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City Holding Company (NASDAQ:CHCO), with a market value of $5.9 billion, reported a quarterly net income of $19.8 million and diluted earnings of $1.25 per share for Q1 2021. Despite the economic recovery post-COVID-19, net interest income fell by $0.7 million, attributed to lower loan yields and average loan balances. The total loan portfolio decreased to $3.55 billion, while deposit balances rose by $152.5 million, supported by stimulus payments. Credit quality remains strong, with only a slight increase in nonperforming assets.
Positive
Total average depository balances rose by $152.5 million, or 3.4%, indicating strong customer deposits.
Nonperforming assets and past due loans showed improved trends, reflecting strong asset quality.
Negative
Net interest income decreased by $0.7 million from the previous quarter, indicating pressure on earnings.
Total loans decreased by $75.4 million, reflecting challenges in loan growth.
City Holding Company (“Company” or “City”) (NASDAQ:CHCO), a $5.9 billion bank holding company headquartered in Charleston, West Virginia, today announced quarterly net income of $19.8 million and diluted earnings of $1.25 per share for the quarter ended March 31, 2021.
Charles R. (“Skip”) Hageboeck, the President and Chief Executive Officer of City Holding Company, commented: “Our country and the communities that we serve are emerging from the COVID-19 pandemic and it is encouraging to see economic activity returning to more “normal” conditions. However, the impacts of this crisis continued to impact our financial performance during the first quarter of 2021. Our reported net interest income dipped $0.7 million from the linked quarter ended December 31, 2020 and our net interest margin dropped 8 basis points to 2.91%. Deposit balances continue to grow primarily as a result of the third round of stimulus payments with average deposit balances increasing over $150 million from the quarter ended December 31, 2020. City continues to participate in the government-sponsored Paycheck Protection Program (“PPP”) loans administered by the Small Business Administration (“SBA”). Thus far, City has assisted customers in obtaining almost $40 million in new PPP loans during the second round.
“A hallmark for City over the last several years has been our asset quality. Our asset quality remains very strong at March 31, 2021. Nonperforming assets, past due loans, and troubled debt restructurings remain at or below the levels reported at December 31, 2020. Deferred commercial loans remained relatively low at approximately 6% of total commercial balances at March 31, 2021. Hotel and lodging related loans comprise $105 million of the $115 million of these deferrals at March 31, 2021, and our hotel and lodging loan customers are experiencing increasing occupancy rates. Residential mortgage deferrals have dropped to approximately $3 million at March 31, 2021.
“Loan growth has been a particular challenge with interest rates at historic lows. Although our residential mortgage origination levels hit record highs in 2020, balances have decreased as some mortgages were refinanced into fixed rate loans not predominately offered by City. Those trends continued in the first quarter of 2021, but we believe that as mortgage rates and fees charged by agencies increase, our mortgage balances will increase. The decline in commercial loans primarily reflects a seasonal customer, as well as pricing pressure from some competitors. As the economy continues to improve, our view is that commercial loans will regain positive momentum.”
Net Interest Income
The Company’s net interest income decreased from $38.2 million during the fourth quarter of 2020 to $37.5 million during the first quarter of 2021. The Company’s tax equivalent net interest income decreased $0.6 million, or 1.7%, from $38.5 million for the fourth quarter of 2020 to $37.9 million for the first quarter of 2021. Lower loan yields (2 basis points) and lower average loan balances ($50 million) decreased interest income by $0.7 million and $0.5 million, respectively, as compared to the quarter ended December 31, 2020. In addition, lower average investment balances ($30 million) decreased interest income by $0.2 million from the quarter ended December 31, 2020. These decreases were partially offset by lower rates paid on interest-bearing liabilities (primarily time deposits) that lowered interest expense by $0.9 million during the quarter ended March 31, 2021. The Company’s reported net interest margin decreased from 2.99% for the fourth quarter of 2020 to 2.91% for the first quarter of 2021.
Balance Sheet Trends
Loans decreased $75.4 million from December 31, 2020 to March 31, 2021, to $3.55 billion. Net of forgiveness received from the SBA of approximately $32 million of PPP loans from the first round, PPP loans increased $7.4 million as a result of the Company’s participation in the second round of the PPP lending. Excluding outstanding PPP loans (included in the commercial and industrial loan category), total loans decreased $82.8 million, (2.3%), from December 31, 2020 to $3.48 billion at March 31, 2021. Residential real estate loans decreased $54.8 million (3.5%); commercial real estate loans decreased $12.1 million (0.8%); commercial and industrial loans decreased $9.2 million (2.9%) (excluding PPP loans); and home equity loans decreased $6.5 million (4.7%).
Total average depository balances increased $152.5 million, or 3.4%, from the quarter ended December 31, 2020 to the quarter ended March 31, 2021. Average noninterest-bearing demand deposit balances increased $67.8 million, average savings deposit balances increased $72.5 million, and average interest-bearing demand deposit balances increased $54.7 million. These balances increased despite low average interest rates paid by the Company – 5 basis points for interest-bearing deposits and 6 basis points for savings deposits. We believe that these increases were largely attributable to the third round of Economic Impact Payments as part of the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 (approximately $180 million). These increases were partially offset by lower average time deposit balances of $42.5 million.
Credit Quality
The Company’s ratio of nonperforming assets to total loans and other real estate owned increased modestly from 0.38% at December 31, 2020 to 0.39% at March 31, 2021. Total nonperforming assets increased slightly from $13.9 million at December 31, 2020 to $14.0 million at March 31, 2021. Total past due loans decreased from $8.9 million, or 0.25% of total loans outstanding, at December 31, 2020 to $6.6 million, or 0.19% of total loans outstanding, at March 31, 2021.
As a result of the Company’s quarterly analysis of the adequacy of the allowance for credit losses (“ACL”), the Company recorded a recovery of credit losses of $0.4 million in the first quarter of 2021, compared to a provision for credit losses of $8.0 million for the comparable period in 2020 and a provision for credit losses of $0.5 million for the fourth quarter of 2020. The recovery of credit losses recorded in the first quarter of 2021 largely reflects the decline in loan balances ($83 million) from the quarter ended December 31, 2020 which resulted in the release of $0.5 million from the allowance for credit losses during the first quarter of 2021. As a result of an improvement in economic conditions in the Company’s footprint, net charge-offs for the quarter ended March 31, 2021 were negligible.
Non-interest Income
During the quarter ended March 31, 2020, the Company sold the entirety of its Visa Inc. Class B common shares (86,605) in a cash transaction which resulted in a pre-tax gain of $17.8 million, or $0.84 diluted per share on an afte
FAQ
What were City Holding Company's earnings for Q1 2021?
City Holding Company reported a net income of $19.8 million and diluted earnings of $1.25 per share for Q1 2021.
How did the COVID-19 pandemic affect City Holding Company's financial performance?
The financial performance was impacted with a decrease in net interest income and challenges in loan growth, despite improvements in asset quality.
What is the status of City Holding Company's loan portfolio?
Total loans decreased to $3.55 billion, primarily due to reductions in residential and commercial real estate loans.
How did deposit balances change for City Holding Company in Q1 2021?
Total average depository balances increased by $152.5 million, largely due to Economic Impact Payments.
What trends were seen in City Holding Company's asset quality?
Nonperforming assets and past due loans remained stable, with a slight increase in nonperforming assets to 0.39%.