City Holding Company Announces Third Quarter Results

CHARLESTON, W. Va--(BUSINESS WIRE)--City Holding Company (“Company” or “City”) (NASDAQ:CHCO), a $5.0 billion bank holding company headquartered in Charleston, West Virginia, today announced quarterly net income of $22.4 million and diluted earnings of $1.36 per share for the quarter ended September 30, 2019. For the third quarter of 2019, the Company achieved a return on assets of 1.81% and a return on tangible equity of 17.0%.

Charles R. (“Skip”) Hageboeck, the President and Chief Executive Officer of City Holding Company, commented: “The third quarter of 2019 saw City once again deliver impressive earnings, along with strong loan growth. Loans grew over $63 million, or 7.2% annualized, from June 30, 2019 to September 30, 2019. Our commercial loan portfolio rebounded this quarter and grew $62 million with growth being generated throughout our footprint, including our core markets. Net income, diluted earnings per share and reported net interest income were all strong again in the third quarter of 2019 despite two 25 basis point interest rate decreases implemented by the Federal Open Market Committee in the third quarter of 2019. Excluding the impact of acquisitions, non-interest income during the third quarter remained strong with year over year upticks in bankcard revenues and service fees while expenses remained well managed. City’s tangible capital of 10.9% increased 23 basis points from the second quarter of 2019, even as we increased our dividend to shareholders 7.5% during the quarter to $2.28 annually and repurchased 99,000 shares of our common stock during the third quarter of 2019.”

Net Interest Income

The Company’s net interest income decreased modestly from $40.9 million during the second quarter of 2019 to $40.5 million during the third quarter of 2019, and the Company’s tax equivalent net interest income decreased $0.4 million, or 0.9%, from $41.1 million for the second quarter of 2019 to $40.7 million for the third quarter of 2019. Lower loan yields (13 basis points) decreased net interest income by $0.7 million but were partially offset by an increase in accretion from fair value adjustments ($0.3 million). As a result, the Company’s reported net interest margin declined to 3.59% for the third quarter of 2019 compared to 3.65% for the second quarter of 2019. Excluding the favorable impact of the accretion from fair value adjustments, the net interest margin would have been 3.48% for the quarter ended September 30, 2019 and 3.57% for the quarter ended June 30, 2019.

Credit Quality

The Company’s ratio of nonperforming assets to total loans and other real estate owned increased from 0.41% at June 30, 2019 to 0.50% at September 30, 2019. Total nonperforming assets increased from $14.5 million at June 30, 2019 to $18.0 million at September 30, 2019 primarily as a result of a loan secured by a residence located at the Greenbrier Sporting Club being placed on nonaccrual status. Excluded from this ratio are purchased credit-impaired loans for which the Company estimated cash flows and estimated a credit mark. Such loans would be considered nonperforming loans if the loan’s performance deteriorates below the Company’s initial expectations. Total past due loans increased modestly from $9.5 million, or 0.27% of total loans outstanding, at June 30, 2019 to $10.2 million, or 0.28% of total loans outstanding, at September 30, 2019.

As a result of the Company’s quarterly analysis of the adequacy of the allowance for loan losses (“ALLL”), the Company recorded a provision for loan losses of $0.3 million in the third quarter of 2019, compared to no provision for loan losses for the comparable period in 2018 and a recovery of loan loss provision of $0.6 million for the second quarter of 2019. The Company’s historical loss rate that is used to compute the allowance not specifically allocated to individual credits improved slightly during the quarter ended September 30, 2019, and reduced the Company’s ALLL, but was essentially offset by an increase in loan balances during the quarter. During the third quarter of 2019, the Company recorded a $0.3 million provision for loan loss expense related to a purchased credit impaired loan. Changes in the amount of the provision and related allowance are based on the Company’s detailed systematic methodology and are directionally consistent with changes in the composition and quality of the Company’s loan portfolio. The Company believes its methodology for determining the adequacy of its ALLL adequately provides for probable losses inherent in the loan portfolio and produces a provision and allowance for loan losses that is directionally consistent with changes in asset quality and loss experience.

Non-interest Income

Non-interest income was $16.7 million for the third quarter of 2019 as compared to $15.8 million for the third quarter of 2018. During the third quarter of 2019, the Company reported $0.2 million of unrealized fair value losses on the Company’s equity securities compared to $0.4 million of unrealized fair value gains on the Company’s equity securities in the third quarter of 2018. Exclusive of these unrealized fair value gains and losses, non-interest income increased from $15.4 million for the third quarter of 2018 to $17.0 million for the third quarter of 2019. This increase was largely attributable to an increase of $0.8 million, or 16.3%, in bankcard revenues and an increase of $0.6 million, or 7.7%, in service charges, with $0.4 million and $0.5 million, respectively, attributable to the late 2018 acquisitions of Poage Bankshares, Inc. (“Poage”) and Farmers Deposit Bancorp, Inc. (“Farmers Deposit”). In addition, trust and investment management fee income increased $0.2 million.

Non-interest Expenses

Non-interest expenses increased $3.4 million (13.4% increase), from $25.0 million in the third quarter of 2018 to $28.4 million in the third quarter of 2019. This increase was predominantly due to an increase in salaries and employee benefits of $1.6 million due to the acquisitions of Poage and Farmers Deposit ($1.2 million) and annual salary adjustments ($0.6 million), that were partially offset by lower health insurance expenses ($0.3 million). Primarily due to the acquisitions of Poage and Farmers Deposit, other expenses increased $1.0 million, bankcard expenses increased $0.4 million, occupancy related expenses increased $0.4 million and equipment and software related expenses increased $0.3 million from the third quarter of 2018 to the third quarter of 2019. Partially offsetting these increases was a decrease of $0.3 million in FDIC insurance expense. As the Deposit Insurance Fund (“DIF”) reserve ratio exceeded 1.38% at June 30, 2019, the Company received a Small Bank Assessment Credit for the full amount of its Federal Deposit Insurance Corporation (“FDIC”) assessment.

Balance Sheet Trends

During the quarter ended September 30, 2019, loans increased $63.2 million (1.8%) from the quarter ended June 30, 2019. Commercial real estate loans increased $53.9 million (3.9%) and commercial and industrial loans increased $8.1 million (2.8%). Loan balances of $3.58 billion at September 30, 2019 are down $5.0 million (0.1%) from December 31, 2018. For the nine months ended September 30, 2019, commercial real estate loans have declined $23.0 million (1.6%) and home equity loans have decreased $2.7 million (1.7%). These decreases have been partially offset by increases in commercial and industrial loans of $10.6 million (3.7%) and residential real estate loans of $8.1 million (0.5%).

Primarily due to the sale of the Company’s Virginia Beach branch on June 28, 2019, total average depository balances decreased $13.7 million, or 0.3%, from the quarter ended June 30, 2019 to the quarter ended September 30, 2019. This branch had total deposits of $25.7 million at the date of the sale, with approximately $15.0 million held in time deposits. During the third quarter of 2019, average time deposit balances decreased $23.6 million and average savings deposit balances decreased $1.9 million. These decreases were partially offset by increases in average interest-bearing demand deposit balances of $7.4 million and in average noninterest-bearing deposit balances of $4.3 million.

Income Tax Expense

The Company’s effective income tax rate for the third quarter of 2019 was 21.7% compared to 20.5% for the year ended December 31, 2018, and 21.3% for the quarter ended September 30, 2018.

Capitalization and Liquidity

The Company’s loan to deposit ratio was 88.9% and the loan to asset ratio was 72.3% at September 30, 2019. The Company maintained investment securities totaling 17.7% of assets as of the same date. Checking and saving accounts fund 54.0% of assets while time deposits fund 27.3% of assets at September 30, 2019. Time deposits are comprised mostly of accounts that have balances under $250,000, reflecting the core retail orientation of the Company.

The Company is strongly capitalized. The Company’s tangible equity ratio increased from 10.0% at December 31, 2018 to 10.9% at September 30, 2019. At September 30, 2019, City National Bank’s Leverage Ratio was 9.7%, its Common Equity Tier I ratio was 14.0%, its Tier I Capital ratio was 14.0%, and its Total Risk-Based Capital ratio was 14.4%. These regulatory capital ratios are significantly above levels required to be considered “well capitalized,” which is the highest possible regulatory designation.

On September 25, 2019, the Board of Directors of the Company approved a quarterly cash dividend of $0.57 per share payable October 31, 2019, to shareholders of record as of October 15, 2019. This dividend increase represents a 7.5% increase from the $0.53 per share paid on July 31, 2019. During the quarter ended September 30, 2019, the Company repurchased 99,000 common shares at a weighted average price of $74.17 as part of a one million share repurchase plan authorized by the Board of Directors in February 2019. As of September 30, 2019, the Company could repurchase approximately 739,000 additional shares under the plan.

City Holding Company is the parent company of City National Bank of West Virginia. City National Bank operates 95 branches across West Virginia, Kentucky, Virginia, and Ohio.

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, 2018 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) 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; (3) changes in the real estate market, including the value of collateral securing portions of our loan portfolio; (4) changes in the interest rate environment; (5) operational risk, including cybersecurity risk and risk of fraud, data processing system failures, and network breaches; (6) changes in technology and increased competition, including competition from non-bank financial institutions; (7) changes in consumer preferences, spending and borrowing habits, demand for our products and services, and customers’ performance and creditworthiness; (8) difficulty growing loan and deposit balances; (9) our ability to effectively execute our business plan, including with respect to future acquisitions; (10) changes in regulations, laws, taxes, government policies, monetary policies and accounting policies affecting bank holding companies and their subsidiaries; (11) 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; (12) regulatory enforcement actions and adverse legal actions; (13) difficulty attracting and retaining key employees; and (14) 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, 2019 Form 10-Q. The Company will continue to evaluate the impact of any subsequent events on the preliminary September 30, 2019 results and will adjust the amounts if necessary.

CITY HOLDING COMPANY AND SUBSIDIARIES
Financial Highlights
(Unaudited)
	Three Months Ended										Nine Months Ended
	September 30, 2019		June 30, 2019		March 31, 2019		December 31, 2018		September 30, 2018		September 30, 2019		September 30, 2018
Earnings
Net Interest Income (fully taxable equivalent)	$	40,729	$	41,113	$	40,274	$	36,625	$	35,745	$	122,118	$	102,339
Net Income available to common shareholders		22,371		22,751		21,619		10,713		20,692		66,741		59,283
Per Share Data
Earnings per share available to common shareholders:
Basic	$	1.36	$	1.38	$	1.31	$	0.68	$	1.34	$	4.05	$	3.82
Diluted		1.36		1.38		1.30		0.68		1.33		4.04		3.82
Weighted average number of shares (in thousands):
Basic		16,271		16,368		16,411		15,603		15,340		16,350		15,360
Diluted		16,289		16,386		16,429		15,618		15,358		16,368		15,380
Period-end number of shares (in thousands)		16,302		16,397		16,484		16,555		15,449		16,302		15,449
Cash dividends declared	$	0.57	$	0.53	$	0.53	$	0.53	$	0.53	$	1.63	$	1.45
Book value per share (period-end)	$	39.85	$	38.84	$	37.57	$	36.29	$	33.14	$	39.85	$	33.14
Tangible book value per share (period-end)		32.44		31.44		30.18		28.87		28.08		32.44		28.08
Market data:
High closing price	$	78.30	$	82.56	$	80.21	$	77.94	$	82.79	$	82.56	$	82.79
Low closing price		72.35		73.05		67.58		66.36		75.54		67.58		65.03
Period-end closing price		76.25		76.26		76.19		67.59		76.80		76.25		76.80
Average daily volume (in thousands)		62		53		54		66		54		56		57
Treasury share activity:
Treasury shares repurchased (in thousands)		99		107		55		69		7		261		221
Average treasury share repurchase price	$	74.17	$	74.81	$	74.69	$	72.89	$	77.18	$	74.54	$	68.81
Key Ratios (percent)
Return on average assets		1.81%		1.84%		1.76%		0.96%		1.90%		1.81%		1.86%
Return on average tangible equity		17.0%		17.9%		17.7%		9.6%		18.9%		17.5%		18.5%
Yield on interest earning assets		4.42%		4.48%		4.46%		4.32%		4.25%		4.46%		4.13%
Cost of interest bearing liabilities		1.10%		1.09%		1.04%		1.00%		0.92%		1.08%		0.79%
Net Interest Margin		3.59%		3.65%		3.66%		3.55%		3.54%		3.64%		3.52%
Non-interest income as a percent of total revenue		29.2%		30.3%		28.3%		28.8%		30.7%		29.3%		31.1%
Efficiency Ratio		48.2%		50.5%		51.2%		47.6%		48.3%		50.2%		50.5%
Price/Earnings Ratio (a)		13.98		13.84		14.58		24.82		14.37		14.13		15.07
Capital (period-end)
Average Shareholders' Equity to Average Assets		13.12%		12.76%		12.49%		12.05%		11.81%
Tangible equity to tangible assets		10.93%		10.70%		10.37%		10.01%		9.99%
Consolidated City Holding Company risk based capital ratios (b):
CET I		15.62%		15.91%		15.55%		15.07%		15.94%
Tier I		15.74%		16.03%		15.67%		15.20%		16.49%
Total		16.14%		16.47%		16.13%		15.69%		17.08%
Leverage		10.87%		10.70%		10.62%		11.36%		11.01%
City National Bank risk based capital ratios (b):
CET I		14.00%		14.19%		13.89%		13.05%		14.00%
Tier I		14.00%		14.19%		13.89%		13.05%		14.00%
Total		14.40%		14.63%		14.36%		13.55%		14.59%
Leverage		9.72%		9.51%		9.45%		9.81%		9.39%
Other (period-end)
Branches		95		95		97		100		87
FTE		916		935		927		939		846
Assets per FTE (in thousands)	$	5,412	$	5,284	$	5,305	$	5,498	$	5,226
Deposits per FTE (in thousands)		4,399		4,312		4,361		4,462		4,070
(a) The price/earnings ratio is computed based on annualized quarterly earnings.
(b) September 30, 2019 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, 2019			June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018			September 30, 2019			September 30, 2018
Interest Income
Interest and fees on loans	$	42,944		$	43,174		$	42,279		$	37,973		$	36,872		$	128,397		$	104,082
Interest on investment securities:
Taxable		6,044			5,732			5,689			5,023			4,216			17,465			12,314
Tax-exempt		722			755			779			729			701			2,257			2,114
Interest on deposits in depository institutions		271			577			186			623			940			1,034			1,043
Total Interest Income		49,981			50,238			48,933			44,348			42,729			149,153			119,553
Interest Expense
Interest on deposits		8,585			8,417			7,767			6,656			5,497			24,768			14,741
Interest on short-term borrowings		814			863			1,052			1,061			1,435			2,729			2,354
Interest on long-term debt		45			47			48			200			239			140			680
Total Interest Expense		9,444			9,327			8,867			7,917			7,171			27,637			17,775
Net Interest Income		40,537			40,911			40,066			36,431			35,558			121,516			101,778
Provision for (recovery of) loan losses		274			(600	)		(849	)		(400	)		(27	)		(1,175	)		(1,910	)
Net Interest Income After Provision for (Recovery of) Loan Losses		40,263			41,511			40,915			36,831			35,585			122,691			103,688
Non-Interest Income
Net (losses) gains on sale of investment securities		(40	)		21			88			-			-			69			-
Unrealized (losses) gains recognized on equity securities still held		(214	)		113			75			(1,246	)		384			(27	)		1,155
Service charges		8,183			7,778			7,321			7,921			7,598			23,281			21,783
Bankcard revenue		5,440			5,522			4,969			4,826			4,677			15,931			13,543
Trust and investment management fee income		1,802			1,699			1,642			1,737			1,579			5,144			4,792
Bank owned life insurance		762			1,132			1,016			734			813			2,910			2,356
Other income		765			1,560			814			734			702			3,139			2,227
Total Non-Interest Income		16,698			17,825			15,925			14,706			15,753			50,447			45,856
Non-Interest Expense
Salaries and employee benefits		15,210			15,767			15,243			14,017			13,576			46,220			40,459
Occupancy related expense		2,725			2,598			2,732			2,250			2,323			8,055			7,073
Equipment and software related expense		2,248			2,223			2,191			2,038			1,965			6,662			5,691
FDIC insurance expense		-			347			291			308			315			639			943
Advertising		861			920			869			530			808			2,650			2,444
Bankcard expenses		1,554			1,534			1,182			1,229			1,134			4,270			3,274
Postage, delivery, and statement mailings		659			545			624			527			537			1,828			1,630
Office supplies		382			399			386			313			364			1,167			1,006
Legal and professional fees		539			605			521			469			453			1,665			1,378
Telecommunications		569			597			726			401			408			1,892			1,349
Repossessed asset (gains) losses, net of expenses		(59	)		253			216			207			156			410			638
Merger related expenses		-			547			250			13,015			242			797			242
Other expenses		3,709			4,437			4,180			2,874			2,759			12,326			8,765
Total Non-Interest Expense		28,397			30,772			29,411			38,178			25,040			88,581			74,892
Income Before Income Taxes		28,564			28,564			27,429			13,359			26,298			84,557			74,652
Income tax expense		6,193			5,813			5,810			2,646			5,606			17,816			15,369
Net Income Available to Common Shareholders	$	22,371		$	22,751		$	21,619		$	10,713		$	20,692		$	66,741		$	59,283
Distributed earnings allocated to common shareholders	$	9,213		$	8,615		$	8,661		$	8,695		$	8,109		$	26,346		$	22,184
Undistributed earnings allocated to common shareholders		12,966			13,939			12,772			1,928			12,382			39,828			36,522
Net earnings allocated to common shareholders	$	22,179		$	22,554		$	21,433		$	10,623		$	20,491		$	66,174		$	58,706
Average common shares outstanding		16,271			16,368			16,411			15,603			15,340			16,350			15,360
Shares for diluted earnings per share		16,289			16,386			16,429			15,618			15,358			16,368			15,380
Basic earnings per common share	$	1.36		$	1.38		$	1.31		$	0.68		$	1.34		$	4.05		$	3.82
Diluted earnings per common share	$	1.36		$	1.38		$	1.30		$	0.68		$	1.33		$	4.04		$	3.82

CITY HOLDING COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
($ in 000s)
	(Unaudited)			(Unaudited)			(Unaudited)						(Unaudited)
	September 30, 2019			June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018
Assets
Cash and due from banks	$	71,332		$	53,373		$	50,522		$	55,016		$	49,806
Interest-bearing deposits in depository institutions		44,862			115,346			93,328			67,975			256,104
Cash and cash equivalents		116,194			168,719			143,850			122,991			305,910
Investment securities available-for-sale, at fair value		798,930			796,237			755,081			723,254			563,003
Investment securities held-to-maturity, at amortized cost		51,211			53,362			55,326			60,827			57,812
Other securities		28,070			28,014			26,182			28,810			28,875
Total investment securities		878,211			877,613			836,589			812,891			649,690
Gross loans		3,582,571			3,519,367			3,559,322			3,587,608			3,146,697
Allowance for loan losses		(13,186	)		(13,795	)		(14,646	)		(15,966	)		(16,311	)
Net loans		3,569,385			3,505,572			3,544,676			3,571,642			3,130,386
Bank owned life insurance		114,616			113,855			114,256			113,544			105,372
Premises and equipment, net		76,929			78,263			78,747			78,383			72,484
Accrued interest receivable		12,929			12,719			13,657			12,424			11,449
Net deferred tax assets		6,432			8,835			12,734			17,338			15,653
Intangible assets		120,773			121,322			121,790			122,848			78,215
Other assets		62,248			53,569			51,309			46,951			51,643
Total Assets	$	4,957,717		$	4,940,467		$	4,917,608		$	4,899,012		$	4,420,802
Liabilities
Deposits:
Noninterest-bearing	$	795,548		$	798,056		$	793,633		$	789,119		$	672,042
Interest-bearing:
Demand deposits		898,704			891,742			879,279			899,568			802,490
Savings deposits		980,539			974,847			988,182			934,218			821,390
Time deposits		1,354,787			1,366,991			1,381,913			1,352,654			1,147,709
Total deposits		4,029,578			4,031,636			4,043,007			3,975,559			3,443,631
Short-term borrowings
Federal Funds purchased		-			-			-			40,000			170,000
Customer repurchase agreements		202,622			207,033			194,683			221,911			220,124
Long-term debt		4,055			4,054			4,053			4,053			16,495
Other liabilities		71,859			60,836			56,624			56,725			58,526
Total Liabilities		4,308,114			4,303,559			4,298,367			4,298,248			3,908,776
Stockholders' Equity
Preferred stock		-			-			-			-			-
Common stock		47,619			47,619			47,619			47,619			47,619
Capital surplus		169,794			169,374			170,215			169,555			140,450
Retained earnings		525,933			512,911			498,847			485,967			484,017
Cost of common stock in treasury		(105,138	)		(98,084	)		(91,589	)		(87,895	)		(136,783	)
Accumulated other comprehensive income (loss):
Unrealized gain (loss) on securities available-for-sale		17,266			10,959			20			(8,611	)		(18,244	)
Underfunded pension liability		(5,871	)		(5,871	)		(5,871	)		(5,871	)		(5,033	)
Total Accumulated Other Comprehensive Income (Loss)		11,395			5,088			(5,851	)		(14,482	)		(23,277	)
Total Stockholders' Equity		649,603			636,908			619,241			600,764			512,026
Total Liabilities and Stockholders' Equity	$	4,957,717		$	4,940,467		$	4,917,608		$	4,899,012		$	4,420,802
Regulatory Capital
Total CET 1 capital	$	518,175		$	511,344		$	504,148		$	492,526		$	457,580
Total tier 1 capital		522,175			515,344			508,148			496,526			473,580
Total risk-based capital		535,441			529,230			523,053			512,801			490,307
Total risk-weighted assets		3,318,386			3,214,153			3,241,989			3,267,357			2,871,241

CITY HOLDING COMPANY AND SUBSIDIARIES
Loan Portfolio
(Unaudited) ($ in 000s)
	September 30, 2019		June 30, 2019		March 31, 2019		December 31, 2018		September 30, 2018
Residential real estate ^(1)	$	1,643,416	$	1,644,494	$	1,625,647	$	1,635,338	$	1,485,823
Home equity - junior liens		150,808		150,676		152,251		153,496		143,540
Commercial and industrial		296,927		288,803		289,327		286,314		213,815
Commercial real estate ^(2)		1,431,983		1,378,116		1,436,190		1,454,942		1,268,052
Consumer		54,799		53,356		52,483		51,190		31,869
DDA overdrafts		4,638		3,922		3,424		6,328		3,598
Gross Loans	$	3,582,571	$	3,519,367	$	3,559,322	$	3,587,608	$	3,146,697
Construction loans included in:
^(1) - Residential real estate loans	$	24,955	$	23,673	$	22,635	$	21,834	$	17,628
^(2) - Commercial real estate loans		55,267		43,432		56,282		37,869		24,110

CITY HOLDING COMPANY AND SUBSIDIARIES
Asset Quality Information
(Unaudited) ($ in 000s)
	Three Months Ended															Nine Months Ended
	September 30, 2019			June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018			September 30, 2019			September 30, 2018
Allowance for Loan Losses
Balance at beginning of period	$	13,795		$	14,646		$	15,966		$	16,311		$	16,876		$	15,966		$	18,836
Charge-offs:
Commercial and industrial		(17	)		(51	)		-			(9	)		-			(68	)		(724	)
Commercial real estate		(216	)		(133	)		(45	)		(20	)		(74	)		(394	)		(349	)
Residential real estate		(291	)		(303	)		(328	)		(218	)		(244	)		(922	)		(464	)
Home equity		(43	)		(71	)		(46	)		-			(108	)		(160	)		(219	)
Consumer		(182	)		(111	)		(185	)		(209	)		(206	)		(478	)		(560	)
DDA overdrafts		(772	)		(588	)		(625	)		(725	)		(704	)		(1,985	)		(1,976	)
Total charge-offs		(1,521	)		(1,257	)		(1,229	)		(1,181	)		(1,336	)		(4,007	)		(4,292	)
Recoveries:
Commercial and industrial		43			5			135			528			147			183			1,625
Commercial real estate		7			575			32			194			166			614			538
Residential real estate		157			50			75			92			116			282			275
Home equity		-			-			-			-			-			-			-
Consumer		68			46			97			36			25			211			130
DDA overdrafts		363			330			419			386			344			1,112			1,109
Total recoveries		638			1,006			758			1,236			798			2,402			3,677
Net (charge-offs)/recoveries		(883	)		(251	)		(471	)		55			(538	)		(1,605	)		(615	)
Provision for (recovery of) loan losses		274			(600	)		(849	)		(400	)		(27	)		(1,175	)		(1,910	)
Balance at end of period	$	13,186		$	13,795		$	14,646		$	15,966		$	16,311		$	13,186		$	16,311
Loans outstanding	$	3,582,571		$	3,519,367		$	3,559,322		$	3,587,608		$	3,146,697
Allowance as a percent of loans outstanding		0.37	%		0.39	%		0.41	%		0.45	%		0.52	%
Allowance as a percent of non-performing loans		84.3	%		115.3	%		119.9	%		107.8	%		142.1	%
Average loans outstanding	$	3,544,548		$	3,539,077		$	3,576,984		$	3,252,939		$	3,149,320		$	3,553,417		$	3,140,480
Net charge-offs (recoveries) (annualized) as a percent of average loans outstanding		0.10	%		0.03	%		0.05	%		-0.01	%		0.07	%		0.06	%		0.03	%

CITY HOLDING COMPANY AND SUBSIDIARIES
Asset Quality Information, continued
(Unaudited) ($ in 000s)
	September 30, 2019		June 30, 2019		March 31, 2019		December 31, 2018		September 30, 2018
Nonaccrual Loans
Residential real estate	$	2,570	$	2,354	$	3,263	$	4,275	$	3,029
Home equity		469		161		41		138		-
Commercial and industrial		2,059		2,149		1,526		1,676		818
Commercial real estate		10,099		7,204		7,282		8,461		7,599
Consumer		-		-		1		1		1
Total nonaccrual loans		15,197		11,868		12,113		14,551		11,447
Accruing loans past due 90 days or more		452		94		106		257		35
Total non-performing loans		15,649		11,962		12,219		14,808		11,482
Other real estate owned		2,326		2,581		3,186		4,608		4,259
Total non-performing assets	$	17,975	$	14,543	$	15,405	$	19,416	$	15,741
Non-performing assets as a percent of loans and other real estate owned		0.50%		0.41%		0.43%		0.54%		0.50%
Past Due Loans
Residential real estate	$	6,859	$	7,302	$	7,972	$	9,991	$	4,657
Home equity		796		322		720		1,275		468
Commercial and industrial		526		166		101		497		187
Commercial real estate		1,276		1,026		1,414		585		934
Consumer		124		172		264		295		39
DDA overdrafts		626		487		535		488		582
Total past due loans	$	10,207	$	9,475	$	11,006	$	13,131	$	6,867
Total past due loans as a percent of loans outstanding		0.28%		0.27%		0.31%		0.37%		0.22%
Troubled Debt Restructurings ("TDRs")
Residential real estate	$	21,320	$	22,373	$	23,481	$	23,521	$	20,589
Home equity		3,034		3,062		3,018		3,030		2,941
Commercial and industrial		83		83		89		98		108
Commercial real estate		8,100		8,044		8,164		8,205		8,231
Consumer		-		-		-		-		-
Total TDRs	$	32,537	$	33,562	$	34,752	$	34,854	$	31,869

CITY HOLDING COMPANY AND SUBSIDIARIES
Consolidated Average Balance Sheets, Yields, and Rates
(Unaudited) ($ in 000s)
	Three Months Ended
	September 30, 2019					June 30, 2019					September 30, 2018
	Average				Yield/	Average				Yield/	Average				Yield/
	Balance		Interest		Rate	Balance		Interest		Rate	Balance		Interest		Rate
Assets:
Loan portfolio ^(1):
Residential real estate ^(2)	$	1,794,068	$	20,564	4.55%	$	1,783,718	$	20,454	4.60%	$	1,618,829	$	17,653	4.33%
Commercial, financial, and agriculture ^(2)		1,692,000		21,293	4.99%		1,698,186		21,658	5.12%		1,494,666		18,460	4.90%
Installment loans to individuals ^(2), (3)		58,480		928	6.30%		57,173		889	6.24%		35,825		584	6.47%
Previously securitized loans ^(4)	***			159	***	***			174	***	***			175	***
Total loans		3,544,548		42,944	4.81%		3,539,077		43,175	4.89%		3,149,320		36,872	4.64%
Securities:
Taxable		790,207		6,044	3.03%		749,346		5,732	3.07%		554,157		4,216	3.02%
Tax-exempt ^(5)		96,011		914	3.78%		100,348		956	3.82%		90,596		888	3.89%
Total securities		886,218		6,958	3.11%		849,694		6,688	3.16%		644,753		5,104	3.14%
Deposits in depository institutions		72,736		271	1.48%		124,732		577	1.86%		210,994		940	1.77%
Total interest-earning assets		4,503,502		50,173	4.42%		4,513,503		50,440	4.48%		4,005,067		42,916	4.25%
Cash and due from banks		67,106					52,922					49,933
Premises and equipment, net		78,091					79,116					72,733
Goodwill and intangible assets		121,124					121,628					78,294
Other assets		188,206					189,618					178,540
Less: Allowance for loan losses		(13,786)					(15,057)					(17,247)
Total assets	$	4,944,243				$	4,941,730				$	4,367,320
Liabilities:
Interest-bearing demand deposits	$	881,476	$	954	0.43%	$	874,039	$	909	0.42%	$	778,639	$	526	0.27%
Savings deposits		978,198		1,159	0.47%		980,089		1,236	0.51%		816,597		537	0.26%
Time deposits ^(2)		1,360,409		6,472	1.89%		1,384,017		6,272	1.82%		1,141,461		4,434	1.54%
Short-term borrowings		187,301		814	1.72%		199,648		863	1.73%		350,832		1,435	1.62%
Long-term debt		4,054		45	4.40%		4,053		47	4.65%		16,495		239	5.75%
Total interest-bearing liabilities		3,411,438		9,444	1.10%		3,441,846		9,327	1.09%		3,104,024		7,171	0.92%
Noninterest-bearing demand deposits		825,029					820,689					697,485
Other liabilities		58,857					48,803					50,093
Stockholders' equity		648,919					630,392					515,718
Total liabilities and stockholders' equity	$	4,944,243				$	4,941,730				$	4,367,320
Net interest income			$	40,729				$	41,113				$	35,745
Net yield on earning assets					3.59%					3.65%					3.54%
(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			$	96				$	481				$	1,325
(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			$	50				$	83				$	110
Commercial, financial, and agriculture				1,110					668					157
Installment loans to individuals				13					(6)					3
Time deposits				75					196					-
			$	1,248				$	941				$	270
(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, 2019					September 30, 2018
	Average				Yield/	Average				Yield/
	Balance		Interest		Rate	Balance		Interest		Rate
Assets:
Loan portfolio ^(1):
Residential real estate ^(2)	$	1,792,013	$	61,468	4.59%	$	1,607,396	$	51,083	4.25%
Commercial, financial, and agriculture ^(2)		1,704,141		63,796	5.01%		1,498,612		50,646	4.52%
Installment loans to individuals ^(2), (3)		57,263		2,656	6.20%		34,472		1,604	6.22%
Previously securitized loans ^(4)	***			477	***	***			748	***
Total loans		3,553,417		128,397	4.83%		3,140,480		104,081	4.43%
Securities:
Taxable		751,600		17,464	3.11%		544,351		12,314	3.02%
Tax-exempt ^(5)		99,555		2,856	3.84%		91,147		2,677	3.93%
Total securities		851,155		20,320	3.19%		635,498		14,991	3.15%
Deposits in depository institutions		82,214		1,038	1.69%		116,532		1,043	1.20%
Total interest-earning assets		4,486,786		149,755	4.46%		3,892,510		120,115	4.13%
Cash and due from banks		65,433					45,268
Premises and equipment, net		78,475					72,780
Goodwill and intangible assets		121,780					78,420
Other assets		191,231					174,378
Less: Allowance for loan losses		(15,000)					(18,286)
Total assets	$	4,928,705				$	4,245,070
Liabilities:
Interest-bearing demand deposits	$	880,763	$	2,796	0.42%	$	782,883	$	1,327	0.23%
Savings deposits		968,655		3,461	0.48%		811,818		1,331	0.22%
Time deposits ^(2)		1,370,934		18,511	1.81%		1,120,459		12,083	1.44%
Short-term borrowings		208,004		2,729	1.75%		265,877		2,355	1.18%
Long-term debt		4,053		140	4.62%		16,495		680	5.51%
Total interest-bearing liabilities		3,432,409		27,637	1.08%		2,997,532		17,776	0.79%
Noninterest-bearing demand deposits		811,411					694,453
Other liabilities		54,356					47,498
Stockholders' equity		630,529					505,587
Total liabilities and stockholders' equity	$	4,928,705				$	4,245,070
Net interest income			$	122,118				$	102,339
Net yield on earning assets					3.64%					3.52%
(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			$	711				$	1,549
(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			$	165				$	350
Commercial, financial, and agriculture				1,968					545
Installment loans to individuals				1					17
Time deposits				527					-
			$	2,661				$	912
(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, 2019		June 30, 2019		March 31, 2019		December 31, 2018		September 30, 2018		September 30, 2019		September 30, 2018
Net Interest Income/Margin
Net interest income ("GAAP")	$	40,537	$	40,911	$	40,066	$	36,431	$	35,558	$	121,516	$	101,778
Taxable equivalent adjustment		192		202		208		194		187		602		561
Net interest income, fully taxable equivalent	$	40,729	$	41,113	$	40,274	$	36,625	$	35,745	$	122,118	$	102,339
Average interest earning assets	$	4,503,502	$	4,513,503	$	4,466,495	$	4,089,984	$	4,005,067	$	4,486,786	$	3,892,510
Net Interest Margin		3.59%		3.65%		3.66%		3.55%		3.54%		3.64%		3.52%
Accretion related to fair value adjustments		-0.11%		-0.08%		-0.05%		-0.05%		-0.03%		-0.08%		-0.03%
Net Interest Margin (excluding accretion)		3.48%		3.57%		3.61%		3.50%		3.51%		3.56%		3.48%
Tangible Equity Ratio (period end)
Equity to assets ("GAAP")		13.10%		12.89%		12.59%		12.26%		11.58%
Effect of goodwill and other intangibles, net		-2.17%		-2.19%		-2.22%		-2.26%		-1.59%
Tangible common equity to tangible assets		10.93%		10.70%		10.37%		10.00%		9.99%
Return on tangible equity ("GAAP")		17.0%		17.9%		17.7%		9.6%		18.9%		17.5%		18.5%
Impact of merger related expenses		0.0%		0.3%		0.1%		9.2%		0.3%		0.2%		0.0%
Return on tangible equity, excluding merger related expenses		17.0%		18.2%		17.8%		18.8%		19.2%		17.7%		18.5%
Return on assets ("GAAP")		1.81%		1.84%		1.76%		0.96%		1.90%		1.81%		1.86%
Impact of merger related expenses		0.00%		0.04%		0.02%		0.92%		0.02%		0.02%		0.00%
Return on assets, excluding merger related expenses		1.81%		1.88%		1.78%		1.88%		1.92%		1.82%		1.86%
Effective Income Tax Rate
Effective tax rate ("GAAP")		21.7%		20.4%		21.2%		19.8%		21.3%		21.1%		20.6%
Impact of FIN 48 adjustments		0.00%		0.00%		0.00%		2.97%		0.00%		0.00%		0.00%
Effective tax rate, excluding FIN 48 adjustments		21.7%		20.4%		21.2%		22.8%		21.3%		21.1%		20.6%