City Holding Company

11/04/2026 | Press release | Distributed by Public on 11/04/2026 09:03

Quarterly Report for Quarter Ending September 30, 2026 (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 2025 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 2025 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 and (ii) income taxes 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 (ACL)
The ACL 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 ACL, the Company stratifies the loan portfolio into five major groupings. The Company has identified the following portfolio segments and measures the ACL 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. 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 ACL, with the most significant drivers being an unemployment rate forecast and qualitative adjustments. In the September 30, 2026 and December 31, 2025 estimates, the Company assumed a 2-year unemployment forecast range of 4.2% to 4.6%. Historical loss rates from periods where the average unemployment rate matches the forecast range are considered when calculating the forecast period loss rate.
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 $2.4 million impact on the reserve allocation. Changing each factor by 0.01% (moderate improvement or decline) would have a $4.8 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, 2026 estimate, management assigned a slight decline (0.005%) to the interest rate risk factor in each pool which increased the reserve by $0.2 million.
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, 2022 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.
Financial Summary
Nine months ended September 30, 2026 vs. 2025
The Company's financial performance is summarized in the following table:
Nine months ended September 30, 2026
2026 2025
Net income available to common shareholders (in thousands)
$ 99,642 $ 98,917
Earnings per common share, basic $ 6.99 $ 6.76
Earnings per common share, diluted $ 6.98 $ 6.75
Dividend payout ratio 39.2 % 36.3 %
ROA(1)
1.98 % 2.01 %
ROE(1)
16.4 % 17.4 %
ROATCE(1)
20.3 % 22.0 %
Average equity to average assets ratio 12.1 % 11.6 %
(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 $183.0 million for the nine months ended September 30, 2026 compared to $175.8 million for the nine months ended September 30, 2025 (see Net Interest Income). The Company recorded a provision for credit losses of $0.9 million for the nine months ended September 30, 2026 compared to a recovery of credit losses of $2.3 million for the nine months ended September 30, 2025 (see Allowance for Credit Losses). As further discussed under the caption Non-Interest Income and Non-Interest Expense, non-interest income increased $3.1 million and non-interest expense increased $5.0 million for the nine months ended September 30, 2026 from the nine months ended September 30, 2025.
Financial Summary
Three months ended September 30, 2026 vs. 2025
The Company's financial performance is summarized in the following table:
Three months ended September 30,
2026 2025
Net income available to common shareholders (in thousands)
$ 34,609 $ 35,188
Earnings per common share, basic $ 2.44 $ 2.41
Earnings per common share, diluted $ 2.43 $ 2.41
Dividend payout ratio 41.1 % 36.1 %
ROA(1)
2.03 % 2.11 %
ROE(1)
16.8 % 17.9 %
ROATCE(1)
20.9 % 22.5 %
Average equity to average assets ratio 12.0 % 11.8 %
(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 $62.6 million for the three months ended September 30, 2026 compared to $61.1 million for the three months ended September 30, 2025 (see Net Interest Income). The Company recorded a $0.1 million
recovery of credit losses for the three months ended September 30, 2026 compared to a $0.5 million recovery of credit losses for the three months ended September 30, 2025 (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 $2.6 million for the three months ended September 30, 2026 compared to the three months ended September 30, 2025.
Balance Sheet Analysis
Selected balance sheet fluctuations from the year ended December 31, 2025 are summarized in the following table (in millions, except percentages):
September 30, December 31,
2026 2025 $ Change % Change
Cash and cash equivalents $ 201.4 $ 191.9 $ 9.5 5.0 %
Total investment securities 1,489.5 1,532.8 (43.3) (2.8)
Gross loans 4,550.1 4,503.3 46.8 1.0
Total deposits 5,358.1 5,301.0 57.1 1.1
Cash and cash equivalents increased $9.5 million (5.0%) from December 31, 2025 to $201.4 million at September 30, 2026 primarily due to income from operations, an increase in deposit balances and proceeds from maturities and calls of available-for-sale securities that were partially offset by cash utilized for purchases of available-for-sale securities, common stock repurchases, and cash dividend payments.
Total investment securities decreased $43.3 million (2.8%) from December 31, 2025 to $1.49 billion at September 30, 2026, due to maturities and calls of available-for-sale securities and unrealized losses arising on available-for-sale securities that were partially offset by purchases of available-for-sale securities.
Gross loans increased $46.8 million (1.0%) from December 31, 2025 to $4.55 billion at September 30, 2026. Commercial and industrial loans increased $20.3 million (4.5%), commercial real estate loans increased $15.8 million (0.9%), and home equity loans increased $14.6 million (6.5%). These increases were partially offset by a decrease in consumer loans of $9.1 million.
Total deposits increased $57.1 million (1.1%) from December 31, 2025 to $5.4 billion at September 30, 2026. Savings deposits increased $49.6 million and non interest-bearing demand deposit balances increased $41.8 million. These increases were partially offset by decreases of $17.2 million in time deposits and $17.0 million in interest-bearing demand deposits.
Net Interest Income
Nine months ended September 30, 2026 vs. 2025
The Company's net interest income increased from $175.8 million for the nine months ended September 30, 2025 to $183.0 million for the nine months ended September 30, 2026. The Company's tax equivalent net interest income increased $7.4 million to $183.8 million for the nine months ended September 30, 2026 from $176.4 million in the nine months ended September 30, 2025. Net interest income increased due to an increase in average loan balances ($184.5 million) and decrease in cost of interest-bearing liabilities (21 basis points) which increased net interest income by $8.0 million and $7.5 million, respectively.
These increases were partially offset by a decrease in yield earned on investment securities (35 basis points) which decreased net interest income by $3.6 million and higher average balances of interest-bearing liabilities ($74.7 million) decreased net interest income by $1.5 million. In addition, a decrease in the yield on loans (3 basis points) and a decrease in the average balance balance of investment securities ($20.0 million) decreased net interest by $1.0 million, respectively. The Company's reported net interest margin increased slightly from 3.95% for the nine months ended September 30, 2025 to 4.00% for the nine months ended September 30, 2026.
Table One
Average Balance Sheets and Net Interest Income
(in thousands, except percentages)
Assets Nine months ended September 30,
2026 2025
Average
Balance
Interest
Yield/
Rate
Average
Balance
Interest
Yield/
Rate
Loan portfolio(1):
Residential real estate(2)
$ 2,145,391 $ 86,264 5.38 % $ 2,068,502 $ 81,373 5.26 %
Commercial, financial, and agriculture(2)
2,320,141 105,742 6.09 2,200,471 103,959 6.32
Installment loans to individuals(2),(3)
41,872 2,404 7.68 53,915 2,779 6.89
Total loans 4,507,404 194,410 5.77 4,322,888 188,111 5.82
Securities:
Taxable 1,344,555 39,565 3.93 1,390,756 45,239 4.35
Tax-exempt(4)
156,398 3,877 3.31 130,179 2,714 2.79
Total securities 1,500,953 43,442 3.87 1,520,935 47,953 4.22
Deposits in depository institutions 139,173 3,859 3.71 128,556 4,275 4.45
Total interest-earning assets 6,147,530 241,711 5.26 5,972,379 240,339 5.38
Cash and due from banks 101,874 96,370
Bank premises and equipment, net 68,206 69,721
Goodwill and intangible assets, net 157,094 159,162
Other assets 290,526 294,930
Less: Allowance for credit losses (20,232) (20,805)
Total assets $ 6,744,998 $ 6,571,757
Liabilities
Interest-bearing demand deposits $ 1,323,899 $ 8,516 0.86 % $ 1,336,129 $ 10,007 1.00 %
Savings deposits 1,276,586 7,359 0.77 1,242,141 6,921 0.74
Time deposits(2)
1,305,854 28,799 2.95 1,281,575 32,616 3.40
Customer repurchase agreements 373,915 8,537 3.05 345,735 9,672 3.74
FHLB advances 150,000 4,706 4.19 150,000 4,707 4.20
Total interest-bearing liabilities 4,430,254 57,917 1.75 4,355,580 63,923 1.96
Noninterest-bearing demand deposits 1,409,895 1,358,250
Other liabilities 90,661 97,024
Stockholders' equity 814,188 760,903
Total liabilities and stockholders' equity $ 6,744,998 $ 6,571,757
Net interest income $ 183,794 $ 176,416
Net yield on earning assets 4.00 % 3.95 %
(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:
2026 2025
Loan fees, net $ (131) $ 246
(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:
2026 2025
Residential real estate $ 176 $ 245
Commercial, financial and agriculture 1,403 1,741
Installment loans to individuals 7 6
Time deposits 6 13
$ 1,592 $ 2,005
(3) Includes the Company's consumer loan category.
(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, 2026 vs. 2025
Interest-earning assets:
Increase (Decrease)
Due to Change In:
Volume Rate Net
Loan portfolio
Residential real estate $ 3,025 $ 1,866 $ 4,891
Commercial, financial, and agriculture 5,654 (3,871) 1,783
Installment loans to individuals (621) 246 (375)
Total loans 8,058 (1,759) 6,299
Securities:
Taxable (1,503) (4,171) (5,674)
Tax-exempt(1)
547 616 1,163
Total securities (956) (3,555) (4,511)
Deposits in depository institutions 353 (769) (416)
Total interest-earning assets $ 7,455 $ (6,083) $ 1,372
Interest-bearing liabilities:
Interest-bearing demand deposits $ (92) $ (1,399) $ (1,491)
Savings deposits 192 246 438
Time deposits 618 (4,435) (3,817)
Customer repurchase agreements 788 (1,923) (1,135)
FHLB advances - (1) (1)
Total interest-bearing liabilities $ 1,506 $ (7,512) $ (6,006)
Net Interest Income $ 5,949 $ 1,429 $ 7,378
(1)Computed on a fully federal tax-equivalent basis assuming a tax rate of approximately 21%.
Net Interest Income
Three months ended September 30, 2026 vs. 2025
The Company's net interest income increased approximately $1.5 million, or 2.5%, from $61.1 million during the third quarter of 2025 to $62.6 million during the third quarter of 2026. The Company's tax equivalent net interest income increased approximately $1.6 million from $61.3 million for the third quarter of 2025 to $62.9 million for the third quarter of 2026 (see Non-GAAP section). Net interest income increased by $2.4 million due to an increase in average loan balances ($159.3 million) and increased $1.9 million due to a decrease in the cost of interest-bearing liabilities (18 basis points). An increase in average balance of deposits in depository institutions ($57.5 million) increased net interest income by $0.6 million.
These increases were partially offset by a lower yield earned on investment securities (37 basis points) and a decrease in average investment security balances ($60.4 million) which decreased net interest income by $1.3 million and $0.8 million, respectively. Additionally, a lower yield earned on loans (4 basis points) decreased net interest income by $0.5 million. The Company's reported net interest margin was 4.04% for both the third quarter of 2025 and 2026.
Table One
Average Balance Sheets and Net Interest Income
(in thousands, except percentages)
Assets Three months ended September 30,
2026 2025
Average
Balance
Interest
Yield/
Rate
Average
Balance
Interest
Yield/
Rate
Loan portfolio(1):
Residential real estate(2)
$ 2,152,553 $ 29,290 5.40 % $ 2,106,823 $ 28,235 5.32 %
Commercial, financial, and agriculture(2)
2,341,437 36,047 6.11 2,215,319 35,443 6.35
Installment loans to individuals(2),(3)
39,130 818 8.29 51,631 928 7.13
Total loans 4,533,120 66,155 5.79 4,373,773 64,606 5.86
Securities:
Taxable 1,350,579 13,516 3.97 1,435,540 15,947 4.41
Tax-exempt(4)
152,428 1,272 3.31 127,878 895 2.78
Total securities 1,503,007 14,788 3.90 1,563,418 16,842 4.27
Deposits in depository institutions 132,416 1,241 3.72 74,918 829 4.39
Total interest-earning assets 6,168,543 82,184 5.29 6,012,109 82,277 5.43
Cash and due from banks 103,504 96,097
Bank premises and equipment, net 67,280 69,355
Goodwill and intangible assets, net 156,594 158,619
Other assets 297,167 286,950
Less: Allowance for credit losses (20,076) (19,497)
Total assets $ 6,773,012 $ 6,603,633
Liabilities
Interest-bearing demand deposits $ 1,321,170 $ 2,958 0.89 % $ 1,329,234 $ 3,378 1.01 %
Savings deposits 1,293,386 2,561 0.79 1,241,494 2,348 0.75
Time deposits(2)
1,300,452 9,476 2.89 1,295,424 10,475 3.21
Customer repurchase agreements 360,377 2,734 3.01 343,903 3,196 3.69
FHLB advances 150,000 1,585 4.19 150,000 1,586 4.19
Total interest-bearing liabilities 4,425,385 19,314 1.73 4,360,055 20,983 1.91
Noninterest-bearing demand deposits 1,438,438 1,374,486
Other liabilities 94,127 89,456
Shareholders' equity 815,062 779,636
Total liabilities and shareholders' equity $ 6,773,012 $ 6,603,633
Net interest income $ 62,870 $ 61,294
Net yield on earning assets 4.04 % 4.04 %
(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:
2026 2025
Loan fees, net $ (78) $ 39
(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:
2026 2025
Residential real estate $ 65 $ 166
Commercial, financial and agriculture 435 535
Installment loans to individuals 3 2
Time deposits 2 3
$ 505 $ 706
(3) Includes the Company's consumer loan category.
(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, 2026 vs. 2025
Interest-earning assets:
Increase (Decrease)
Due to Change In:
Volume Rate Net
Loan portfolio
Residential real estate $ 613 $ 442 $ 1,055
Commercial, financial, and agriculture 2,018 (1,414) 604
Installment loans to individuals (225) 115 (110)
Total loans 2,406 (857) 1,549
Securities:
Taxable (944) (1,487) (2,431)
Tax-exempt(1)
172 205 377
Total securities (772) (1,282) (2,054)
Deposits in depository institutions 636 (224) 412
Total interest-earning assets $ 2,270 $ (2,363) $ (93)
Interest-bearing liabilities:
Interest-bearing demand deposits $ (20) $ (400) $ (420)
Savings deposits 98 115 213
Time deposits 41 (1,040) (999)
Customer repurchase agreements 153 (615) (462)
FHLB advances - (1) (1)
Total interest-bearing liabilities $ 272 $ (1,941) $ (1,669)
Net Interest Income $ 1,998 $ (422) $ 1,576
(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,
2026 2025 2026 2025
Net interest income ("GAAP") $ 62,605 $ 61,107 182,981 175,846
Taxable equivalent adjustment 265 187 813 570
Net interest income, fully taxable equivalent $ 62,870 $ 61,294 $ 183,794 $ 176,416
Equity to assets ("GAAP") 11.52 % 11.98 %
Effect of goodwill and other intangibles, net (2.09) (2.14)
Tangible common equity to tangible assets 9.43 % 9.84 %
The following table presents estimated uninsured deposits by type as of September 30, 2026 and December 31, 2025:
September 30, 2026
December 31, 2025
Noninterest-Bearing Demand Deposits 19 % 16 %
Interest-Bearing Deposits
Demand Deposits 13 % 14 %
Savings Deposits 13 % 13 %
Time Deposits 17 % 17 %
Total Uninsured 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).
Loans
Table Three
Loan Portfolio
The composition of the Company's loan portfolio as of the dates indicated follows (in thousands):
September 30, 2026 December 31, 2025 September 30, 2025
Commercial and industrial $ 474,251 $ 453,975 $ 426,654
1-4 Family 226,367 210,232 204,280
Hotels 403,794 398,608 397,338
Multi-family 230,172 237,424 233,678
Non Residential Non-Owner Occupied 772,072 767,580 728,625
Non Residential Owner Occupied 250,683 253,398 239,058
Commercial real estate 1,883,088 1,867,242 1,802,979
Residential real estate 1,915,322 1,910,060 1,909,791
Home equity 239,264 224,701 218,750
Consumer 38,215 47,353 50,056
Total loans $ 4,550,140 $ 4,503,331 $ 4,408,230
Loan balances increased $46.8 million from December 31, 2025 to September 30, 2026.
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 $20.3 million from December 31, 2025 to September 30, 2026.
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 $15.8 million from December 31, 2025 to September 30, 2026. At September 30, 2026, $46.9 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:
â—¦Commercial 1-4 Family loans increased $16.1 million from December 31, 2025 to September 30, 2026. Commercial 1-4 Family loans consist of residential single-family, duplex, triplex, and fourplex rental properties and totaled $226.4 million as of September 30, 2026. 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.
â—¦Hotel loans increased $5.2 million from December 31, 2025 to September 30, 2026. The Hotel portfolio is comprised of all lodging establishments and totaled $403.8 million as of September 30, 2026. Risk characteristics relate to the demand for travel.
â—¦Multi-family loans decreased $7.3 million from December 31, 2025 to September 30, 2026. Multi-family consists of 5 or more family residential apartment lending. The portfolio totaled $230.2 million as of September 30, 2026. Risk characteristics are driven by rental housing demand as well as economic and employment conditions.
â—¦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 $772.1 million at September 30, 2026 and increased $4.5 million from December 31, 2025 to September 30, 2026.
â—¦Nonresidential owner-occupied commercial real estate totaled $250.7 million at September 30, 2026 and decreased $2.7 million from December 31, 2025. Risk characteristics relate to levels of consumer spending and overall economic conditions.
The following table presents information regarding the various sectors within the Company's commercial loan portfolio as of September 30, 2026:
Commercial Loan Information % of Total Average Average
Sector Total Loans DSC LTV
Natural Gas Extraction $ 63,211 1.39% 3.60 NA
Natural Gas Distribution 18,130 0.40% 3.08 NA
Masonry Contractors 18,460 0.41% 1.04 100%
Sheet Metal Work Manufacturing 26,437 0.58% 1.40 68%
Beer & Ale Merchant Wholesalers 24,590 0.54% 1.59 NA
Gasoline Stations with Convenience Stores 44,987 0.99% 2.02 65%
Lessors of Residential Buildings & Dwellings 511,898 11.27% 1.56 66%
1-4 Family 193,595 4.26% 1.82 63%
Multi-Family 205,768 4.53% 1.76 68%
Lessors of Nonresidential Buildings 620,918 13.68% 1.33 65%
Office Buildings 158,469 3.49% 1.65 62%
Lessors of Mini-Warehouses & Self-Storage Units 54,735 1.21% 1.44 64%
Assisted Living Facilities 24,773 0.55% 1.58 41%
Hotels & Motels 404,188 8.90% 1.75 58%
Average Median
Balance Balance
Commercial, Financial & Agriculture Loans $ 516 $ 107
Commercial Real Estate Loans 582 137
Residential real estate loans increased $5.3 million from December 31, 2025 to September 30, 2026. 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, 2026, $12.8 million of the residential real estate loans were for properties under construction.
Home equity loans increased by $14.6 million during the first nine months of 2026. 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 $9.1 million during the first nine months of 2026.
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 $0.1 million in the third quarter of 2026 compared to a $0.5 million recovery of credit losses recorded in the third quarter of 2025.
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, 2026 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,
2026 2025 2025
Commercial and industrial $ 3,614 $ 2,831 $ 3,083
1-4 Family 1,447 1,425 1,426
Hotels 1,871 2,059 2,009
Multi-family 1,250 1,496 1,238
Non Residential Non-Owner Occupied 2,801 3,165 3,102
Non Residential Owner Occupied 1,834 1,788 1,777
Commercial real estate 9,203 9,933 9,552
Residential real estate 6,010 5,596 5,909
Home equity 633 436 608
Consumer 164 261 177
Allowance for Credit Losses $ 19,624 $ 19,057 $ 19,329
Loans outstanding $ 4,550,140 $ 4,408,230 $ 4,503,331
Allowance as a percent of loans outstanding 0.43 % 0.43 % 0.43 %
Allowance as a percent of non-performing loans 183.2 % 138.2 % 138.9 %
Nine months ended September 30, For year ended December 31,
2026 2025 2025
Average loans outstanding $ 4,533,120 $ 4,373,773 $ 4,431,079
Net (recoveries) charge-offs (annualized) as a percent of average loans outstanding 0.01 % (0.04) % 0.08 %
The Allowance for Credit Losses increased slightly from $19.3 million at December 31, 2025 to $19.6 million at September 30, 2026. The Company recorded a recovery of credit losses of $0.1 million in the third quarter of 2026, compared to a recovery of credit losses of $0.5 million for the comparable period in 2025, and a provision for credit losses of $0.4 million for the second quarter of 2026. The recovery of credit losses in the third quarter of 2026 was primarily related to the upgrade of a commercial real estate loan and a marginal decrease in the historical loss rates for commercial and residential real estate loans during the quarter ended September 30, 2026 These decreases were partially offset by revisions to qualitative adjustment factors and the downgrade of a commercial loan ($0.25 million) during the quarter ended September 30, 2026.
As of September 30, As of December 31,
2026 2025 2025
Nonaccrual Loans
Residential real estate $ 2,866 $ 2,624 $ 4,497
Home equity 250 498 308
Commercial and industrial 625 555 557
Commercial real estate 6,840 9,169 8,448
Consumer - - -
Total nonaccrual loans 10,581 12,846 13,810
Accruing loans past due 90 days or more 132 946 109
Total non-performing loans 10,713 13,792 13,919
Other real estate owned 180 485 482
Total non-performing assets $ 10,893 $ 14,277 $ 14,401
Non-performing assets as a percent of loans and other real estate owned 0.24 % 0.32 % 0.32 %
Past Due Loans
Residential real estate $ 6,808 $ 5,635 $ 6,461
Home equity 643 651 772
Commercial and industrial 104 140 279
Commercial real estate 557 1,314 291
Consumer 181 221 308
Total past due loans $ 8,293 $ 7,961 $ 8,111
Total past due loans as a percent of loans outstanding 0.18 % 0.18 % 0.18 %
Non-Interest Income and Non-Interest Expense
Nine months ended September 30, 2026 vs. 2025
(in millions, except percentages)
Nine months ended September 30,
2026 2025 $ Change % Change
Non-interest income, excluding net investment securities gains (losses) $ 62.1 $ 59.1 3.0 5.1
Non-interest income as a percent of total revenue 25.4 % 25.1 %
Non-interest expense $ 120.4 $ 115.4 5.0 4.4
Efficiency ratio 48.4 % 48.3 %
Non-Interest Income: Non-interest income was $62.2 million for the nine months ended September 30, 2026, as compared to $59.1 million for the nine months ended September 30, 2025. During the nine months ended September 30, 2026, the Company reported $0.1 million of unrealized fair value gains on the Company's equity securities compared to $0.2 million of realized investment gains and $0.2 million of unrealized fair value losses on the Company's equity securities during the nine months ended September 30, 2025.
Excluding net investment securities gains and losses, non-interest income increased from $59.1 million for the nine months ended September 30, 2025 to $62.1 million for the nine months ended September 30, 2026. The increase was largely attributable to an increase in wealth and investment management fee income of $1.2 million (13.0%), an increase in services charges of $1.1 million (4.9%), and an increase in bankcard revenue of $0.5 million (2.3%).
Non-Interest Expense: Non-interest expenses increased $5.0 million (4.4%), from $115.4 million in the first nine months of 2025 to $120.4 million in the first nine months of 2026 primarily due to an increase in salaries and employee benefits ($2.6 million), other tax related matters ($0.7 million), advertising costs ($0.5 million), and other expenses ($0.5 million).
Income Tax Expense: The Company's effective income tax rate for the nine months ended September 30, 2026 was 19.5% compared to 18.9% for the nine months ended September 30, 2025.
Non-Interest Income and Non-Interest Expense
Three months ended September 30, 2026 vs. 2025
(in millions, except percentages)
Three months ended September 30,
2026 2025 $ Change % Change
Non-interest income $ 21.4 $ 20.5 0.9 4.4
Non-interest income as a percent of total revenue 25.4 % 24.7 %
Non-interest expense $ 40.9 $ 38.3 2.6 6.8
Efficiency ratio 48.0 % 46.0 %
Non-Interest Income: Non-interest income increased $0.9 million, or 4.4%, from $20.5 million for the third quarter of 2025 to $21.4 million for the third quarter of 2026. This increase was due to an increase of $0.5 million, or 6.0%, in service charges and an increase of $0.3 million, or 10.5%, in wealth and investment management fee income.
Non-Interest Expense: Non-interest expenses increased $2.6 million from $38.3 million in the third quarter of 2025 to $40.9 million in the third quarter of 2026. The increase during the quarter ended September 30, 2026 was largely due to an increase in salaries and employee benefit expenses of $1.1 million due to salary adjustments, increased incentive compensation, and increased health insurance costs. In addition, other expenses increased $0.5 million and advertising expenses increased $0.4 million.
Income Tax Expense: The Company's effective income tax rate for the three months ended September 30, 2026 and September 30, 2025 was 19.9%, and 19.7%, respectively.
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, 2026
+300 7.00 % (0.8) %
+200 6.00 1.4
+100 5.00 1.9
-100 3.00 (1.4)
-200 2.00 (4.1)
-300 1.00 (9.4)
December 31, 2025
+300 6.75 % 0.2 %
+200 5.75 2.6
+100 4.75 3.1
-100 2.75 (1.6)
-200 1.75 (4.8)
-300 0.75 (10.0)
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 2026 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, 2026, City National could pay dividends up to $118.1 million plus net profits for the remainder of 2026, 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 $56.3 million on an annualized basis over the next 12 months based on common shares outstanding at September 30, 2026. 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 $2.9 million of additional cash over the next 12 months. As of September 30, 2026, City Holding reported a cash balance of $74.0 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 $106.5 million of cash from operating activities during the first nine months of 2026, primarily from interest income received on loans and investments, net of interest expense paid on deposits and borrowings. The Company utilized $78.0 million of cash in investing activities during the first nine months of 2026, primarily due to $210.5 million in purchases of available for sale securities which was partially offset by proceeds from maturities and calls on investment securities of $183.6 million. The Company utilized $19.0 million of cash in financing activities during the first nine months of 2026 due to purchases of treasury stock of $38.1 million and dividends paid of $37.2 million. The cash utilized for financing activities was partially offset by a net increase in non-interest bearing deposits of $41.8 million and a net increase in interest-bearing deposits of $15.4 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, 2026, City National had the capacity to borrow an additional $1.8 billion from these existing borrowing facilities. In addition, approximately $688 million of City National's investment securities were pledged to collateralize customer repurchase agreements and various deposit accounts, leaving approximately $801 million of City National's investment securities unpledged at September 30, 2026. 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 ended 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 matured 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 matured 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 66.8% as of September 30, 2026 and deposit balances fund 79.0% 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, 2026, and that exceeded the Company's non-deposit sources of borrowing, which totaled $517.4 million. Further, the Company's deposit mix has a high proportion of transaction and savings accounts that fund 60.0% 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.
Capital Resources
Shareholders' equity decreased $28.1 million for the nine months ended September 30, 2026, primarily due to other comprehensive loss of $54.4 million, cash dividends declared of $38.7 million, and the repurchase of 321,173 common shares at a weighted average price of $118.65 per share ($38.1 million) as part of the one million share repurchase plans authorized by the Board of Directors in January 2024 and March 2026. These decreases were partially offset by net income of $99.6 million.
The Company continues to be strongly capitalized with tangible equity of $625 million at September 30, 2026. Due primarily to unrealized security losses, the Company's tangible equity ratio decreased from 9.9% at December 31, 2025 to 9.4% at September 30, 2026. Additionally, average equity to average assets remained at 12.0% at both December 31, 2025 and September 30, 2026.
The Basel III Capital Rules require City Holding and City National to maintain minimum Common Equity Tier I (CET I), Tier I 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 I 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, 2026 Actual Minimum Required - Basel III
Required to be Considered Well Capitalized (1)
Capital Amount Ratio Capital Amount Ratio Capital Amount Ratio
CET I Capital
City Holding Company $ 758,756 17.1 % $ 309,825 7.0 % N/A
City National Bank 682,684 15.5 308,889 7.0 286,825 6.5
Tier I Capital
City Holding Company 758,756 17.1 376,216 8.5 354,086 8.0
City National Bank 682,684 15.5 375,079 8.5 353,016 8.0
Total Capital
City Holding Company 779,017 17.6 464,738 10.5 442,607 10.0
City National Bank 702,944 15.9 463,333 10.5 441,270 10.0
Tier I Leverage Ratio
City Holding Company 758,756 11.3 269,583 4.0 N/A
City National Bank 682,684 10.2 268,878 4.0 336,097 5.0
December 31, 2025 Actual Minimum Required - Basel III
Required to be Considered Well Capitalized (1)
Capital Amount Ratio Capital Amount Ratio Capital Amount Ratio
CET I Capital
City Holding Company $ 730,153 16.9 % $ 301,848 7.0 % N/A
City National Bank 576,928 13.4 300,911 7.0 279,418 6.5
Tier I Capital
City Holding Company 730,453 16.9 366,530 8.5 344,969 8.0
City National Bank 576,928 13.4 365,392 8.5 343,899 8.0
Total Capital
City Holding Company 750,319 17.4 452,772 10.5 431,211 10.0
City National Bank 596,794 13.9 451,367 10.5 429,873 10.0
Tier I Leverage Ratio
City Holding Company 730,453 11.0 266,566 4.0 N/A
City National Bank 576,928 8.7 265,801 4.0 332,252 5.0
1.Ratios reflect required well-capitalized standards under Regulation Y for City Holding Company and the prompt corrective action framework for City National Bank
As of September 30, 2026, 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, 2026, 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 04, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 04, 2026 at 15:03 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]