UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K For Annual and Transition Reports Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1998. or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period __________ to __________. Commission File Number 0-11733 CITY HOLDING COMPANY (Exact name of registrant as specified in its charter) West Virginia 55-0619957 (State of other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 25 Gatewater Road Charleston, West Virginia 25313 (Address of principal offices) Registrant's telephone number, including area code: (304) 769-1100 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: <TABLE> <CAPTION> <S> <C> Title of Each Class Name of Each Exchange on Which Registered: Common Stock, $2.50 par value The Nasdaq Stock Market - --------------------------------- ------------------------------------------ </TABLE> Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report(s), and (2) has been subject to such filing requirements for the past 90 days. [x] Yes [ ] No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in part III of this Form 10-K or any amendment to this Form 10-K. [x] The aggregate market value of the voting stock held by nonaffiliates of the registrant based on the closing price as of March 29, 1999 (Registrant has assumed that all of its executive officers and directors are affiliates. Such assumption shall not be deemed to be conclusive for any other purpose.): Aggregate Market Value -- $ 384,562,285 The number of shares outstanding of the issuer's common stock as of March 29, 1999: Common Stock, $2.50 Par Value -- 16,812,944 shares - ---------------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE Documents Part of Form 10-K into which Document is incorporated Portions of the Annual Part I, Item 1; Part Report to Shareholders II, Items 5, 6, 7, of City Holding Company and 8; Part III, Item for the year ended 13; Part IV, Item 14. December 31, 1998. _____________ Portions of City Holding Part III, Items 10, Company's Proxy statement 11, 12 and 13. for the 1999 Annual Meeting of Shareholders. ______________
FORM 10-K INDEX <TABLE> <CAPTION> PART I Page ---- <S> <C> <C> Item 1. Business 4 Item 2. Properties 12 Item 3. Legal Proceedings 12 Item 4. Submission of Matters to a Vote of 12-13 Security Holders PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters 13 Item 6. Selected Financial Data 13 Item 7. Management's Discussion and Analysis of 13 Financial Condition and Results of Operations Item 7a. Quantitative and Qualitative Disclosures About Market Risk 14 Item 8. Financial Statements and Supplementary Data 14 Item 9. Changes In and Disagreements with Accountants 14 on Accounting and Financial Disclosure PART III Item 10. Directors and Executive Officers of Registrant 14 Item 11. Executive Compensation 14 Item 12. Security Ownership of Certain Beneficial 14 Owners and Management Item 13. Certain Relationships and Related Transactions 14 PART IV Item 14. Exhibits, Financial Statement Schedules and 15-16 Reports on Form 8-K Signatures 17-18 Exhibit Index </TABLE>
PART I ITEM 1 BUSINESS City Holding Company (the Company), a West Virginia corporation headquartered in Charleston, West Virginia, is a multi-bank holding company that provides diversified financial products and services to consumers and local businesses. Through its network of 63 banking offices in West Virginia (60 offices), Ohio (1 office) and California (2 offices), the Company provides credit, deposit, investment advisory, insurance, and technology products and services to its customers. In addition to its branch network, the Company's delivery channels include ATMs, check cards, telemarketing, direct mail solicitation, interactive voice response systems, and Internet technology. Community banking is the core business segment of the Company. Since 1983, the Company has provided traditional banking products and services through its lead bank, City National Bank of West Virginia (City National), and through the various financial institutions the Company has acquired over the years. In conjunction with the evolution of the financial services industry, the Company, in recent years, has diversified its business to offer additional products and services to existing and new customers. Mortgage banking, including the origination, acquisition, servicing and sale of mortgage loans has developed into a significant product line for the Company. Additionally, the Company provides other financial services, including investment advisory, insurance, and internet technology products. When combined, these business lines reflect the diversification of the Company and depth and breadth of the products and services the Company delivers to its customers. In addition to the Company's community banking, mortgage banking, and other financial services business segments, the Company has identified a fourth segment, general corporate, which primarily includes the parent company and other administrative areas which provide general corporate support. These business segments are primarily identified by the products and services offered and the delivery channels through which the product or service is offered. The following tables summarize selected segment information for each of the last three years: Other <TABLE> <CAPTION> Community Mortgage Financial General (in thousands) Banking Banking Services Corporate Eliminations Consolidated --------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> 1998 Net interest income (expense) $ 96,085 $ 8,906 $ 64 $ (1,712) - $ 103,343 Provision for loan losses (8,481) - - - - (8,481) --------------------------------------------------------------------------------------- Net interest income after provision for loan losses 87,604 8,906 64 (1,712) 94,862 Other income 19,355 47,414 11,133 216 $ (5,695) 72,423 Other expenses 82,100 50,752 11,502 16,899 (5,695) 155,558 --------------------------------------------------------------------------------------- Income before income taxes 24,859 5,568 (305) (18,395) - 11,727 Income tax expense (benefit) 9,816 1,798 (8) (5,113) - 6,493 --------------------------------------------------------------------------------------- NET INCOME $ 15,043 $ 3,770 $ (297) $ (13,282) $ - 5,234 ======================================================================================= Average assets $ 2,202,104 $ 336,367 $ 14,660 $ 12,969 $ - $ 2,566,100 ======================================================================================= 1997 Net interest income (expense) $ 90,769 $ 8,456 $ 3 $ (2,074) - $ 97,154 Provision for loan losses (4,064) - - - - (4,064) --------------------------------------------------------------------------------------- Net interest income after provision for loan losses 86,705 8,456 3 (2,074) - 93,090 Other income 13,858 17,636 446 673 - 32,613 Other expenses 61,165 14,702 366 8,666 - 84,899 --------------------------------------------------------------------------------------- Income before income taxes 39,399 11,389 83 (10,067) - 40,804 Income tax expense (benefit) 12,604 4,284 36 (2,411) - 14,513 --------------------------------------------------------------------------------------- NET INCOME $ 26,795 $ 7,105 $ 47 $ (7,656) - $ 26,291 ======================================================================================= Average assets $ 2,041,150 $ 133,792 $ 627 $ 4,892 - $ 2,180,461 ======================================================================================= 1996 Net interest income (expense) $ 86,496 $ 6,113 $ 1 $ (1,236) - $ 91,374 Provision for loan losses (5,012) - - - - (5,012) --------------------------------------------------------------------------------------- Net interest income after provision for loan losses 81,484 6,113 1 (1,236) - 86,362 Other income 11,732 3,924 111 706 - 16,473 Other expenses 59,399 4,637 129 5,901 - 70,066 --------------------------------------------------------------------------------------- 33,817 5,400 (17) (6,431) - 32,769 Income tax expense (benefit) 11,830 2,032 - (2,374) - 11,488 --------------------------------------------------------------------------------------- NET INCOME $ 21,987 $ 3,368 $ (17) $ (4,057) - $ 21,281 ======================================================================================= Average assets $ 1,867,334 $ 149,075 $ 92 $ 5,487 - $ 2,021,988 ======================================================================================= </TABLE> Services provided to the banking segments by the direct mail, insurance, and internet service provider divisions are eliminated in the Consolidated Statements of Income.
MERGERS AND ACQUISITIONS On December 31, 1998, the Company's merger with Horizon Bancorp, Inc. (Horizon) became effective. The merger into the Company of Horizon, a $1.0 billion bank holding company headquartered in Beckley, West Virginia, increased total assets by approximately 65% and increased deposit market share such that the Company currently ranks third in West Virginia in that category. The transaction was accounted for under the pooling-of-interests method of accounting. As such, the Company's historical financial information has been restated to include the operations of Horizon for all periods presented. With the addition of the Horizon banks, the Company significantly strengthens its presence in the Beckley and Huntington markets of West Virginia. Both areas are considered growth locations and the Company expects to capitalize and expand on its existing customer base in those cities. Additionally, the community banking philosophy utilized by Horizon management was very similar to the Company's management style. With minimal impact from overlapping markets and management's identification of operational efficiencies to be achieved, Horizon was identified as an ideal strategic partner that could significantly enhance the Company's community banking franchise. On April 1, 1998, the Company consummated its acquisition of Del Amo Savings Bank (Del Amo), a federally-chartered savings bank headquartered in Torrance, California. At the date of acquisition, Del Amo reported total assets and deposits of approximately $116 million and $102 million, respectively. This transaction was accounted for under the purchase method of accounting. Accordingly, the operations of Del Amo have been included in the consolidated financial statements from the date of acquisition. This acquisition represented a strong addition to the Company's existing operations in the Southern California area and the Company's continued commitment to grow its community banking operating segment. The other financial services business line also experienced growth during 1998. In April 1998, City National acquired Citynet Corporation and MarCom, Inc. The operations of these entities were consolidated into Citynet, a division of City National. With the addition of these companies, City National is expanding its Internet banking capabilities and introducing new Internet technology products, including balance inquiry and funds transfer capabilities, loan payment processing and web site development. In March 1998, City National increased the size of its insurance brokerage division with the acquisition of Morton Specialty Insurance Partners, Inc. (Morton). Morton was subsequently consolidated into RMI, Ltd., a division of City National, and increased the diversity of insurance products the Company offers. Also within the Other Financial Services business segment, City National acquired Jarrett/Aim Communications (Jarrett/Aim) in January 1998. Jarrett/Aim, a division of City National, conducts printing and direct mail marketing for the Company and third party customers.
Within the community-banking segment, no portion of the Company's deposits are derived from a single person or a few persons, the loss of which could have a material adverse affect on liquidity capital, or other elements of financial performance. No material portion of the Company's loans, within this segment, are concentrated within a single industry or group of related industries. Within the mortgage banking segment, the Company has focused on the origination, acquisition, servicing and sale of mortgage loans, primarily junior lien mortgages and, to a lesser extent, traditional mortgage products. Junior lien mortgage loans, which comprise approximately 82% of loans classified as held for sale at December 31, 1998, are originated by the Company's four retail origination platforms on a nationwide basis. These loan production offices, located in West Virginia, California and Texas solicit potential borrowers through direct mail and telemarketing delivery channels. Additionally, the Company's correspondent lending division acquires loans either on a flow or bulk basis from an approved network of unaffiliated lenders. Because the retail and correspondent lending divisions originate and acquire these loans on a nationwide basis, the Company's risk related to geographic concentration is significantly reduced. These loans are generally expected to either be sold or securitized within 90 to 180 days. The other financial services business segment is not significant to the Company's consolidated balance sheets or statements of income, representing less than 1% of total assets and net income in 1998. The Company's business is not seasonal and has no foreign sources or applications of funds. There are no anticipated material capital expenditures, or any expected material effects on earnings or the Company's competitive position as a result of compliance with federal, state and local provisions enacted or adopted relating to environmental protection. REGULATION AND SUPERVISION The Company, as a registered bank holding company and its banking subsidiaries, as insured depository institutions, operate in a highly regulated environment and are regularly examined by federal and state regulators. The following description briefly discusses certain provisions of federal and state laws and certain regulations and the potential impact of such provisions to which the Company and its subsidiaries are subject. These federal and state laws and regulations have been enacted for the protection of depositors in national and state banks and not for the protection of shareholders of bank holding companies. As a bank holding company registered under the Bank Holding Company Act of 1956, as amended (the "BHCA"), the Company is subject to regulation by the Federal Reserve Board. The Federal Reserve Board has jurisdiction under the BHCA to approve any bank or nonbank acquisition, merger or consolidation proposed by a bank holding company. The BHCA generally limits the activities of a bank holding company and its subsidiaries to that of banking, managing or controlling banks, or any other activity which is so closely related to banking or to managing or controlling banks as to be a proper incident thereto.
There are a number of obligations and restrictions imposed on bank holding companies and their depository institution subsidiaries by federal law and regulatory policy that are designed to reduce potential loss exposure to the depositors of such depository institutions and to the FDIC insurance fund in the event the depository institution becomes in danger of default or in default. For example, under a policy of the Federal Reserve Board with respect to bank holding company operations, a bank holding company is required to serve as a source of financial strength to its subsidiary depository institutions and to commit resources to support such institutions in circumstances where it might not do so otherwise. In addition, the "cross-guarantee" provisions of federal law require insured depository institutions under common control to reimburse the FDIC for any loss suffered or reasonably anticipated by the Bank Insurance Fund (BIF) as a result of the default of a commonly controlled insured depository institution or for any assistance provided by the FDIC to a commonly controlled insured depository institution in danger of default. The FDIC may decline to enforce the cross-guarantee provisions if it determines that a waiver is in the best interest of the BIF. The FDIC's claim for reimbursement is superior to claims of shareholders of the insured depository institution or its holding company but is subordinate to claims of depositors, secured creditors and holders of subordinated debt (other than affiliates) of the commonly controlled insured depository institution. The Federal Deposit Insurance Act (FDIA) also provides that amounts received from the liquidation or other resolution of any insured depository institution by any receiver must be distributed (after payment of secured claims) to pay the deposit liabilities of the institution prior to payment of any other general or unsecured senior liability, subordinated liability, general creditor or shareholder. This provision would give depositors a preference over general and subordinated creditors and shareholders in the event a receiver is appointed to distribute the assets of any of the banking divisions. The BHCA also prohibits a bank holding company, with certain exceptions, from acquiring more than 5% of the voting shares of any company that is not a bank and from engaging in any business other than banking or managing or controlling banks. Under the BHCA, the Federal Reserve Board is authorized to approve the ownership of shares by a bank holding company in any company the activities of which the Federal Reserve Board has determined to be so closely related to banking or to managing or controlling banks as to be a proper incident thereto. The Federal Reserve Board has by regulation determined that certain activities are closely related to banking within the meaning of the BHCA. These activities include: operating a mortgage company, finance company, credit card company or factoring company; performing certain data processing operations; providing investment and financial advice; and acting as an insurance agent for certain types of credit-related insurance. The banking subsidiaries are subject to supervision and regulation by the Office of the Comptroller of the Currency ("OCC"), West Virginia Division of Banking, the Federal Reserve Board and the FDIC. The various laws and regulations administered by the regulatory agencies affect corporate practices, such as payment of dividends, incurring debt and acquisition of financial institutions and other companies, and affect business practices, such as payment of interest on deposits, the charging of interest on loans, types of business conducted and location of offices.
FDICIA In December 1991, the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") became effective. FDICIA substantially revised the depository institution regulatory and funding provisions of the Federal Deposit Insurance Act and revised several other federal banking statutes. Among other things, FDICIA requires federal bank regulatory authorities to take "prompt corrective action" with respect to depository institutions that do not meet minimum capital requirements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and its banking subsidiaries must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance sheet items, calculated under regulatory accounting practices. The Company's and its banking subsidiaries' capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. FDICIA requires the federal banking regulators to take prompt corrective action with respect to depository institutions that do not meet minimum capital requirements. FDICIA establishes five capital tiers: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. The Federal Reserve Board has adopted regulations establishing relevant capital measures and relevant capital levels for banks. The relevant capital measures are the total risk-adjusted capital ratio, Tier I risk-adjusted capital ratio and the leverage ratio. Under the regulations, a bank is considered (i) well capitalized if it has a total capital ratio of ten percent or greater, a Tier 1 capital ratio of six percent or greater and a leverage ratio of five percent or greater and is not subject to any order or written directive by such regulator to meet and maintain a specific capital level for any capital measure, (ii) adequately capitalized if it has a total capital ratio of eight percent or greater, a Tier I capital ratio of four percent or greater and a leverage ratio of four percent or greater (three percent in certain circumstances) and is not well capitalized, (iii) undercapitalized if it has a total capital ratio of less than eight percent, a Tier 1 capital ratio of less than four percent or a leverage ratio of less than four percent (three percent in certain circumstances), (iv) significantly undercapitalized if it has a total capital ratio of less than six percent, a Tier 1 capital ratio of less than three percent or a leverage ratio of less than three percent, and (v) critically undercapitalized if its tangible equity is equal to or less than two percent of average quarterly tangible assets. As of December 31, 1997, City National had capital levels that qualify it as being well capitalized under such regulations. FDICIA generally prohibits a depository institution from making any capital distribution (including payment of a dividend) or paying any management fee to its holding company if the depository institution would thereafter be undercapitalized. Undercapitalized depository institutions are subject to restrictions on borrowing from the Federal Reserve Board. In addition, undercapitalized depository institutions are subject to growth limitations and are required to submit capital restoration plans. In order to obtain acceptance of a capital restoration plan, a depository institution's holding company must guarantee the capital plan, up to an amount equal to the lesser of 5% of the depository institution's assets at the time it becomes undercapitalized or the amount of the capital deficiency when the institution fails to comply with the plan. Furthermore, in the event of a bankruptcy of the parent holding company, such guarantee would take priority over the parent's general unsecured creditors. The federal banking agencies may not accept a capital plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution's capital. If a depository institution fails to submit an acceptable plan, it is treated as if it is significantly undercapitalized. Significantly undercapitalized depository institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets, and cessation of receipt of deposits from correspondent banks. Critically undercapitalized depository institutions are subject to appointment of a receiver or conservator.
Under FDICIA, a depository institution that is not well capitalized is generally prohibited from accepting brokered deposits and offering interest rates on deposits higher than the prevailing rate in its market. In addition, pass-through insurance coverage may not be available for certain employee benefit accounts. CAPITAL REQUIREMENTS Under the risk-based capital requirements of these federal bank regulatory agencies, the Company and its banking subsidiaries are required to maintain a minimum ratio of total capital to risk-weighted assets of at least 10% in order to remain categorized as "well capitalized". At least half of the total capital is required to be "Tier 1 capital", which consists principally of common and certain qualifying preferred shareholders' equity, less certain intangibles and other adjustments. The remainder, "Tier 2 capital," consists of a limited amount of subordinated and other qualifying debt (including certain hybrid capital instruments) and a limited amount of the general loan loss allowance. In addition, each of the federal regulatory agencies has established a minimum leverage capital ratio (Tier 1 capital to average tangible assets). These guidelines provide for a minimum ratio of 4% for banks and bank holding companies that meet certain specified criteria, including that they have the highest regulatory examination rating and are not contemplating significant growth or expansion. All other institutions are expected to maintain a leverage ratio of at least 100 to 200 basis points above the minimum. The guidelines also provide that banking organizations experiencing internal growth or making acquisitions will be expected to maintain strong capital positions substantially above the minimum supervisory levels, without significant reliance on intangible assets. During 1998, the Company created two separate special-purpose statutory trust subsidiaries which sold trust preferred securities generating gross proceeds of $87.50 million. Pursuant to rulings released in 1996 by the Federal Reserve Board, the Company has included the trust preferred securities in its regulatory capital ratio computations. At December 31, 1998, $72.02 million of trust preferred securities are included in the Company's Tier I capital, with the remaining $15.48 million added to the Company's total regulatory capital. Proceeds from the issuance of the trust preferred securities were used for general corporate purposes, including, but not limited to, repayment of long-term debt and infusion of capital into the Company's lead bank, City National Bank of West Virginia. The Tier 1 capital, total capital and leverage ratios of the Company as of December 31, 1998 were 10.60%, 12.00%, and 9.99%, respectively, meeting the minimums required to be considered well capitalized. As of December 31, 1998, the most recent notifications from banking regulatory agencies categorized the Company and its banking subsidiaries as "well capitalized" under the regulatory framework for prompt corrective action. There are no conditions or events since notifications that management believes have changed the institution's classifications. LIMITS ON DIVIDENDS AND OTHER PAYMENTS The Company is a legal entity separate and distinct from its subsidiaries. Most of the Company's revenues result from dividends paid to the Company by those subsidiaries. The right of the Company, and shareholders of the Company, to participate in any distribution of the assets or earnings of any subsidiary through the payment of such dividends or otherwise is necessarily subject to the prior claims of creditors of such subsidiary, except to the extent that claims of the Company in its capacity as a creditor may be recognized. Moreover, there are various legal limitations applicable to the payment of dividends to the Company as well as the payment of dividends by the Company to its shareholders. Under federal law, the Company's subsidiaries may not, subject to certain limited expectations, make loans or extensions of credit to, or investment in the securities of, or take securities of the Company as collateral for loans to any borrower. The Company's subsidiaries are also subject to collateral security requirements for any loans or extensions of credit permitted by such exceptions.
The Company's banking subsidiaries are subject to various statutory restrictions on their ability to pay dividends to the Company. Under applicable regulations, at December 31, 1998, the banking subsidiaries have paid aggregate dividends to the Company of $30.26 million without obtaining prior approval of the Office of the Comptroller of the Currency (the OCC). The payment of dividends by the Company and the banking subsidiaries may also be limited by other factors, such as requirements to maintain adequate capital above regulatory guidelines. The OCC has the authority to prohibit any bank under its jurisdiction from engaging in an unsafe and unsound practice in conducting its business. The payment of dividends, depending upon the financial condition of the subsidiary in question, could be deemed to constitute such an unsafe or unsound practice. The Federal Reserve Board and the OCC have indicated their view that it generally would be an unsafe and unsound practice to pay dividends except out of current operating earnings. The Federal Reserve Board has stated that, as a matter of prudent banking, a bank or bank holding company should not maintain its existing rate of cash dividends on common stock unless (1) the organization's net income available to common shareholders over the past year has been sufficient to fund fully the dividends and (2) the prospective rate of earnings retention appears consistent with the organization's capital needs, asset quality, and overall financial condition. Moreover, the Federal Reserve Board has indicated that bank holding companies should serve as a source of managerial and financial strength to their subsidiary banks. Accordingly, the Federal Reserve Board has stated that a bank holding company should not maintain a level of cash dividends to its shareholders that places undue pressure on the capital of bank subsidiaries, or that can be funded only through additional borrowings or other arrangements that may undermine the bank holding company's ability to serve as a source of strength. The ability of the Company's subsidiaries to pay dividends in the future is, and is expected to continue to be, influenced by regulatory policies and by capital guidelines. The OCC has broad discretion in developing and applying policies and guidelines, in monitoring compliance with existing policies and guidelines, and in determining whether to modify such policies and guidelines. GOVERNMENTAL POLICIES The operations of the Company and its banking subsidiaries are also affected by the policies set forth by regulatory authorities. In particular, the Federal Reserve Board regulates money and credit and interest rates in order to influence general economic conditions. These policies have a significant influence on overall growth and distribution of bank loans, investments and deposits and affect interest rates charged on loans or paid for time and savings deposits. Federal Reserve monetary policies have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. Various other legislation, including proposals to overhaul the banking regulatory system and to limit the investments that a depository institution may make with insured funds are from time to time introduced in Congress. The Company cannot determine the ultimate effect that such potential legislation, if enacted, would have upon its financial condition or operations. OTHER SAFETY AND SOUNDNESS REGULATIONS The federal banking agencies have broad powers under current federal law to take prompt corrective action to resolve problems of insured depository institutions. The extent of these powers depends upon whether the institutions in question are "well capitalized", "adequately capitalized", "undercapitalized", "significantly undercapitalized" or "critically undercapitalized", as such terms are defined under uniform regulations defining such capital levels issued by each of the federal banking agencies.
(d) Employees As of December 31, 1998, City Holding Company employed 1,869 associates. Employee relations within the Company are considered to be satisfactory. (e) Statistical Information The information noted below is provided pursuant to Guide 3 -- Statistical Disclosure by Bank Holding Companies. Page references are to the Annual Report to Shareholders for the year ended December 31, 1998 and such pages are incorporated herein by reference. <TABLE> <CAPTION> Page Description of Information Reference - -------------------------- ---------- <S> <C> <C> 1. DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY; INTEREST RATES AND INTEREST DIFFERENTIAL a. Average Balance Sheets 29 b. Analysis of Net Interest Earnings 29-30 c. Rate Volume Analysis of Changes in 30 Interest Income and Expense 2. a. Book Value of Investments 35 b. Maturity Schedule of Investments 35 c. Securities of Issuers Exceeding 10% of 35 Stockholders' Equity 3. LOAN PORTFOLIO a. Types of Loans 35 b. Maturities and Sensitivity to Changes in Interest Rates 36 c. Risk Elements 38 d. Other Interest Bearing Assets N/A </TABLE>
<TABLE> <CAPTION> <S> <C> <C> 4. SUMMARY OF LOAN LOSS EXPERIENCE 37 5. DEPOSITS a. Breakdown of Deposits by Categories, Average Balance 29 and Average Rate Paid b. Maturity Schedule of Time Certificates of Deposit 40 and Other Time Deposits of $100,000 or More $100,000 or More 6. RETURN ON EQUITY AND ASSETS 25 </TABLE> ITEM 2 PROPERTIES City Holding Company and its subsidiaries own the facilities maintained as the Company's headquarters and generally own all of the facilities maintained as operating facilities by the subsidiaries. Those facilities not owned by the Company are maintained under long term lease agreements. The properties owned or leased by the Company consist generally of the main corporate office, sixty (60) banking offices in West Virginia, one branch office in Ohio, two banking and four loan production offices in California, two loan production offices in West Virginia and one non-banking office in West Virginia. All of the properties are suitable and adequate for their current operations and are generally being fully utilized. ITEM 3 LEGAL PROCEEDINGS There are various legal proceedings pending to which City Holding Company and/or its subsidiaries are parties. These proceedings are incidental to the business of City Holding Company and its subsidiaries and, after reviewing the matters and consulting with counsel, management is of the opinion that the ultimate resolution of such matters will not materially affect the consolidated financial statements. ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On December 9, 1998, the Company held a special meeting of its shareholders to vote on: (1) A proposal to approve the Agreement and Plan of Reorganization, dated August 7, 1998, between City Holding Company and Horizon Bancorp, Inc. ("Horizon"), a related Plan of Merger, and the transactions contemplated by those documents. These transactions included the merger of Horizon into City Holding Company. They also included the issuance of City Holding Company common shares to Horizon shareholders in connection with the merger of Horizon and the Company.
Results of shareholder votes cast were as follows: NUMBER % OF SHARES SHARES OUTSTANDING ------ ----------- Voting For 4,682,695 70.30% Voting Against 28,097 0.43 Abstain From Voting 32.921 0.49 =========== =========== Total 4,743,713 71.22% =========== =========== (2) A proposal to increase the authorized shares of common stock of the Company to fifty million (50,000,000) shares. Results of shareholder votes cast were as follows: NUMBER % OF SHARES SHARES OUTSTANDING Voting For 4,892,062 73.45% Voting Against 329,950 4.95 Abstain From Voting 24,347 0.37 ------------ -------------- Total 5,246,359 78.77% ============ ============== PART II ITEM 5 MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS Page 26 of the Annual Report to Shareholders of City Holding Company for the year ended December 31, 1998, included in this report as Exhibit 13, is incorporated herein by reference. During 1998, the Company issued 74,401 shares of its common stock to the owners and certain employees of acquired businesses in transactions exempt from registration pursuant to Section 4(2) of the Securities Act of 1933. ITEM 6 SELECTED FINANCIAL DATA Selected Financial Data on page 25 of the Annual Report to Shareholders of City Holding Company for the year ended December 31, 1998, included in this report as Exhibit 13, is incorporated herein by reference. ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's Discussion and Analysis of Financial Condition and Results of Operations on pages 26 through 42 of the Annual Report to Shareholders of City Holding Company for the year ended December 31, 1998, included in this report as Exhibit 13, is incorporated herein by reference. ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Information appearing under the caption "Market Risk Management" appearing on pages 32 through 34 of the Annual Report to Shareholders of City Holding Company for the year ended December 31, 1998, included in this report as Exhibit 13, is incorporated herein by reference.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The report of independent auditors and consolidated financial statements, included on pages 43 through 62 of the Annual Report to Shareholders of City Holding Company for the year ended December 31, 1998, included in this report as Exhibit 13, are incorporated herein by reference. ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT The information required by Item 10 of FORM 10-K appears in the Company's 1999 Proxy Statement to be filed within 120 days of fiscal year end under the captions "ELECTION OF DIRECTORS" and "EXECUTIVE OFFICERS". ITEM 11 EXECUTIVE COMPENSATION The information required by Item 11 of FORM 10-K appears in the Company's 1999 Proxy Statement under the caption "EXECUTIVE COMPENSATION". ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by Item 12 of FORM 10-K appears in the Company's 1999 Proxy Statement under the caption "OWNERSHIP OF EQUITY SECURITIES". ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by Item 13 of FORM 10-K appears in the Company's 1999 Proxy Statement under the caption "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" and in NOTE FIVE of Notes to Consolidated Financial Statements appearing on pages 52 and 53 of the Company's Annual Report to Shareholders for the year ended December 31, 1998, included in this report as Exhibit 13, and incorporated herein by reference.
PART IV ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Financial Statements Filed; Financial Statement Schedules The following consolidated financial statements of City Holding Company and subsidiaries, included in the Company's Annual Report to Shareholders for the year ended December 31, 1998, are incorporated by reference in Item 8: Page Number ----------- Report of Independent Auditors 43 Consolidated Balance Sheets - December 31, 1998 and 1997 44 Consolidated Statements of Income - Years Ended December 31, 1998, 1997, and 1996 45 Consolidated Statements of Changes in Stockholders' Equity - Years Ended December 31,1998, 1997 and 1996 46 Consolidated Statements of Cash Flows - Years Ended December 31, 1998, 1997 and 1996 47 Notes to Consolidated Financial Statements - December 31, 1998 48-62
FINANCIAL SCHEDULES I AND II UNDER ARTICLE 9 OF REGULATION S-X ARE NOT APPLICABLE. (b) Reports on Form 8-K: NONE. (c) Exhibits The exhibits listed in the EXHIBIT INDEX included herein are filed herewith or incorporated by reference from previous filings.
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CITY HOLDING COMPANY ------------------------------- (Registrant) /s/ Steven J. Day ------------------------------ Steven Day, President/Director (Principal Executive Officer) /s/ Robert A. Henson ------------------------------- Robert A. Henson, Chief Financial Officer (Principal Financial Officer) /s/ Michael D. Dean ------------------------------- Michael D. Dean Senior Vice President - Finance (Principal Accounting Officer) POWER OF ATTORNEY Pursuant to the requirements of the Securities Exchange Act of 1934, this report on Form 10-K has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on March 8, 1999. Each of the directors and/or officers of City Holding Company whose signature appears below hereby appoints Steven J. Day and Robert A. Henson and each of them severally, as his attorney-in-fact to sign in his name and behalf, in any and all capacities stated below and to file with the Commission, any and all amendments to this report on Form 10-K, making such changes in this report on Form 10-K as appropriate, and generally to do all such things in their behalf in their capacities as officers and directors to enable City Holding Company to comply with the provisions of the Securities Exchange Act of 1934, and all requirements of the Securities and Exchange Commission. /s/ Samuel M. Bowling /s/ D. K. Cales - ---------------------- ----------------------- Samuel M. Bowling Dr. D. K. Cales Director Director /s/ Hugh R. Clonch /s/ Robert D. Fisher - ---------------------- ---------------------- Hugh R. Clonch Robert D. Fisher Director Director /s/ William M. Frazier /s/ Jay C. Goldman - ---------------------- ---------------------- William M. Frazier Jay C. Goldman Director Director
/s/ David E. Haden /s/ Carlin K. Harmon - ---------------------- ---------------------- David E. Haden Carlin K. Harmon Director Director /s/ C. Dallas Kayser - ---------------------- ---------------------- C. Dallas Kayser Leon K. Oxley Director Director /s/ Mark H. Schaul /s/ Steven J. Day - ---------------------- ---------------------- Mark H. Schaul Steven J. Day Director Director/President /s/ James E. Songer, Sr. /s/ Philip L. McLaughlin - ---------------------- ---------------------- James E. Songer, Sr. Philip L. McLaughlin Director Director /s/ B. C. McGinnis III /s/Tracy W. Hylton II - ---------------------- ---------------------- B. C. McGinnis III Tracy W. Hylton II Director Director /s/ Albert M. Tieche, Jr. /s/ Phillip W. Cain - ---------------------- ---------------------- Albert M. Tieche, Jr. Phillip W. Cain Director Director /s/ William C. Dolin /s/ David W. Hambrick - ---------------------- ---------------------- William C. Dolin David W. Hambrick Director Director /s/ Frank S. Harkins, Jr. /s/ Thomas L. McGinnis - ---------------------- ---------------------- Frank S. Harkins, Jr. Thomas L. McGinnis Director Director /s/ R. T. Rogers /s/ E. M. Payne III - ---------------------- ---------------------- R. T. Rogers E. M. Payne III Director Director
EXHIBIT INDEX The following exhibits are filed herewith or are incorporated herein by reference. <TABLE> <CAPTION> Prior Filing Exhibit Reference Number Description (if applicable) - ------ ----------- ----------------- <S> <C> <C> 3(a) Articles of Incorporation of I City Holding Company 3(b) Articles of Amendment to the II Articles of Incorporation of City Holding Company, dated March 6, 1984 3(c) Articles of Amendment to the III Articles of Incorporation of City Holding Company, dated March 4, 1986 3(d) Articles of Amendment to the IV Articles of Incorporation of City Holding Company, dated September 29, 1987 3(e) Articles of Amendment to the V Articles of Incorporation of City Holding Company, dated May 6, 1991 3(f) Articles of Amendment to the V Articles of Incorporation of City Holding Company, dated May 7, 1991 3(g) Articles of Amendment to the VIII Articles of Incorporation of City Holding Company, dated August 1, 1994 3(h) Articles of Amendment to the Articles of Incorporation of City Holding Company, dated December 9, 1998 3(i) Amended and Restated By laws of City Holding Company 4(a) Amendment and Restated Rights VII Agreement, dated as of May 7, 1991, between the Company and Sovran Bank, N.A. (predecessor to Nations Bank, N.A.), as Rights Agent 4(b) Supplement, dated as of June 30, XIII 1998, between City Holding Company and SunTrust Bank, Atlanta, as Rights Agent, to Amended and Restated Rights Agreement dated May 7, 1991 10(a) Agreement dated June 5, 1986, by III and between Steven J. Day and City Holding Company </TABLE> <TABLE> <CAPTION> <S> <C> <C> 10(b) Form of Employment Agreement, IX dated as of December 31, 1998, by and between City Holding Company and Steven J. Day 10(c) Form of Employment Agreement, IX dated as of December 31, 1998, by and between City Holding Company and Robert A. Henson 10(d) Form of Employment Agreement, IX dated as of December 31, 1998, by and between City Holding Company and Matthew B. Call 10(e) Form of Employment Agreement, IX dated as of December 31, 1998, by and between City Holding Company and Philip L. McLaughlin 10(f) Form of Employment Agreement, IX dated as of December 31, 1998, by and between City Holding Company and Bernard C. McGinnis, III 10(g) Form of Employment and Consulting IX Agreement, dated as of December 31, 1998 by and between City Holding Company and Frank S. Harkins, Jr. 10(h) Junior Subordinated Indenture, X dated as of March 31, 1998, between City Holding Company and The Chase Manhatten Bank, as Trustee 10(i) Form of City Holding Company's X 9.15% Debenture due April 1, 2028 10(j) Form of City Holding Company's XI 9.125% Debenture due October 31, 2028 10(k) City Holding Company's 1993 XII Stock Incentive Plan 11 Statement Re: Computation of Per Share Earnings 13 City Holding Company Annual Report to Shareholders for Year Ended December 31, 1998 21 Subsidiaries of City Holding Company 23 Consent of Ernst & Young LLP 24 Power of Attorney (included on the signature page hereof) 27(a) Financial Data Schedule for the year ending 27(b) Restated Financial Data Schedule for the year ending December 31, 1997 27(c) Restated Financial Data Schedule for the year ending December 31, 1996 </TABLE> - ---- I Attached to, and incorporated by reference from Amendment No. 1 to City Holding Company's statement on Form S-4, Registration No. 2-86250, filed November 4, 1983, with the Securities and Exchange Commission. II Attached to, and incorporated by reference from City Holding Company's Form 8-K Report dated March 7, 1984, and filed with the Securities and Exchange Commission on March 22, 1984. III Attached to, and incorporated by reference from City Holding Company's Form 10-K Annual Report dated December 31, 1986, and filed March 31, 1987, with the Securities and Exchange Commission. IV Attached to and incorporated by reference from City Holding Company's Registration Statement on Form S-4, Registration No. 33-23295, filed with the Securities and Exchange Commission on August 3, 1988. Attached to, and incorporated by reference from City Holding Company's Form 10-K Annual Report dated December 31, 1991, and filed March 17, 1992, with the Securities and Exchange Commission. V Attached to, and incorporated by reference from City Holding Company's Form 10-K Annual Report dated December 31, 1991, and filed March 17, 1992, with the Securities and Exchange Commission. VI Attached to, and incorporated by reference from City Holding Company's Form 10-K Annual Report dated December 31, 1988, and filed March 30, 1989, with the Securities and Exchange Commission. VII Attached to, and incorporated by reference from City Holding Company's Form 8-K Current Report dated May 7, 1991, and filed May 14, 1991, with the Securities and Exchange Commission. VIII Attached to, and incorporated by reference from City Holding Company's Form 10-Q Quarterly Report dated September 30, 1994 and filed November 14, 1994, with the Securities and Exchange Commission. IX Attached to, and incorporated by reference from, City Holding Company's Registration Statement on Form S-4, Registration No. 333-64205, filed with the Securities and Exchange Commission on September 24, 1998. X Attached to, and incorporated by reference from, City Holding Company's Registration Statement on Form S-4, Registration No. 333-62419, filed with the Securities and Exchange Commission on August 28, 1998. XI Attached to, and incorporated by reference from, the Pre-Effective Amendment No. 1 to City Holding Company's Registration Statement on Form S-3, Registration No. 333-64809, filed with the Securities and Exchange Commission on October 21, 1998. XII Attached to, and incorporated by reference from, City Holding Company's Registration Statement on Form S-8, Registration No. 033-62738, filed with the Securities and Exchange Commission on May 14, 1993. XIII Attached to, and incorporated by reference from, City Holding Company's Form 10-Q Quarterly Report dated June 30, 1998 and filed August 14, 1998, with the Securities and Exchange Commission.