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, 2000. 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: Title of Each Class Name of Each Exchange on Which Registered: Common Stock, $2.50 par value The Nasdaq Stock Market - -------------------------------- ------------------------------------------ Securities registered pursuant to Section 12(g) of the Act: None. 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 as of March 28, 2001 was $147,937,055. As of March 28, 2001, there were 16,887,934 shares of the Company's common stock outstanding. (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.) DOCUMENTS INCORPORATED BY REFERENCE Portions of the annual shareholders' report for the year ended December 31, 2000 are incorporated by reference into Parts I and II. Portions of the proxy statement for the annual shareholders' meeting to be held June 13, 2001 are incorporated by reference into Part III. 1
FORM 10-K INDEX --------------- PART I Page ---- Item 1. Business......................................... 3 Item 2. Properties....................................... 11 Item 3. Legal Proceedings................................ 11 Item 4. Submission of Matters to a Vote of Security Holders............................... 11 PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters.................... 12 Item 6. Selected Financial Data.......................... 12 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.. 12 Item 7A. Quantitative and Qualitative Disclosures About Market Risk.................................... 12 Item 8. Financial Statements and Supplementary Data...... 12 Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure......... 12 PART III Item 10. Directors and Executive Officers of Registrant... 12 Item 11. Executive Compensation........................... 12 Item 12. Security Ownership of Certain Beneficial Owners and Management.......................... 12 Item 13. Certain Relationships and Related Transactions... 13 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............................ 13 Signatures....................................... 14-15 Exhibit Index 2
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 62 banking offices in West Virginia (56 offices), Ohio (2 offices) and California (4 offices), the Company's subsidiaries provide 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. The Company operates three business segments: community banking, mortgage banking, and other financial services. These segments are primarily identified by the products or services offered and the delivery channels through which the product or service is delivered. The Company also maintains a general corporate business segment that includes the operations of the Parent Company. 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. The mortgage banking segment includes the origination, acquisition, servicing and sale of, primarily, junior lien mortgage loans. Over the past few years, mortgage banking operations grew to represent a significant percentage of the Company's operating results. However, during 2000, the Company closed its California mortgage loan origination divisions and sold the mortgage servicing rights to approximately $1.10 billion or 92% of its mortgage loan servicing portfolio. Additionally, the Company announced its intentions to close its remaining specialty finance loan origination operations. As a result, the mortgage banking segment is expected to have minimal operations during 2001. The Company's other financial services segment includes brokerage and investment advisory services, insurance sales, internet service operations, and a direct mail division. Community-Banking Included within the community banking segment are the operating results generated from providing traditional banking products and services, including credit, deposit, trust and other similar services. No portion of the Company's deposits are derived from a single person or persons, the loss of which could have a material adverse effect on liquidity, capital, or other elements of financial performance. City National does, however, maintain approximately 37% of its borrowings with the Federal Home Loan Bank (FHLB). City National has historically utilized borrowing capacity with the FHLB to fund asset growth. Although no portion of the Company's loan portfolio is concentrated within a single industry or group of related industries, the Company historically has held residential mortgage loans as a significant portion of its loan portfolio. At December 31, 2000, 49% of the Company's loan portfolio was categorized as residential mortgage loans. However, due to the fractionated nature of residential mortgage lending, there is no concentration of credits that would be considered detrimental to the Company's financial position or operating results. City National, headquartered in Charleston, West Virginia, represents 92% of the total assets of the community banking segment. City National operates 56 offices in West Virginia and 2 offices in Ohio. The Company also maintains two wholly-owned banking subsidiaries, Del Amo Savings Bank FSB and Frontier Bancorp, headquartered in Torrance and Redondo Beach, California, respectively. Combined, the California banking franchises represent approximately 8% of the total assets of the community banking segment. During 2000, the Company announced its intention to complete an orderly exit from its California operations, which would include divesting of its investments in the California banking entities. The Company hopes to complete its divestiture of these entities by the end of 2001. 3
Mortgage Banking The mortgage banking segment generally includes the Company's operations that are devoted to the origination, acquisition, servicing, and sale of mortgage loan products. In previous years, the Company increased its mortgage banking operations to include the retail origination and wholesale acquisition of junior lien mortgage and similar loan products. The Company initiated this program, in part, to continue the growth of the Company's loan servicing division. Additionally, in December 1997, the Company initiated a loan securitization program, which included the securitization of junior lien mortgage loans. Including one securitization completed in May 1999, the Company has completed six such loan securitizations. As noted above, the Company is working to terminate its operations within the mortgage banking segment. Although the Company intends to continue to originate traditional, first lien mortgage loans for sale on the secondary market, this product line within the mortgage banking segment has historically not had a significant impact to the Company's results of operations or total assets. With the closure of its California specialty finance loan origination operations, the announced intention to close its remaining junior lien loan origination divisions, and the sale of its mortgage loan servicing rights, it is anticipated that the mortgage banking segment will have minimal operations in 2001. The Company does retain, however, residual interests from its six loan securitizations completed between 1997 and 1999. Although the Company terminated its loan securitization program in 1999, it still retains a residual interest in those securitizations. The retained interests and related funding and capital allocations are maintained in the mortgage banking segment. Other Financial Services The other financial services business segment includes the operations of the Company's securities brokerage subsidiary and City National's insurance, internet, and printing divisions. This segment is not considered significant to the Company's consolidated financial statements. In addition to the Company's community banking, mortgage banking, and other financial services business segments, the Company's general corporate business segment, which primarily includes the parent company and other administrative areas, provides general corporate support. Each of these business segments is 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: <TABLE> <CAPTION> Other (in thousands) Community Mortgage Financial General Banking Banking Services Corporate Eliminations Consolidated --------- -------- --------- --------- ------------ ------------ 2000 - ---- <S> <C> <C> <C> <C> <C> <C> Net interest income (expense)................... $ 102,916 $(11,302) $ (289) $(2,169) $ -- $ 89,156 Provision for loan losses....................... 25,480 -- -- -- -- 25,480 ---------- -------- ------- ------- --------- ---------- Net interest income (expense) after provision for loan losses................................ 77,436 (11,302) (289) (2,169) -- 63,676 Other income.................................... 12,421 13,729 12,921 3,629 (8,136) 34,564 Other expenses.................................. 91,369 40,668 19,536 8,906 (8,136) 152,343 ---------- -------- ------- ------- --------- ---------- Income before income taxes...................... (1,512) (38,241) (6,904) (7,446) -- (54,103) Income tax expense (benefit).................... 1,643 (15,283) (285) (1,806) -- (15,730) ---------- -------- ------- ------- --------- ---------- Net loss........................................ $ (3,155) $(22,958) $(6,619) $(5,640) $ -- $ (38,373) ========== ======== ======= ======= ========= ========== Average assets.................................. $2,732,085 $176,111 $13,085 $ 9,583 $ (153,845) $2,777,019 ========== ======== ======= ======= ========= ========== </TABLE> 4
<TABLE> <CAPTION> Other (in thousands) Community Mortgage Financial General Banking Banking Services Corporate Eliminations Consolidated --------- -------- --------- --------- ------------ ------------ 1999 - ---- <S> <C> <C> <C> <C> <C> <C> Net interest income (expense)................... $ 105,381 $ (5,273) $ (171) $ (1,517) $ -- $ 98,420 Provision for loan losses....................... 19,286 -- -- -- -- 19,286 ---------- -------- ------- -------- --------- ---------- Net interest income (expense) after provision for loan losses................................ 86,095 (5,273) (171) (1,517) -- 79,134 Other income.................................... 29,850 22,523 12,495 64 (5,397) 59,535 Other expenses.................................. 80,387 33,528 14,792 7,304 (5,397) 130,614 ---------- -------- ------- -------- --------- ---------- Income before income taxes...................... 35,558 (16,278) (2,468) (8,757) -- 8,055 Income tax expense (benefit).................... 12,920 (5,995) (808) (4,275) -- 1,842 ---------- -------- ------- -------- --------- ---------- Net income...................................... $ 22,638 $(10,283) $(1,660) $ (4,482) $ -- $ 6,213 ========== ======== ======= ======== ========= ========== Average assets.................................. $2,572,162 $306,819 $13,381 $ 12,697 $(186,327) $2,718,732 ========== ======== ======= ======== ========= ========== 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 (expense) 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 $ 12,968 $ -- $2,566,099 ========== ======== ======= ======== ========= ========== </TABLE> Internal warehouse funding between the community banking segment and the mortgage banking and other financial services segments is eliminated in the Consolidated Balance Sheets. Services provided to the banking segments by the direct mail, insurance, and internet service provider divisions are eliminated in the Consolidated Statements of Income. 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 that is so closely related to banking or to managing or controlling banks as to be a proper incident thereto. 5
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"), the Office of Thrift Supervision, 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. On July 12, 2000, the Company announced that City National had entered into a formal agreement with the Comptroller of the Currency. The agreement required City National to adopt a three-year comprehensive strategic plan, improve its loan portfolio management, and develop and adhere to a written plan for liquidity, including a formal asset and liability management policy. City National also agreed to incorporate liquidity planning in its financial management process, implement a satisfactory program to manage interest rates, and ensure full compliance of its securitization program with recent OCC regulations. Additionally, City National agreed to develop a plan to dispose of loans held for sale that are held in excess of 90 days, develop a three-year capital plan, strengthen internal controls and its audit committee, and establish a program to maintain an adequate allowance for loan and lease losses. Additionally, as a consequence of entering into this agreement, City National became subject to certain FDIC restrictions regarding the issuance of brokered deposits. City National also agreed to maintain its regulatory Total Capital ratio above 10.00% and to establish a committee of its Board of Directors to oversee compliance with the agreement. 6
Since the date of the agreement, City National has devoted significant time and resources to comply with the formal agreement. City National established a compliance oversight committee, which meets regularly to determine the status of compliance with the agreement. City National, and the Company, have adopted a three-year comprehensive strategic plan and formalized its policies and procedures related to asset and liability management, including liquidity and interest rate risk issues. City National has also disposed of substantially all of its loans held for sale that had been held in excess of 90 days and transferred the unsold loans to the permanent portfolio at estimated fair market value. City National continues to address the remaining issues identified in the formal agreement, including improving its loan portfolio management, managing its allowance for losses, and strengthening internal controls. 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. 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. 7
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. Federal banking agencies have broad powers 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. As an example, 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. 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 be 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. At December 31, 2000, the Company's total capital, Tier I capital, and leverage ratios were 11.61%, 9.05%, and 7.94%, respectively. Similarly, City National's total capital, Tier I capital, and leverage ratios were 12.72%, 11.47%, and 10.10%. Despite these relatively strong capital ratios, City National cannot be categorized as "well capitalized" under the regulatory framework discussed previously. Any bank that has entered into a formal agreement with the OCC such as that disclosed is precluded from being categorized as "well capitalized', regardless of its capital ratios. Additionally, the formal agreement requires that City National maintain its total capital ratio above 10.00%. 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 banking 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. 8
The Company's banking subsidiaries are subject to various statutory restrictions on their ability to pay dividends to the Company. Specifically, the approval of the banks' primary regulator is required prior to the payment of dividends by a subsidiary bank in excess of its earnings retained in the current year plus retained net profits for the preceding two years. 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. Depending upon the financial condition of the subsidiary in question, the payment of dividends 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. As a result of the net loss reported for 2000 and depressed earnings at the subsidiary bank levels in 1999 and 1998, the subsidiary banks will be required to request and obtain regulatory approval prior to the payment of dividends to the Parent Company in 2001. Because of recent earnings trends, on January 31, 2001, the Company announced a suspension of the payment of dividends to holders of its common stock. Additionally, the Company will be required to request and obtain regulatory approval prior to the payment of future distributions on the Company's trust preferred issues. City National obtained OCC approval in order to pay a $2.69 million dividend to the Parent Company in March 2001, primarily for the purpose of satisfying the Parent Company's debt service requirements. The Parent Company obtained Federal Reserve approval to pay a $1.37 million interest distribution on the Company's trust preferred securities in March 2001. However, both the OCC and the Federal Reserve have broad discretionary authority in developing and applying policies and guidelines regarding the payment of dividends and other cash distributions. The recently received approvals obtained from the OCC and the Federal Reserve Board are not necessarily indicative of future regulatory decisions expected by the Company. Governmental Policies 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. (d) Employees --------- As of December 31, 2000, City Holding Company employed 1,352 associates. Employee relations within the Company are considered to be satisfactory. 9
(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, 2000 and such pages are incorporated herein by reference. Page Description of Information Reference - -------------------------- --------- 1. Distribution of Assets, Liabilities and Stockholders' Equity; Interest Rates and Interest Differential a. Average Balance Sheets...................................... 6 b. Analysis of Net Interest Earnings........................... 6-7 c. Rate Volume Analysis of Changes in Interest Income and Expense................................ 8 2. Investment Portfolio a. Book Value of Investments................................... 13 b. Maturity Schedule of Investments............................ 13 c. Securities of Issuers Exceeding 10% of Stockholders' Equity....................................... 13 3. Loan Portfolio a. Types of Loans.............................................. 13 b. Maturities and Sensitivity to Changes in Interest Rates..... 14 c. Risk Elements............................................... 17 d. Other Interest Bearing Assets............................... N/A 4. Summary of Loan Loss Experience................................. 17 5. Deposits a. Breakdown of Deposits by Categories, Average Balance and Average Rate Paid...................................... 6 b. Maturity Schedule of Time Certificates of Deposit and Other Time Deposits of $100,000 or More $100,000 or More........................................... 19 6. Return on Equity and Assets..................................... 3 10
Item 2 Properties - ---------------------- At December 31, 2000, the Company and its subsidiaries owned the majority of their principal business locations, including the Company's corporate headquarters. The corporate headquarters also house City National's primary data processing center, the main office of the loan servicing division, and the operations of City National's internet service division. City National also maintains 56 banking offices and one loan production office in West Virginia, two banking locations in Ohio, and two loan production offices near Costa Mesa, California. In addition to the office located in West Virginia, the loan servicing division maintains an office near Dallas, Texas and another office in Costa Mesa, California. Del Amo Savings Bank and Frontier Bancorp, wholly owned subsidiaries of the Company, each maintain two offices in Southern California. 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 Company's consolidated financial statements. Item 4 Submission of Matters to a Vote of Security Holders - --------------------------------------------------------------- None. 11
PART II Item 5 Market for Registrant's Common Stock and Related Stockholder Matters - -------------------------------------------------------------------------------- Pages 2 and 38 of the Annual Report to Shareholders of City Holding Company for the year ended December 31, 2000, included in this report as Exhibit 13, are incorporated herein by reference. Item 6 Selected Financial Data - ----------------------------------- Selected Financial Data on page 1 of the Annual Report to Shareholders of City Holding Company for the year ended December 31, 2000, 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 2 through 21 of the Annual Report to Shareholders of City Holding Company for the year ended December 31, 2000, 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 10 through 11 of the Annual Report to Shareholders of City Holding Company for the year ended December 31, 2000, 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 22 through 43 of the Annual Report to Shareholders of City Holding Company for the year ended December 31, 2000, 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 2001 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 2001 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 2001 Proxy Statement under the caption "OWNERSHIP OF EQUITY SECURITIES". 12
Item 13 Certain Relationships and Related Transactions - ---------------------------------------------------------- The information required by Item 13 of FORM 10-K appears in the Company's 2001 Proxy Statement under the caption "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS". 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, 2000, are incorporated by reference in Item 8: Page Number ----------- Report of Independent Auditors............................... 22 Consolidated Balance Sheets - December 31, 2000 and 1999..... 23 Consolidated Statements of Income - Years Ended December 31, 2000, 1999, and 1998............................ 24 Consolidated Statements of Changes in Stockholders' Equity - Years Ended December 31, 2000, 1999 and 1998................. 25 Consolidated Statements of Cash Flows - Years Ended December 31, 2000, 1999 and 1998................. 26 Notes to Consolidated Financial Statements - December 31, 2000............................................ 27 - 43 (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. 13
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/ Robert A. Henson ---------------------------------- Robert A. Henson Acting Chief Executive Officer and Chief Financial Officer (Principal Executive and Financial Officer) /s/ Michael D. Dean ---------------------------------- Michael D. Dean Senior Vice President - Finance and Chief Accounting Officer (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 28, 2001. Each of the directors and/or officers of City Holding Company whose signature appears below hereby appoints Robert A. Henson, 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/ C. Dallas Kayser - ---------------------------- -------------------------------- Samuel M. Bowling C. Dallas Kayser Director Director /s/ Hugh R. Clonch /s/ Thomas E. Lilly - ---------------------------- -------------------------------- Hugh R. Clonch Thomas E. Lilly Director Director /s/ Robert D. Fisher /s/ Philip L. McLaughlin - ---------------------------- -------------------------------- Robert D. Fisher Philip L. McLaughlin Director Chairman of the Board of Directors /s/ Jay C. Goldman /s/ E. M. Payne III - ---------------------------- -------------------------------- Jay C. Goldman E. M. Payne III Director Director 14
/s/ David E. Haden /s/ R. T. Rogers - ---------------------------- -------------------------------- David E. Haden R. T. Rogers Director Director /s/ David W. Hambrick /s/ Mark H. Schaul - ---------------------------- -------------------------------- David W. Hambrick Mark H. Schaul Director Director /s/ Frank S. Harkins, Jr. /s/ James E. Songer, II - ---------------------------- -------------------------------- Frank S. Harkins, Jr. James E. Songer, II Director Director /s/ Carlin K. Harmon /s/ Albert M. Tieche, Jr. - ---------------------------- -------------------------------- Carlin K. Harmon Albert M. Tieche, Jr. Director Director /s/ Tracy W. Hylton II - ---------------------------- Tracy W. Hylton II Director 15
EXHIBIT INDEX The following exhibits are filed herewith or are incorporated herein by reference. Prior Filing Exhibit Reference Number Description (if applicable) - ------- ----------- ---------------- 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 XIV 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 16
4(b) Supplement, dated as of June 1, 1998, XIII between City Holding Company and SunTrust Bank, Atlanta, as Rights Agent, to Amended and Restated Rights Agreement dated May 7, 1991 10(a) Form of Employment Agreement, IX dated as of December 31, 1998, by and between City Holding Company and Robert A. Henson 10(b) Form of Employment Agreement, IX dated as of December 31, 1998, by and between City Holding Company and Matthew B. Call 10(c) Form of Employment Agreement, IX dated as of December 31, 1998, by and between City Holding Company and Philip L. McLaughlin 10(d) 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(e) Junior Subordinated Indenture, X dated as of March 31, 1998, between City Holding Company and The Chase Manhattan Bank, as Trustee 10(f) Form of City Holding Company's X 9.15% Debenture due April 1, 2028 10(g) Form of City Holding Company's XI 9.125% Debenture due October 31, 2028 10(h) City Holding Company's 1993 XII Stock Incentive Plan 10(i) Form of Interim Employment Agreement, dated as of January 31, 2001, by and between City Holding Company and Gerald R. Francis 10(j) Form of Employment Agreement, dated as of January 31, 2001, by and between City Holding Company and Gerald R. Francis 11 The information required by Item 14, Exhibit 11 of Form 10-K appears on page 43 of the Annual Report to Shareholders of City Holding Company for the year ended December 31, 2000, included in this report as Exhibit 13 and incorporated herein by reference. 17
13 Portions of City Holding Company Annual Report to Shareholders for Year Ended December 31, 2000 21 Subsidiaries of City Holding Company 23 Consent of Ernst & Young LLP 24 Power of Attorney (included on the signature page hereof) ____ 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. 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. XIV Attached to, and incorporated by reference from, City Holding Company's Form 10-K Annual Report dated December 31, 1998, and filed March 31, 1999, with the Securities and Exchange Commission. 18