463
INCOME TAXES 1,772 1,634
------------- ---------
NET INCOME $ 3,113 $ 2,829
======= =======
Basic earnings per common share $ 0.48 $ 0.47
====== ======
Diluted earnings per common share $ 0.48 $ 0.47
------ ======
Average common shares outstanding:
Basic 6,450,281 6,068,488
========== ==========
Diluted 6,541,290 6,079,500
========== =========
</TABLE>
<PAGE>
CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY CITY HOLDING COMPANY AND SUBSIDIARIES
Three Months Ended March 31, 1998 (in thousands)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER TOTAL
COMMON CAPITAL RETAINED TREASURY COMPREHENSIVE STOCKHOLDERS'
STOCK SURPLUS EARNINGS STOCK INCOME EQUITY
------------ ------------ ------------- ---------------- ----------------------------------
<S> <C>
Balances
at December 31, 1997 $ 16,067 $ 48,769 $ 40,374 ($310) $ 1,355 $ 106,255
---------------
Comprehensive Income:
Net income 3,113 3,113
Other comprehensive income, net of
tax:
Unrealized holding gain on securities
arising during the period 167 167
Less: reclassification adjustment for
gains realized in net income (6) (6)
--- ---
Other comprehensive income 161 161
---------------
Comprehensive Income 3,274
---------------
Cash Dividends
Declared ($.19/share) (1,227) (1,227)
Common stock issued in acquisitions 155 2,831 2,986
------------ ------------ ------------- ---------------- -----------------------------------
Balances
at March 31, 1998 $ 16,222 $51,600 $ 42,260 ($310) $1,516 $ 111,288
============ =========== ============ =============== ===================================
Three Months Ended March 31, 1997
ACCUMULATED
OTHER TOTAL
COMMON CAPITAL RETAINED TREASURY COMPREHENSIVE STOCKHOLDERS'
STOCK SURPLUS EARNINGS STOCK INCOME EQUITY
------------ ------------- -------------- ------------- -----------------------------------
Balances
at December 31, 1996 $ 13,998 $ 35,426 $ 30,246 ($300) $ 3 $ 79,373
---------------
Comprehensive Income:
Net income 2,829 2,829
Other comprehensive income, net of tax:
Unrealized losses on securities (453) (453)
---------------
Comprehensive Income 2,376
---------------
Cash Dividends
Declared ($.18/share) (1,092) (1,092)
Issuance of stock for Old National Bank
of Huntington 1,202 298 2,150 19 3,669
------------ ------------- -------------- ------------- -----------------------------------
Balances
at March 31, 1997 $ 15,200 $ 35,724 $ 34,133 ($300) $ (431) $ 84,326
------------ ------------- -------------- ------------- -----------------------------------
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
CITY HOLDING COMPANY AND SUBSIDIARIES
(in thousands)
<TABLE>
<CAPTION>
THREE MONTH PERIOD ENDED
MARCH 31
1998 1997
---- ----
<S> <C>
OPERATING ACTIVITIES
Net Income $ 3,113 $ 2,829
Adjustments to reconcile net income to net cash
used in operating activities:
Net amortization 875 237
Provision for depreciation 1,682 1,123
Provision for possible loan losses 520 388
Loans originated for sale (84,439) (23,149)
Purchases of loans held for sale (246,061) (135,753)
Proceeds from loans sold 231,051 101,543
Realized gains on loans sold (2,558) (296)
Realized investment securities gains (10) (28)
Increase in accrued interest receivable (2,300) (1,052)
Increase in other assets (33,873) (1,048)
Increase in other liabilities 390 1,442
------------- ----------
NET CASH USED IN OPERATING ACTIVITIES (131,610) (53,764)
INVESTING ACTIVITIES
Proceeds from sales of securities available for sale 4,049 9,254
Proceeds from maturities of securities available for sale 19,805 10,209
Purchases of securities available for sale (23,357) (24,566)
Proceeds from maturities and calls of investment securities 0 1,438
Net increase in loans (10,258) (11,628)
Net cash acquired in acquisitions 0 9,126
Purchases of premises and equipment (11,228) (840)
----------- ----------
NET CASH USED IN INVESTING ACTIVITIES (20,989) (7,007)
FINANCING ACTIVITIES
Net increase in noninterest-bearing deposits 1,566 3,258
Net increase in interest-bearing deposits 22,031 15,703
Net increase in short-term borrowings 45,767 36,173
Proceeds from long-term-debt 30,000 2,650
Proceeds from issuance of Trust Preferred Securities 29,158 0
Cash dividends paid (1,227) (1,092)
-------------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 127,295 56,692
============= =========
DECREASE IN CASH AND CASH EQUIVALENTS (25,304) (4,079)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 87,235 47,764
-------------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD 61,931 43,685
============== =========
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
March 31, 1998
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 three months ended March 31,
1998, are not necessarily indicative of the results of operations that can be
expected for the year ending December 31, 1998. 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. Certain amounts in the unaudited consolidated financial
statements have been reclassified. Such reclassifications had no impact on net
income or stockholders' equity in any period presented. 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, 1997.
<PAGE>
NOTE B - ACQUISITIONS
In January 1998, City National Bank (City National), a
wholly-owned subsidiary of the Company, acquired Jarrett/Aim Communications,
Inc. (Jarrett/Aim). Jarrett/Aim is a printer and direct mail corporation. In
March 1998, City National acquired Morton Specialty Insurance Partners,
Inc. (Morton Insurance). Morton Insurance offers property and casualty insurance
and bonding programs to established commercial and industrial clients, primarily
in energy related industries. In April 1998, City National acquired CityNet
Corporation (CityNet) and MarCom, Inc. (MarCom). Both companies provide internet
access to business and individual subscribers. These transactions were accounted
for under the purchase method of accounting. Accordingly, the results of
operations attributable to the Jarrett/Aim and Morton transactions have been
included in the consolidated totals from the date of the acquisitions. The
assets of Jarrett/Aim, Morton Insurance, CityNet and MarCom represent less than
1% of the total assets of the Company. Accordingly, no proforma information has
been included for the information provided herein.
Effective April 1, 1998, the Company consummated its acquisition of Del
Amo Savings Bank, FSB (Del Amo). Del Amo is a federally chartered savings bank,
headquartered in Torrance, California with total assets and total deposits of
approximately $116 million and $102 million, respectively, at March 31, 1998.
The merger involved the exchange of 264,776 shares of the Company's common stock
for all of the outstanding shares of Del Amo. This transaction was accounted for
under the purchase method of accounting. Due to the immaterial impact on the
Company's financial statements, no proforma information has been included for
the information provided herein.
NOTE C - TRUST PREFERRED SECURITIES
During March 1998, City Holding Capital Trust (the "Trust"), a
special-purpose statutory trust subsidiary of the Company, issued $30 million of
preferred capital securities (the "Capital Securities") to qualified
institutional buyers and $928,000 of common securities (the "Common Securities")
to the Company. Distributions on the Capital Securities will be payable at an
annual rate of 9.15%, payable semi-annually, and each Capital Security has a
stated liquidation amount of $1,000. To fund the Trust, the Company sold to the
Trust Junior Subordinated Debentures (the "Debentures") with terms identical to
the Capital Securities. Cash distributions on the Capital Securities are made to
the extent interest on the Debentures is received by the Trust. The Company,
through various agreements, has irrevocably and unconditionally guaranteed all
of the Trust's obligations under the Capital Securities regarding the payment of
distributions and payment on liquidation or redemption of the Capital
Securities, but only to the extent of funds held by the Trust. In the event of
certain changes or amendments to regulatory requirements or federal tax rules,
the Capital Securities are redeemable in whole at par or, if greater, a
make-whole amount. Otherwise, the Capital Securities are generally redeemable in
whole or in part on or after April 1, 2008, at a declining redemption price
ranging from 104.58% to 100% of the liquidation amount. On or after April 1,
2018, the Capital Securities may be redeemed at 100% of the liquidation amount.
After deducting expenses incurred in the issuance, the Company received proceeds
of $29.2 million from the Capital Securities offering.
The offering of the Capital Securities is classified as and is
similar to a minority interest and is presented as "Corporation-obligated
mandatorily redeemable capital securities of subsidiary trust holding
subordinated debentures of City Holding Company." The Company may include the
proceeds from the Capital Securities offering in its Tier I capital, and the
Company's payments on the Debentures are fully tax deductible.
NOTE D - INCOME TAXES
The consolidated provision for income taxes is based upon
financial statement earnings. The effective tax rate for the three months ended
March 31, 1998, of 36.27% 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
<PAGE>
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 approximated $84,145,000 at March 31, 1998. 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 $2,873,000,
have historically expired unfunded.
NOTE F - NEW ACCOUNTING PRONOUNCEMENTS
<PAGE>
Effective January 1, 1998, the Company adopted Financial
Accounting Standards Board (FASB) Statement 130, Reporting Comprehensive Income.
Statement 130 establishes new rules for the reporting and display of
comprehensive income and its components; however, the adoption of this Statement
had no impact on the Company's net income or shareholders' equity. Statement 130
requires unrealized gains or losses on the Company's securities, which prior to
adoption were reported separately in shareholders' equity, to be included in
other comprehensive income. Prior year financial statements have been
reclassified to conform to the requirements of Statement 130. During the first
quarter of 1998 and 1997, total comprehensive income amounted to $3.3 million
and $2.4 million, respectively.
As of January 1, 1998, the Company adopted the provisions of
SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities," relating to repurchase agreements, securities
lending and other similar transactions and pledged collateral, which had been
delayed until after December 31, 1997 by SFAS No. 127, "Deferral of the
Effective Date of Certain Provisions of FASB Statement 125, an amendment of FASB
Statement 125." The effect of adopting the additional provisions of Statement
125 as amended by Statement 127 had no material impact on the Company's
financial position or results of operations. During 1997, the FASB issued
Statement 131, "Disclosures about Segments of an Enterprise and Related
Information", which is effective for fiscal years beginning after December 15,
1997. This statement requires public companies to disclose certain information
about reportable operating segments in complete sets of financial statements of
the company and in interim condensed financial statements. However, the
provisions of this statement do not require the disclosure of segment
information in interim financial statements in the initial year of application
therefore no such disclosures are included herein. These disclosure requirements
will have no effect on the Company's financial position or results of
operations.
NOTE G - LONG-TERM BORROWINGS
Long-term debt consists of a $35,000,000 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 (7.1875% at March 31, 1998) due on December 31, 1998. As of March 31,
1998, the outstanding balance was equal to $33,400,000. The Company paid $23
million on the line of credit in April 1998 with proceeds received from the
issuance of the Trust Preferred Securities (See Note C). Interest on this
obligation is payable quarterly, and the Parent Company has pledged the common
stock of City National as collateral for the revolving credit loan. Management
intends to refinance this loan according to the provisions provided in the
agreement.
Additionally, City National maintains long-term financing
from the Federal Home Loan Bank (FHLB) in the form of Long-Term LIBOR Floaters
as follows:
Amount Interest Maturity
Outstanding Rate Date
----------- ------- --------
10,000,000 5.60% July 2002
25,000,000 5.61 September 2002
25,000,000 4.89 January 2008
5,000,000 5.48 February 2008
As of March 31, 1998, City National has maximum available credit with
the FHLB of approximately $308 million, which is collateralized by a
blanket lien on all residential and multi-family mortgage loans, and eligible
government and agency securities.
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
HIGHLIGHTS
FINANCIAL POSITION
Total assets increased $134.8 million or approximately 10.65%
during the first three months of 1998. Net loans increased $9.7 million or 1.3%.
Loans held for sale, consisting primarily of loans purchased or originated with
the intent to sell or securitize, increased $102.1 million or 75.6%. See LOAN
PORTFOLIO and LOANS HELD FOR SALE for further discussion. In addition, the
Company earned interest income of approximately $5,847,000 on the loans held for
sale during the three months ended March 31, 1998. See NET INTEREST INCOME for
further discussion. The increase in net loans and loans held for sale was funded
primarily by an increase in short-term, and long-term borrowings of $45.8
million and $33.0 million, respectively. Other assets increased $37.1 million
during the first quarter of 1998 due to the recording of approximately $30
million in receivables for loans sold in late March 1998 and due to an
additional $7.9 million in retained interest recorded through an asset-backed
securitization transaction. See LOANS HELD FOR SALE for further discussion.
Total stockholders' equity increased $5.0 million during the first three months
of 1998 primarily due to the net income recorded during the period of $3.1
million less dividends of $1.2 million and the $3.0 million increase due to
common stock issued in acquisitions.
QUARTER ENDED MARCH 31, 1998, COMPARED TO QUARTER ENDED MARCH 31, 1997.
The Company reported net income of $3,113,000 for the three
months ended March 31, 1998 compared to net income of $2,829,000 for the quarter
ended March 31, 1997. This increase of $284,000, or 10.04%, was attributable to
an increase in net interest income after provision for possible loan losses of
$1,662,000 and an increase in other income (excluding securities transactions)
of $7,757,000 which was offset with an increase in other expenses of $8,979,000.
The increase in non-interest income is a result of the
Company's $2.6 million increase in net origination fees on junior lien mortgages
and an additional $1.3 million in non-interest income from the mortgage
servicing division. A net increase of $1.7 million in gains on loans sold to
third parties also contributed to the increase in non-interest income. In
addition, the Company recognized $1.2 million in non-interest income from
printing and insurance services combined, with no income recorded for these
services in the first quarter of 1997.
Non-interest expenses increased $8,979,000 or 74.13% during
the first quarter of 1998 as compared to the same period of 1997, primarily due
to the $5.6 million in expenses associated with the Companys' acquisitions in
1997. Because prior periods were not restated for these acquisitions, no
expenses for these new divisions are included in the 1997 results. With the
overall growth of the Company, total personnel and other expenses have continued
to increase approximately $922,000 and $1.3 million, respectively, excluding the
impact of the 1997 acquisitions as previously discussed.
<PAGE>
Net income for the first quarter also benefited from an
increase of $1,794,000 in the Company's net interest income during the first
quarter of 1998 as compared to the same period of 1997. See NET INTEREST INCOME
for further discussion. Earnings per share (basic and diluted) were $.48 and
$.47 for the first quarter of 1998 and 1997, respectively.
SELECTED RATIOS
The return on average assets (ROA) for the first quarter of
1998 was .96% compared to 1.02% in the first quarter of 1997. The return on
average shareholder's equity (ROE) for the first quarter of 1998 was 11.57%
compared to 13.39% ROE for the first quarter of 1997.
The dividend payout ratio of 39.6% for the quarter ended March
31,1998 represents an increase of 3.3% from the dividend payout ratio of 38.3%
for the quarter ended March 31, 1997. Since 1988, the Company has paid dividends
on a quarterly basis, and expects to continue to do so in the future.
<PAGE>
LOAN PORTFOLIO
The composition of the Company's loan portfolio is presented
in the following table:
LOAN PORTFOLIO BY TYPE
(Dollars in Thousands)
March 31 December 31
1998 1997
Commercial, financial and
agricultural 244,436 232,602
Real Estate-Mortgage 374,130 371,974
Real Estate-Construction 27,115 28,427
Installment and other 151,387 154,713
Unearned Income (7,000) (7,354)
--------- ---------
TOTAL 790,068 780,362
======= =======
Loans Held for Sale
Program Loans 214,656 114,462
Loans Originated for Sale 22,396 20,528
-------- --------
TOTAL 237,052 134,990
======== =======
The Company continues to grant portfolio loans to customers
generally within the market areas of City National and its divisions. Loan
volume has continued to increase in recent years as a result of the Company's
more active solicitation of commercial loan business as well as general volume
increases applicable to the traditional borrowing segment from which the Company
has generated loans in the past. The Company has successfully attracted more
commercial customers, while continuing to obtain noncommercial, lower risk
collateral such as residential properties. The Company's collateral position
with respect to real estate loans has typically been less volatile than its
peers, particularly banks located outside of its region where dramatic
escalations in real estate values took place in certain prior years.
LOANS HELD FOR SALE
Loans held for sale represent mortgage loans the Company has
either purchased or originated with the intent to sell or securitize and are
carried at the lower of aggregate cost or market. With the acquisition of First
Allegiance and the creation of City Credit Services and CNB-Retail in the fourth
quarter of 1997, the Company began to originate high loan-to-value (LTV) debt
consolidation loans and other junior lien mortgage loans on a nationwide level.
Currently, these divisions are conducting business in 30 states across the
country. These loans are expected to either be securitized by the Company or
sold within 90-180 days to independent third parties.
The Company announced on May 11, 1998, that it had
discontinued its participation in a whole loan purchasing program with a
non-affiliated seller. The Company had participated in this program since the
first quarter of 1994.
As a result of discontinuing this program, the Company's
average balance of loans held for sale is expected to be less than originally
estimated, primarily in the third and fourth quarter, but also for the months of
May and June. In addition, servicing volume increases will not be as great as
was expected.
The Company has estimated that the impact of these events on
1998 earnings per share will be a decrease of $0.30 per share to $0.40 per
share, or 11-15% of its SNL I/B/E/S consensus estimate.
The Company's origination and purchasing of loans to be sold
or securitized involves certain risks. Such risks include credit risk related to
the quality of the underlying loan and the borrower's financial capability to
repay the loan, market risk related to the continued attractiveness of the loan
product to both borrowers and end-investors, and interest rate risk related to
potential changes in interest rates and the resulting repricing of both
financial assets and liabilities. The Company seeks to manage this risk by
continuously improving policies and procedures designed to reduce the risk of
loss to a level commensurate with the return being earned on the Company's
investment.
During the first quarter of 1998, the Company originated $84
million and purchased $246 million in loans held for sale and sold $231 million
during the same period. This compares to originations of $23 million, purchases
of $136 million, and sales of $102 million during the first quarter of 1997.
On March 18, 1998, the Company sold approximately $59.7
million of junior lien mortgage loans held for sale through an asset-backed
securitization transaction. As a result, the Company recorded a retained
interest of approximately $7.9 million. At March 31, 1998, approximately $12.2
million is included in Other Assets representing the Company's retained
interests in its securitized loan pools.
LOAN SERVICING
Mortgage loans serviced for others are not included in the
accompanying consolidated balance sheets. They consist primarily of Title I home
improvement loans and debt consolidation loans secured by junior lien mortgages.
The unpaid principal balances of mortgage loans serviced for others was $1.422
billion and $1.253 billion at March 31, 1998 and December 31, 1997,
respectively. The unpaid principal balances of intercompany mortgage loans
serviced was $227,701,000 at March 31, 1998.
Mortgage loan servicing rights of $1,985,000 and $2,462,000 at
March 31, 1998 and December 31, 1997, respectively, are included in other assets
in the accompanying balance sheets. Amortization of mortgage loan servicing
rights approximated $179,000 and $70,000 during the three months ended March 31,
1998 and March 31, 1997, respectively.
ASSET QUALITY AND ALLOWANCE FOR LOAN LOSSES
<PAGE>
The following table summarizes the Company's risk elements for
the periods ending March 31, 1998 and December 31, 1997. The Company's coverage
ratio of nonperforming assets and potential problem loans continues to be strong
at 113% as of March 31, 1998.
Management is of the opinion that the allowance for loan
losses is adequate to provide for probable future losses inherent in the
portfolio.
<PAGE>
RISK ELEMENTS
(in thousands)
Three Months
Ended Year Ended
March 31 December 31
1998 1997
---- ----
ALLOWANCE FOR LOAN LOSSES
Balance at beginning of period $7,673 $7,281
Charge-offs (602) (1,899)
Recoveries 105 419
---------- --------
Net charge-offs (497) (1,480)
Provision for loan possible losses 520 1,662
Balance of acquired subsidiary 0 210
----------- --------
Balance at end of period $7,696 $7,673
========== ========
AS A PERCENT OF AVERAGE TOTAL LOANS
Net charge-offs .06% .20%
Provision for possible loan losses .07% .22%
Allowance for loan losses .98% 1.01%
March 31 December 31
1998 1997
---- ----
NON-PERFORMING ASSETS
Other real estate owned $1,576 $1,263
Non-accrual loans 2,833 3,758
Accruing loans past due 90 days
or more 1,868 1,858
Restructured loans 331 331
--------- -------
Total Non-performing Assets $6,608 $7,210
POTENTIAL PROBLEM LOANS $190 $204
AS A PERCENT OF NON-PERFORMING ASSETS
AND POTENTIAL PROBLEM LOANS
Allowance for loan losses 113.21% 103.49%
ACCRUING LOANS PAST DUE 90 DAYS OR MORE
AS A PERCENT OF AVERAGE TOTAL LOANS 0.24% 0.25%
INTEREST RATE SENSITIVITY AND LIQUIDITY
Interest Rate Sensitivity: The Company manages its liquidity
position to reduce interest rate risk, which is the susceptibility of assets and
liabilities to declines in value as a result of changes in general market
interest rates. The Company seeks to reduce the risk through asset and liability
management, where the goal is to optimize the balance between earnings and
interest rate risk. The Company measures interest rate risk through interest
sensitivity gap analysis as illustrated in the following table. At March 31,
1998, the one year period shows a negative gap (liability sensitive) of $382
million. This analysis is a "static gap" presentation and movements in deposit
rates offered by City National 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
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 banking divisions,
and is based upon historical experience with their individual markets and
customers. Management expects to continue the same pricing methodology in
response to 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 terms 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. After
management adjustments, the table shows a negative gap in the one-year period of
$139 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.
However, when interest rates are rising, this position produces the converse
effect. Consequently, the Company has experienced a slight decline in its net
interest margin during the past two years and is somewhat vulnerable to a rapid
rise in interest rates in 1998. These declines in net interest margin did not
translate into declines in net interest income because of increases in the
volume of interest-earning assets.
INTEREST RATE SENSITIVITY GAPS (in thousands)
<TABLE>
<CAPTION>
1 to 3 MO. 3 to 12 MO. 1 to 5 YRS. Over 5 YRS. Total
-------------- --------------- -------------- --------------- ---------------
<S> <C>
ASSETS
Gross loans $176,704 $94,211 $422,352 $100,968 $794,235
Loans held for sale 237,052 0 0 0 237,052
Securities 20,047 21,424 91,170 29,705 162,346
Federal funds sold 137 0 0 0 137
Retained interest in securitized 12,221 0 0 0 12,221
loans
-------------- --------------- -------------- --------------- ---------------
Total interest earning assets $446,161 $115,635 $513,522 $130,673 $1,205,991
-------------- --------------- -------------- --------------- ---------------
LIABILITIES
Savings and NOW Accounts $377,298 $0 $0 $0 $377,298
All other interest bearing deposits 85,274 206,900 135,247 18,968 446,389
Short term and other borrowings 175,958 0 0 0 175,958
Long term borrowings 98,400 0 0 0 98,400
Trust preferred securities 0 0 0 30,000 30,000
-------------- --------------- -------------- --------------- ---------------
Total interest bearing liabilities $736,930 $206,900 $135,247 $48,968 $1,128,045
-------------- --------------- -------------- --------------- ---------------
Interest sensitivity gap ($290,769) ($91,265) $378,275 $81,705 $77,946
-------------- --------------- -------------- --------------- ---------------
Cumulative sensitivity gap ($290,769) ($382,034) ($3,759) $77,946
============== =============== ============== =============== ===============
Management adjustments $307,850 ($64,464) ($224,182) ($19,204)
-------------- --------------- -------------- --------------- ---------------
Cumulative management adjusted gap $17,081 ($138,648) $15,445 $77,946
============== =============== ============== =============== ===============
</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>
In addition to the interest rate sensitivity gap analysis, the Company performs
an earnings sensitivity analysis to identify the impact of changes in interest
rates on its net interest income. Since the simulated gap analysis incorporates
management assumptions as noted in the previous gap analysis discussion, actual
results will differ from simulated results due to timing, magnitude and
frequency of interest rate changes and changes in market conditions and
management strategies, among other factors.
The Company's policy objective is to avoid negative fluctuations in
net interest income of 10% within a 12-month period. As of March 31, 1998, the
Company had the following estimated earnings sensitivity profile:
Immediate Change in Rates
Pretax Earnings Changes +200 bp -200 bp
($769,000) $769,000
Based on the results of the simulation model as of March 31, 1998, the
Company would expect a decrease in net interest income of $385,000 and an
increase in net interest income of $385,000 if interest rates gradually increase
or decrease, respectively, from current rates by 100 basis points over a
12-month period.
Liquidity: During 1997 and continuing into 1998, the Company has sought
additional sources of liquidity. These additional sources were necessitated by
management's desire to reduce the reliance upon the Federal Home Loan Bank in
funding the Company's loans held for sale.
In the fourth quarter of 1997, a New York investment bank committed
to issue up to $100 million of the Company's certificates of deposit. The
activation of this commitment is solely at the discretion of the Company. The
certificates of deposit could be issued in maturities up to five years at a
rate equal to a comparable treasury maturity plus a market based spread. At
March 31, 1998, $2 million of the certificates of deposit had been sold under
this commitment at an average rate and term of approximately 5.70% and two
years, respectively. In addition, the Company is currently negotiating with a
large regional bank to enter into a committed $100 million warehouse line to
fund loan purchases and originations. There can be no assurance that the Company
will issue additional certificates of deposit pursuant to this arrangement or
that the warehouse line will be obtained.
The Company is satisfied with its liquidity position and its plans for
diversifying the Company's funding sources, and there are no known trends,
demands, commitments or uncertainties that have resulted or are reasonably
likely to result in material changes in liquidity. The Company also seeks to
maintain adequate liquidity in order to generate sufficient cash flows to fund
operations on a timely basis. The Company manages its liquidity position to
provide for asset growth and to ensure that the funding needs of depositors and
borrowers can be met promptly. The Company does not have a high concentration of
volatile funds, and all such funds are invested in assets of comparable maturity
to mitigate liquidity concerns.
The Company's cash and cash equivalents, represented by cash,
due from banks and federal funds sold, are a product of its operating, investing
and financing activities. These activities are set forth in the Company's
Consolidated Statements of Cash Flows included elsewhere herein. Cash was used
from operating activities in the first quarter of 1998 and 1997 due to cash
outlays for loans originated for sale and purchases of loans held for sale. Net
cash was used in investing activities for both periods presented which is
indicative of the Company's net increases in loan volume and purchases of
securities available for sale. Cash was provided by financing activities during
each period, as a result of net increases in deposits, short-term and long-term
borrowings, and the issuance of the trust preferred securities in March 1998.
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 March 31,
1998, the regulatory minimum ratio of qualified total capital to risk-weighted
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:
<TABLE>
<CAPTION>
Dollars in Thousands
March 31 December 31
1998 1997
----- ----
<S> <C>
Capital Components
Tier 1 risk-based capital $112,440 $ 82,842
Total risk-based capital 120,136 90,515
Capital Ratios
Tier 1 risk-based 10.21% 9.16%
Total risk-based 10.91 10.00
Leverage 8.82 6.49
Regulatory Minimum
Tier 1 risk-based (dollar/ratio) $44,045/4.00% $36,191/4.00%
Total risk-based (dollar/ratio) 88,091/8.00 72,381/8.00
Leverage (dollar/ratio) 50,983/4.00 51,094/4.00
</TABLE>
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.
As of March 31, 1998, the increased ratios reflect the effect of the Company's
Trust Preferred offering. See to NOTE C to Consolidated Financial Statements -
TRUST PREFERRED SECURITIES.
The Company does not anticipate any material capital
expenditures in 1998. Earnings from City National are expected to remain
adequate to fund payment of stockholders' dividends and normal internal growth.
In management's opinion, City National maintains the capability to upstream
sufficient dividends to meet the normal cash requirements of the Company.
NET INTEREST INCOME
Net interest income, on a fully federal tax-equivalent basis,
improved from the first quarter of 1997 to the first quarter of 1998 by
approximately $1,766,000 due to an increase in net earning assets. Net yield on
earning assets increased between the respective periods from 4.69% to 4.72%.
Earning asset yields increased 51 basis points (100 basis points equal one
percent) to 8.92%, and the cost of interest-bearing liabilities increased 45
basis points to 4.72%. The $22,000 increase in net interest income due to a
change in the rate, as shown in the following table, was coupled with a
$1,744,000 increase in net interest income due to a change in the volume. The
major component of this favorable volume change was increased average loans held
for sale.
EARNING ASSETS AND INTEREST-BEARING LIABILITIES
(in thousands)
<TABLE>
<CAPTION>
Quarter Ended
March 31
1998 1997
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ----
<S> <C>
EARNING ASSETS:
Loans (1)
Commercial and industrial $ 238,599 $ 5,403 9.06% $ 243,748 $ 5,117 8.40%
Real estate 401,867 8,391 8.35 341,740 7,332 8.58
Consumer obligations 143,962 3,545 9.85 144,986 3,536 9.76
--------------------------------------------------------------------------
Total loans 784,428 17,339 8.84 730,474 15,985 8.75
Loans held for sale 217,299 5,847 10.76 114,006 2,671 9.37
Securities
Taxable 131,264 2,100 6.40 141,388 2,167 6.13
Tax-exempt (2) 31,592 634 8.03 35,837 736 8.21
--------------------------------------------------------------------------
Total securities 162,856 2,734 6.72 177,225 2,903 6.55
Retained interest in securitized loans 5,632 180 12.78 0 0 0.00
Federal funds sold 2,224 31 5.58 6,861 56 3.26
--------------------------------------------------------------------------
Total earning assets 1,172,439 26,131 8.92 1,028,566 21,615 8.41
Cash and due from banks 30,647 37,933
Bank premises and equipment 41,079 30,847
Other assets 66,559 17,133
Less: allowance for possible loan losses (8,809) (7,574)
--------------------------------------------------------------------------
Total assets $1,301,915 $ 1,106,905
--------------- ----------- ----------- ------------- ------------ ------------
INTEREST-BEARING LIABILITIES:
Demand deposits $ 149,740 $ 1,246 3.33% $ 117,948 $ 897 3.04%
Savings deposits 215,908 1,591 2.95 221,511 1,627 2.94
Time deposits 449,450 6,021 5.36 405,148 5,180 5.11
Short-term borrowings 138,539 1,975 5.70 112,500 1,262 4.49
Long-term debt 89,511 1,475 6.59 38,108 592 6.21
--------------------------------------------------------------------------
Total interest-bearing liabilities 1,043,148 12,308 4.72 895,215 9,558 4.27
Demand deposits 127,824 117,389
Other liabilities 23,030 9,795
Trust preferred securities 333 0
Stockholders' equity 107,580 84,506
--------------------------------------------------------------------------
Total liabilities and
Stockholders' equity $1,301,915 $1,106,905
=============== =========== =========== ============= ============ ============
Net interest income $ 13,823 $12,057
=============== =========== =========== ============= ============ ============
Net yield on earning assets 4.72% 4.69%
=============== =========== =========== ============= ============ ============
</TABLE>
(1) For purposes of this table, non-accruing 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
approximately 35% in 1998 and 34% in 1997.
RATE VOLUME ANALYSIS OF
CHANGES IN INTEREST INCOME AND EXPENSE
(in thousands)
<TABLE>
<CAPTION>
Quarter Ended
March 31
1998 VS. 1997
Increase (Decrease)
Due to Change In:
Volume Rate Net
------- ---- ---
<S> <C>
INTEREST INCOME FROM:
Loans
Commercial and Industrial $ (621) $ 907 $ 286
Real estate 2,283 (1,224) 1,059
Consumer obligations (112) 121 9
------------------- ------------------- -------------------
Total loans 1,550 (196) 1,354
Loans held for sale 2,729 447 3,176
Investment securities
Taxable (513) 446 (67)
Tax-exempt (1) (86) (16) (102)
------------------- ------------------- -------------------
Total investment securities (599) 430 (169)
Retained interest in securitized loans 180 0 180
Federal funds sold (167) 142 (25)
------------------- ------------------- -------------------
Total interest-earning assets $ 3,693 $ 823 $ 4,516
INTEREST EXPENSE ON:
Demand deposits 259 90 349
Savings deposits (69) 33 (36)
Time deposits 585 256 841
Short-term borrowings 329 384 713
Long-term debt 845 38 883
------------------- ------------------- -------------------
Total interest-bearing liabilities $ 1,949 $ 801 $ 2,750
------------------- ------------------- -------------------
NET INTEREST INCOME $ 1,744 $ 22 $ 1,766
=================== =================== ===================
</TABLE>
(1) Fully federal taxable equivalent using a tax rate of 35% in 1998 and 34%
in 1997.
The change in interest due to both rate and volume has been allocated to
volume and rate changes in proportion to the relationship of the absolute
dollar amounts of the change in each.
<TABLE>
<S> <C>
Item 3. Quantitative and Qualitative Not Applicable
Disclosures and Market Risk
PART II OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities- None
Item 4. Submission of Matters to a Vote of
Security Holders -
Item 5. Other Information - On May 11, 1998, the Company issued a press
release announcing the discontinuation of
its participation in a whole loan purchasing
program with a non-affiliated seller. The
press release is attached as an exhibit hereto.
Item 6. Exhibits and Reports on 8-K -
Exhibit
Number Exhibit
11 Computation of Earnings per Share
27 Financial Data Schedule for the three months
ended March 31, 1998
99 Press Release issued May 11, 1998
</TABLE>
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
May 14,1998 By /s/ Dawn Woolsey
----------------------
Dawn Woolsey,
Chief Accounting Officer
(Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page Number
- ------- -----------
Index
- -----
<S> <C>
11 Computation of Earnings per Share 33
27 Financial Data Schedule for the three months ending March 31, 1998 34 - 35
99 Press Release Issued May 11, 1998 36 - 37
</TABLE>
<PAGE>
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1998 1997
---- ----
<S> <C>
Numerator:
Net income $3,113,000 $2,829,000
========== ==========
Denominator:
Denominator for basic earnings per share--
weighted average shares outstanding 6,450,281 6,068,488
Effect of dilutive securities:
Employee stock options 81,675 11,012
Contingent stock - acquisition 9,334 0
----- -
Dilutive potential common shares 91,009 11,012
------ ------
Denominator for diluted earnings per share--
Adjusted weighted-average shares and
Assumed conversions 6,541,290 6,079,500
========= =========
Basic earnings per share $ 0.48 $ 0.47
======= =======
Diluted earnings per share $ 0.48 $ 0.47
======= =======
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 61,794
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 137
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 162,346
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 790,068
<ALLOWANCE> 7,696
<TOTAL-ASSETS> 1,400,930
<DEPOSITS> 962,095
<SHORT-TERM> 175,958
<LIABILITIES-OTHER> 53,189
<LONG-TERM> 98,400
0
0
<COMMON> 16,222
<OTHER-SE> 95,066
<TOTAL-LIABILITIES-AND-EQUITY> 1,400,930
<INTEREST-LOAN> 23,186
<INTEREST-INVEST> 2,512
<INTEREST-OTHER> 211
<INTEREST-TOTAL> 25,909
<INTEREST-DEPOSIT> 8,858
<INTEREST-EXPENSE> 12,308
<INTEREST-INCOME-NET> 13,601
<LOAN-LOSSES> 520
<SECURITIES-GAINS> 10
<EXPENSE-OTHER> 21,092
<INCOME-PRETAX> 4,885
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,113
<EPS-PRIMARY> 0.48
<EPS-DILUTED> 0.48
<YIELD-ACTUAL> 4.72
<LOANS-NON> 2,833
<LOANS-PAST> 1,868
<LOANS-TROUBLED> 331
<LOANS-PROBLEM> 190
<ALLOWANCE-OPEN> 7,673
<CHARGE-OFFS> 602
<RECOVERIES> 105
<ALLOWANCE-CLOSE> 7,696
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
NEWS RELEASE
- -------------------------------------------------------------------------------
For Immediate Release
May 11, 1998
For Further Information Contact:
Steven J. Day, President & CEO
(304) 769-1101
CITY HOLDING COMPANY ANNOUNCES DISCONTINUATION IN A
WHOLE LOAN PURCHASING PROGRAM
(Charleston, West Virginia): City Holding Company (NASDAQ: CHCO), a
$1.3 billion bank holding company headquartered in Charleston, West Virginia,
announced today that it had discontinued its participation in a whole loan
purchasing program with a non-affiliated seller. City has participated in this
program since the first quarter of 1994.
As a result of discontinuing this program, City's average balance of
loans held for sale is expected to be less than originally estimated, primarily
in the third and fourth quarter, but also for the months of May and June. In
addition, servicing volume increases will not be as great as was expected.
Steven J. Day, President and Chief Executive Officer of City Holding
Company said, "We will move aggressively to increase our West Coast loan
production in order to minimize this event. However, we do expect a negative
short-term impact on earnings."
City has estimated that the impact of these events on 1998 earnings per
share will be a decrease of 30(cent) per share to 40(cent) per share, or 11-15%
of its SNL I/B/E/S consensus estimate.
Information contained in this news release includes forward-looking
financial information relating to the Company's operations based on estimates
and assumptions made by management. Such forward-looking information involves
risks and uncertainties including those associated with the interest rate and
general economic environments, federal and state banking regulations,
competition, and other risks. The forward-looking financial information is
provided to assist investors and Company shareholders in understanding
anticipated future financial operations of the Company and are included pursuant
to the safe harbor provisions of the Private Litigation Reform Act of 1995. The
actual results achieved may differ materially from those projected in the
forward-looking information. Further, the Company disclaims any intent or
obligation to update this forward-looking information.
City Holding Company is the parent company of The City National Bank of
Charleston and its banking divisions, Peoples National Bank, First State Bank &
Trust, The Bank of Ripley, Home National Bank of Sutton, Blue Ridge Bank,
Peoples State Bank, The First National Bank of Hinton, Merchants National Bank
and The Old National Bank of Huntington which currently operate 43 banking
offices in the state of West Virginia; Del Amo Savings Bank headquartered in
Torrance, California; City Financial Corporation, a full service brokerage
company in Charleston, West Virginia; City Mortgage Services (a division of City
National Bank), an originator and servicer of junior lien and related loans;
First Allegiance Financial Corporation and City Credit Services (divisions of
City National Bank), which are originators of junior lien mortgages for
securitization, or sale to independent third parties, headquartered in Irvine,
CA; RMI, ltd. (a division of City National Bank) an insurance agency offering a
full range of insurance products and services, including employee benefit
programs, key person programs, benefits consulting services, property and
casualty insurance, retirement plans and deferred compensation plans, to select
corporate associations and individual clients, and Jarrett/Aim Communications,
(a division of City National Bank) a printing company and direct mail service
provider.
City Holding Company is traded on the NASDAQ Stock Market under the
symbol "CHCO".
