City Holding Company Announces Record Quarterly Results

City Holding Company ("Company" or "City") (NASDAQ:CHCO), a $6.6 billion bank holding company headquartered in Charleston, West Virginia, today announced record quarterly net income of $33.4 million and diluted earnings of $2.29 per share for the quarter ended June 30, 2025. In the second quarter of 2025, the Company achieved a return on assets of 2.03% and a return on tangible equity of 22.7%.

Net Interest Income

The Company's net interest income increased approximately $3.1 million, or 5.6%, from $55.8 million during the first quarter of 2025 to $58.9 million during the second quarter of 2025. The Company's tax equivalent net interest income increased $3.1 million, or 5.5%, from $56.0 million for the first quarter of 2025 to $59.1 million for the second quarter of 2025. Due to an increase in the yield on loans of 18 basis points, net interest income increased $1.5 million as adjustable rate loans reprice upwards and new loans were added at higher yields. Additionally, net interest income increased by $1.0 million due to an increase in the average balance of investments ($91.7 million), by $0.7 million due to a decrease of three basis points in the cost of interest bearing liabilities, and by $0.4 million due to an increase in the yield of 15 basis points on investments. These increases were partially offset by an increase in the average balance of interest bearing liabilities ($63.2 million) which lowered net interest income by $0.4 million. The Company's reported net interest margin increased from 3.84% for the first quarter of 2025 to 3.95% for the second quarter of 2025.

Credit Quality

The Company's ratio of nonperforming assets to total loans and other real estate owned decreased from 0.38%, or $16.5 million, at March 31, 2025, to 0.33%, or $14.2 million, at June 30, 2025. Total past due loans increased from $7.5 million, or 0.18% of total loans outstanding, at March 31, 2025, to $8.0 million, or 0.18% of total loans outstanding, at June 30, 2025.

As a result of the Company's quarterly analysis of the adequacy of the allowance for credit losses ("ACL"), the Company recorded a recovery of credit losses of $2.0 million in the second quarter of 2025, compared to a provision for credit losses of $0.5 million for the comparable period in 2024 and no provision for credit losses for the first quarter of 2025. The recovery of credit losses in the second quarter was primarily due to an upgrade of a specific credit that was downgraded in the third quarter of 2023, but has since seen improved financial performance. This upgrade released $1.4 million of ACL reserves. Additionally, $0.3 million of reserves were reversed due to payoffs on purchase credit deteriorated loans during the quarter ended June 30, 2025. From January 1, 2023 through June 30, 2025, the Company had cumulative net charge-offs of $3.1 million.

Non-interest Income

Non-interest income was $19.2 million during the quarter ended June 30, 2025, as compared to $18.9 million during the quarter ended June 30, 2024. During the second quarter of 2025, the Company reported $0.2 million of realized investment gains and $0.3 million of unrealized fair value losses 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 second quarter of 2024.

Exclusive of these items, non-interest income increased $0.8 million, or 4.3%, from $18.6 million for the second quarter of 2024 to $19.4 million for the second quarter of 2025. This increase was attributable to an increase of $0.3 million in service fees, an increase of $0.3 million in wealth and investment management fee income, and an increase of $0.2 million in bank owned life insurance. As compared to the six months ended June 30, 2024, service fee income increased $0.4 million and bankcard revenues were flat for the six months ended June 30, 2025.

Non-interest Expenses

Non-interest expenses increased $2.2 million, or 6.1%, from $36.8 million in the second quarter of 2024 to $39.0 million in the second quarter of 2025. This increase was largely due to an increase of $1.2 million in salaries and employee benefits due to increased health insurance costs and salary adjustments. In addition, equipment and software related expenses increased $0.4 million, other tax-related matters increased $0.3 million, and repossessed asset losses increased $0.3 million.

Balance Sheet Trends

Loans increased $53.4 million (1.3%) from March 31, 2025 to $4.34 billion at June 30, 2025. Residential real estate loans increased $42.6 million (2.3%), commercial real estate loans increased $19.9 million (1.1%), and home equity loans increased $4.7 million (2.3%). These increases were partially offset by a decrease in commercial and industrial loans of $13.9 million.

Period-end deposit balances decreased $9.6 million from March 31, 2025 to June 30, 2025. Total average depository balances increased $64.3 million, or 1.2%, from the quarter ended March 31, 2025 to the quarter ended June 30, 2025. Average noninterest bearing deposits increased $27.1 million, average time deposits increased $18.6 million, average savings deposits increased $10.7 million, and average interest-bearing demand deposits increased $7.8 million.

Income Tax Expense

The Company's effective income tax rate for the second quarter of 2025 was 18.9%, compared to 19.0% for the year ended December 31, 2024 and 19.7% for the quarter ended June 30, 2024.

Capitalization and Liquidity

The Company's gross loan to deposit ratio was 82.7%, and its gross loan to asset ratio was 65.8% at June 30, 2025. The Company maintained investment securities totaling 24.1% of assets as of the same date. The Company's deposit mix is weighted heavily toward checking and saving accounts, which fund 60.0% of assets at June 30, 2025. Time deposits funded 19.5% of assets at June 30, 2025, with only 14.9% of time deposits having balances of more than $250,000, reflecting the core retail orientation of the Company.

City Holding Company is the parent company of City National Bank of West Virginia ("City National"). 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 June 30, 2025, City National had the capacity to borrow an additional $1.6 billion from these existing borrowing facilities. In addition, approximately $669 million of City National's investment securities were pledged to collateralize customer repurchase agreements and various deposit accounts, leaving approximately $924 million of City National's investment securities unpledged at June 30, 2025.

The Company continues to be strongly capitalized with tangible equity of $605 million at June 30, 2025. The Company's tangible equity ratio increased from 9.1% at December 31, 2024 to 9.4% at June 30, 2025. At June 30, 2025, City National's Leverage Ratio was 9.6%, its Common Equity Tier I ratio was 15.1%, its Tier I Capital ratio was 15.1%, and its Total Risk-Based Capital ratio was 15.6%. These regulatory capital ratios are significantly above levels required to be considered "well capitalized," which is the highest possible regulatory designation.

On May 28, 2025, the Board of Directors of the Company approved a quarterly cash dividend of $0.79 per share payable July 31, 2025 to shareholders of record as of July 15, 2025. During the quarter ended June 30, 2025, the Company repurchased 175,000 common shares at a weighted average price of $111.09 per share as part of a one million share repurchase plan authorized by the Board of Directors in January 2024. As of June 30, 2025, the Company could repurchase 566,000 additional shares under the current program. At June 30, 2025, City Holding Company had significant resources available to repurchase shares with a cash balance of $66 million and dividends available from City National of $65 million through the six months ended June 30, 2025. The parent company's annual expenditures are approximately $45 million (based on the Company's operating expenses, contractual obligations and current quarterly dividend of $0.79 per share).

City National operates 96 branches across West Virginia, Kentucky, Virginia, and Ohio.

Forward-Looking Information

This news release contains certain forward-looking statements that are included pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements express only management's beliefs regarding future results or events and are subject to inherent uncertainty, risks, and changes in circumstances, many of which are outside of management's control. Uncertainty, risks, changes in circumstances and other factors could cause the Company's actual results to differ materially from those projected in the forward-looking statements. Factors that could cause actual results to differ from those discussed in such forward-looking statements include, but are not limited to those set forth in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024 under "ITEM 1A Risk Factors" and the following: (1) general economic conditions, especially in the communities and markets in which we conduct our business; (2) credit risk, including risk that negative credit quality trends may lead to a deterioration of asset quality, risk that our allowance for credit losses may not be sufficient to absorb actual losses in our loan portfolio, and risk from concentrations in our loan portfolio; (3) changes in the real estate market, including the value of collateral securing portions of our loan portfolio; (4) changes in the interest rate environment; (5) operational risk, including cybersecurity risk and risk of fraud, data processing system failures, and network breaches; (6) changes in technology and increased competition, including competition from non-bank financial institutions; (7) changes in consumer preferences, spending and borrowing habits, demand for our products and services, and customers' performance and creditworthiness; (8) difficulty growing loan and deposit balances; (9) our ability to effectively execute our business plan, including with respect to future acquisitions; (10) changes in regulations, laws, taxes, government policies, monetary policies and accounting policies affecting bank holding companies and their subsidiaries, including changes in deposit insurance premiums; (11) deterioration in the financial condition of the U.S. banking system may impact the valuations of investments the Company has made in the securities of other financial institutions; (12) regulatory enforcement actions and adverse legal actions; (13) difficulty attracting and retaining key employees; and (14) other economic, competitive, technological, operational, governmental, regulatory, and market factors affecting our operations. Forward-looking statements made herein reflect management's expectations as of the date such statements are made. Such information is provided to assist stockholders and potential investors in understanding current and anticipated financial operations of the Company and is included pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances that arise after the date such statements are made. Further, the Company is required to evaluate subsequent events through the filing of its June 30, 2025 Form 10-Q. The Company will continue to evaluate the impact of any subsequent events on the preliminary June 30, 2025 results and will adjust the amounts if necessary.