Results

City Holding Company

11/05/2025 | Press release | Distributed by Public on 11/05/2025 09:23

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
Critical Accounting Policies and Estimates
The accounting policies of the Company conform with U.S. generally accepted accounting principles and require management to make estimates and develop assumptions that affect the amounts reported in the financial statements and related footnotes. These estimates and assumptions are based on information available to management as of the date of the financial statements. Actual results could differ significantly from management's estimates. As this information changes, management's estimates and assumptions used to prepare the Company's financial statements and related disclosures may also change. The most significant accounting policies followed by the Company are presented in Note One to the audited financial statements included in the Company's 2024 Annual Report to Shareholders. The information included in this Quarterly Report on Form 10-Q, including the Consolidated Financial Statements, Notes to Consolidated Financial Statements, and Management's Discussion and Analysis of Financial Condition and Results of Operations, should be read in conjunction with the financial statements and notes thereto included in the 2024 Annual Report of the Company. Based on the sensitivity of financial statement amounts to the methods, assumptions, and estimates underlying those amounts, management has identified: (i) the determination of the allowance for credit losses (ii) income taxes and (iii) acquisition and preliminary purchase price accounting to be the accounting areas that require the most subjective or complex judgments and, as such, could be most subject to revision as new information becomes available.
Allowance for Credit Losses
The allowance for credit losses is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes the uncollectibility of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off in the future. Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics, such as differences in underwriting standards, portfolio mix, delinquency level, or term, as well as for changes in environmental conditions, such as changes in unemployment rates, property values, or other relevant factors. These evaluations are conducted at least quarterly and more frequently if deemed necessary. Additionally, all commercial loans within the portfolio are subject to internal risk grading. Risk grades are generally assigned by the primary lending officer and are periodically evaluated by the Company's internal loan review process.
In evaluating the appropriateness of its allowance for credit losses, the Company stratifies the loan portfolio into six major groupings. The Company has identified the following portfolio segments and measures the allowance for credit losses using the following methods:
Portfolio Segment Measurement Method
Commercial and industrial Migration
Commercial real estate:
1-4 family Migration
Hotels Migration
Multi-family Migration
Non Residential Non-Owner Occupied Migration
Non Residential Owner Occupied Migration
Residential real estate Vintage
Home equity Vintage
Consumer Vintage
Migration is an analysis that tracks a closed pool of loans for a configurable period of time and calculates a loss ratio on only those loans in the pool at the start date based on outstanding balance. Vintage is a predictive loss model that includes a reasonable approximation of probable and estimable future losses by tracking each loan's net losses over the life of the loan as compared to its original balance. For demand deposit overdrafts, the allowance for credit losses is measured using the historical loss rate. Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not
included in the collective evaluation. When management determines that foreclosure is probable, the expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.
Expected credit losses are estimated over the contractual term of the loan, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a restructured loan will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.
The Company uses a number of economic variables in its scenarios to estimate the Allowance for credit losses (ACL), with the most significant drivers being an unemployment rate forecast and qualitative adjustments. In the September 30, 2025 estimate, the Company assumed a 2-year unemployment forecast range of 4.3% to 4.7%, changed from 4.2% to 4.7% for the June 30, 2025 estimate. Historical loss rates from periods where the average unemployment rate matches the forecast range are considered when calculating the forecast period loss rate. In total, the changes in loss rates decreased the reserve $0.1 million for the quarter.
Based on sensitivity analysis of all portfolios, a 0.0050% change (slight improvement or decline on bank's scale) in all 11 qualitative risk factors (where assigned) would have a $2.3 million impact on the reserve allocation. Changing each factor by 0.01% (moderate improvement or decline) would have a $4.6 million impact. Management recognizes that these are extreme scenarios and it is very unlikely that all risk factors would change by 0.005% or 0.01% simultaneously. For the September 30, 2025 estimate, management did not adjust any qualitative factors utilized in the previous quarter.
Income Taxes
The Company is subject to federal and state income taxes in the jurisdictions in which it conducts business. In computing the provision for income taxes, management must make judgments regarding interpretation of laws in those jurisdictions. Because the application of tax laws and regulations for many types of transactions is susceptible to varying interpretations, amounts reported in the financial statements could be changed at a later date upon final determinations by taxing authorities. On a quarterly basis, the Company estimates its annual effective tax rate for the year and uses that rate to provide for income taxes on a year-to-date basis. The amount of unrecognized tax benefits could change over the next twelve months as a result of various factors. However, management cannot currently estimate the range of possible change. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service and various state taxing authorities for the years ended December 31, 2021 and forward.
The effective tax rate is calculated by taking the statutory rate and adjusting for permanent and discrete items. The discrete items can vary between periods but historically have remained consistent.
The One Big Beautiful Bill Act ("OBBBA") was enacted on July 4, 2025. The OBBBA makes permanent certain expiring tax provisions of the 2017 Tax Cuts and Jobs Act and introduces new provisions affecting both businesses and individuals. We are currently evaluating the provisions of the OBBBA, but do not expect the impacts to be material to our financial statements.
Financial Summary
Nine months ended September 30, 2025 vs. 2024
The Company's financial performance is summarized in the following table:
Nine months ended September 30,
2025 2024
Net income available to common shareholders (in thousands)
$ 98,917 $ 88,447
Earnings per common share, basic $ 6.76 $ 5.96
Earnings per common share, diluted $ 6.75 $ 5.96
Dividend payout ratio 36.3 % 37.3 %
ROA* 2.01 % 1.88 %
ROE* 17.4 % 16.9 %
ROATCE* 22.0 % 21.9 %
Average equity to average assets ratio 11.6 % 11.1 %
*ROA (Return on Average Assets) is a measure of the effectiveness of asset utilization. ROE (Return on Average Equity) is a measure of the return on shareholders' investment. ROATCE (Return on Average Tangible Common Equity) is a measure of the return on shareholders' equity, less intangible assets.
The Company's net interest income was $175.8 million for the nine months ended September 30, 2025 compared to $164.7 million for the nine months ended September 30, 2024 (see Net Interest Income). The Company recorded a recovery of credit losses of $2.5 million for the nine months ended September 30, 2025 compared to a provision for credit losses of $1.5 million for the nine months ended September 30, 2024 (see Allowance for Credit Losses). As further discussed under the caption Non-Interest Income and Non-Interest Expense, non-interest income increased $0.9 million and non-interest expense increased $4.2 million for the nine months ended September 30, 2025 from the nine months ended September 30, 2024.
Financial Summary
Three months ended September 30, 2025 vs. 2024
The Company's financial performance is summarized in the following table:
Three months ended September 30,
2025 2024
Net income available to common shareholders (in thousands)
$ 35,188 $ 29,809
Earnings per common share, basic $ 2.41 $ 2.02
Earnings per common share, diluted $ 2.41 $ 2.02
Dividend payout ratio 36.1 % 39.1 %
ROA(1)
2.11 % 1.87 %
ROE(1)
17.9 % 16.3 %
ROATCE(1)
22.5 % 20.9 %
Average equity to average assets ratio 11.8 % 11.4 %
(1) ROA (Return on Average Assets) is a measure of the effectiveness of asset utilization. ROE (Return on Average Equity) is a measure of the return on shareholders' investment. ROATCE (Return on Average Tangible Common Equity) is a measure of the return on shareholders' equity, less intangible assets.
The Company's net interest income was $61.1 million for the three months ended September 30, 2025 compared to $55.6 million for the three months ended September 30, 2024 (see Net Interest Income). The Company recorded a $0.5 million
recovery of credit losses for the three months ended September 30, 2025 compared to a $1.2 million provision for credit losses for the three months ended September 30, 2024 (see Allowance for Credit Losses). As further discussed under the caption Non-Interest Income and Non-Interest Expense, non-interest income decreased $0.2 million and non-interest expense increased $0.3 million for the three months ended September 30, 2025 compared to the three months ended September 30, 2024.
Balance Sheet Analysis
Selected balance sheet fluctuations from the year ended December 31, 2024 are summarized in the following table (in millions, except percentages):
September 30, December 31,
2025 2024 $ Change % Change
Cash and cash equivalents $ 225.6 $ 225.4 $ 0.2 0.1 %
Total investment securities 1,540.7 1,451.1 89.6 6.2
Gross loans 4,412.8 4,274.8 138.0 3.2
Total deposits 5,257.6 5,144.2 113.4 2.2
Cash and cash equivalents increased $0.2 million (0.1%) from December 31, 2024 to $225.6 million at September 30, 2025.
Total investment securities increased $89.6 million (6.2%) from December 31, 2024 to $1.54 billion at September 30, 2025, due to mortgage-backed security purchases.
Gross loans increased $138.0 million (3.2%) from December 31, 2024 to $4.41 billion at September 30, 2025. Residential real estate loans increased $86.2 million (4.7%), commercial real estate loans increased $34.4 million (1.9%),home equity loans increased $19.6 million (9.8%), and commercial and industrial loans increased $6.8 million (1.6%) during the first nine months of 2025. These increases were partially offset by a decrease in consumer loans of $7.8 million (13.4%).
Total deposits increased $113.4 million (2.2%) from December 31, 2024 to$5.3 billion at September 30, 2025. Time deposit balances increased $53.5 million, non-interest-bearing demand deposit balances increased $32.9 million, and savings deposits increased $23.5 million.
Net Interest Income
Nine months ended September 30, 2025 vs. 2024
The Company's net interest income increased from $164.7 million for the nine months ended September 30, 2024 to $175.8 million for the nine months ended September 30, 2025. The Company's tax equivalent net interest income increased $11.1 million to $176.4 million for the nine months ended September 30, 2025 from $165.3 the nine months ended September 30, 2024. The increase in net interest income was due to an increase in average loan balances ($221.2 million) and decrease in cost of interest bearing liabilities (7 basis points) which increased net interest income by $9.7 million and $4.3 million, respectively. Additionally, an increase in average balance of investment securities ($79.1 million) increased net interest income by $2.8 million.
These increases were partially offset by an increase in average balance of interest bearing liabilities ($211.5 million) which decreased net interest income by $5.2 million. The Company's reported net interest margin increased slightly from 3.90% for the nine months ended September 30, 2024 to 3.95% for the nine months ended September 30, 2025.
Table One
Average Balance Sheets and Net Interest Income
(in thousands, except percentages)
Assets Nine months ended September 30,
2025 2024
Average
Balance
Interest
Yield/
Rate
Average
Balance
Interest
Yield/
Rate
Loan portfolio(1):
Residential real estate(2)
$ 2,068,502 $ 81,373 5.26 % $ 1,968,377 $ 74,566 5.06 %
Commercial, financial, and agriculture(2)
2,200,471 103,959 6.32 2,070,431 102,211 6.59
Installment loans to individuals(2),(3)
58,459 2,779 6.36 67,463 3,042 6.02
Total loans 4,327,432 188,111 5.81 4,106,271 179,819 5.85
Securities:
Taxable 1,390,756 45,239 4.35 1,282,167 40,390 4.21
Tax-exempt(4)
130,179 2,714 2.79 159,654 3,154 2.64
Total securities 1,520,935 47,953 4.22 1,441,821 43,544 4.03
Deposits in depository institutions 128,556 4,275 4.45 119,649 4,907 5.48
Total interest-earning assets 5,976,923 240,339 5.38 5,667,741 228,270 5.38
Cash and due from banks 96,370 104,269
Bank premises and equipment 69,721 71,479
Goodwill and intangible assets 159,162 161,622
Other assets 291,080 305,113
Less: allowance for credit losses (21,499) (23,014)
Total assets $ 6,571,757 $ 6,287,210
Liabilities
Interest-bearing demand deposits $ 1,336,129 $ 10,007 1.00 % $ 1,308,779 $ 11,384 1.16 %
Savings deposits 1,242,141 6,921 0.74 1,240,788 6,705 0.72
Time deposits(2)
1,281,575 32,616 3.40 1,124,295 28,977 3.44
Customer repurchase agreements 345,735 9,672 3.74 324,631 11,309 4.65
FHLB long-term advances 150,000 4,707 4.20 145,620 4,577 4.20
Total interest-bearing liabilities 4,355,580 63,923 1.96 4,144,113 62,952 2.03
Noninterest-bearing demand deposits 1,358,250 1,332,988
Other liabilities 97,024 109,194
Stockholders' equity 760,903 700,915
Total liabilities and stockholders' equity $ 6,571,757 $ 6,287,210
Net interest income $ 176,416 $ 165,318
Net yield on earning assets 3.95 % 3.90 %
(1) For purposes of this table, non-accruing loans have been included in average balances and the following amounts (in thousands) of net loan fees have been included in interest income:
2025 2024
Loan fees, net $ 246 $ 320
(2) Included in the above table are the following amounts (in thousands) for the accretion of the fair value adjustments related to the Company's acquisitions:
2025 2024
Residential real estate $ 245 $ 145
Commercial, financial and agriculture 1,741 2,499
Installment loans to individuals 6 17
Time deposits 13 98
$ 2,005 $ 2,759
(3) Includes the Company's consumer and DDA overdrafts loan categories.
(4) Computed on a fully federal tax-equivalent basis assuming a tax rate of approximately 21%.
Table Two
Rate/Volume Analysis of Changes in Interest Income and Interest Expense
(in thousands)
Nine months ended September 30, 2025 vs. 2024
Interest-earning assets:
Increase (Decrease)
Due to Change In:
Volume Rate Net
Loan portfolio
Residential real estate $ 3,789 $ 3,018 $ 6,807
Commercial, financial, and agriculture 6,414 (4,666) 1,748
Installment loans to individuals (406) 143 (263)
Total loans 9,797 (1,505) 8,292
Securities:
Taxable 3,418 1,431 4,849
Tax-exempt(1)
(582) 142 (440)
Total securities 2,836 1,573 4,409
Deposits in depository institutions 365 (997) (632)
Total interest-earning assets $ 12,998 $ (929) $ 12,069
Interest-bearing liabilities:
Interest-bearing demand deposits $ 238 $ (1,615) $ (1,377)
Savings deposits 7 209 216
Time deposits 4,050 (411) 3,639
Customer repurchase agreements 735 (2,372) (1,637)
FHLB long-term advances 138 (8) 130
Total interest-bearing liabilities $ 5,168 $ (4,197) $ 971
Net Interest Income $ 7,830 $ 3,268 $ 11,098
(1)Computed on a fully federal tax-equivalent basis assuming a tax rate of approximately 21%.
Net Interest Income
Three months ended September 30, 2025 vs. 2024
The Company's net interest income increased approximately $5.5 million, or 9.9%, from $55.6 million during the third quarter of 2024 to $61.1 million during the third quarter of 2025. The Company's tax equivalent net interest income increased approximately $5.5 million from $55.8 million for the third quarter of 2024 to $61.3 million for the third quarter of 2025. Net interest income increased by $3.6 million due to an increase in average loan balances ($244.8 million) and by $2.9 million due to a decrease in the cost of interest-bearing liabilities (22 basis points). Additionally, net interest income increased $0.8 million due to an increase in average investment security balances ($60.9 million).
These increases were partially offset by an increase in average balance of interest-bearing liabilities ($170.1 million) which lowered net interest income by $1.4 million. The Company's reported net interest margin increased from 3.87% for the third quarter of 2024 to 4.04% for the third quarter of 2025.
Table One
Average Balance Sheets and Net Interest Income
(in thousands, except percentages)
Assets Three months ended September 30,
2025 2024
Average
Balance
Interest
Yield/
Rate
Average
Balance
Interest
Yield/
Rate
Loan portfolio(1):
Residential real estate(2)
$ 2,106,823 $ 28,235 5.32 % $ 1,984,502 $ 25,654 5.14 %
Commercial, financial, and agriculture(2)
2,215,319 35,443 6.35 2,082,888 34,708 6.63
Installment loans to individuals(2),(3)
56,200 928 6.55 66,130 1,045 6.29
Total loans 4,378,342 64,606 5.85 4,133,520 61,407 5.91
Securities:
Taxable 1,435,540 15,947 4.41 1,343,323 14,402 4.27
Tax-exempt(4)
127,878 895 2.78 159,225 1,043 2.61
Total securities 1,563,418 16,842 4.27 1,502,548 15,445 4.09
Deposits in depository institutions 74,918 829 4.39 103,322 1,417 5.46
Total interest-earning assets 6,016,678 82,277 5.43 5,739,390 78,269 5.43
Cash and due from banks 96,097 110,765
Bank premises and equipment 69,355 70,998
Goodwill and intangible assets 158,619 161,009
Other assets 282,993 292,758
Less: allowance for credit losses (20,109) (23,205)
Total assets $ 6,603,633 $ 6,351,715
Liabilities
Interest-bearing demand deposits $ 1,329,234 $ 3,378 1.01 % $ 1,321,922 $ 4,100 1.23 %
Savings deposits 1,241,494 2,348 0.75 1,220,009 2,200 0.72
Time deposits(2)
1,295,424 10,475 3.21 1,174,217 10,772 3.65
Customer repurchase agreements 343,903 3,196 3.69 323,844 3,788 4.65
FHLB long-term advances 150,000 1,586 4.19 150,000 1,586 4.21
Total interest-bearing liabilities 4,360,055 20,983 1.91 4,189,992 22,446 2.13
Noninterest-bearing demand deposits 1,374,486 1,334,762
Other liabilities 89,456 99,797
Shareholders' equity 779,636 727,164
Total liabilities and shareholders' equity $ 6,603,633 $ 6,351,715
Net interest income $ 61,294 $ 55,823
Net yield on earning assets 4.04 % 3.87 %
(1) For purposes of this table, non-accruing loans have been included in average balances and the following amounts (in thousands) of net loan fees have been included in interest income:
2025 2024
Loan fees, net $ 39 $ 127
(2) Included in the above table are the following amounts (in thousands) for the accretion of the fair value adjustments related to the Company's acquisitions:
2025 2024
Residential real estate $ 166 $ 27
Commercial, financial and agriculture 535 752
Installment loans to individuals 2 5
Time deposits 3 14
$ 706 $ 798
(3) Includes the Company's consumer and DDA overdrafts loan categories.
(4) Computed on a fully federal tax-equivalent basis assuming a tax rate of 21%.
Table Two
Rate/Volume Analysis of Changes in Interest Income and Interest Expense
(in thousands)
Three months ended September 30, 2025 vs. 2024
Interest-earning assets:
Increase (Decrease)
Due to Change In:
Volume Rate Net
Loan portfolio
Residential real estate $ 1,586 $ 995 $ 2,581
Commercial, financial, and agriculture 2,213 (1,478) 735
Installment loans to individuals (157) 40 (117)
Total loans 3,642 (443) 3,199
Securities:
Taxable 991 554 1,545
Tax-exempt(1)
(206) 58 (148)
Total securities 785 612 1,397
Deposits in depository institutions (391) (197) (588)
Total interest-earning assets $ 4,036 $ (28) $ 4,008
Interest-bearing liabilities:
Interest-bearing demand deposits $ 23 $ (745) $ (722)
Savings deposits 39 109 148
Time deposits 1,115 (1,412) (297)
Customer repurchase agreements 235 (827) (592)
FHLB long-term advances - - -
Total interest-bearing liabilities $ 1,412 $ (2,875) $ (1,463)
Net Interest Income $ 2,624 $ 2,847 $ 5,471
(1) Computed on a fully federal taxable equivalent using a tax rate of 21%.
Non-GAAP Financial Measures
Management of the Company uses measures in its analysis of the Company's performance other than those in accordance with generally accepted accounting principles in the United States of America ("GAAP"). These measures are useful when evaluating the underlying performance of the Company's operations. The Company's management believes that these non-GAAP measures enhance comparability of results with prior periods and demonstrate the effects of significant gains and charges in the current period. The Company's management believes that investors may use these non-GAAP financial measures to evaluate the Company's financial performance without the impact of those items that may obscure trends in the Company's performance. These disclosures should not be viewed as a substitute for financial measures determined in accordance with GAAP, nor are they comparable to non-GAAP financial measures that may be presented by other companies. The following table reconciles fully taxable equivalent net interest income with net interest income as derived from the Company's financial statements, as well as other non-GAAP measures (dollars in thousands):
Three months ended September 30, Nine months ended September 30,
2025 2024 2025 2024
Net interest income ("GAAP") $ 61,107 $ 55,605 $ 175,846 $ 164,657
Taxable equivalent adjustment 187 218 $ 570 $ 661
Net interest income, fully taxable equivalent $ 61,294 $ 55,823 $ 176,416 $ 165,318
Equity to assets ("GAAP") 11.98 % 11.52 %
Effect of goodwill and other intangibles, net (2.14) (2.26)
Tangible common equity to tangible assets 9.84 % 9.26 %
Loans
Table Three
Loan Portfolio
The composition of the Company's loan portfolio as of the dates indicated follows (in thousands):
September 30, 2025 December 31, 2024 September 30, 2024
Commercial and industrial $ 426,654 $ 419,838 $ 424,414
1-4 Family 204,280 197,258 194,670
Hotels 397,338 389,660 383,232
Multi-family 233,678 240,943 193,875
Non Residential Non-Owner Occupied 728,625 707,265 665,210
Non Residential Owner Occupied 239,058 233,497 236,826
Commercial real estate 1,802,979 1,768,623 1,673,813
Residential real estate 1,909,791 1,823,610 1,806,578
Home equity 218,750 199,192 190,149
Consumer 50,056 57,816 58,710
DDA overdrafts 4,545 5,697 4,166
Total loans $ 4,412,775 $ 4,274,776 $ 4,157,830
Loan balances increased $138.0 million from December 31, 2024 to September 30, 2025.
The commercial and industrial ("C&I") loan portfolio consists of loans to corporate borrowers that are primarily in small to mid-size industrial and commercial companies. Collateral securing these loans includes equipment, machinery, inventory, receivables and vehicles. C&I loans are considered to contain a higher level of risk than other loan types, although care is taken to minimize these risks. Numerous risk factors impact this portfolio, including industry specific risks such as the economy, new technology, labor rates and cyclicality, as well as customer specific factors, such as cash flow, financial structure, operating controls and asset quality. C&I loans increased $6.8 million from December 31, 2024to September 30, 2025.
Commercial real estate loans consist of commercial mortgages, which generally are secured by nonresidential and multi-family residential properties, including hotel/motel and apartment lending. Commercial real estate loans are made to many of the same customers and carry similar industry risks as C&I loans. Commercial real estate loans increased $34.4 million from December 31, 2024 to September 30, 2025. At September 30, 2025, $31.9 million of the commercial real estate loans were for commercial properties under construction.
In order to group loans with similar risk characteristics, the portfolio is further segmented by product types:
◦Commercial 1-4 Family loans increased $7.0 million from December 31, 2024 to September 30, 2025. Commercial 1-4 Family loans consist of residential single-family, duplex, triplex, and fourplex rental properties and totaled $204.3 million as of September 30, 2025. Risk characteristics are driven by rental housing demand as well as economic and employment conditions. These properties exhibit greater risk than multi-family properties due to fewer income sources.
◦Hotel loans increased $7.7 million from December 31, 2024 to September 30, 2025. The Hotel portfolio is comprised of all lodging establishments and totaled $397.3 million as of September 30, 2025. Risk characteristics relate to the demand for travel.
◦Multi-family loans decreased $7.3 million from December 31, 2024 to September 30, 2025. Multi-family consists of 5 or more family residential apartment lending. The portfolio totaled $233.7 million as of September 30, 2025. Risk characteristics are driven by rental housing demand as well as economic and employment conditions.
◦Non-residential commercial real estate includes properties such as retail, office, warehouse, storage, healthcare, entertainment, religious, and other nonresidential commercial properties. The non-residential product type is further segmented into owner- and non-owner occupied properties. Nonresidential non-owner occupied commercial real estate
totaled $728.6 million at September 30, 2025 and increased $21.4 million from December 31, 2024 to September 30, 2025.
◦Nonresidential owner-occupied commercial real estate totaled $239.1 million at September 30, 2025 and increased $5.6 million from December 31, 2024. Risk characteristics relate to levels of consumer spending and overall economic conditions.
Residential real estate loans increased $86.2 million from December 31, 2024 to September 30, 2025. Residential real estate loans represent loans to consumers that are secured by a first lien on residential property. Residential real estate loans provide for the purchase or refinance of a residence and first-lien home equity loans allow consumers to borrow against the equity in their home. These loans primarily consist of single family five- and seven-year adjustable rate mortgages with terms that amortize up to 30 years. The Company also offers fixed-rate residential real estate loans that are generally sold in the secondary market that are not included on the Company's balance sheet; the Company does not retain the servicing rights to these loans. Residential mortgage loans are generally underwritten to comply with Fannie Mae guidelines, while the home equity loans are underwritten with typically less documentation, but with lower loan-to-value ratios and shorter maturities. At September 30, 2025, $6.8 million of the residential real estate loans were for properties under construction.
Home equity loans increased $19.6 million during the first nine months of 2025. The Company's home equity loans represent loans to consumers that are secured by a second (or junior) lien on a residential property. Home equity loans allow consumers to borrow against the equity in their home without paying off an existing first lien. These loans consist of home equity lines of credit ("HELOC") and amortized home equity loans that require monthly installment payments. Home equity loans are underwritten with less documentation, lower loan-to-value ratios and for shorter terms than residential mortgage loans. The amount of credit extended is directly related to the value of the real estate at the time the loan is made.
Consumer loans may be secured by automobiles, boats, recreational vehicles and other personal property or they may be unsecured. The Company monitors the risk associated with these types of loans by monitoring such factors as portfolio growth, lending policies and economic conditions. Underwriting standards are continually evaluated and modified based upon these factors. Consumer loans decreased by $7.8 million during the first nine months of 2025.
Allowance for Credit Losses
Management systematically monitors the loan portfolio and the appropriateness of the allowance for credit losses on a quarterly basis to provide for expected losses inherent in the portfolio. Management assesses the risk in each loan type based on historical trends, the general economic environment of its local markets, individual loan performance and other relevant factors. The Company's estimate of future economic conditions utilized in its provision estimate is primarily dependent on expected unemployment ranges over a two-year period. Beyond two years, a straight line reversion to historical average loss rates is applied over the life of the loan pool in the migration methodology. The vintage methodology applies future average loss rates based on net losses in historical periods where the unemployment rate was within the forecasted range. As a result of the Company's quarterly analysis of the adequacy of the Allowance for Credit Losses, the Company recorded a recovery of credit losses of $0.5 million in the third quarter of 2025compared to a $1.2 million provision for credit losses recorded in the third quarter of 2024.
Individual credits in excess of $1 million are selected at least annually for detailed loan reviews, which are utilized by management to assess the risk in the portfolio and the appropriateness of the allowance.
Determination of the Allowance for Credit Losses is subjective in nature and requires management to periodically reassess the validity of its assumptions. Differences between actual losses and estimated losses are assessed such that management can timely modify its evaluation model to ensure that adequate provision has been made for risk in the total loan portfolio.
Based on the Company's analysis of the adequacy of the allowance for credit losses and in consideration of the known factors utilized in computing the allowance, management believes that the allowance for credit losses as of September 30, 2025 is adequate to provide for expected losses inherent in the Company's loan portfolio. Future provisions for credit losses will be dependent upon trends in loan balances including the composition of the loan portfolio, changes in loan quality and loss experience trends, and recoveries of previously charged-off loans, among other factors.
Table Four
Allocation of the Allowance for Credit Losses
The allocation of the allowance for credit losses is shown in the table below (in thousands). The allocation of a portion of the allowance in one portfolio loan classification does not preclude its availability to absorb losses in other portfolio segments.
As of September 30, As of December 31,
2025 2024 2024
Commercial and industrial $ 2,831 $ 4,520 $ 4,541
1-4 Family 1,425 1,234 1,366
Hotels 2,059 2,240 2,355
Multi-family 1,496 997 1,390
Non Residential Non-Owner Occupied 3,165 3,037 3,001
Non Residential Owner Occupied 1,788 2,130 1,725
Commercial real estate 9,933 9,638 9,837
Residential real estate 5,596 5,891 5,731
Home equity 436 624 643
Consumer 261 326 381
DDA overdrafts 601 833 789
Allowance for Credit Losses $ 19,658 $ 21,832 $ 21,922
The Allowance for Credit Losses decreased slightly from $21.9 million at December 31, 2024 to $19.7 million at September 30, 2025. The Company recorded a recovery of credit losses of $0.5 million in the third quarter of 2025, compared to a provision for credit losses of $1.2 million for the comparable period in 2024, and a recovery of credit losses of $2.0 million for the second quarter of 2025. The recovery of credit losses in the third quarter was primarily related to net recoveries of $0.4 million for the quarter ended September 30, 2025. More specifically, the allowance for credit losses allocated to the commercial and industrial portfolio has decreased by $1.7 million since December 31, 2024. The decrease is primarily due to an upgrade of a specific credit during the second quarter of 2025 that was downgraded in the third quarter of 2023, but has since seen improved financial performance.
Non-Interest Income and Non-Interest Expense
Nine months ended September 30, 2025 vs. 2024
(in millions, except percentages)
Nine months ended September 30,
2025 2024 $ Change % Change
Net investment securities gains $ - $ 0.6 $ (0.6) (100.0) %
Non-interest income, excluding net investment securities gains 58.1 56.7 1.4 2.5
Non-interest expense 114.5 110.3 4.2 3.8
Non-Interest Income: Non-interest income was $58.1 million for the nine months ended September 30, 2025, as compared to $57.2 million for the nine months ended September 30, 2024. During the nine months ended September 30, 2025, the Company reported $0.2 million of realized investment gains and $0.2 million of unrealized fair value losses on the Company's equity securities compared to $0.6 million of unrealized fair value gains during the nine months ended September 30, 2024.
Excluding net investment securities gains and losses, non-interest income increased from $56.7 million for the nine months ended September 30, 2024 to $58.1 million for the nine months ended September 30, 2025. The increase was largely
attributable to an increase in wealth and investment management fee income of $0.7 million (8.2%) and an increase in service charges of $0.7 million (3.3%).
Non-Interest Expense: Non-interest expenses increased $4.2 million (3.8%), from $110.3 million in the first nine months of 2024 to $114.5 million in the first nine months of 2025 primarily due to an increase in salaries and employee benefits ($2.1 million), equipment and software related expense ($1.2 million), bankcard expenses ($0.9 million), and legal and professional fees ($0.2 million). These increases were partially offset by a $0.4 million decrease in advertising expenses.
Income Tax Expense: The Company's effective income tax rate for the nine months ended September 30, 2025 was 18.9% compared to 19.6% for the nine months ended September 30, 2024.
Non-Interest Income and Non-Interest Expense
Three months ended September 30, 2025 vs. 2024
(in millions, except percentages)
Three months ended September 30,
2025 2024 $ Change % Change
Net investment securities gains $ 0.1 0.3 $ (0.2) 66.7 %
Non-interest income, excluding net investment securities gains 20.0 20.0 - -
Non-interest expense 37.9 37.6 0.3 0.8
Non-Interest Income: Non-interest income was $20.2 million during the quarter ended September 30, 2025, as compared to $20.3 million during the quarter ended September 30, 2024. During the third quarter of 2025, the Company reported $0.1 million of unrealized fair value gains on the Company's equity securities, as compared to $0.4 million of unrealized fair value gains on the Company's equity securities during the third quarter of 2024.
Exclusive of these items, non-interest income remained consistent at $20.0 million for both the third quarter of 2024 and the third quarter of 2025. Increases of $0.3 million (4.3%) in service fees and $0.2 million (5.2%) in wealth and investment management fee income were essentially offset by lower bank owned life insurance (due to death benefit proceeds in the third quarter of 2024) of $0.5 million.
Non-Interest Expense:Non-interest expenses increased $0.3 million, or 0.7%, from $37.6 million in the third quarter of 2024 to $37.9. million in the third quarter of 2025. This increase was largely due to an increase in salaries and employee benefits of $0.5 million and an increase of $0.3 million in other tax-related matters. These increases were partially offset by lower advertising $0.4 million and other expenses $0.3 million.
Income Tax Expense:The Company's effective income tax rate was 19.7% for both the three months ended September 30, 2025 and the three months September 30, 2024.
Risk Management
Market risk is the risk of loss due to adverse changes in current and future cash flows, fair values, earnings or capital due to adverse movements in interest rates and other factors, including foreign exchange rates, underlying credit risk and commodity prices. Because the Company has no significant foreign exchange activities and holds no commodities, interest rate risk represents the primary market risk factor affecting the Company's balance sheet and net interest margin. Significant changes in interest rates by the Federal Reserve could result in similar changes in SOFR interest rates, prime rates, and other benchmark interest rates that could affect the estimated fair value of the Company's investment securities portfolio, interest paid on the Company's short-term and long-term borrowings, interest earned on the Company's loan portfolio and interest paid on its deposit accounts. The Company utilizes derivative instruments, primarily in the form of interest rate swaps, to help manage its interest rate risk on commercial loans.
The Company's ALCO has been delegated the responsibility of managing the Company's interest-sensitive balance sheet accounts to maximize earnings while managing interest rate risk. ALCO, comprised of various members of executive and senior management, is also responsible for establishing policies to monitor and limit the Company's exposure to interest rate risk and to manage the Company's liquidity position. ALCO satisfies its responsibilities through at least quarterly meetings during which product pricing issues, liquidity measures, and interest sensitivity positions are monitored.
In order to measure and manage its interest rate risk, the Company uses an asset/liability management and simulation software model to periodically update the interest sensitivity position of the Company's balance sheet. The model is also used to perform analyses that measure the impact on net interest income and capital as a result of various changes in the interest rate environment. Such analyses quantify the effects of various interest rate scenarios on projected net interest income.
The Company's policy objective is to avoid negative fluctuations in net income or the economic value of equity of more than 15% within a 12-month period, assuming an immediate parallel increase or decrease of 100 to 300 basis points. The Company measures the long-term risk associated with sustained increases and decreases in rates through analysis of the impact to changes in rates on the economic value of equity.
The following table summarizes the sensitivity of the Company's net income to various interest rate scenarios. The results of the sensitivity analyses presented below differ from the results used internally by ALCO in that, in the analyses below, interest rates are assumed to have an immediate and sustained parallel shock. The Company recognizes that rates are volatile, but rarely move with immediate and parallel effects. Internally, the Company considers a variety of interest rate scenarios that are deemed possible while considering the level of risk it is willing to assume in "worst-case" scenarios such as shown by the following:
Immediate Basis Point Change in Interest Rates Implied Federal Funds Rate Associated with Change in Interest Rates Estimated Increase or Decrease in Net Income Over 12 Months
September 30, 2025
+300 7.25 % (0.7) %
+200 6.25 1.7
+100 5.25 3.0
-100 3.25 (2.1)
-200 2.25 (5.9)
-300 1.25 (10.2)
December 31, 2024
+300 7.50 % 3.2 %
+200 6.50 5.9
+100 5.50 7.0
-100 3.50 (2.9)
-200 2.50 (7.8)
-300 1.50 (13.2)
These estimates are highly dependent upon assumptions made by management, including, but not limited to, assumptions regarding the manner in which interest-bearing demand deposit and savings deposit accounts reprice in different interest rate scenarios, changes in the composition of deposit balances, pricing behavior of competitors, prepayments of loans and deposits under alternative rate environments, and new business volumes and pricing. As a result, there can be no assurance that the estimates above will be achieved in the event that interest rates increase or decrease during the remainder of 2025 and beyond. The estimates above do not necessarily imply that the Company will experience increases in net income if market interest rates rise. The table above indicates how the Company's net income behaves relative to an increase in rates compared to what would otherwise occur if rates remain stable.
Liquidity and Capital Resources
Liquidity
The Company evaluates the adequacy of liquidity at both the City Holding level and at the City National level. At the City Holding level, the principal source of cash is dividends from City National. Dividends paid by City National to City Holding are subject to certain legal and regulatory limitations. Generally, any dividends in amounts that exceed the earnings retained by City National in the current year plus retained net profits for the preceding two years must be approved by regulatory authorities. At September 30, 2025, City National could pay dividends up to $135.5 million plus net profits for the remainder of 2025, as defined by statute, up to the dividend declaration date without prior regulatory permission.
Additionally, City Holding anticipates continuing the payment of dividends on its common stock, which are expected to approximate $47.4 million on an annualized basis over the next 12 months based on common shares outstanding at September 30, 2025. However, dividends to shareholders can, if necessary, be suspended. In addition to these anticipated cash needs, City Holding has operating expenses and other contractual obligations, which are estimated to require $2.0 million of additional cash over the next 12 months. As of September 30, 2025, City Holding reported a cash balance of $54.4 million and management believes that City Holding's available cash balance, together with cash dividends from City National, will be adequate to satisfy its funding and cash needs over the next 12 months.
As illustrated in the consolidated statements of cash flows, the Company generated $97.0 million of cash from operating activities during the first nine months of 2025, primarily from interest income received on loans and investments, net of interest expense paid on deposits and borrowings. The Company utilized $189.5 million of cash in investing activities during the first nine months of 2025, primarily due to purchases of available-for-sale securities of $267.9 million, a net increase in loans of $134.3 million, and payments of $8.6 million for low income housing tax credits. These purchases were partially offset by proceeds from maturities and calls on investment securities of $156.9 million and proceeds of $66.8 million on sales of investment securities. The Company generated $92.7 million of cash in financing activities during the first nine months of 2025, principally as a result of a net increase in interest-bearing deposits of $80.6 million, an increase in customer repurchase agreements of $43.4 million, and a net increase in non-interest bearing deposits of $32.9 million. These increases were partially offset by dividends paid of $34.7 million and purchases of treasury stock of $28.9 million.
City National has borrowing facilities with the Federal Reserve Bank and the Federal Home Loan Bank that can be accessed as necessary to fund operations and to provide contingency funding. These borrowing facilities are collateralized by various loans held on City National's balance sheet. As of September 30, 2025, City National had the capacity to borrow an additional $1.7 billion from these existing borrowing facilities. In addition, approximately $725 million of City National's investment securities were pledged to collateralize customer repurchase agreements and various deposit accounts, leaving approximately $815 million of City National's investment securities unpledged at September 30, 2025. City National also segregates certain mortgage loans, mortgage-backed securities, and other investment securities in a separate subsidiary so that it can separately monitor the asset quality of these primarily mortgage-related assets, which could be used to raise cash through securitization transactions or obtain additional equity or debt financing if necessary.
The Company manages its asset and liability mix to balance its desire to maximize net interest income against its desire to minimize risks associated with capitalization, interest rate volatility, and liquidity. Historically, the Company has utilized derivative instruments, when appropriate, to assist this goal. During the year ending December 31, 2020, the Company entered into three $50 million swap agreements that hedged interest rate risk on certain pools of the Company's investment securities. These agreements require the Company to pay rates ranging from 0.20% to 0.24%, while receiving the federal funds effective rate in return. Interest income and changes in market valuations from these swap agreements are recognized as investment income in the accompanying statements of income. These agreements mature in October ($50 million) and November ($100 million) of 2025. During the year ending December 31, 2023, the Company entered into a $100 million swap agreement that hedged interest rate risk on certain loans of the Company. This agreement requires the Company to pay 3.60%, while receiving SOFR in return. Interest income and changes in market valuations from this swap agreement are recognized as loan interest income in the accompanying statements of income. This agreement matures in March 2026.
With respect to liquidity, the Company has chosen a conservative posture and believes that its liquidity position is strong. The Company's net loan to asset ratio is 65.9% as of September 30, 2025 and deposit balances fund 78.9% of total assets. The Company has obligations to extend credit, but these obligations are primarily associated with existing home equity loans that have predictable borrowing patterns across the portfolio. The Company has investment security balances with carrying values that totaled $1.5 billion at September 30, 2025, and that exceeded the Company's non-deposit sources of borrowing, which totaled $519.0 million. Further, the Company's deposit mix has a high proportion of transaction and savings accounts that fund 59.3% of the Company's total assets. As interest rates increase, deposit balances may decline or the composition of the deposit portfolio may shift to higher yielding deposit products, such as money market accounts or time deposits.
As the following table reflects, approximately 15% (estimated) of the Company's deposits were uninsured (either with balances above $250,000 or not collateralized by investment securities) as of September 30, 2025.
Estimated Uninsured Deposits by Deposit Type
September 30, 2025 June 30, 2025
Noninterest-Bearing Demand Deposits 17 % 16 %
Interest-Bearing Deposits
Demand Deposits 15 % 14 %
Savings Deposits 13 % 12 %
Time Deposits 17 % 17 %
Total Deposits 15 % 15 %
The amounts listed above represent management's best estimate as of the respective period shown of uninsured deposits (either with balances above $250,000 or not collateralized by investment securities).
Capital Resources
Shareholders' equity increased $68.3 million for the nine months ended September 30, 2025, primarily due to net income of $98.9 million and other comprehensive income of $31.5 million. These increases were partially offset by cash dividends declared of $35.7 million and the repurchase of 255,494 common shares at a weighted average price of $113.09 per share ($28.9 million) as part of a one million share repurchase plan authorized by the Board of Directors in January 2024.
The Basel III Capital Rules require City Holding and City National to maintain minimum CET 1, Tier 1 and Total Capital ratios, along with a capital conservation buffer, effectively resulting in new minimum capital ratios (which are shown in the table below). The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of CET 1 capital to risk-weighted assets above the minimum but below the conservation buffer (or below the combined capital conservation buffer and countercyclical capital buffer, when the latter is applied) will face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall. The Basel III Capital Rules also provide for a "countercyclical capital buffer" that is applicable to only certain covered institutions and does not have any current applicability to the Company.
The Company's regulatory capital ratios for both City Holding and City National include the 2.5% capital conservation buffer are illustrated in the following tables (in thousands, except percentages):
September 30, 2025 Actual Minimum Required - Basel III Required to be Considered Well Capitalized
Capital Amount Ratio Capital Amount Ratio Capital Amount Ratio
CET I Capital
City Holding Company $ 726,739 17.2 % $ 295,870 7.0 % $ 274,736 6.5 %
City National Bank 667,193 15.8 294,962 7.0 273,893 6.5
Tier I Capital
City Holding Company 726,739 17.2 359,271 8.5 338,137 8.0
City National Bank 667,193 15.8 358,168 8.5 337,099 8.0
Total Capital
City Holding Company 746,422 17.7 443,805 10.5 422,671 10.0
City National Bank 686,876 16.3 442,443 10.5 421,374 10.0
Tier I Leverage Ratio
City Holding Company 726,739 11.1 262,814 4.0 328,517 5.0
City National Bank 667,193 10.2 262,067 4.0 327,583 5.0
December 31, 2024 Actual Minimum Required - Basel III Required to be Considered Well Capitalized
Capital Amount Ratio Capital Amount Ratio Capital Amount Ratio
CET I Capital
City Holding Company $ 688,707 16.5 % $ 291,989 7.0 % $ 271,133 6.5 %
City National Bank 563,301 13.6 291,068 7.0 270,277 6.5
Tier I Capital
City Holding Company 688,707 16.5 354,558 8.5 333,702 8.0
City National Bank 563,301 13.6 353,439 8.5 332,649 8.0
Total Capital
City Holding Company 709,820 17.0 437,983 10.5 417,127 10.0
City National Bank 584,415 14.1 436,602 10.5 415,811 10.0
Tier I Leverage Ratio
City Holding Company 688,707 10.6 259,325 4.0 324,156 5.0
City National Bank 563,301 8.7 258,477 4.0 323,096 5.0
As of September 30, 2025, management believes that City Holding Company and its banking subsidiary, City National, were "well capitalized." City Holding is subject to regulatory capital requirements administered by the Federal Reserve, while City National is subject to regulatory capital requirements administered by the Office of the Comptroller of the Currency ("OCC") and the Federal Deposit Insurance Corporation ("FDIC"). Regulatory agencies can initiate certain mandatory actions if either City Holding or City National fails to meet the minimum capital requirements, as shown above. As of September 30, 2025, management believes that City Holding and City National have met all capital adequacy requirements.
Depository institutions and depository institution holding companies that have less than $10 billion in total consolidated assets and meet other qualifying criteria, including a leverage ratio of greater than 9%, off-balance-sheet exposures of 25% or less of total consolidated assets and trading assets plus trading liabilities of 5% or less of total consolidated
assets, are deemed "qualifying community banking organizations" and are eligible to opt into the "community bank leverage ratio framework." A qualifying community banking organization that elects to use the community bank leverage ratio framework and that maintains a leverage ratio of greater than 9% is considered to have satisfied the generally applicable risk-based and leverage capital requirements under the Basel III Rules and, if applicable, is considered to have met the "well capitalized" ratio requirements for purposes of its primary federal regulator's prompt corrective action rules. The Company and its subsidiary bank do not have any immediate plans to elect to use the community bank leverage ratio framework but may make such an election in the future.
City Holding Company published this content on November 05, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on November 05, 2025 at 15:23 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]