City Holding Company Announces Record Annual Earnings

Rhea-AI Summary

City Holding Company (NASDAQ:CHCO) reported a record net income of $89.6 million and diluted earnings of $5.55 per share for the year ending December 31, 2020. Despite challenges from COVID-19, total deposits rose by $576 million, a 14.1% increase. However, the net interest margin fell to 3.16% and net interest income decreased by $6.8 million. Notably, asset quality improved with nonperforming assets decreasing from $16.4 million to $13.9 million.

Positive

• Record net income of $89.6 million and diluted earnings of $5.55 per share.
• Total deposits increased by $576 million, or 14.1%.
• Asset quality improved; nonperforming assets decreased from $16.4 million to $13.9 million.

Negative

• Net interest income decreased by $6.8 million from the previous year.
• Net interest margin declined from 3.59% to 3.16%.

City Holding Company (“Company” or “City”) (NASDAQ:CHCO), a $5.8 billion bank holding company headquartered in Charleston, West Virginia, today announced record net income of $89.6 million and diluted earnings of $5.55 per share for the year ended December 31, 2020.

City’s CEO Charles Hageboeck stated that, “2020 was a year unlike any before for City Holding Company, City National Bank, the financial industry, and the world. COVID-19 has impacted all facets of our lives from personal to professional. As a result of disruptions to our communities and the economy, City’s staff was presented with many unusual and unforeseen challenges during 2020. While the task at hand for our Company and employees was more difficult, our employees rose to the occasion and not only persevered, but excelled at providing outstanding service to our customers. For the third year in a row, City was recognized by the JD Power organization as the “Highest in Customer Satisfaction” in the North Central US. I applaud our employees for this achievement, particularly in the midst of a world-wide pandemic.”

“The COVID-19 crisis also created pressure on financial results. As a result of the pandemic, the Federal Reserve slashed interest rates to nearly zero in mid-March. Consequently, both loan and deposit rates fell and net interest margins for financial institutions contracted significantly in 2020. City’s net interest margin declined by 43 basis points and our reported net interest income decreased $6.8 million. While deposit rates dropped precipitously, deposit balances at banks increased dramatically, with total deposits at City increasing $576 million, or 14.1%, from December 31, 2019 to December 31, 2020. As the economy flattened during 2020, commercial loan demand for the majority of 2020 was weak, except for Government-sponsored Paycheck Protection Program (“PPP”) loans administered by the Small Business Administration (“SBA”). During the fourth quarter however, City had commercial loan growth of $32 million, or approximately 7.3%, on an annualized basis, exclusive of PPP loan repayments.”

“Asset quality remains in the forefront for those in the investment community focused on financial institutions. City’s asset quality remains stellar at December 31, 2020. Nonperforming assets, past due loans, and troubled debt restructurings at December 31, 2020, are all below the levels reported at December 31,2019. City has also continued to see a decline in deferred loans as of the quarter ended December 31, 2020. Commercial loan deferrals have dropped from $180 million at September 30, 2020 to $99 million at December 31, 2020. Of that, $88 million of the commercial deferrals at December 31, 2020 were for hotel and lodging related loans. While occupancy levels for our loan customers in this industry are still below pre-pandemic levels, our loan customers are continuing to see occupancy levels continue to slowly increase. Residential mortgage deferrals at December 31, 2020 were approximately $9 million.”

“In summary, 2020 presented a myriad of obstacles for all of us to overcome and I am pleased with how City and our employees managed these obstacles and are moving into 2021 from a position of strength.”

Net Interest Income

The Company’s net interest income decreased from $161.4 million for the year ended December 31, 2019 to $154.6 million for the year ended December 31, 2020. The Company’s tax equivalent net interest income decreased $6.5 million, or 4.0%, from $162.2 million for the year ended December 31, 2019 to $155.7 million for the year ended December 31, 2020. Lower loan yields (68 basis points) and investment yields (48 basis points) decreased net interest income by $24.5 million and $5.4 million, respectively. These decreases were partially offset by lower rates paid on interest bearing liabilities (40 basis points), higher investment balances ($195.9 million), and higher commercial loan balances ($99.3 million, driven largely by PPP loans) which increased net interest income by $13.1 million, $6.5 million, and $4.7 million, respectively. In addition, the Company recognized $1.6 million of loan fees associated with PPP loans during 2020. The Company’s reported net interest margin declined from 3.59% for the year ended December 31, 2019 to 3.16% for the year ended December 31, 2020. Excluding the favorable impact of the accretion from the fair value adjustments, the net interest margin would have been 3.08% for the year ended December 31, 2020 and 3.51% for the year ended December 31, 2019.

The Company’s net interest income increased from $38.0 million during the third quarter of 2020 to $38.2 million during the fourth quarter of 2020. During the fourth quarter of 2020, the Company’s tax equivalent net interest income increased $0.2 million, or 0.6%, to $38.5 million from $38.3 million during the third quarter of 2020. Higher investment balances ($133.3 million) and lower rates on interest bearing deposits (12 basis points) increased net interest income by $0.9 million and $0.8 million, respectively. In addition, loan fees increased $0.8 million due to an increase in PPP loan fees recognized as $33.1 million of PPP loans were fully repaid by the SBA during the quarter ended December 31, 2020. These increases were partially offset by lower investment yields (51 basis points) and lower loan yields (7 basis points) which decreased net interest income by $1.6 million and $0.7 million, respectively. The Company’s reported net interest margin declined from 3.02% for the third quarter of 2020 to 2.99% for the fourth quarter of 2020. Excluding the favorable impact of the accretion from the fair value adjustments, the net interest margin would have been 2.94% for the quarter ended December 31, 2020 and 2.97% for the quarter ended September 30, 2020.

Credit Quality

The Company’s ratio of nonperforming assets to total loans and other real estate owned decreased from 0.45% at December 31, 2019 to 0.38% at December 31, 2020. Total nonperforming assets decreased from $16.4 million at December 31, 2019 to $13.9 million at December 31, 2020. Excluded from this ratio are purchased credit-impaired loans in which the Company estimated cash flows and estimated a credit mark. Such loans would be considered nonperforming loans if the loan’s performance deterior

FAQ

What were City Holding Company's earnings for 2020?

City Holding Company reported a net income of $89.6 million and diluted earnings of $5.55 per share for the year ending December 31, 2020.

How did the COVID-19 pandemic affect City Holding Company's financial results?

The pandemic led to a decrease in net interest income by $6.8 million and a decline in the net interest margin from 3.59% to 3.16%.

What improvements did City Holding Company see in asset quality?

The company's nonperforming assets decreased from $16.4 million at December 31, 2019, to $13.9 million at December 31, 2020.

How much did City Holding Company's total deposits increase in 2020?

Total deposits increased by $576 million, or 14.1%, from December 31, 2019, to December 31, 2020.