City Holding Company Reports Operating Results (10-Q)
City Holding Company is a multi-bank holding company that providesdiversified financial products and services to consumers and local businesses. City Holding Company has a market cap of $490.8 million; its shares were traded at around $30.85 with a P/E ratio of 19 and P/S ratio of 2.9. The dividend yield of City Holding Company stocks is 4.5%. City Holding Company had an annual average earning growth of 3.5% over the past 5 years. Highlight of Business Operations:On a quarterly basis, the Company performs a review of investment securities to determine if any unrealized losses are other than temporarily impaired. Management considers the following, amongst other things, in its determination of the nature of the unrealized losses, (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. As a result of this review, the Company recognized $2.2 million of other than temporary impairment charges during the quarter ended March 31, 2009. These impairment charges were related to pooled bank trust preferreds with a remaining book value of $8.9 million. At March 31, 2009, the Company s portfolio of perpetual callable preferred securities, preferred securities, and trust preferred securities primarily invested in regional banks have a total book value of $109.7 million and unrealized losses of $21.7 million. The Company continues to actively monitor the market values of these investments along with the financial strength of the issuers behind these securities, as well as our entire investment portfolio. Based on the market information available the Company believes that the recent declines in market value are temporary and that the Company has the ability and intent to hold these securities until the temporary losses recover or the securities are called or mature. The Company cannot guarantee that such securities will recover and if additional information becomes available in the future to suggest that the losses are other than temporary, the Company may need to record impairment charges in future periods.
The Company reported consolidated net income of $10.9 million, or $0.69 per diluted common share, for the three months ended March 31, 2009, compared to $13.0 million, or $0.80 per diluted common share for the first three months of 2008. Return on average assets (“ROA”) was 1.70% and return on average equity (“ROE”) was 15.3% for the first three months of 2009, compared to 2.09% and 17.4%, respectively, for the first three months of 2008.
The Company s net interest income for the first three months of 2009 increased $0.8 million compared to the first three months of 2008 (see Net Interest Income). The Company recorded a provision for loan losses of $1.7 million for the first three months of 2009 while $1.9 million was recorded for the first three months of 2008 (see Allowance and Provision for Loan Losses). The Company recorded $2.2 million of investment impairment losses in the first three months of 2009 (see Non-Interest Income and Expense) while no such impairment charges were recognized in the first quarter of 2008. As further discussed under the caption Non-Interest Income and Expense, excluding investment impairment losses and the gain from the Visa initial public offering, non-interest income increased $0.5 million from the three months ended March 31, 2008, to the three months ended March 31, 2009. Excluding theloss on the early redemption of the trust preferred securities in the first quarter of 2008, non-interest expenses for the three months ended March 31, 2009 increased $0.1 million from the three months ended March 31, 2008.
The Company s tax equivalent net interest income increased $0.9 million, or 3.5%, from $24.1 million during the first three months of 2008 to $25.0 million during the first three months of 2009, as interest expense on deposits and other interest bearing liabilities decreased more quickly than interest income from loans and investments. The Company s reported net interest margin increased from 4.40% for the quarter ended March 31, 2008 to 4.46% for the quarter ended March 31, 2009.
During the third and fourth quarters of 2008, the Company sold $450 million of interest rate floors. The gain from sales of these interest rate floors of $16.7 million will be recognized over the remaining lives of the various hedged loans. During the first quarter of 2009, the Company recognized $2.9 million of interest income compared to $1.0 million of interest income recognized in the first quarter of 2008 from the interest rate floors.
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