CHCO City Holding Company

City Holding Company (“Company” or “City”) (NASDAQ:CHCO), a $3.6 billion bank holding company headquartered in Charleston, today announced record quarterly diluted earnings of $1.17 per share and record quarterly net income of $18.0 million. Effective January 1, 2015, the Company sold its insurance operations, “CityInsurance”, and recognized a one-time after tax gain of $5.8 million, or $0.37 per diluted share, in the first quarter of 2015.

Net Interest Income

The Company’s tax equivalent net interest income increased $0.1 million, or 0.4%, from $29.4 million during the fourth quarter of 2014 to $29.5 million during the first quarter of 2015. This increase is due to additional accretion from fair value adjustments related to the acquisitions of Virginia Savings Bank and Community Bank ($2.5 million for the quarter ended March 31, 2015 compared to $1.3 million for the quarter ended December 31, 2014). This increase was partially offset by a decrease in interest income from commercial loans of $0.6 million due to lower yields as a result of a continued competitive commercial lending environment. The Company’s reported net interest margin increased from 3.89% for the fourth quarter of 2014 to 3.99% for the first quarter of 2015. Excluding the favorable impact of the accretion from the fair value adjustments, the net interest margin would have been 3.66% for the quarter ended March 31, 2015 and 3.71% for the quarter ended December 31, 2014.

Credit Quality

The Company’s ratio of nonperforming assets to total loans and other real estate owned increased slightly from 0.90% at December 31, 2014 to 0.96% at March 31, 2015. 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 deteriorates below the initial expectations. Total past due loans decreased modestly from $10.7 million, or 0.40% of total loans outstanding, at December 31, 2014 to $10.2 million, or 0.39% of total loans outstanding, at March 31, 2015. Acquired past due loans represent approximately 45% of total past due loans and have declined $11.9 million, or 72%, since March 31, 2013.

As a result of the Company’s quarterly analysis of the adequacy of the ALLL, the Company recorded a provision for loan losses of $0.9 million in the first quarter of 2015, compared to $1.4 for the comparable period in 2014 and $0.4 million for the fourth quarter of 2014. The provision for loan losses recorded in the first quarter of 2015 reflects difficulties of certain commercial borrowers of the Company during the quarter, the downgrade of their related credits and management’s assessment of the impact of these difficulties on the ultimate collectability of the loans. Additionally, the first quarter of 2015 includes $0.25 million of provision expense related to purchased credit impaired loans. 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

Effective January 1, 2015, the Company sold its insurance operations, CityInsurance, which resulted in a pre-tax gain of $11.1 million. Exclusive of this gain, non-interest income declined from $14.2 million for the first quarter of 2014 to $12.9 million for the first quarter of 2015. The primary reason for this decline was the sale of CityInsurance which had insurance commission revenues of $2.0 million in the first quarter of 2014. In addition, service charges decreased $0.2 million, or 3.8%, from the first quarter of 2014 to $5.9 million. These decreases were partially offset by increases in bankcard revenues of $0.4 million (10.6%), other income of $0.4 million, and trust and investment management fee income of $0.2 million (15.7%).

Non-interest Expenses

Non-interest expenses decreased $0.2 million, from $23.4 million in the first quarter of 2014 to $23.2 million in the first quarter of 2015. This drop was largely due to a decline in salaries and employee benefit expense of $1.0 million, or 7.3%, to $12.2 million. This decrease was due to a reduction in the Company’s salary expense as a result of the sale of CityInsurance. This decrease was partially offset by an increase in other expenses of $0.8 million to $2.7 million. During the first quarter of 2014, the Company’s non-income based taxes decreased due to the recognition of a previously unrecognized tax position due to the close of the statute of limitations for a previous tax year and was discrete to the first quarter of 2014.

Balance Sheet Trends

Loans decreased $19.6 million (0.7%) from December 31, 2014 to $2.63 billion at March 31, 2015. Commercial real estate loans decreased $17.2 million (1.7%), commercial and industrial (“C&I”) loans decreased $8.3 million (6.3%), home equity junior lien loans fell $1.9 million (1.3%), and consumer loans declined $1.3 million (3.2%). These decreases were partially offset by an increase in residential real estate loans of $8.7 million (0.7%).

Total average depository balances increased $74.7 million, or 2.6%, from the quarter ended December 31, 2014 to the quarter ended March 31, 2015. Increases in savings deposits ($51.8 million), interest-bearing deposits ($17.1 million), and noninterest-bearing demand deposits ($14.4 million) were partially offset by a decrease in time deposits ($8.5 million).

Income Tax Expense

The Company’s effective income tax rate for the first quarter of 2015 was 38.7% compared to 31.4% for the year ended December 31, 2014, and 29.6% for the quarter ended March 31, 2014. As noted previously, the Company sold CityInsurance in the first quarter of 2015. As a result of differences between the book and tax basis of the assets that were sold, the Company’s income tax expense increased by $1.1 million. During the first quarter of 2014, the Company reduced income tax expense by $0.8 million due to the recognition of previously unrecognized tax position resulting from the close of the statute of limitations for a previous tax year. Exclusive of the sale of CityInsurance in the first quarter of 2015 and the discrete item recognized in the first quarter of 2014, the Company’s tax rate from operations was 33.3% and 33.6%, for the quarters ended March 31, 2015 and March 31, 2014, respectively.

Capitalization and Liquidity

The Company’s loan to deposit ratio was 89.5% and the loan to asset ratio was 74.1% at March 31, 2015. The Company maintained investment securities totaling 10.4% of assets as of this date. Further, the Company’s deposit mix is weighted heavily toward checking and saving accounts that fund 54.3% of assets at March 31, 2015. Time deposits fund 28.5% of assets at March 31, 2015, 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 is also strongly capitalized. The Company’s tangible equity ratio increased from 9.4% at December 31, 2014 to 9.6% at March 31, 2015. At March 31, 2015, City National Bank’s Leverage Ratio is 9.07%, its Common Equity Tier I ratio is 11.87%, its Tier I Capital ratio is 13.04%, and its Total Risk-Based Capital ratio is 13.89%. These regulatory capital ratios are significantly above levels required to be considered “well capitalized,” which is the highest possible regulatory designation.

On March 26, 2015, the Board approved a quarterly cash dividend of $0.42 cents per share payable April 30, 2015, to shareholders of record as of April 15, 2015.

City Holding Company is the parent company of City National Bank of West Virginia. City National operates 82 branches across West Virginia, Virginia, Kentucky 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. Such information involves risks and uncertainties that could result in the Company's actual results differing materially from those projected in the forward-looking statements. Important factors that could cause actual results to differ materially from those discussed in such forward-looking statements include, but are not limited to, (1) the Company may incur additional loan loss provision due to negative credit quality trends in the future that may lead to a deterioration of asset quality; (2) the Company may incur increased charge-offs in the future; (3) the Company could have adverse legal actions of a material nature; (4) the Company may face competitive loss of customers; (5) the Company may be unable to manage its expense levels; (6) the Company may have difficulty retaining key employees; (7) changes in the interest rate environment may have results on the Company’s operations materially different from those anticipated by the Company’s market risk management functions; (8) changes in general economic conditions and increased competition could adversely affect the Company’s operating results; (9) changes in other regulations and government policies affecting bank holding companies and their subsidiaries, including changes in monetary policies, could negatively impact the Company’s operating results; (10) the Company may experience difficulties growing loan and deposit balances; (11) the current economic environment poses significant challenges for us and could adversely affect our financial condition and results of operations; (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 resulting in either actual losses or other than temporary impairments on such investments; (13) the effects of the Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and the regulations promulgated and to be promulgated thereunder, which may subject the Company and its subsidiaries to a variety of new and more stringent legal and regulatory requirements which adversely affect their respective businesses; (14) the impact of new minimum capital thresholds established as a part of the implementation of Basel III; and (15) other risk factors relating to the banking industry or the Company as detailed from time to time in the Company’s reports filed with the Securities and Exchange Commission, including those risk factors included in the disclosures under the heading “ITEM 1A Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014. 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 March 31, 2015 Form 10-Q. The Company will continue to evaluate the impact of any subsequent events on the preliminary March 31, 2015 results and will adjust the amounts if necessary.

CITY HOLDING COMPANY AND SUBSIDIARIES

Financial Highlights

(Unaudited)

        Three Months Ended March 31,   Percent 2015

2014

  Change   Earnings ($000s, except per share data): Net Interest Income (FTE) $ 29,533 $ 30,193 (2.19)% Net Income available to common shareholders 17,992 13,803 30.35% Earnings per Basic Share 1.18 0.87 35.04% Earnings per Diluted Share 1.17 0.86 35.72%             Key Ratios (percent): Return on Average Assets 2.04% 1.63% 25.18% Return on Average Tangible Equity 21.58% 17.32% 24.60% Net Interest Margin 3.99% 4.15% (3.75)% Efficiency Ratio (a) 54.24% 52.28% 3.75% Average Shareholders' Equity to Average Assets 11.48% 11.64% (1.34)%   Consolidated Risk Based Capital Ratios (b): CET I 14.04% * N/A Tier I 14.70% 13.58% 8.25% Total 15.57% 14.47% 7.60%   Tangible Equity to Tangible Assets 9.60% 9.60% (0.01)%             Common Stock Data: Cash Dividends Declared per Share $ 0.42 $ 0.40 5.00% Book Value per Share 26.63 25.05 6.30% Tangible Book Value per Share 21.96 20.28 8.28% Market Value per Share: High 48.09 46.69 3.00% Low 41.76 42.15 (0.93)% End of Period 47.03 44.86 4.84%   Price/Earnings Ratio (c) 9.96 12.83 (22.36)%            

(a) The March 31, 2015 efficiency ratio calculation excludes the gain on sale of insurance division.

(b) March 31, 2015 risk-based capital ratios are estimated.

(c) March 31, 2015 price/earnings ratio computed based on annualized first quarter 2015 earnings.

(*) Basel III CET 1 ratio requirements are effective beginning January 1, 2015 and are not required for prior periods.

CITY HOLDING COMPANY AND SUBSIDIARIES

Financial Highlights

(Unaudited)

                                          Book Value and Market Price Range per Share Market Price Book Value per Share Range per Share March 31   June 30   September 30   December 31     Low     High   2011 20.39 20.58 20.86 21.05 26.06 37.22 2012 21.46 21.63 22.14 22.47 30.96 37.16 2013 23.36 23.52 24.03 24.61 36.07 49.21 2014 25.05 25.45 25.52 25.85 41.20 46.95 2015 26.63 41.76 48.09                               Earnings per Basic Share   Quarter Ended March 31   June 30   September 30   December 31     Year-to-Date   2011 0.62 0.65 0.77 0.65 2.68 2012 0.68 0.50 0.71 0.73 2.63 2013 0.51 0.83 0.89 0.84 3.07 2014 0.87 0.81 0.76 0.95 3.40 2015 1.18 1.18                               Earnings per Diluted Share   Quarter Ended March 31   June 30   September 30   December 31     Year-to-Date   2011 0.62 0.64 0.76 0.65 2.67 2012 0.67 0.50 0.71 0.73 2.61 2013 0.51 0.82 0.88 0.83 3.04 2014 0.86 0.80 0.76 0.95 3.38 2015 1.17 1.17                            

CITY HOLDING COMPANY AND SUBSIDIARIES

Consolidated Statements of Income

(Unaudited) ($ in 000s, except per share data)

    Three Months Ended March 31, 2015   2014   Interest Income Interest and fees on loans $ 29,388 $ 29,734 Interest on investment securities: Taxable 2,712 3,003 Tax-exempt   264   281

Total Interest Income

32,364 33,018   Interest Expense Interest on deposits 2,741 2,753 Interest on short-term borrowings 82 75 Interest on long-term debt   150   150 Total Interest Expense   2,973   2,978 Net Interest Income 29,391 30,040 Provision for loan losses   888   1,363 Net Interest Income After Provision for Loan Losses 28,503 28,677   Non-Interest Income Gains on sale of investment securities 14 83 Service charges 5,927 6,160 Bankcard revenue 4,074 3,685 Insurance commissions - 2,025 Trust and investment management fee income 1,200 1,037 Bank owned life insurance 764 756 Gain on sale of insurance division 11,084 - Other income   958   559 Total Non-Interest Income 24,021 14,305   Non-Interest Expense Salaries and employee benefits 12,179 13,139 Occupancy and equipment 2,590 2,615 Depreciation 1,511 1,478 FDIC insurance expense 450 410 Advertising 704 824 Bankcard expenses 818 806 Postage, delivery, and statement mailings 561 575 Office supplies 346 410 Legal and professional fees 567 409 Telecommunications 475 338 Repossessed asset losses, net of expenses 220 379 Other expenses   2,744   1,993 Total Non-Interest Expense   23,165   23,376 Income Before Income Taxes 29,359 19,606 Income tax expense   11,367   5,803 Net Income Available to Common Shareholders $ 17,992 $ 13,803   Distributed earnings allocated to common shareholders $ 6,315 $ 6,224 Undistributed earnings allocated to common shareholders   11,468   7,438 Net earnings allocated to common shareholders $ 17,783 $ 13,662   Average common shares outstanding 15,067 15,631 Effect of dilutive securities: Employee stock options and warrants   82   165 Shares for diluted earnings per share   15,149   15,796   Basic earnings per common share $ 1.18 $ 0.87 Diluted earnings per common share $ 1.17 $ 0.86 Dividends declared per common share $ 0.42 $ 0.40   Comprehensive Income $ 18,898 $ 14,579

CITY HOLDING COMPANY AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders' Equity

(Unaudited) ($ in 000s)

  Three Months Ended March 31, 2015   March 31, 2014   Balance at January 1 $ 390,853 $ 387,623   Net income 17,992 13,803 Other comprehensive income: Change in unrealized (loss) gainon securities available-for-sale 906 776 Cash dividends declared ($0.42/share) and ($0.40/share), respectively (6,389 ) (6,287 ) Issuance of stock award shares, net 740 572 Exercise of 28,500 stock options 973 - Exercise of 7,000 stock options - 199 Purchase of 68,145 common shares of treasury -     (2,936 ) Balance at March 31 $ 405,075     $ 393,750  

CITY HOLDING COMPANY AND SUBSIDIARIES

Condensed Consolidated Quarterly Statements of Income

(Unaudited) ($ in 000s, except per share data)

          Quarter Ended March 31   December 31 September 30 June 30 March 31

 

2015   2014   2014   2014   2014

 

Interest income $ 32,364 $ 32,282 $ 32,438 $ 31,828 $ 33,018 Taxable equivalent adjustment   142     164     152     151     153 Interest income (FTE) 32,506 32,446 32,590 31,979 33,171 Interest expense   2,973     3,041     2,968     2,973     2,978 Net interest income 29,533 29,405 29,622 29,006 30,193 Provision for loan losses   888     384     1,872     435     1,363 Net interest income after provision for loan losses 28,645 29,021 27,750 28,571 28,830   Noninterest income 24,021 14,669 14,609 15,139 14,305 Noninterest expense   23,165     23,035     24,325     24,305     23,376 Income before income taxes 29,501 20,655 18,034 19,405 19,759 Income tax expense 11,367 5,961 6,010 6,497 5,803 Taxable equivalent adjustment   142     164     152     151     153 Net income $ 17,992   $ 14,530   $ 11,872   $ 12,757   $ 13,803                           Distributed earnings allocated to common shareholders $ 6,315 $ 5,996 $ 6,073 $ 6,178 $ 6,224 Undistributed earnings allocated to common shareholders   11,468     8,378     5,673     6,448     7,439 Net earnings allocated to common shareholders $ 17,783   $ 14,374   $ 11,746   $ 12,626   $ 13,663   Average common shares outstanding 15,067 15,096 15,363 15,556 15,631   Effect of dilutive securities: Employee stock options and warrants   82     86     82     150     165   Shares for diluted earnings per share   15,149     15,182     15,445     15,706     15,796   Basic earnings per common share $ 1.18 $ 0.95 $ 0.76 $ 0.81 $ 0.87 Diluted earnings per common share 1.17 0.95 0.76 0.80 0.86   Cash dividends declared per share 0.42 0.40 0.40 0.40 0.40                         Net Interest Margin 3.99% 3.89% 3.95% 3.95% 4.15%   Interest Income from Accretion Related to Fair Value Adjustments Recorded as a Result of Acquisition $ 2,450 $ 1,307 $ 1,836 $ 1,494 $ 2,151   Net Interest Margin (excluding accretion) 3.66% 3.71% 3.71% 3.75% 3.85%                                

CITY HOLDING COMPANY AND SUBSIDIARIES

Non-Interest Income and Non-Interest Expense

(Unaudited) ($ in 000s)

          Quarter Ended March 31   December 31 September 30 June 30 March 31 2015   2014   2014   2014   2014   Non-Interest Income: Service charges $ 5,927 $ 6,750 $ 6,934 $ 6,739 $ 6,160 Bankcard revenue 4,074 3,744 3,796 3,838 3,685 Insurance commissions - 1,238 1,396 1,319 2,025 Trust and investment management fee income 1,200 1,363 1,103 1,111 1,037 Bank owned life insurance 764 778 771 765 756 Gain on sale of insurance division 11,084 - - - - Other income   958     612     538     549     559 Subtotal 24,007 14,485 14,538 14,321 14,222 Gain (loss) on sale of investment securities   14     184     71     818     83 Total Non-Interest Income $ 24,021   $ 14,669   $ 14,609   $ 15,139   $ 14,305   Non-Interest Expense: Salaries and employee benefits $ 12,179 $ 12,489 $ 13,144 $ 12,977 $ 13,139 Occupancy and equipment 2,590 2,449 2,531 2,395 2,615 Depreciation 1,511 1,534 1,542 1,533 1,478 FDIC insurance expense 450 448 432 357 410 Advertising 704 726 799 925 824 Bankcard expenses 818 891 843 833 806 Postage, delivery and statement mailings 561 549 557 530 575 Office supplies 346 360 405 420 410 Legal and professional fees 567 552 476 612 409 Telecommunications 475 522 510 506 338 Repossessed asset (gains) losses, net of expenses 220 27 31 142 379 Other expenses   2,744     2,488     3,055     3,075     1,993 Total Non-Interest Expense $ 23,165   $ 23,035   $ 24,325   $ 24,305   $ 23,376                             Employees (Full Time Equivalent) 845 889 908 912 925 Branch Locations 82 82 82 82 82                                

CITY HOLDING COMPANY AND SUBSIDIARIES

Consolidated Balance Sheets

($ in 000s)

      March 31, 2015 December 31, 2014 (Unaudited) Assets Cash and due from banks $ 235,004 $ 138,503 Interest-bearing deposits in depository institutions 10,106 9,725 Federal funds sold   -       -   Cash and cash equivalents 245,110 148,228   Investment securities available-for-sale, at fair value 273,856 254,043 Investment securities held-to-maturity, at amortized cost 87,455 90,786 Other securities   9,857       9,857   Total investment securities 371,168 354,686   Gross loans 2,632,471 2,652,066 Allowance for loan losses   (20,179 )     (20,150 ) Net loans 2,612,292 2,631,916   Bank owned life insurance 95,880 95,116 Premises and equipment, net 76,910 77,988 Accrued interest receivable 7,752 6,826 Net deferred tax assets 35,335 36,766 Intangible assets 70,964 74,198 Other assets   37,674       35,909   Total Assets $ 3,553,085     $ 3,461,633     Liabilities Deposits: Noninterest-bearing $ 551,596 $ 545,465 Interest-bearing: Demand deposits 654,832 639,932 Savings deposits 722,324 660,727 Time deposits   1,013,630       1,026,663   Total deposits 2,942,382 2,872,787 Short-term borrowings Customer repurchase agreements 132,588 134,931 Long-term debt 16,495 16,495 Other liabilities   56,545       46,567   Total Liabilities 3,148,010 3,070,780   Stockholders' Equity Preferred stock, par value $25 per share: 500,000 shares authorized; none issued - - Common stock, par value $2.50 per share: 50,000,000 shares authorized; 18,499,282 shares issued at March 31, 2015 and December 31, 2014 less 3,285,958 and 3,345,590 shares in treasury, respectively 46,249 46,249 Capital surplus 106,397 107,370 Retained earnings 373,812 362,211 Cost of common stock in treasury (118,130 ) (120,818 ) Accumulated other comprehensive loss: Unrealized gain on securities available-for-sale 2,096 1,190 Underfunded pension liability   (5,349 )     (5,349 ) Total Accumulated Other Comprehensive Loss   (3,253 )     (4,159 ) Total Stockholders' Equity   405,075       390,853   Total Liabilities and Stockholders' Equity $ 3,553,085     $ 3,461,633  

CITY HOLDING COMPANY AND SUBSIDIARIES

Investment Portfolio

(Unaudited) ($ in 000s)

        Original Cost

Credit-RelatedNet InvestmentImpairmentLosses through March 31, 2015

Unrealized Gains(Losses)

Carrying Value   US Government Agencies $ 1,713 $ - $ 2 $ 1,715 Mortgage Backed Securities 292,831 - 2,463 295,294 Municipal Bonds 38,147 - 767 38,914 Pooled Bank Trust Preferreds 20,664 (20,171 ) 1,167 1,660 Single Issuer Bank Trust Preferreds, Subdebt of Financial Institutions, and Bank Holding Company Preferred Stocks 22,040 (1,015 ) (2,350 ) 18,675 Money Markets and Mutual Funds 1,525 - 10 1,535 Federal Reserve Bank and FHLB stock 9,857 - - 9,857 Community Bank Equity Positions   3,715   (1,584 )   1,387     3,518 Total Investments $ 390,492 $ (22,770 ) $ 3,446   $ 371,168

CITY HOLDING COMPANY AND SUBSIDIARIES

Loan Portfolio

(Unaudited) ($ in 000s)

          March 31 December 31 September 30 June 30 March 31   2015     2014     2014     2014     2014   Residential real estate (1) $ 1,303,258 $ 1,294,576 $ 1,274,062 $ 1,242,972 $ 1,212,232 Home equity - junior liens

 

143,670 145,604 146,965 145,452 144,482 Commercial and industrial

 

124,342 132,641 130,462 131,627 126,569 Commercial real estate (2)

 

1,019,562 1,036,738 1,034,593 1,011,367 1,027,431 Consumer

 

38,436 39,705 41,042 42,858 42,320 DDA overdrafts

 

3,203     2,802     3,618     3,501     4,001 Gross Loans $ 2,632,471   $ 2,652,066   $ 2,630,742   $ 2,577,777   $ 2,557,035   Construction loans included in: (1) - Residential real estate loans $ 17,459 $ 22,992 $ 22,426 $ 20,078 $ 17,697 (2) - Commercial real estate loans $ 30,554 $ 28,652 $ 24,875 $ 24,608 $ 28,894

CITY HOLDING COMPANY AND SUBSIDIARIES

Acquisition Activity - Accretion

(Unaudited) ($ in 000s)

  The following table presents the actual and forecasted accretion related to the fair value adjustments on net interest income recorded as a result of the Virginia Savings Bancorp ("Virginia Savings") and Community Financial Corporation ("Community") acquisitions.                           Virginia Savings   Community   Loan   Certificates of Loan   Certificates of Year Ended: Accretion(a)   Deposit(a) Accretion(a)   Deposit(a) Total   1Q 2015 $ 123 $ 129 $ 2,158 $ 40 $ 2,450 Remainder 2015 336 388 1,734 120 2,578 2016 276 497 1,480 48 2,301 2017 154 - 1,070 - 1,224 a - 1Q 2015 amounts are based on actual results. Remainder 2015, 2016 and 2017 amounts are based on estimated amounts.     Note: The amounts reflected in the table above require management to make significant assumptions based on estimated future default, prepayment, and discount rates. Actual performance could be significantly different from that assumed, which could result in the actual results being materially different from the amounts estimated above.

CITY HOLDING COMPANY AND SUBSIDIARIES

Consolidated Average Balance Sheets, Yields, and Rates

(Unaudited) ($ in 000s)

        Three Months Ended March 31,   2015   2014 Average Yield/ Average Yield/ Balance   Interest   Rate   Balance   Interest   Rate   Assets: Loan portfolio (1): Residential real estate (2) $ 1,436,720 $ 14,201 4.01 % $ 1,350,556 $ 13,746 4.13 % Commercial, financial, and agriculture (2) 1,149,798 13,586 4.79 % 1,167,606 14,236 4.94 % Installment loans to individuals (2), (3) 49,882 1,150 9.35 % 52,557 1,179 9.10 % Previously securitized loans (4) ***   451   ***   ***   574   *** Total loans 2,636,400 29,388 4.52 % 2,570,719 29,735 4.69 % Securities: Taxable 327,185 2,712 3.36 % 345,982 3,003 3.52 % Tax-exempt (5) 28,477     406   5.78 %   27,506     433   6.38 %

Total securities

355,662 3,118 3.56 % 373,488 3,436 3.73 % Deposits in depository institutions 8,968 - - 8,831 - - Federal funds sold -     -   -     -     -   0.00 % Total interest-earning assets 3,001,030 32,506 4.39 % 2,953,038 33,171 4.56 % Cash and due from banks 222,409 125,221 Bank premises and equipment 77,638 82,214 Other assets 244,686 246,091 Less: Allowance for loan losses (20,658 )           (21,221 )         Total assets $ 3,525,105             $ 3,385,343             Liabilities: Interest-bearing demand deposits 636,810 132 0.08 % 611,797 176 0.12 % Savings deposits 694,700 181 0.11 % 618,412 207 0.14 % Time deposits (2) 1,021,474 2,428 0.96 % 1,070,065 2,370 0.90 % Short-term borrowings 129,647 82 0.26 % 118,771 75 0.26 % Long-term debt 16,495     150   3.69 %   16,495     150   3.69 % Total interest-bearing liabilities 2,499,126 2,973 0.48 % 2,435,540 2,978 0.50 % Noninterest-bearing demand deposits 571,340 517,207 Other liabilities 49,996 38,705 Stockholders' equity 404,643             393,891           Total liabilities and stockholders' equity $ 3,525,105             $ 3,385,343           Net interest income     $ 29,533           $ 30,193     Net yield on earning assets         3.99 %           4.15 % (1) For purposes of this table, non-accruing loans have been included in average balances and loan fees, which are immaterial, have been included in interest income. (2) Included in the above table are the following amounts (in thousands) for the accretion of the fair value adjustments related to the acquisitions of Virginia Savings Bancorp ("Virginia Savings") and Community Financial Corporation ("Community"):         Three Months Ended March 31, 2015         Three Months Ended March 31, 2014 Virginia Savings   Community   Total         Virginia Savings   Community   Total Residential real estate $ 64   $ 133   $ 197 $ 151   $ 115   $ 266 Commercial, financial, and agriculture 29 1,959 1,988 114 1,324 1,438 Installment loans to individuals 30 66 96 34 189 223 Time deposits   129     40     169           131     93     224 $ 252   $ 2,198   $ 2,450         $ 430   $ 1,721   $ 2,151 (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 35%.

CITY HOLDING COMPANY AND SUBSIDIARIES

Analysis of Risk-Based Capital

(Unaudited) ($ in 000s)

            March 31 December 31 September 30 June 30 March 31 2015 (a)   2014     2014     2014     2014     Tier I Capital: Stockholders' equity $ 405,075 $ 390,853 $ 391,673 $ 397,231 $ 393,750 Goodwill and other intangibles (69,227 ) (74,011 ) (74,247 ) (74,483 ) (74,719 ) Accumulated other comprehensive loss 3,253 4,159 2,921 2,509 4,214 Qualifying trust preferred stock 16,000 16,000 16,000 16,000 16,000 Excess deferred tax assets   (1,564 )     (3,838 )     (3,131 )     (4,019 )     (6,508 ) Total tier I capital $ 353,537 $ 333,163 $ 333,216 $ 337,238 $ 332,737 Qualifying trust preferred stock

 

(16,000 )   *   *   *   * Total CET I capital $ 337,537     *   *   *   *                           Total Risk-Based Capital: Tier I capital $ 353,537 $ 333,163 $ 333,216 $ 337,238 $ 332,737 Qualifying allowance for loan losses 20,179 20,150 20,487 20,536 21,044 Unrealized gain on securities   704       560       630       605       786   Total risk-based capital $ 374,420     $ 353,873     $ 354,333     $ 358,379     $ 354,567     Net risk-weighted assets $ 2,404,331 $ 2,493,078 $ 2,493,938 $ 2,464,081 $ 2,450,949                           Ratios: Average stockholders' equity to average assets 11.48 % 11.40 % 11.78 % 11.71 % 11.64 % Tangible capital ratio 9.60 % 9.35 % 9.58 % 9.80 % 9.60 % Risk-based capital ratios: CET 1 capital 14.04 % * * * * Tier I capital 14.70 % 13.36 % 13.36 % 13.69 % 13.58 % Total risk-based capital 15.57 % 14.19 % 14.21 % 14.54 % 14.47 % Leverage capital 10.23 % 9.89 % 10.07 % 10.15 % 10.07 %

(a) March 31, 2015 risk-based capital ratios are estimated.

(*) Basel III CET 1 ratio requirements are effective beginning January 1, 2015 and are not required for prior periods.

CITY HOLDING COMPANY AND SUBSIDIARIES

Intangibles

(Unaudited) ($ in 000s)

      As of and for the Quarter Ended March 31   December 31   September 30 June 30 March 31 2015   2014   2014   2014   2014   Intangibles, net $ 70,964 $ 74,198 $ 74,434 $ 74,670 $ 74,906 Intangibles amortization expense 214 236 236 236 236

CITY HOLDING COMPANY AND SUBSIDIARIES

Summary of Loan Loss Experience

(Unaudited) ($ in 000s)

          Quarter Ended March 31 December 31 September 30 June 30 March 31 2015     2014     2014     2014     2014     Balance at beginning of period $ 20,150 $ 20,487 $ 20,536 $ 21,044 $ 20,575   Charge-offs: Commercial and industrial 94 (7 ) 325 1 4 Commercial real estate 337 260 696 587 382 Residential real estate 257 414 605 316 427 Home equity 91 21 142 38 108 Consumer 74 17 49 38 84 DDA overdrafts   311       363       390       321       341  

Total charge-offs

1,164 1,068 2,207 1,301 1,346   Recoveries: Commercial and industrial 18 4 4 18 63 Commercial real estate 8 19 11 53 30 Residential real estate 10 96 28 39 24 Home equity - - - - - Consumer 28 32 43 53 76 DDA overdrafts   241       196       200       195       259   Total recoveries 305 347 286 358 452                   Net charge-offs 859 721 1,921 943 894 Provision for (recovery of) acquired loans 246 148 (3 ) 150 (12 ) Provision for loan losses   642       236       1,875       285       1,375   Balance at end of period $ 20,179     $ 20,150     $ 20,487     $ 20,536     $ 21,044     Loans outstanding $ 2,632,471     $ 2,652,066     $ 2,630,742     $ 2,577,777     $ 2,557,035   Average loans outstanding   2,636,400       2,639,106       2,600,142       2,563,601       2,570,719   Allowance as a percent of loans outstanding   0.77 %     0.76 %     0.78 %     0.80 %     0.82 % Allowance as a percent of non-performing loans   121.81 %     128.10 %     112.61 %     106.86 %     100.09 % Net charge-offs (annualized) as a percent of average loans outstanding   0.13 %     0.11 %     0.30 %     0.15 %     0.14 % Net charge-offs, excluding overdraft deposit accounts, (annualized) as a percent of average loans outstanding   0.12 %     0.08 %     0.27 %     0.13 %     0.13 %

CITY HOLDING COMPANY AND SUBSIDIARIES

Summary of Non-Performing Assets

(Unaudited) ($ in 000s)

            March 31 December 31 September 30 June 30 March 31 2015   2014   2014   2014   2014   Nonaccrual loans $ 16,182 $ 15,307 $ 17,384 $ 18,423 $ 20,593 Accruing loans past due 90 days or more   384     423     809     794     432 Total non-performing loans 16,566 15,730 18,193 19,217 21,025 Other real estate owned   8,771     8,180     9,162     9,129     9,538 Total non-performing assets $ 25,337   $ 23,910   $ 27,355   $ 28,346   $ 30,563   Non-performing assets as a percent of loans and other real estate owned 0.96% 0.90% 1.04% 1.10% 1.19%

CITY HOLDING COMPANY AND SUBSIDIARIES

Summary of Total Past Due Loans

(Unaudited) ($ in 000s)

 

    Originated March 31   December 31   September 30   June 30   March 31 2015   2014   2014   2014   2014   Residential real estate $ 4,326 $ 5,164 $ 5,276 $ 5,794 $ 4,118 Home equity - junior liens 543 746 751 926 638 Commercial and industrial 113 310 188 25 77 Commercial real estate 299 479 938 443 789 Consumer 122 197 58 80 63 DDA overdrafts   215     318     592     281     196 Total past due loans $ 5,618   $ 7,214   $ 7,803   $ 7,549   $ 5,881   Acquired March 31 December 31 September 30 June 30 March 31 2015   2014   2014   2014   2014   Residential real estate $ 1,792 $ 714 $ 500 $ 873 $ 813 Home equity - junior liens 86 2 16 3 21 Commercial and industrial 490 143 96 58 127 Commercial real estate 2,018 2,372 2,972 2,110 3,789 Consumer 150 221 162 374 397 DDA overdrafts   -     -     -     -     - Total past due loans $ 4,536   $ 3,452   $ 3,746   $ 3,418   $ 5,147   Total March 31 December 31 September 30 June 30 March 31 2015   2014   2014   2014   2014   Residential real estate $ 6,118 $ 5,878 $ 5,776 $ 6,667 $ 4,931 Home equity - junior liens 629 748 767 929 659 Commercial and industrial 603 453 284 83 204 Commercial real estate 2,317 2,851 3,910 2,553 4,578 Consumer 272 418 220 454 460 DDA overdrafts   215     318     592     281     196 Total past due loans $ 10,154   $ 10,666   $ 11,549   $ 10,967   $ 11,028   Total past due loans as a percent of loans outstanding 0.39% 0.40% 0.44% 0.43% 0.43%

CITY HOLDING COMPANY AND SUBSIDIARIES

Summary of Troubled Debt Restructurings

(Unaudited) ($ in 000s)

            March 31 December 31 September 30 June 30 March 31 2015 2014 2014 2014 2014   Residential real estate $ 19,067 $ 18,492 $ 18,040 $ 19,212 $ 18,940 Home equity - junior liens 2,741 2,688 2,821 2,858 2,866 Commercial and industrial 70 73 77 86 84 Commercial real estate 1,894 2,263 2,270 2,281 1,854 Consumer   -   -   -   -   - Total $ 23,772 $ 23,516 $ 23,208 $ 24,437 $ 23,744

CITY HOLDING COMPANY AND SUBSIDIARIES

Summary of Purchased Credit Impaired Loans

(Unaudited) ($ in 000s)

          Virginia Savings Acquisition March 31   December 31 September 30 June 30 March 31 2015   2014   2014   2014   2014   Contractual required principal and interest 2,419 2,407 3,481 3,735 3,821 Carrying value 1,979 1,964 2,987 3,098 3,102   Community Acquisition March 31 December 31 September 30 June 30 March 31 2015   2014   2014   2014   2014   Contractual required principal and interest 20,189 23,277 24,147 27,394 30,476 Carrying value 14,627 15,365 15,518 17,902 19,986

City Holding CompanyCharles R. Hageboeck, Chief Executive Officer and President304-769-1102