City Holding Company Announces Increased Second Quarter Earnings

Share Name	Share Symbol	Market	Type
City Holding Company	NASDAQ:CHCO	NASDAQ	Common Stock

	Price Change	% Change	Share Price	Bid Price	Offer Price	High Price	Low Price	Open Price	Shares Traded	Last Trade
	5.16	4.50%	119.77	103.29	125.89	119.9913	114.3204	115.45	115,974	22:30:00

City (NASDAQ:CHCO)
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From Jul 2019 to Jul 2024

CHARLESTON, W.Va., July 24 /PRNewswire-FirstCall/ -- City Holding Company, "the Company" (NASDAQ:CHCO), a $2.5 billion bank holding company headquartered in Charleston, today announced net income for the second quarter of $13.8 million, or diluted earnings per share of $0.77 compared to $12.3 million, or $0.71 per diluted share in the second quarter of 2005, an 8.5% increase. For the second quarter of 2006, the Company achieved a return on assets of 2.17%, a return on equity of 18.8%, a net interest margin of 4.58%, and an efficiency ratio of 44.1%. Key components of the increase in net income were increases in net interest income of $2.3 million and non-interest income (principally service charge revenue) of $1.4 million. These increases were partially offset by the provision for loan losses of $0.7 million in the second quarter of 2006, as compared to no provision for loan losses in the second quarter of 2005 and increased non-interest expenses of $0.8 million (principally salaries and benefits). The Company completed the acquisition of Classic Bancshares, Inc. on May 20, 2005. Charles Hageboeck, Chief Executive Officer and President, stated, "I am very pleased with City's continuing success during the second quarter of 2006. The Company achieved a significant increase in its earnings per share despite the impact of the provision for loan losses in the second quarter of 2006 (as compared to no such provision in the second quarter of 2005) and a decrease of over $300,000 in interest income associated with previously securitized loans (whose balances decreased 45%). As compared to the prior year ended June 30, 2005, our net interest margin was higher, efficiency ratio better, and profitability as measured by our return on assets was higher. Loans and deposits both grew meaningfully in an economic environment that has been somewhat challenging for banks. Asset quality, as measured by non-performing assets, remained stable and at very desirable levels as compared to many of our peers and our level of net charge-offs was well within acceptable limits. The bank is extremely well capitalized and highly liquid. In summary, the Company is performing well against all measures. The Company used some of its profits to repurchase approximately 271,000 shares of common stock during the second quarter. Based on our continued success in the second quarter of 2006, we believe that the Company remains well positioned to maintain our solid performance on behalf of our shareholders throughout the remainder of the year." For the six months ended June 30, 2006, City's net income grew 10.8% to $26.6 million compared to $24.0 million in the first half of 2005. Diluted earnings per share grew 6.4% to $1.49 per share for the six months ended June 30, 2006 as compared to $1.40 per share for the six months ended June 30, 2005. Net Interest Income The Company's tax equivalent net interest income increased $2.3 million, or 9.7%, from $23.9 million during the second quarter of 2005 to $26.2 million during the second quarter of 2006. This increase was primarily attributable to a widening of the Company's net interest margin from increasing rates, which increased net interest income by $2.1 million from the second quarter of 2005. The increase was due primarily to an increase of 89 basis points in the Company's traditional loan portfolio (residential real estate, home equity, commercial, and installment loans). As a result, interest income from the Company's traditional loan portfolio increased $3.7 million from the second quarter of 2005. Also contributing to increased interest income was growth in the Company's traditional loan portfolio due to internal growth and the acquisition of Classic Bancshares, Inc. during the second quarter of 2005. As a result of this growth of $185 million, or 12.89%, in the average balances of traditional loan products, interest income from these loans increased $2.7 million. These increases were partially offset by increased interest expense associated with higher rates paid on deposits and increased balances of deposits. Interest expense increased $2.7 million due to a 75 basis point increase in the rate paid on interest bearing deposits from the second quarter of 2005. Meanwhile, increased average balances of deposits of $190 million, or 13.2%, from the second quarter of 2005 was due to internal growth and the acquisition of Classic during the second quarter of 2005. Growth in average balances of deposits increased interest expense by $1.2 million. Interest income from previously securitized loans decreased $0.3 million from the second quarter of 2005. This decrease was related to a decrease in the average balance of the loans from $45.6 million for the quarter ended June 30, 2005, to $24.0 million for the quarter ended June 30, 2006. However, this reduction was partially mitigated as the yield on these loans rose from 25.0% from the second quarter of 2005 to 41.9% for the second quarter of 2006 (see Previously Securitized Loans section for further discussion). Credit Quality At June 30, 2006, the Allowance for Loan Losses ("ALLL") was $16.6 million or 1.00% of total loans outstanding and 445% of non-performing loans compared to $18.3 million or 1.14% of loans outstanding and 464% of non-performing loans at June 30, 2005, and $16.8 million or 1.04% of loans outstanding and 402% of non-performing loans at December 31, 2005. As a result of the Company's quarterly analysis of the adequacy of the ALLL, the Company recorded a provision for loan losses of $0.7 million in the second quarter of 2006 and no provision in the second quarter of 2005. The provision for loan losses also decreased slightly from $1.0 million in the first quarter of 2006 primarily due to recent improvements within the Company's home equity and consumer portfolios. Changes in the amount of the provision and related allowance are based upon City's detailed methodology and are directionally consistent with changes in quality of the Company's loan portfolio. The Company had net charge-offs of $0.9 million for the second quarter of 2006, with depository accounts representing $0.6 million of this total. While charge-offs on depository accounts are appropriately taken against the ALLL, the revenue associated with depository accounts is reflected in service charges and has been steadily growing as the core base of checking accounts has grown. Net charge-offs on real estate loans and installment loans were $0.2 million and $0.1 million, respectively, while commercial loans experienced no net charge-offs for the quarter ended June 30, 2006. Due to a number of strategic initiatives to strengthen the loan portfolio implemented by management in recent years, including tightening credit standards, changing the overall mix of the portfolio to include a higher proportion of real estate secured loans, and identifying and charging off or resolving problem loans, the quality of the Company's loan portfolio remains solid. At June 30, 2006, non-performing assets as a percentage of loans and other real estate owned were 0.25%. Average non-performing assets as a percentage of loans and other real estate owned for the Company's peer group (bank holding companies with total assets between $1 and $5 billion) for the most recently reported quarter ended March 31, 2006, were 0.71%. Another contributing factor that has enabled the Company to maintain its allowance at lower levels than peers is the composition of the Company's loan portfolio, which is weighted more heavily toward residential mortgage loans and less toward non-real estate secured commercial loans than its peers. As a result, the Company's ALLL as a percentage of loans outstanding is 1.00% at June 30, 2006, compared to the average of the Company's peer group of 1.20% for the most recently reported quarter. 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 for loan losses that is directionally consistent with changes in asset quality and loss experience. Non-interest Income Net of investment securities gains, non-interest income increased $1.4 million, or 11.4%, to $13.5 million in the second quarter of 2006 as compared to $12.1 million in the second quarter of 2005. The largest source of non-interest income is service charges from depository accounts, which increased $1.2 million, or 12.6%, from $9.7 million during the second quarter of 2005 to $10.9 million during the second quarter of 2006. This increase is due to an increase in the utilization of services by the Company's expanding customer base. On a year-to-date basis, non-interest income increased $2.3 million, or 9.8%, exclusive of security gains primarily due to increases in service charges. Non-interest Expenses Non-interest expenses increased $0.8 million from $16.8 million in the second quarter of 2005 to $17.6 million in the second quarter of 2006. The increase in non-interest expenses for the quarter and year to date was primarily attributable to increased compensation expenses and other miscellaneous non-interest expenses related to the Company's acquisition of Classic Bancshares, Inc. during the second quarter of 2005. The Company's efficiency ratio improved from 46.9% for the quarter ended June 30, 2005 to 44.1% for the quarter ended June 30, 2006, reflecting ongoing strength in managing expenses while increasing revenues. The average efficiency ratio for the Company's peer group for the most recently reported quarter ended March 31, 2006, was 61.1%. For the six months ended June 30, 2006, the efficiency ratio improved to 44.69% from 47.12% for the six months ended June 30, 2005. Balance Sheet Trends As compared to December 31, 2005, loans have increased $46.1 million at June 30, 2006. The primary reasons for this growth are increases in targeted areas of commercial loans of $38.9 million, home equity loans of $11.6 million and residential real estate loans of $8.6 million. These increases were partially offset by decreases in previously securitized loans of $8.0 million (see discussion below) and installment loans of $5.0 million. The Company was successful in increasing residential real estate loans and home equity loans despite continued difficulties imposed by the flat yield curve that has resulted in borrowers refinancing into fixed rate mortgages. Total average depository balances increased $63.0 million, or 13.3% on an annualized basis, from the quarter ended December 31, 2005 to the quarter ended June 30, 2006. This growth was primarily in time deposits, which have increased $56.1 million from the quarter ended December 31, 2005. Previously Securitized Loans Between 1997 and 1999, the Company originated and securitized $760 million in 125% loan to value junior-lien underlying mortgages in six separate pools. The Company had a retained interest in the residual cash flows associated with these underlying mortgages after satisfying priority claims. Principal amounts owed to investors in the securitizations were evidenced by notes that were subject to redemption under certain circumstances. When the notes were redeemed during 2003 and 2004, the Company became the beneficial owner of the mortgage loans and recorded the loans as "Previously Securitized Loans" within the loan portfolio. At June 30, 2006, the Company reported "Previously Securitized Loans" of $22.3 million compared to $41.7 million and $30.3 million at June 30, 2005 and December 31, 2005, respectively, representing a decrease of 46.6% and 26.5%, respectively. Because the carrying value of the previously securitized loans incorporates discounts for expected prepayment and default rates, the carrying value of the loans is generally less than the contractual outstanding balance of the loans. As of June 30, 2006, the contractual outstanding balances of the mortgages securitized were $40.0 million while the carrying value of these assets was $22.3 million. The difference between the carrying value and the contractual outstanding balance of previously securitized loans is accreted into interest income over the life of the loans. An impairment charge on previously securitized loans would be provided through the Company's provision and allowance for loan losses if the discounted present value of estimated future cash flows declines below the recorded value of previously securitized loans. The Company estimates the net carrying value of previously securitized loan balances and related interest income to decrease as shown below: 12/31 Balance Annualized Interest Effective (in millions)* Income (in Annualized Yield* millions)* 2005 $ 30.3 $ 11.4 27 % 2006 18.4 9.5 42 % 2007 13.7 6.8 42 % 2008 10.4 5.1 42 % 2009 7.9 3.9 42 % * - 2005 amounts are based on actual results. 2006 amounts are based on actual results through 6/30/06 and estimated amounts for the remainder of the year. 2007, 2008 and 2009 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 different from that assumed, which could result in the actual results being materially different from the amounts estimated above. The yield on the previously securitized loans was 41.9% for the quarter ended June 30, 2006, compared to 39.1% for the quarter ended March 31, 2006, and 25.0% for the quarter ended June 30, 2005. The yield on the previously securitized loans has increased due to improved cash flows from net default rates being less than previously estimated. The lower net default rates resulted from the Company's assumption of the servicing of all of the pool balances during the second quarter of 2005. This favorably impacted the yield realized on the previously securitized loans by eliminating the servicing fees previously being paid to the external servicing agent and increased internal collection efforts that have resulted in enhanced levels of recoveries on previously charged-off loans. Subsequent to our assumption of the servicing of these loans, the Company has averaged net recoveries of approximately $485,000 per month. The Company does not believe that continued net recoveries at this rate can be sustained indefinitely. As a result of these net recoveries which are accreted into income over the remaining expected life of the loans, together with the improvements associated with lower servicing costs, the Company now projects that the yield on these loans will be in the range of 41-43%. Capitalization and Liquidity One of the Company's strengths is that it is highly profitable while maintaining strong liquidity and capital. With respect to liquidity, the Company's loan to deposit ratio was 84.1% and the loan to asset ratio was 65.8% at June 30, 2006. The Company maintained investment securities totaling 22.5% of assets as of this date. Further, the Company's deposit mix is weighted heavily toward checking and saving accounts that fund 43.3% of assets at June 30, 2006. Time deposits fund 34.9% of assets at June 30, 2006, but very few of these deposits are in accounts that have balances of more than $150,000, reflecting the core retail orientation of the Company. The Company is also strongly capitalized. Capitalization (as measured by average equity to average assets) was 11.5% for the quarter ended June 30, 2006 as a result of the Company's strong earnings. With respect to regulatory capital, at June 30, 2006, the Company's Leverage Ratio is 10.34%, the Tier I Capital ratio is 14.58%, and the Total Risk-Based Capital ratio is 15.53%. These regulatory capital ratios are significantly above levels required to be considered "well capitalized," which is the highest possible regulatory designation. The Company's tangible equity ratio was 9.1% at June 30, 2006 compared with a tangible equity ratio of 8.9% at June 30, 2005. During the second quarter of 2006, the Company repurchased 271,481 common shares at a weighted average price of $35.72 as part of a 1 million share repurchase plan authorized by the Board of Directors in June 2005. Between December 31, 2005 and June 30, 2006, the Company repurchased a total of 572,053 shares representing 3.2% of total shares outstanding. Due to the Company's strong earnings, the Company was able to both repurchase these shares and increase its tangible equity ratio. As a result of repurchases completed in the second quarter of 2006, the Company's average outstanding shares decreased 109,000 shares during the quarter, providing the Company's shareholders increased earnings capacity as shares repurchased improve earnings per share on the remaining shares outstanding. The Company has 222,847 shares remaining under the plan approved by the Board of Directors in June 2005. City Holding Company is the parent company of City National Bank of West Virginia. City National operates 67 branches across West Virginia, Eastern Kentucky and Southern 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 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 may experience increases in the default rates on previously securitized loans that would result in impairment losses or lower the yield on such loans; (4) the Company may continue to benefit from strong recovery efforts on previously securitized loans resulting in improved yields on these assets; (5) the Company could have adverse legal actions of a material nature; (6) the Company may face competitive loss of customers; (7) the Company may be unable to manage its expense levels; (8) the Company may have difficulty retaining key employees; (9) 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; (10) changes in general economic conditions and increased competition could adversely affect the Company's operating results; (11) 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; and (12) the Company may experience difficulties growing loan and deposit balances. 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. CITY HOLDING COMPANY AND SUBSIDIARIES Financial Highlights (Unaudited) Three Months Ended June 30 June 30 Percent 2006 2005 Change Earnings ($000s, except per share data): Net Interest Income (FTE) $26,171 $23,863 9.67% Net Income 13,761 12,349 11.43% Earnings per Basic Share 0.78 0.72 8.33% Earnings per Diluted Share 0.77 0.71 8.45% Key Ratios (percent): Return on Average Assets 2.17% 2.09% 3.77% Return on Average Equity 18.83% 19.76% (4.74)% Net Interest Margin 4.58% 4.42% 3.56% Efficiency Ratio 44.11% 46.90% (5.95)% Average Shareholders' Equity to Average Assets 11.51% 10.57% 8.93% Risk-Based Capital Ratios (a): Tier I 14.57% 14.38% 1.32% Total 15.52% 15.43% 0.58% Average Tangible Equity to Average Tangible Assets 9.13% 8.91% 2.50% Common Stock Data: Cash Dividends Declared per Share $0.28 $0.25 12.00% Book Value per Share 16.17 15.56 3.95% Tangible Book Value per Share 12.80 12.13 5.53% Market Value per Share: High 37.31 37.00 0.84% Low 34.53 27.57 25.24% End of Period 36.14 36.52 (1.04)% Price/Earnings Ratio (b) 11.58 12.68 (8.65)% Six Months Ended June 30 June 30 Percent 2006 2005 Change Earnings ($000s, except per share data): Net Interest Income (FTE) $52,276 $46,360 12.76% Net Income 26,627 24,027 10.82% Earnings per Basic Share 1.49 1.42 4.93% Earnings per Diluted Share 1.49 1.40 6.43% Key Ratios (percent): Return on Average Assets 2.12% 2.10% 0.80% Return on Average Equity 18.10% 20.30% (10.88)% Net Interest Margin 4.64% 4.44% 4.60% Efficiency Ratio 44.69% 47.12% (5.17)% Average Shareholders' Equity to Average Assets 11.69% 10.33% 13.11% Common Stock Data: Cash Dividends Declared per Share $0.56 $0.50 12.00% Market Value per Share: High 37.64 37.00 1.73% Low 34.53 27.57 25.24% (a) June 30, 2006 risk-based capital ratios are estimated. (b) June 30, 2006 price/earnings ratio computed based on annualized second quarter 2006 earnings. 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 Mar. June Sept. Dec. 31 30 30 31 Low High 2002 $8.92 $9.40 $9.64 $9.93 $12.04 $30.20 2003 10.10 10.74 11.03 11.46 25.50 37.15 2004 12.09 11.89 12.70 13.03 27.30 37.58 2005 13.20 15.56 15.99 16.14 27.57 39.21 2006 16.17 16.17 34.53 37.64 Earnings per Basic Share Quarter Ended Mar. June Sept. Dec. Year- 31 30 30 31 to-Date 2002 $0.38 $0.45 $0.53 $0.56 $1.92 2003 0.56 0.73 0.69 0.64 2.62 2004 0.66 0.80 0.66 0.67 2.79 2005 0.70 0.72 0.73 0.72 2.87 2006 0.71 0.78 1.49 Earnings per Diluted Share Quarter Ended Mar. June Sept. Dec. Year- 31 30 30 31 to-Date 2002 $0.38 $0.45 $0.52 $0.55 $1.90 2003 0.55 0.72 0.68 0.63 2.58 2004 0.65 0.79 0.65 0.66 2.75 2005 0.69 0.71 0.72 0.72 2.84 2006 0.71 0.77 1.49 CITY HOLDING COMPANY AND SUBSIDIARIES Consolidated Statements of Income (Unaudited) ($ in 000s, except per share data) Three Months Ended June 30, 2006 2005 Interest Income Interest and fees on loans $30,651 $24,523 Interest on investment securities: Taxable 7,489 7,682 Tax-exempt 455 447 Interest on deposits in depository institutions 415 24 Total Interest Income 39,010 32,676 Interest Expense Interest on deposits 10,520 6,605 Interest on short-term borrowings 1,326 787 Interest on long-term debt 1,239 1,662 Total Interest Expense 13,085 9,054 Net Interest Income 25,925 23,622 Provision for loan losses 675 - Net Interest Income After Provision for Loan Losses 25,250 23,622 Non-Interest Income Investment securities gains - 18 Service charges 10,903 9,685 Insurance commissions 521 545 Trust and investment management fee income 504 462 Bank owned life insurance 678 545 Other income 857 843 Total Non-Interest Income 13,463 12,098 Non-Interest Expense Salaries and employee benefits 8,764 8,404 Occupancy and equipment 1,624 1,564 Depreciation 1,071 994 Professional fees and litigation expense 571 514 Postage, delivery, and statement mailings 689 615 Advertising 755 762 Telecommunications 525 513 Bankcard expenses 458 560 Insurance and regulatory 381 365 Office supplies 372 275 Repossessed asset (gains) losses, net of expenses (129) (16) Other expenses 2,474 2,289 Total Non-Interest Expense 17,555 16,839 Income Before Income Taxes 21,158 18,881 Income tax expense 7,397 6,532 Net Income $13,761 $12,349 Basic earnings per share $0.78 $0.72 Diluted earnings per share $0.77 $0.71 Average Common Shares Outstanding: Basic 17,719 17,268 Diluted 17,772 17,477 CITY HOLDING COMPANY AND SUBSIDIARIES Consolidated Statements of Income (Unaudited) ($ in 000s, except per share data) Six Months Ended June 30, 2006 2005 Interest Income Interest and fees on loans $60,214 $46,713 Interest on investment securities: Taxable 14,748 15,328 Tax-exempt 922 882 Interest on deposits in depository institutions 566 42 Interest on federal funds sold - 4 Total Interest Income 76,450 62,969 Interest Expense Interest on deposits 19,721 12,473 Interest on short-term borrowings 2,452 1,364 Interest on long-term debt 2,499 3,247 Total Interest Expense 24,672 17,084 Net Interest Income 51,778 45,885 Provision for loan losses 1,675 - Net Interest Income After Provision for Loan Losses 50,103 45,885 Non-Interest Income Investment securities gains - 21 Service charges 20,764 18,128 Insurance commissions 1,135 1,137 Trust and investment management fee income 1,070 1,053 Bank owned life insurance 1,215 1,536 Other income 1,667 1,667 Total Non-Interest Income 25,851 23,542 Non-Interest Expense Salaries and employee benefits 17,396 16,324 Occupancy and equipment 3,223 3,039 Depreciation 2,121 1,938 Professional fees and litigation expense 966 1,079 Postage, delivery, and statement mailings 1,333 1,268 Advertising 1,529 1,467 Telecommunications 1,001 986 Bankcard expenses 1,001 1,085 Insurance and regulatory 769 731 Office supplies 754 478 Repossessed asset (gains) losses, net of expenses (125) (15) Loss on early extinguishment of debt 282 - Other expenses 4,802 4,472 Total Non-Interest Expense 35,052 32,852 Income Before Income Taxes 40,902 36,575 Income tax expense 14,275 12,548 Net Income $26,627 $24,027 Basic earnings per share $1.49 $1.42 Diluted earnings per share $1.49 $1.40 Average Common Shares Outstanding: Basic 17,860 16,938 Diluted 17,917 17,146 CITY HOLDING COMPANY AND SUBSIDIARIES Consolidated Statements of Changes in Stockholders' Equity (Unaudited) ($ in 000s) Three Months Ended June 30, 2006 June 30, 2005 Balance at April 1 $288,376 $219,302 Net income 13,761 12,349 Other comprehensive income: Change in unrealized gain on securities available-for-sale (2,994) 2,660 Change in derivative instruments (503) (104) Cash dividends declared ($0.28/share) (4,919) - Cash dividends declared ($0.25/share) - (4,497) Issuance of 1,580,034 shares for acquisition of Classic Bancshares, net 108,173 owned and transferred to treasury - 54,339 Issuance of stock award shares, net 20 - Exercise of 5,132 stock options 68 - Exercise of 15,018 stock options - 200 Excess tax benefits on stock compensation 22 - Purchase of 271,481 common shares of treasury (9,711) - Purchase of 139,776 common shares of treasury - (4,625) Balance at June 30 $284,120 $279,624 Six Months Ended June 30, 2006 June 30, 2005 Balance at January 1 $292,141 $216,080 Net income 26,627 24,027 Other comprehensive income: Change in unrealized gain on securities available-for-sale (3,911) (2,086) Change in derivative instruments (1,012) (104) Cash dividends declared ($0.56/share) (9,907) - Cash dividends declared ($0.50/share) - (8,651) Issuance of 1,580,034 shares for acquisition of Classic Bancshares, net 108,173 owned and transferred to treasury - 54,339 Issuance of stock award shares, net 187 - Issuance of 4,800 stock award shares - 147 Exercise of 32,007 stock options 425 - Exercise of 38,368 stock options - 497 Excess tax benefits on stock compensation 195 - Purchase of 572,053 common shares of treasury (20,625) - Purchase of 139,776 common shares of treasury - (4,625) Balance at June 30 $284,120 $279,624 CITY HOLDING COMPANY AND SUBSIDIARIES Condensed Consolidated Quarterly Statements of Income (Unaudited) ($ in 000s, except per share data) Quarter Ended June 30 March 31 Dec. 31 Sept. 30 June 30 2006 2006 2005 2005 2005 Interest income $39,010 $37,441 $36,639 $35,910 $32,676 Taxable equivalent adjustment 246 252 269 273 241 Interest income (FTE) 39,256 37,693 36,908 36,183 32,917 Interest expense 13,085 11,588 11,064 10,290 9,054 Net interest income 26,171 26,105 25,844 25,893 23,863 Provision for loan losses 675 1,000 800 600 - Net interest income after provision for loan losses 25,496 25,105 25,044 25,293 23,863 Noninterest income 13,463 12,389 13,537 13,012 12,098 Noninterest expense 17,555 17,497 18,339 17,922 16,839 Income before income taxes 21,404 19,997 20,242 20,383 19,122 Income tax expense 7,397 6,879 6,884 6,938 6,532 Taxable equivalent adjustment 246 252 269 273 241 Net income $13,761 $12,866 $13,089 $13,172 $12,349 Basic earnings per share $0.78 $0.71 $0.72 $0.73 $0.72 Diluted earnings per share 0.77 0.71 0.72 0.72 0.71 Cash dividends declared per share 0.28 0.28 0.25 0.25 0.25 Average Common Share (000s): Outstanding 17,719 18,006 18,127 18,052 17,268 Diluted 17,772 18,067 18,211 18,238 17,477 Net Interest Margin 4.58% 4.71% 4.55% 4.51% 4.42% CITY HOLDING COMPANY AND SUBSIDIARIES Non-Interest Income and Non-Interest Expense (Unaudited) ($ in 000s) Quarter Ended June 30 March 31 Dec. 31 Sept. 30 June 30 2006 2006 2005 2005 2005 Non-Interest Income: Service charges $10,903 $9,862 $10,530 $10,433 $9,685 Insurance commissions 521 614 620 595 545 Trust and investment management fee income 504 566 504 468 462 Bank owned life insurance 678 537 691 552 545 Other income 857 810 1,067 959 843 Subtotal 13,463 12,389 13,412 13,007 12,080 Investment security gains - - 125 5 18 Total Non-Interest Income $13,463 $12,389 $13,537 $13,012 $12,098 Non-Interest Expense: Salaries and employee benefits $8,764 $8,632 $8,416 $8,739 $8,404 Occupancy and equipment 1,624 1,599 1,569 1,687 1,564 Depreciation 1,071 1,050 1,062 1,096 994 Professional fees and litigation expense 571 395 486 456 514 Postage, delivery, and statement mailings 689 644 728 670 615 Advertising 755 774 710 764 762 Telecommunications 525 476 560 702 513 Bankcard expenses 458 543 540 512 560 Insurance and regulatory 381 388 380 385 365 Office supplies 372 383 388 327 275 Repossessed asset (gains) losses, net of expenses (129) 4 (28) (35) (16) Loss on early extinguishment of debt - 282 - - - Other expenses 2,474 2,327 3,528 2,619 2,289 Total Non-Interest Expense $17,555 $17,497 $18,339 $17,922 $16,839 Employees (Full Time Equivalent) 779 764 770 768 767 Branch Locations 67 66 67 67 67 CITY HOLDING COMPANY AND SUBSIDIARIES Consolidated Balance Sheets ($ in 000s) June 30 December 31 2006 2005 (Unaudited) Assets Cash and due from banks $59,282 $81,822 Interest-bearing deposits in depository institutions 35,388 4,451 Cash and cash equivalents 94,670 86,273 Investment securities available-for- sale, at fair value 512,474 549,966 Investment securities held-to- maturity, at amortized cost 54,372 55,397 Total investment securities 566,846 605,363 Gross Loans 1,658,919 1,612,827 Allowance for loan losses (16,636) (16,790) Net loans 1,642,283 1,596,037 Bank owned life insurance 54,058 52,969 Premises and equipment 43,094 42,542 Accrued interest receivable 11,271 13,134 Net deferred tax assets 30,095 27,929 Intangible assets 59,219 59,559 Other assets 20,485 18,791 Total Assets $2,522,021 $2,502,597 Liabilities Deposits: Noninterest-bearing $345,207 $376,076 Interest-bearing: Demand deposits 427,813 437,639 Savings deposits 319,189 302,571 Time deposits 880,261 812,134 Total deposits 1,972,470 1,928,420 Short-term borrowings 142,156 152,255 Long-term debt 90,854 98,425 Other liabilities 32,421 31,356 Total Liabilities 2,237,901 2,210,456 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 June 30, 2006 and December 31, 2005 less 928,811 and 395,465 shares in treasury, respectively 46,249 46,249 Capital surplus 103,825 104,435 Retained earnings 177,467 160,747 Cost of common stock in treasury (30,486) (11,278) Accumulated other comprehensive (loss) income: Unrealized loss on securities available-for-sale (8,750) (4,839) Unrealized loss on derivative instruments (1,012) - Underfunded pension liability (3,173) (3,173) Total Accumulated Other Comprehensive (Loss) Income (12,935) (8,012) Total Stockholders' Equity 284,120 292,141 Total Liabilities and Stockholders' Equity $2,522,021 $2,502,597 CITY HOLDING COMPANY AND SUBSIDIARIES Loan Portfolio (Unaudited) ($ in 000s) June 30 March 31 Dec. 31 2006 2006 2005 Residential real estate $601,097 $595,093 $592,521 Home equity 313,301 304,559 301,728 Commercial, financial, and agriculture 668,581 643,269 629,670 Installment loans to individuals 53,687 54,287 58,652 Previously securitized loans 22,253 25,918 30,256 Gross Loans $1,658,919 $1,623,126 $1,612,827 CITY HOLDING COMPANY AND SUBSIDIARIES Loan Portfolio (Unaudited) ($ in 000s) Sept. 30 June 30 2005 2005 Residential real estate $596,184 $596,893 Home equity 306,448 307,354 Commercial, financial, and agriculture 621,345 584,164 Installment loans to individuals 63,134 70,904 Previously securitized loans 35,599 41,670 Gross Loans $1,622,710 $1,600,985 CITY HOLDING COMPANY AND SUBSIDIARIES Consolidated Average Balance Sheets, Yields, and Rates (Unaudited) ($ in 000s) Three Months Ended June 30, 2006 Average Yield/ Balance Interest Rate Assets: Loan portfolio: Residential real estate $596,758 $8,484 5.70% Home equity 309,270 5,962 7.73% Commercial, financial, and agriculture 651,501 12,092 7.44% Installment loans to individuals 55,280 1,600 11.61% Previously securitized loans 24,045 2,513 41.92% Total loans 1,636,854 30,651 7.51% Securities: Taxable 579,058 7,489 5.19% Tax-exempt 43,388 700 6.47% Total securities 622,446 8,189 5.28% Deposits in depository institutions 33,986 416 4.91% Total interest-earning assets 2,293,286 39,256 6.87% Cash and due from banks 50,217 Bank premises and equipment 42,621 Other assets 170,271 Less: Allowance for loan losses (16,911) Total assets $2,539,484 Liabilities: Interest-bearing demand deposits 438,851 1,329 1.21% Savings deposits 318,702 926 1.17% Time deposits 865,554 8,265 3.83% Short-term borrowings 161,082 1,326 3.30% Long-term debt 92,267 1,239 5.39% Total interest-bearing liabilities 1,876,456 13,085 2.80% Noninterest-bearing demand deposits 342,115 Other liabilities 28,527 Stockholders' equity 292,389 Total liabilities and stockholders' equity $2,539,487 Net interest income $26,171 Net yield on earning assets 4.58% CITY HOLDING COMPANY AND SUBSIDIARIES Consolidated Average Balance Sheets, Yields, and Rates (Unaudited) ($ in 000s) Three Months Ended June 30, 2005 Average Yield/ Balance Interest Rate Assets: Loan portfolio: Residential real estate $523,607 $7,290 5.58% Home equity 304,475 4,602 6.06% Commercial, financial, and agriculture 545,511 8,258 6.07% Installment loans to individuals 54,704 1,537 11.27% Previously securitized loans 45,583 2,836 24.95% Total loans 1,473,880 24,523 6.67% Securities: Taxable 645,375 7,682 4.77% Tax-exempt 41,209 688 6.70% Total securities 686,584 8,370 4.89% Deposits in depository institutions 5,061 24 1.90% Total interest-earning assets 2,165,525 32,917 6.10% Cash and due from banks 38,292 Bank premises and equipment 38,104 Other assets 140,301 Less: Allowance for loan losses (17,489) Total assets $2,364,733 Liabilities: Interest-bearing demand deposits 428,700 845 0.79% Savings deposits 291,368 468 0.64% Time deposits 713,383 5,292 2.98% Short-term borrowings 158,170 787 2.00% Long-term debt 154,723 1,662 4.31% Total interest-bearing liabilities 1,746,344 9,054 2.08% Noninterest-bearing demand deposits 340,340 Other liabilities 28,098 Stockholders' equity 249,951 Total liabilities and stockholders' equity $2,364,733 Net interest income $23,863 Net yield on earning assets 4.42% CITY HOLDING COMPANY AND SUBSIDIARIES Consolidated Average Balance Sheets, Yields, and Rates (Unaudited) ($ in 000s) Six Months Ended June 30, 2006 Average Yield/ Balance Interest Rate Assets: Loan portfolio: Residential real estate $594,954 $16,864 5.72% Home equity 305,787 11,556 7.62% Commercial, financial, and agriculture 643,420 23,385 7.33% Installment loans to individuals 55,909 3,193 11.52% Previously securitized loans 26,037 5,217 40.41% Total loans 1,626,107 60,215 7.47% Securities: Taxable 576,640 14,748 5.16% Tax-exempt 43,843 1,418 6.52% Total securities 620,483 16,166 5.25% Deposits in depository institutions 24,490 566 4.66% Federal funds sold - - - Total interest-earning assets 2,271,080 76,947 6.83% Cash and due from banks 51,726 Bank premises and equipment 42,575 Other assets 169,159 Less: Allowance for loan losses (16,881) Total assets $2,517,659 Liabilities: Interest-bearing demand deposits 441,474 2,588 1.18% Savings deposits 312,542 1,658 1.07% Time deposits 848,306 15,474 3.68% Short-term borrowings 156,431 2,452 3.16% Long-term debt 93,773 2,499 5.37% Total interest-bearing liabilities 1,852,526 24,671 2.69% Noninterest-bearing demand deposits 342,298 Other liabilities 28,546 Stockholders' equity 294,294 Total liabilities and stockholders' equity $2,517,664 Net interest income $52,276 Net yield on earning assets 4.64% CITY HOLDING COMPANY AND SUBSIDIARIES Consolidated Average Balance Sheets, Yields, and Rates (Unaudited) ($ in 000s) Six Months Ended June 30, 2005 Average Yield/ Balance Interest Rate Assets: Loan portfolio: Residential real estate $494,968 $13,809 5.63% Home equity 305,410 8,876 5.86% Commercial, financial, and agriculture 511,674 15,241 6.01% Installment loans to individuals 49,249 2,870 11.75% Previously securitized loans 50,230 5,917 23.75% Total loans 1,411,531 46,713 6.67% Securities: Taxable 651,275 15,328 4.75% Tax-exempt 39,269 1,357 6.97% Total securities 690,544 16,685 4.87% Deposits in depository institutions 4,391 42 1.93% Federal funds sold 290 4 2.78% Total interest-earning assets 2,106,756 63,444 6.07% Cash and due from banks 41,063 Bank premises and equipment 36,229 Other assets 123,538 Less: Allowance for loan losses (17,485) Total assets $2,290,101 Liabilities: Interest-bearing demand deposits 421,005 1,561 0.75% Savings deposits 284,281 823 0.58% Time deposits 685,619 10,089 2.97% Short-term borrowings 151,158 1,364 1.82% Long-term debt 151,796 3,247 4.31% Total interest-bearing liabilities 1,693,859 17,084 2.03% Noninterest-bearing demand deposits 331,046 Other liabilities 28,522 Stockholders' equity 236,674 Total liabilities and stockholders' equity $2,290,101 Net interest income $46,360 Net yield on earning assets 4.44% CITY HOLDING COMPANY AND SUBSIDIARIES Analysis of Risk-Based Capital (Unaudited) ($ in 000s) June 30 March 31 Dec. 31 Sept. 30 June 30 2006 (a) 2006 2005 2005 2005 Tier I Capital: Stockholders' equity $284,120 $288,376 $292,141 $290,432 $279,624 Goodwill and other intangibles (59,219) (59,378) (59,559) (59,742) (61,578) Accumulated other comprehensive income 9,762 6,265 8,012 4,106 3,334 Qualifying trust preferred stock 25,500 25,500 28,000 28,000 28,000 Excess deferred tax assets (4,079) (2,254) (1,071) - - Total tier I capital $256,084 $258,509 $267,523 $262,796 $249,380 Total Risk-Based Capital: Tier I capital $256,084 $258,509 $267,523 $262,796 $249,380 Qualifying allowance for loan losses 16,636 16,818 16,790 17,768 18,298 Total risk-based capital $272,720 $275,327 $284,313 $280,564 $267,678 Net risk-weighted assets $1,757,720 $1,742,943 $1,735,538 $1,758,566 $1,734,653 Ratios: Average stockholders' equity to average assets 11.51% 11.87% 11.87% 11.47% 10.57% Tangible capital ratio 9.13% 9.24% 9.52% 9.32% 8.91% Risk-based capital ratios: Tier I capital 14.57% 14.83% 15.41% 14.94% 14.38% Total risk-based capital 15.52% 15.80% 16.38% 15.95% 15.43% Leverage capital 10.34% 10.62% 10.97% 10.68% 10.83% (a) June 30, 2006 risk-based capital ratios are estimated. CITY HOLDING COMPANY AND SUBSIDIARIES Intangibles (Unaudited) ($ in 000s) As of and for the Quarter Ended June 30 March 31 Dec 31. Sept. 30 June 30 2006 2006 2005 2005 2005 Intangibles, net $59,219 $59,378 $59,559 $59,742 $61,578 Intangibles amortization expense 181 181 183 183 95 CITY HOLDING COMPANY AND SUBSIDIARIES Summary of Loan Loss Experience (Unaudited) ($ in 000s) Quarter Ended June 30 March 31 Dec. 31 2006 2006 2005 Balance at beginning of period $16,818 $16,790 $17,768 Allowance acquired through acquisition - - - Charge-offs: Commercial, financial, and agricultural 43 185 527 Real estate-mortgage 232 296 302 Installment loans to individuals 239 368 664 Overdraft deposit accounts 955 958 996 Total charge-offs 1,469 1,807 2,489 Recoveries: Commercial, financial, and agricultural 33 32 30 Real estate-mortgage 56 105 188 Installment loans to individuals 151 198 163 Overdraft deposit accounts 372 500 330 Total recoveries 612 835 711 Net charge-offs 857 972 1,778 Provision for loan losses 675 1,000 800 Balance at end of period $16,636 $16,818 $16,790 Loans outstanding $1,658,919 $1,623,126 $1,612,827 Average loans outstanding 1,636,854 1,615,242 1,618,711 Allowance as a percent of loans outstanding 1.00% 1.04% 1.04% Allowance as a percent of non- performing loans 445% 504% 402% Net charge-offs (annualized) as a percent of average loans outstanding 0.21% 0.24% 0.44% Net charge-offs, excluding overdraft deposit accounts, (annualized) as a percent of average loans outstanding 0.07% 0.13% 0.27% CITY HOLDING COMPANY AND SUBSIDIARIES Summary of Loan Loss Experience (Unaudited) ($ in 000s) Quarter Ended Sept. 30 June 30 2005 2005 Balance at beginning of period $18,298 $16,325 Allowance acquired through acquisition - 3,265 Charge-offs: Commercial, financial, and agricultural 54 663 Real estate-mortgage 208 323 Installment loans to individuals 476 263 Overdraft deposit accounts 1,012 832 Total charge-offs 1,750 2,081 Recoveries: Commercial, financial, and agricultural 135 345 Real estate-mortgage 53 25 Installment loans to individuals 136 175 Overdraft deposit accounts 296 244 Total recoveries 620 789 Net charge-offs 1,130 1,292 Provision for loan losses 600 - Balance at end of period $17,768 $18,298 Loans outstanding $1,622,710 $1,600,985 Average loans outstanding 1,612,344 1,473,880 Allowance as a percent of loans outstanding 1.09% 1.14% Allowance as a percent of non- performing loans 487% 464% Net charge-offs (annualized) as a percent of average loans outstanding 0.28% 0.35% Net charge-offs, excluding overdraft deposit accounts, (annualized) as a percent of average loans outstanding 0.10% 0.19% CITY HOLDING COMPANY AND SUBSIDIARIES Summary of Non-Performing Assets (Unaudited) ($ in 000s) June 30 March 31 Dec. 31 Sept.30 June 30 2006 2006 2005 2005 2005 Nonaccrual loans $3,046 $2,743 $2,785 $2,468 $2,709 Accruing loans past due 90 days or more 573 512 1,124 1,003 936 Previously securitized loans past due 90 days or more 123 85 268 174 299 Total non-performing loans 3,742 3,340 4,177 3,645 3,944 Other real estate owned, excluding property associated with previously securitized loans 294 403 135 117 471 Other real estate owned associated with previously securitized loans 92 306 - - - 386 709 135 117 471 Total non-performing assets $4,128 $4,049 $4,312 $3,762 $4,415 Non-performing assets as a percent of loans and other real estate owned 0.25% 0.25% 0.27% 0.23% 0.28% DATASOURCE: City Holding Company CONTACT: David L. Bumgarner, Chief Financial Officer of City Holding Company, +1-304-769-1169 Web site: http://www.cityholding.com/

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CHCO City Holding Company