City Holding Company Announces Third Quarter Results

Rhea-AI Summary

City Holding Company (NASDAQ:CHCO) reported a net income of $20.1 million and diluted earnings of $1.25 per share for Q3 2020, reflecting a return on assets of 1.46% and return on tangible equity of 13.8%. Despite the impacts of COVID-19, deposits increased by $350 million (8%) year-over-year. Asset quality remains stable, with nonperforming assets decreasing to 0.43%. However, net interest income slightly declined from $38.1 million in Q2 to $38.0 million in Q3. The Company approved a $0.57 per share dividend, with ongoing share repurchase activity under a prior plan.

Positive

• Net income of $20.1 million and diluted earnings of $1.25 per share.
• Deposits increased by $350 million (8%) since December 31, 2019.
• Nonperforming assets decreased to 0.43% of total loans.
• Dividend of $0.57 per share approved for payment on October 30, 2020.

Negative

• Net interest income decreased slightly from $38.1 million in Q2 to $38.0 million in Q3.
• Total loans decreased by $40.6 million (1.1%) excluding PPP loans.

CHARLESTON, W. Va.--(BUSINESS WIRE)--City Holding Company (“Company” or “City”) (NASDAQ:CHCO), a $5.5 billion bank holding company headquartered in Charleston, West Virginia, today announced quarterly net income of $20.1 million and diluted earnings of $1.25 per share for the quarter ended September 30, 2020. For the third quarter of 2020, the Company achieved a return on assets of 1.46% and a return on tangible equity of 13.8%.

Charles R. (“Skip”) Hageboeck, the President and Chief Executive Officer of City Holding Company, commented: “Like all of the world, City Holding Company and City National Bank have experienced repercussions from the economic slow-down that has accompanied COVID-19. As an essential business, our company has focused on continuing to provide our customers safe access to banking products and services consistent with our reputation for exceptional customer service. In 2020, City was recognized for the third consecutive year by the JD Power organization as the “Highest in Customer Satisfaction” in the North Central US. We have also been highly focused on protecting the health of our employees and customers. Branches were open by appointment only during the initial months of the pandemic, but by the end of the third quarter of 2020, all 94 of our locations were fully open to customers. We are pleased that while many businesses in our nation have had to implement layoffs, we have been fortunate not to have to consider such painful changes, and City’s family of dedicated employees have continued to demonstrate their exceptional commitment to each other, our customers, our communities, and to our company. I thank all of them for their brave and hard work during a very stressful time.”

“The COVID crisis caused the Federal Reserve to lower short-term interest rates to nearly zero during the second quarter of 2020. As a result, deposit rates are very low across all financial institutions. And yet, deposits at banks have ballooned this year. At City, deposits are up nearly $350 million since December 31, 2019 – or about 8%. While the economy continued to recover in the third quarter of 2020, the drop-off in the second quarter of 2020 was extraordinarily steep and thus loan demand outside of the Government sponsored Paycheck Protection Program ("PPP") remains very weak. Despite these lingering effects of COVID-19, City was again able to produce strong results during the third quarter of 2020. Net interest income for the third quarter of 2020 was about flat with the linked quarter. Provision expense was low. Fee income was solid and expenses continue to be well managed. These successes are attributable to the hard working team of City professionals, and I thank them for their dedication and effort.”

“Asset quality seems to be the top concern for analysts who follow banking organizations. In our opinion, City’s asset quality continues to remain solid. As compared to pre-COVID asset quality levels at December 31, 2019, nonperforming assets have improved; past-due loans have improved and troubled-debt restructured loans have improved! Further, the amount of loans in deferment status dropped dramatically during the quarter ended September 30, 2020. As of September 30, 2020, approximately $180 million of commercial loans have been granted deferrals as compared to approximately $430 million as of June 30, 2020. Nearly $160 million of the commercial loan deferments were for hotel and lodging related loans at September 30, 2020. While reduced business and personal travel have lowered occupancy rates for our hotel and lodging loan customers, occupancy rates continued to improve during the third quarter of 2020. As of September 30, 2020, approximately $15 million of mortgage loans have been granted deferrals as compared to approximately $125 million at June 30, 2020.”

Net Interest Income

The Company’s net interest income decreased slightly from $38.1 million during the second quarter of 2020 to $38.0 million during the third quarter of 2020. The Company’s tax equivalent net interest income remained level at $38.3 million for both the second and third quarters of 2020. Lower loan yields (21 basis points) decreased net interest income by $1.5 million and a decrease in accretion fair value adjustments lowered net interest income by $0.5 million. These decreases were essentially offset by an increase in investment income due to higher yields and an increase in balances and a decrease in rates paid on deposits (13 basis points) which increased net interest income by $0.9 million and $0.8 million, respectively. The Company’s reported net interest margin decreased from 3.13% for the second quarter of 2020 to 3.02% for the third quarter of 2020. Excluding the favorable impact of the accretion from fair value adjustments, the net interest margin would have been 2.97% for the quarter ended September 30, 2020 and 3.05% for the quarter ended June 30, 2020.

Credit Quality

The Company’s ratio of nonperforming assets to total loans and other real estate owned decreased from 0.48% at June 30, 2020 to 0.43% at September 30, 2020. Total nonperforming assets decreased from $17.6 million at June 30, 2020 to $15.7 million at September 30, 2020. Total past due loans increased marginally from $7.1 million, or 0.19% of total loans outstanding, at June 30, 2020 to $7.4 million, or 0.20% of total loans outstanding, at September 30, 2020.

As a result of the Company’s quarterly analysis of the adequacy of the allowance for credit losses (“ACL”), the Company recorded a provision for credit losses of $1.0 million in the third quarter of 2020, compared to a provision for loan losses of $0.3 million for the comparable period in 2019 and a provision for credit losses of $1.25 million for the second quarter of 2020. The provision for credit losses recognized in the third quarter of 2020 primarily relates to changes in outstanding balances in the Company’s loan portfolio and their associated loss rates and downgrades of certain hotel/motel credits during the quarter based on current market conditions which increased the Company’s ACL by $2.0 million and $1.2 million. Partially offsetting these increases in the ACL was a decrease in the ACL due to the upgrade of a specific credit that was downgraded in 2017, but has since seen improved financial performance. This upgrade released $2.2 million of ACL reserves.

Non-interest Income

Non-interest income was $17.0 million for the third quarter of 2020 as compared to $16.7 million for the third quarter of 2019. During the third quarter of 2020, the Company reported $0.5 million of unrealized fair value gains on the Company’s equity securities compared to $0.3 million of unrealized fair value losses on the Company’s equity securities in the third quarter of 2019. Exclusive of these gains, non-interest income decreased from $17.0 million for the third quarter of 2019 to $16.5 million for the third quarter of 2020. This decrease was largely attributable to a decrease of $1.9 million, or 23.1%, in service charges as average deposit balances have increased during the COVID-19 pandemic. This decrease was partially offset by increases in our bankcard revenues ($0.6 million), other income due to fees from loan interest rate swap originations ($0.5 million), and bank owned life insurance revenues due to death benefit proceeds ($0.3 million).

Non-interest Expenses

Non-interest expenses increased $0.3 million (1.1%), from $28.4 million in the third quarter of 2019 to $28.7 million in the third quarter of 2020. This increase was primarily due to an increase in equipment and software related expenses of $0.4 million, FDIC insurance expense of $0.4 million, and other expenses of $0.2 million. These increases were partially offset by decreases in advertising expenses ($0.4 million) and occupancy related expenses ($0.3 million).

Balance Sheet Trends

Loans increased $47.9 million (1.3%) from December 31, 2019 to $3.66 billion at September 30, 2020. As a result of the Company’s participation in the PPP loans administered by the SBA, commercial and industrial loans increased $88.5 million. Excluding PPP loans, total loans decreased $40.6 million, (1.1%), from December 31, 2019 to $3.58 billion at September 30, 2020. Residential real estate loans decreased $19.1 million (1.2%), commercial and industrial loans decreased $12.5 million (4.1%) (excluding PPP loans), home equity loans decreased $8.8 million (5.9%) and consumer loans decreased $3.7 million (6.9%). These decreases were partially offset by an increase in commercial real estate loans of $5.0 million (0.3%). Decreases in loan outstandings are reflective of the low-interest rate environment driving residential mortgage originations toward fixed rate loans and a general lack of borrowing for commercial loans.

Total average depository balances increased $133.4 million, or 3.1%, from the quarter ended June 30, 2020 to the quarter ended September 30, 2020. Average noninterest-bearing demand deposit balances increased $70.8 million, average savings deposit balances increased $56.5 million, and average interest-bearing demand deposit balances increased $37.3 million. These increases were partially offset by a decrease in time deposit balances of $31.2 million. Since December 31, 2019, depository balances have increased $344.2 million (8.4%) due to the infusion of government transfer payments for unemployment insurance, PPP loans and stimulus checks. Additionally, due to very low interest rates across a wide array of investment alternatives, it appears that customers are stockpiling cash in banking institutions.

Income Tax Expense

The Company’s effective income tax rate for the third quarter of 2020 was 20.2% compared to 21.3% for the year ended December 31, 2019, and 21.7% for the quarter ended September 30, 2019.

Capitalization and Liquidity

The Company’s loan to deposit ratio was 82.9% and the loan to asset ratio was 66.5% at September 30, 2020. The Company maintained investment securities totaling 21.5% of assets as of the same date. The Company’s deposit mix is weighted heavily toward checking and saving accounts, which fund 56.6% of assets at September 30, 2020. Time deposits fund 23.6% of assets at September 30, 2020, but very few of these deposits are in accounts that have balances of more than $250,000, reflecting the core retail orientation of the Company.

The Company continues to be strongly capitalized. The Company’s tangible equity ratio decreased from 11.0% at December 31, 2019 to 10.6% at September 30, 2020. At September 30, 2020, City National Bank’s Leverage Ratio was 9.32%, its Common Equity Tier I ratio was 14.46%, its Tier I Capital ratio was 14.46%, and its Total Risk-Based Capital ratio was 15.04%. These regulatory capital ratios are significantly above levels required to be considered “well capitalized,” which is the highest possible regulatory designation.

On September 30, 2020, the Board of Directors of the Company approved a quarterly cash dividend of $0.57 per share payable October 30, 2020, to shareholders of record as of October 15, 2020. During the quarter ended September 30, 2020, the Company repurchased 231,000 common shares at a weighted average price of $59.49 as part of a one million share repurchase plan authorized by the Board of Directors in February 2019. As of September 30, 2020, the Company could repurchase approximately 247,000 additional shares under the plan.

City Holding Company is the parent company of City National Bank of West Virginia. City National Bank operates 94 branches across West Virginia, Kentucky, Virginia, and Ohio. The Company recently commenced construction of a new branch in Spring Mills, WV. Located in Berkeley County, the branch will serve one of West Virginia’s fastest growing markets in the second-most populous of West Virginia’s 55 counties.

Forward-Looking Information

• This news release contains certain forward-looking statements that are included pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements express only management’s beliefs regarding future results or events and are subject to inherent uncertainty, risks, and changes in circumstances, many of which are outside of management’s control. Uncertainty, risks, changes in circumstances and other factors could cause the Company’s actual results to differ materially from those projected in the forward-looking statements. Factors that could cause actual results to differ from those discussed in such forward-looking statements include, but are not limited to those set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 under “ITEM 1A Risk Factors” and the following: (1) general economic conditions, especially in the communities and markets in which we conduct our business; (2) the uncertainties on the Company’s business, results of operations and financial condition, caused by the COVID-19 pandemic, which will depend on several factors, including the scope and duration of the pandemic, its continued influence on financial markets, the effectiveness of the Company’s work from home arrangements and staffing levels in operational facilities, the impact of market participants on which the Company relies and actions taken by governmental authorities and other third parties in response to the pandemic; (3) credit risk, including risk that negative credit quality trends may lead to a deterioration of asset quality, risk that our allowance for loan losses may not be sufficient to absorb actual losses in our loan portfolio, and risk from concentrations in our loan portfolio; (4) changes in the real estate market, including the value of collateral securing portions of our loan portfolio; (5) changes in the interest rate environment; (6) operational risk, including cybersecurity risk and risk of fraud, data processing system failures, and network breaches; (7) changes in technology and increased competition, including competition from non-bank financial institutions; (8) changes in consumer preferences, spending and borrowing habits, demand for our products and services, and customers’ performance and creditworthiness; (9) difficulty growing loan and deposit balances; (10) our ability to effectively execute our business plan, including with respect to future acquisitions; (11) changes in regulations, laws, taxes, government policies, monetary policies and accounting policies affecting bank holding companies and their subsidiaries; (12) deterioration in the financial condition of the U.S. banking system may impact the valuations of investments the Company has made in the securities of other financial institutions; (13) regulatory enforcement actions and adverse legal actions; (14) difficulty attracting and retaining key employees; (15) other economic, competitive, technological, operational, governmental, regulatory, and market factors affecting our operations. Forward-looking statements made herein reflect management's expectations as of the date such statements are made. Such information is provided to assist stockholders and potential investors in understanding current and anticipated financial operations of the Company and is included pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances that arise after the date such statements are made. Further, the Company is required to evaluate subsequent events through the filing of its September 30, 2020 Form 10-Q. The Company will continue to evaluate the impact of any subsequent events on the preliminary September 30, 2020 results and will adjust the amounts if necessary.

CITY HOLDING COMPANY AND SUBSIDIARIES
Financial Highlights
(Unaudited)
		Three Months Ended																						Nine Months Ended
		September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019				September 30, 2019						September 30, 2020				September 30, 2019
Earnings
Net Interest Income (fully taxable equivalent)		$	38,278			$	38,287			$	40,603			$	40,036			$	40,729					$	117,168			$	122,118
Net Income available to common shareholders			20,126				18,251				29,000				22,611				22,371						67,374				66,741
Per Share Data
Earnings per share available to common shareholders:
Basic		$	1.25			$	1.12			$	1.79			$	1.38			$	1.36					$	4.15			$	4.05
Diluted			1.25				1.12				1.78				1.38				1.36						4.15				4.04
Weighted average number of shares (in thousands):
Basic			15,950				16,081				16,080				16,207				16,271						16,065				16,350
Diluted			15,970				16,097				16,101				16,230				16,289						16,084				16,368
Period-end number of shares (in thousands)			15,848				16,077				16,140				16,303				16,302						15,848				16,302
Cash dividends declared		$	0.57			$	0.57			$	0.57			$	0.57			$	0.57					$	1.71			$	1.63
Book value per share (period-end)		$	43.62			$	43.15			$	42.45			$	40.36			$	39.85					$	43.62			$	39.85
Tangible book value per share (period-end)			36.11				35.72				35.03				32.98				32.44						36.11				32.44
Market data:
High closing price		$	67.98			$	71.19			$	82.40			$	82.72			$	78.30					$	82.40			$	82.56
Low closing price			55.37				55.18				57.11				74.33				72.35						55.18				67.58
Period-end closing price			57.61				65.17				66.53				81.95				76.25						57.61				76.25
Average daily volume (in thousands)			67				89				69				54				62						75				56
Treasury share activity:
Treasury shares repurchased (in thousands)			231				79				182				-				99						492				261
Average treasury share repurchase price		$	59.49			$	61.75			$	71.31			$	-			$	74.17					$	64.23			$	74.54
Key Ratios (percent)
Return on average assets			1.46	%			1.35	%			2.29	%			1.80	%			1.81	%					1.68	%			1.81	%
Return on average tangible equity			13.8	%			12.6	%			20.6	%			16.8	%			17.0	%					15.6	%			17.5	%
Yield on interest earning assets			3.43	%			3.64	%			4.22	%			4.22	%			4.42	%					3.75	%			4.46	%
Cost of interest bearing liabilities			0.58	%			0.71	%			0.91	%			1.00	%			1.10	%					0.73	%			1.08	%
Net Interest Margin			3.02	%			3.13	%			3.54	%			3.46	%			3.59	%					3.22	%			3.64	%
Non-interest income as a percent of total revenue			30.3	%			27.4	%			30.6	%			31.2	%			29.2	%					35.8	%			29.3	%
Efficiency Ratio			51.6	%			53.3	%			49.7	%			50.0	%			48.2	%					51.5	%			50.0	%
Price/Earnings Ratio (a)			11.53				14.50				17.63				14.82				13.98						10.40				14.13
Capital (period-end)
Average Shareholders' Equity to Average Assets			12.71	%			12.91	%			13.50	%			13.12	%			13.12	%
Tangible equity to tangible assets			10.61	%			10.62	%			11.38	%			10.98	%			10.93	%
Consolidated City Holding Company risk based capital ratios (b):
CET I			15.93	%			16.10	%			16.02	%			16.05	%			15.62	%
Tier I			15.93	%			16.10	%			16.02	%			16.05	%			15.74	%
Total			16.50	%			16.69	%			16.46	%			16.40	%			16.14	%
Leverage			10.19	%			10.45	%			11.10	%			10.90	%			10.87	%
City National Bank risk based capital ratios (b):
CET I			14.46	%			14.55	%			14.32	%			13.92	%			14.00	%
Tier I			14.46	%			14.55	%			14.32	%			13.92	%			14.00	%
Total			15.04	%			15.15	%			14.82	%			14.28	%			14.40	%
Leverage			9.32	%			9.29	%			9.98	%			9.51	%			9.72	%
Other (period-end)
Branches			94				94				95				95				95
FTE			921				913				921				918				916
Assets per FTE (in thousands)		$	5,984			$	6,058			$	5,525			$	5,467			$	5,412
Deposits per FTE (in thousands)			4,799				4,834				4,400				4,440				4,399
(a) The price/earnings ratio is computed based on annualized quarterly earnings (excludes gain for sale of VISA shares, net of taxes).
(b) September 30, 2020 risk-based capital ratios are estimated.

CITY HOLDING COMPANY AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited) ($ in 000s, except per share data)
		Three Months Ended																					Nine Months Ended
		September 30, 2020			June 30, 2020				March 31, 2020				December 31, 2019				September 30, 2019						September 30, 2020				September 30, 2019
Interest Income
Interest and fees on loans		$	35,761		$	37,718			$	41,335			$	41,615			$	42,944					$	114,813			$	128,397
Interest on investment securities:
Taxable			6,266			5,718				5,871				5,924				6,044						17,855				17,465
Tax-exempt			1,132			821				707				711				722						2,659				2,257
Interest on deposits in depository institutions			72			55				304				298				271						432				1,034
Total Interest Income			43,231			44,312				48,217				48,548				49,981						135,759				149,153
Interest Expense
Interest on deposits			5,123			5,963				7,238				7,897				8,585						18,324				24,768
Interest on short-term borrowings			131			279				464				762				814						873				2,729
Interest on long-term debt			-			-				100				42				45						100				140
Total Interest Expense			5,254			6,242				7,802				8,701				9,444						19,297				27,637
Net Interest Income			37,977			38,070				40,415				39,847				40,537						116,462				121,516
Provision for (recovery of) credit losses			1,026			1,250				7,972				(75	)			274						10,248				(1,175	)
Net Interest Income After Provision for (Recovery of) Credit Losses			36,951			36,820				32,443				39,922				40,263						106,214				122,691
Non-Interest Income
Net (losses) gains on sale of investment securities			-			(6	)			63				-				(40	)					56				69
Unrealized gains (losses) recognized on equity securities still held			461			242				(2,402	)			914				(214	)					(1,698	)			(27	)
Service charges			6,295			4,945				7,723				8,233				8,183						18,962				23,281
Bankcard revenue			6,065			5,888				5,115				5,162				5,440						17,068				15,931
Trust and investment management fee income			1,844			1,931				1,799				2,016				1,802						5,574				5,144
Bank owned life insurance			1,088			848				1,676				856				762						3,611				2,910
Sale of VISA shares			-			-				17,837				-				-						17,837				-
Other income			1,232			783				1,536				861				765						3,550				3,139
Total Non-Interest Income			16,985			14,631				33,347				18,042				16,698						64,960				50,447
Non-Interest Expense
Salaries and employee benefits			15,361			14,873				15,851				15,918				15,210						46,085				46,220
Occupancy related expense			2,428			2,402				2,488				2,540				2,725						7,318				8,055
Equipment and software related expense			2,607			2,504				2,429				2,302				2,248						7,540				6,662
FDIC insurance expense			355			167				-				-				-						522				639
Advertising			462			933				843				694				861						2,238				2,650
Bankcard expenses			1,517			1,498				1,435				1,285				1,554						4,450				4,270
Postage, delivery, and statement mailings			513			592				616				588				659						1,721				1,828
Office supplies			396			353				394				392				382						1,143				1,167
Legal and professional fees			548			589				601				706				539						1,738				1,665
Telecommunications			547			531				511				563				569						1,589				1,892
Repossessed asset losses (gains), net of expenses			39			76				198				224				(59	)					313				410
Merger related expenses			-			-				-				-				-						-				797
Other expenses			3,939			3,950				4,102				3,822				3,709						11,992				12,326
Total Non-Interest Expense			28,712			28,468				29,468				29,034				28,397						86,649				88,581
Income Before Income Taxes			25,224			22,983				36,322				28,930				28,564						84,525				84,557
Income tax expense			5,098			4,732				7,322				6,319				6,193						17,151				17,816
Net Income Available to Common Shareholders		$	20,126		$	18,251			$	29,000			$	22,611			$	22,371					$	67,374			$	66,741
Distributed earnings allocated to common shareholders		$	8,944		$	9,073			$	9,117			$	9,209			$	9,213					$	26,832			$	26,346
Undistributed earnings allocated to common shareholders			10,984			8,998				19,620				13,200				12,966						39,884				39,828
Net earnings allocated to common shareholders		$	19,928		$	18,071			$	28,737			$	22,409			$	22,179					$	66,716			$	66,174
Average common shares outstanding			15,950			16,081				16,080				16,207				16,271						16,065				16,350
Shares for diluted earnings per share			15,970			16,097				16,101				16,230				16,289						16,084				16,368
Basic earnings per common share		$	1.25		$	1.12			$	1.79			$	1.38			$	1.36					$	4.15			$	4.05
Diluted earnings per common share		$	1.25		$	1.12			$	1.78			$	1.38			$	1.36					$	4.15			$	4.04

CITY HOLDING COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
($ in 000s)
		(Unaudited)				(Unaudited)				(Unaudited)								(Unaudited)
		September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019				September 30, 2019
Assets
Cash and due from banks		$	76,451			$	87,658			$	92,365			$	88,658			$	71,332
Interest-bearing deposits in depository institutions			176,267				285,596				18,271				51,486				44,862
Cash and cash equivalents			252,718				373,254				110,636				140,144				116,194
Investment securities available-for-sale, at fair value			1,157,399				1,055,185				934,113				810,106				798,930
Investment securities held-to-maturity, at amortized cost			-				-				-				49,036				51,211
Other securities			26,548				26,144				26,827				28,490				28,070
Total investment securities			1,183,947				1,081,329				960,940				887,632				878,211
Gross loans			3,663,966				3,665,596				3,613,050				3,616,099				3,582,571
Allowance for credit losses			(24,867	)			(25,199	)			(24,393	)			(11,589	)			(13,186	)
Net loans			3,639,099				3,640,397				3,588,657				3,604,510				3,569,385
Bank owned life insurance			117,501				116,746				116,000				115,261				114,616
Premises and equipment, net			77,031				77,991				78,948				76,965				76,929
Accrued interest receivable			16,627				14,200				12,570				11,569				12,929
Net deferred tax assets			-				-				2,159				6,669				6,432
Intangible assets			119,004				119,417				119,829				120,241				120,773
Other assets			105,361				105,438				98,710				55,765				62,248
Total Assets		$	5,511,288			$	5,528,772			$	5,088,449			$	5,018,756			$	4,957,717
Liabilities
Deposits:
Noninterest-bearing		$	1,061,310			$	1,079,469			$	857,501			$	805,087			$	795,548
Interest-bearing:
Demand deposits			940,791				921,761				837,966				896,465				898,704
Savings deposits			1,117,684				1,067,254				989,609				1,009,771				980,539
Time deposits			1,300,291				1,342,631				1,366,977				1,364,571				1,354,787
Total deposits			4,420,076				4,411,115				4,052,053				4,075,894				4,029,578
Short-term borrowings
Federal Funds purchased			-				-				9,900				-				-
Customer repurchase agreements			279,866				282,676				224,247				211,255				202,622
Long-term debt			-				-				-				4,056				4,055
Net deferred tax liabilities			1,601				2,598				-				-				-
Other liabilities			118,386				138,633				117,021				69,568				71,859
Total Liabilities			4,819,929				4,835,022				4,403,221				4,360,773				4,308,114
Stockholders' Equity
Preferred stock			-				-				-				-				-
Common stock			47,619				47,619				47,619				47,619				47,619
Capital surplus			170,526				169,881				170,096				170,309				169,794
Retained earnings			576,901				565,804				556,718				539,253				525,933
Cost of common stock in treasury			(134,177	)			(120,583	)			(116,665	)			(105,038	)			(105,138	)
Accumulated other comprehensive income:
Unrealized gain on securities available-for-sale			36,760				37,299				33,730				12,110				17,266
Underfunded pension liability			(6,270	)			(6,270	)			(6,270	)			(6,270	)			(5,871	)
Total Accumulated Other Comprehensive Income			30,490				31,029				27,460				5,840				11,395
Total Stockholders' Equity			691,359				693,750				685,228				657,983				649,603
Total Liabilities and Stockholders' Equity		$	5,511,288			$	5,528,772			$	5,088,449			$	5,018,756			$	4,957,717
Regulatory Capital
Total CET 1 capital		$	548,269			$	548,972			$	547,040			$	532,829			$	518,175
Total tier 1 capital			548,269				548,972				547,040				532,829				522,175
Total risk-based capital			568,153				569,213				561,944				544,479				535,441
Total risk-weighted assets			3,442,629				3,410,589				3,412,591				3,319,998				3,318,386

CITY HOLDING COMPANY AND SUBSIDIARIES
Loan Portfolio
(Unaudited) ($ in 000s)
		September 30, 2020			June 30, 2020			March 31, 2020			December 31, 2019			September 30, 2019
Residential real estate (1)		$	1,621,265		$	1,631,151		$	1,629,578		$	1,640,396		$	1,643,416
Home equity - junior liens			140,135			142,672			146,034			148,928			150,808
Commercial and industrial			383,980			369,122			308,567			308,015			296,927
Commercial real estate (2)			1,464,701			1,467,673			1,470,949			1,459,737			1,431,983
Consumer			50,541			52,278			54,749			54,263			54,799
DDA overdrafts			3,344			2,700			3,173			4,760			4,638
Gross Loans		$	3,663,966		$	3,665,596		$	3,613,050		$	3,616,099		$	3,582,571
Construction loans included in:
(1) - Residential real estate loans		$	28,947		$	28,252		$	28,870		$	29,033		$	24,955
(2) - Commercial real estate loans			42,449			42,092			44,453			64,049			55,267

CITY HOLDING COMPANY AND SUBSIDIARIES
Asset Quality Information
(Unaudited) ($ in 000s)
		Three Months Ended																						Nine Months Ended
		September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019				September 30, 2019						September 30, 2020				September 30, 2019
Allowance for Credit Losses
Balance at beginning of period		$	25,199			$	24,393			$	11,589			$	13,186			$	13,795					$	11,589			$	15,966
Charge-offs:
Commercial and industrial			(757	)			-				(77	)			(193	)			(17	)					(834	)			(68	)
Commercial real estate			(75	)			(39	)			(383	)			(964	)			(216	)					(497	)			(394	)
Residential real estate			(252	)			(376	)			(483	)			(226	)			(194	)					(1,111	)			(922	)
Home equity			(126	)			(161	)			(45	)			(134	)			(43	)					(332	)			(160	)
Consumer			(74	)			(36	)			(55	)			(338	)			(279	)					(165	)			(478	)
DDA overdrafts			(554	)			(459	)			(703	)			(792	)			(772	)					(1,716	)			(1,985	)
Total charge-offs			(1,838	)			(1,071	)			(1,746	)			(2,647	)			(1,521	)					(4,655	)			(4,007	)
Recoveries:
Commercial and industrial			3				5				9				581				43						17				183
Commercial real estate			44				128				203				10				7						375				614
Residential real estate			24				8				95				87				157						127				282
Home equity			33				9				47				-				-						89				-
Consumer			42				128				13				54				68						183				211
DDA overdrafts			334				349				451				393				363						1,134				1,112
Total recoveries			480				627				818				1,125				638						1,925				2,402
Net (charge-offs)/recoveries			(1,358	)			(444	)			(928	)			(1,522	)			(883	)					(2,730	)			(1,605	)
Provision for (recovery of) credit losses			1,026				1,250				7,972				(75	)			274						10,248				(1,175	)
Impact of Adopting ASC 326			-				-				5,760				-				-						5,760				-
Balance at end of period		$	24,867			$	25,199			$	24,393			$	11,589			$	13,186					$	24,867			$	13,186
Loans outstanding		$	3,663,966			$	3,665,596			$	3,613,050			$	3,616,099			$	3,582,571
Allowance as a percent of loans outstanding			0.68	%			0.69	%			0.68	%			0.32	%			0.37	%
Allowance as a percent of non-performing loans			182.7	%			185.1	%			202.2	%			98.6	%			84.3	%
Average loans outstanding		$	3,661,569			$	3,660,174			$	3,608,868			$	3,607,864			$	3,544,548					$	3,643,603			$	3,553,417
Net charge-offs (recoveries) (annualized) as a percent of average loans outstanding			0.15	%			0.05	%			0.10	%			0.17	%			0.10	%					0.10	%			0.06	%

CITY HOLDING COMPANY AND SUBSIDIARIES
Asset Quality Information, continued
(Unaudited) ($ in 000s)
		September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019				September 30, 2019
Nonaccrual Loans
Residential real estate		$	3,983			$	3,477			$	2,750			$	3,393			$	2,570
Home equity			74				265				249				531				469
Commercial and industrial			728				1,087				1,175				1,182				2,059
Commercial real estate			8,479				8,715				7,865				6,384				10,099
Consumer			-				-				1				-				-
Total nonaccrual loans			13,264				13,544				12,040				11,490				15,197
Accruing loans past due 90 days or more			345				68				26				267				452
Total non-performing loans			13,609				13,612				12,066				11,757				15,649
Other real estate owned			2,080				3,997				3,922				4,670				2,326
Total non-performing assets		$	15,689			$	17,609			$	15,988			$	16,427			$	17,975
Non-performing assets as a percent of loans and other real estate owned			0.43	%			0.48	%			0.44	%			0.45	%			0.50	%
Past Due Loans
Residential real estate		$	5,153			$	5,261			$	7,815			$	7,485			$	6,859
Home equity			474				393				430				956				796
Commercial and industrial			691				160				71				458				526
Commercial real estate			602				917				1,021				1,580				1,276
Consumer			121				67				177				187				124
DDA overdrafts			379				273				467				730				626
Total past due loans		$	7,420			$	7,071			$	9,981			$	11,396			$	10,207
Total past due loans as a percent of loans outstanding			0.20	%			0.19	%			0.28	%			0.32	%			0.28	%
Troubled Debt Restructurings ("TDRs")
Residential real estate		$	20,398			$	20,631			$	21,413			$	21,029			$	21,320
Home equity			2,100				2,138				2,294				3,628				3,034
Commercial and industrial			-				-				-				-				83
Commercial real estate			4,894				4,915				5,163				4,973				8,100
Consumer			260				185				184				-				-
Total TDRs		$	27,652			$	27,869			$	29,054			$	29,630			$	32,537

CITY HOLDING COMPANY AND SUBSIDIARIES
Consolidated Average Balance Sheets, Yields, and Rates
(Unaudited) ($ in 000s)
		Three Months Ended
		September 30, 2020										June 30, 2020										September 30, 2019
		Average							Yield/			Average							Yield/			Average							Yield/
		Balance				Interest			Rate			Balance				Interest			Rate			Balance				Interest			Rate
Assets:
Loan portfolio (1):
Residential real estate (2)		$	1,766,796			$	17,899		4.03	%		$	1,785,631			$	19,048		4.29	%		$	1,794,068			$	20,564		4.55	%
Commercial, financial, and agriculture (2)			1,839,939				16,910		3.66	%			1,818,344				17,665		3.91	%			1,692,000				21,293		4.99	%
Installment loans to individuals (2), (3)			54,834				804		5.83	%			56,199				852		6.10	%			58,480				928		6.30	%
Previously securitized loans (4)		***					148		***			***					152		***			***					159		***
Total loans			3,661,569				35,761		3.89	%			3,660,174				37,717		4.14	%			3,544,548				42,944		4.81	%
Securities:
Taxable			877,623				6,266		2.84	%			896,997				5,718		2.56	%			790,207				6,044		3.03	%
Tax-exempt (5)			204,178				1,433		2.79	%			120,751				1,039		3.46	%			96,011				914		3.78	%
Total securities			1,081,801				7,699		2.83	%			1,017,748				6,757		2.67	%			886,218				6,958		3.11	%
Deposits in depository institutions			304,498				72		0.09	%			236,320				55		0.09	%			72,736				271		1.48	%
Total interest-earning assets			5,047,868				43,532		3.43	%			4,914,242				44,529		3.64	%			4,503,502				50,173		4.42	%
Cash and due from banks			80,505										79,501										67,106
Premises and equipment, net			77,647										78,717										78,091
Goodwill and intangible assets			119,267										119,681										121,124
Other assets			229,667										230,423										188,206
Less: Allowance for credit losses			(25,311	)									(24,700	)									(13,786	)
Total assets		$	5,529,643									$	5,397,864									$	4,944,243
Liabilities:
Interest-bearing demand deposits		$	931,152			$	187		0.08	%		$	893,832			$	178		0.08	%		$	881,476			$	954		0.43	%
Savings deposits			1,093,886				303		0.11	%			1,037,387				363		0.14	%			978,198				1,159		0.47	%
Time deposits (2)			1,322,423				4,633		1.39	%			1,353,619				5,422		1.61	%			1,360,409				6,472		1.89	%
Short-term borrowings			260,518				131		0.20	%			256,790				279		0.44	%			187,301				814		1.72	%
Long-term debt			-				-		0.00	%			-				-		0.00	%			4,054				45		4.40	%
Total interest-bearing liabilities			3,607,979				5,254		0.58	%			3,541,628				6,242		0.71	%			3,411,438				9,444		1.10	%
Noninterest-bearing demand deposits			1,114,822										1,044,009										825,029
Other liabilities			104,084										115,110										58,857
Stockholders' equity			702,758										697,117										648,919
Total liabilities and
stockholders' equity		$	5,529,643									$	5,397,864									$	4,944,243
Net interest income						$	38,278									$	38,287									$	40,729
Net yield on earning assets									3.02	%									3.13	%									3.59	%
(1) For purposes of this table, non-accruing loans have been included in average balances and the following amounts (in thousands) of loan fees have been included in interest income:
Loan fees						$	156									$	609									$	96
(2) Included in the above table are the following amounts (in thousands) for the accretion of the fair value adjustments related to the Company's acquisitions:
Residential real estate						$	132									$	194									$	50
Commercial, financial, and agriculture							250										651										1,110
Installment loans to individuals							38										37										13
Time deposits							155										155										75
						$	575									$	1,037									$	1,248
(3) Includes the Company’s consumer and DDA overdrafts loan categories.
(4) Effective January 1, 2012, the carrying value of the Company's previously securitized loans was reduced to $0.
(5) Computed on a fully federal tax-equivalent basis assuming a tax rate of approximately 21%.

CITY HOLDING COMPANY AND SUBSIDIARIES
Consolidated Average Balance Sheets, Yields, and Rates
(Unaudited) ($ in 000s)
		Nine Months Ended
		September 30, 2020										September 30, 2019
		Average							Yield/			Average							Yield/
		Balance				Interest			Rate			Balance				Interest			Rate
Assets:
Loan portfolio (1):
Residential real estate (2)		$	1,776,903			$	56,827		4.27	%		$	1,792,013			$	61,468		4.59	%
Commercial, financial, and agriculture (2)			1,810,165				55,051		4.06	%			1,704,141				63,796		5.01	%
Installment loans to individuals (2), (3)			56,535				2,519		5.95	%			57,263				2,656		6.20	%
Previously securitized loans (4)		***					415		***			***					477		***
Total loans			3,643,603				114,812		4.21	%			3,553,417				128,397		4.83	%
Securities:
Taxable			861,853				17,855		2.77	%			751,600				17,464		3.11	%
Tax-exempt (5)			140,075				3,366		3.21	%			99,555				2,856		3.84	%
Total securities			1,001,928				21,221		2.83	%			851,155				20,320		3.19	%
Deposits in depository institutions			214,912				432		0.27	%			82,214				1,038		1.69	%
Total interest-earning assets			4,860,443				136,465		3.75	%			4,486,786				149,755		4.46	%
Cash and due from banks			76,936										65,433
Premises and equipment, net			77,910										78,475
Goodwill and intangible assets			119,678										121,780
Other assets			218,695										191,231
Less: Allowance for credit losses			(21,984	)									(15,000	)
Total assets		$	5,331,678									$	4,928,705
Liabilities:
Interest-bearing demand deposits		$	898,440			$	833		0.12	%		$	880,763			$	2,796		0.42	%
Savings deposits			1,045,877				1,366		0.17	%			968,655				3,461		0.48	%
Time deposits (2)			1,347,013				16,125		1.60	%			1,370,934				18,511		1.81	%
Short-term borrowings			242,173				873		0.48	%			208,004				2,729		1.75	%
Long-term debt			1,109				100		12.04	%			4,053				140		4.62	%
Total interest-bearing liabilities			3,534,612				19,297		0.73	%			3,432,409				27,637		1.08	%
Noninterest-bearing demand deposits			1,004,144										811,411
Other liabilities			98,393										54,356
Stockholders' equity			694,529										630,529
Total liabilities and
stockholders' equity		$	5,331,678									$	4,928,705
Net interest income						$	117,168									$	122,118
Net yield on earning assets									3.22	%									3.64	%
(1) For purposes of this table, non-accruing loans have been included in average balances and the following amounts (in thousands) of loan fees have been included in interest income:
Loan fees						$	881									$	711
(2) Included in the above table are the following amounts (in thousands) for the accretion of the fair value adjustments related to the Company's acquisitions:
Residential real estate						$	477									$	165
Commercial, financial, and agriculture							2,141										1,968
Installment loans to individuals							114										1
Time deposits							466										527
						$	3,198									$	2,661
(3) Includes the Company’s consumer and DDA overdrafts loan categories.
(4) Effective January 1, 2012, the carrying value of the Company's previously securitized loans was reduced to $0.
(5) Computed on a fully federal tax-equivalent basis assuming a tax rate of approximately 21%.

CITY HOLDING COMPANY AND SUBSIDIARIES
Non-GAAP Reconciliations
(Unaudited) ($ in 000s, except per share data)
		Three Months Ended																						Nine Months Ended
		September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019				September 30, 2019						September 30, 2020				September 30, 2019
Net Interest Income/Margin
Net interest income ("GAAP")		$	37,977			$	38,070			$	40,415			$	39,847			$	40,537					$	116,462			$	121,516
Taxable equivalent adjustment			301				217				188				189				192						706				602
Net interest income, fully taxable equivalent		$	38,278			$	38,287			$	40,603			$	40,036			$	40,729					$	117,168			$	122,118
Average interest earning assets		$	5,047,868			$	4,914,242			$	4,617,157			$	4,585,008			$	4,503,502					$	4,860,443			$	4,486,786
Net Interest Margin			3.02	%			3.13	%			3.54	%			3.46	%			3.59	%					3.22	%			3.64	%
Accretion related to fair value adjustments			-0.05	%			-0.08	%			-0.14	%			-0.08	%			-0.11	%					-0.09	%			-0.08	%
Net Interest Margin (excluding accretion)			2.97	%			3.05	%			3.40	%			3.38	%			3.48	%					3.13	%			3.56	%
Tangible Equity Ratio (period end)
Equity to assets ("GAAP")			12.54	%			12.55	%			13.47	%			13.11	%			13.10	%
Effect of goodwill and other intangibles, net			-1.93	%			-1.93	%			-2.09	%			-2.13	%			-2.17	%
Tangible common equity to tangible assets			10.61	%			10.62	%			11.38	%			10.98	%			10.93	%
Return on Tangible Equity
Return on tangible equity ("GAAP")			13.8	%			12.6	%			20.6	%			16.8	%			17.0	%					15.6	%			17.5	%
Impact of merger related expenses			0.0	%			0.0	%			0.0	%			0.0	%			0.0	%					0.0	%			0.2	%
Impact of sale of VISA shares			0.0	%			0.0	%			-9.7	%			0.0	%			0.0	%					-3.1	%			0.0	%
Return on tangible equity, excluding merger related expenses and sale of VISA shares			13.8	%			12.6	%			10.9	%			16.8	%			17.0	%					12.5	%			17.7	%
Return on Assets
Return on assets ("GAAP")			1.46	%			1.35	%			2.29	%			1.80	%			1.81	%					1.68	%			1.81	%
Impact of merger related expenses			0.00	%			0.00	%			0.00	%			0.00	%			0.00	%					0.00	%			0.02	%
Impact of sale of VISA shares			0.00	%			0.00	%			-1.08	%			0.00	%			0.00	%					-0.33	%			0.00	%
Return on assets, excluding merger related expenses and sale of VISA shares			1.46	%			1.35	%			1.21	%			1.80	%			1.81	%					1.35	%			1.83	%