CITY HOLDING CO

City Holding Company (CHCO) operates as a financial holding company primarily through its wholly-owned subsidiary, City National Bank of West Virginia ("City National"), focusing on community banking ¹. The company's business activities are limited to this single reportable segment, offering commercial banking, consumer banking, mortgage banking, and wealth and investment management services ¹. City National serves a diverse customer base across West Virginia, Kentucky, Virginia, and southeastern Ohio, operating through a network of 96 bank branches and 934 full-time equivalent associates ¹. The company emphasizes strong customer relationships and a diversified loan portfolio, with no single depositor having a material adverse effect on liquidity or capital ¹.

City National competes with national, regional, and local community banks, as well as credit unions, finance companies, financial technology ("fintech") companies, mutual funds, and insurance companies ¹. The company's competitive advantages are not explicitly detailed beyond its ability to develop and maintain long-term customer relationships, expand its market area and services, keep up with technological advancements, and ensure customer satisfaction ¹. City National holds approximately 13% of the deposit market share in its West Virginia counties, 24% in eastern Kentucky, 5% in Virginia's I-81 corridor counties, and 19% in Lawrence County, Ohio ¹.

The core business model revolves around generating net interest income from its loan and investment portfolios, complemented by non-interest income from various banking services. Revenue is generated from commercial, consumer, and mortgage banking, as well as wealth and investment management services ¹. The company's income is a mix of recurring fees (e.g., wealth management fees, service charges) and transactional income (e.g., loan interest, bankcard revenue) ¹. Primary customer segments include corporations, other business customers, and individual consumers ¹.

The company's product and service lines are categorized into Commercial Banking, Consumer Banking, Mortgage Banking, and Wealth and Investment Management Services ¹. Commercial Banking provides loans for commercial and industrial projects, income-producing commercial real estate, owner-occupied real estate, and construction and land development, alongside deposit services like treasury and cash management ¹. As of December 31, 2025, Commercial and Industrial loans totaled $454.0 million ¹. Commercial Real Estate loans, totaling $1.87 billion ¹, are further segmented into Commercial 1-4 Family ($210.2 million) ¹, Hotels ($398.6 million) ¹, Multi-family ($237.4 million) ¹, Non-residential Non-Owner Occupied ($767.6 million) ¹, and Non-residential Owner Occupied ($253.4 million) ¹. Residential mortgage and home equity loans comprised approximately 47% of the total loan portfolio at December 31, 2025 ¹. Residential Real Estate loans amounted to $1.91 billion ¹, and Home Equity loans were $224.7 million ¹. Consumer loans totaled $47.4 million ¹, and DDA overdrafts were $3.7 million ¹. Wealth and Investment Management Services include personal trusts, estates, investment account management, employee benefit plans, charitable foundations, corporate trust, institutional custody, financial and estate planning, and retirement plan services ¹.

For the fiscal year ended December 31, 2025, the company reported net income available to common shareholders of $130,485 thousand ², up from $117,101 thousand in 2024 ². Basic earnings per common share were $8.94 ², and diluted earnings per common share were $8.93 ². Total interest income was $321,216 thousand ², and total interest expense was $84,813 thousand ², resulting in net interest income of $236,403 thousand ². The company recorded a recovery of provision for credit losses of $1,400 thousand ². Non-interest income totaled $77,765 thousand ², and non-interest expense was $154,103 thousand ². Cash and cash equivalents decreased by $33.5 million ³ to $191.9 million ³. Total deposits increased by $156.8 million ³ to $5.301 billion ³. Gross loans increased by $232.2 million ³ to $4.507 billion ³. The allowance for credit losses decreased from $21,922 thousand ⁴ in 2024 to $19,862 thousand ⁴ in 2025.

Year-over-year, net income available to common shareholders increased by $13,384 thousand ² from 2024 to 2025. Diluted EPS increased from $7.89 ² in 2024 to $8.93 ² in 2025. Net interest income increased by $16.1 million ³ or 7.3% ³ from $220.2 million ³ in 2024 to $236.4 million ³ in 2025. The reported net interest margin increased from 3.86% ³ in 2024 to 3.94% ³ in 2025. Non-interest income, excluding net investment securities losses, increased by $2.2 million ³ or 2.9% ³ from $76.0 million ³ in 2024 to $78.2 million ³ in 2025, driven by a $1.1 million ³ (9.7%) ³ increase in wealth and investment management fee income and a $0.8 million ³ (2.6%) ³ increase from service charges. Non-interest expenses increased by $6.9 million ³ or 4.7% ³ from $147.2 million ³ in 2024 to $154.1 million ³ in 2025, primarily due to increases in salaries and employee benefits ($2.8 million) ³, other tax-related matters ($1.3 million) ³, and equipment and software related expenses ($1.3 million) ³.

During 2025, the company's fair value hedge agreements related to certain securities, with a total notional amount of $150 million ⁵ and amortized cost of $282.5 million ⁵ at December 31, 2024, matured ⁵. The company also initiated the termination of the Pentegra DB Plan associated with the acquisition of Classic Bancshares, incurring a charge of $0.4 million ⁶ in connection with this termination ⁶. The process is anticipated to be finalized in mid-2026 ⁶.

The Parent Company anticipates continuing the payment of dividends, which are expected to approximate $50.0 million ⁷ on an annualized basis for 2026, based on common shareholders of record at December 31, 2025, at a dividend rate of $3.48 per share ⁷ for 2026. In addition to these anticipated cash needs, the Parent Company has operating expenses and other contractual obligations estimated to require $2.2 million ⁷ of additional cash over the next 12 months ⁷.

The company's future success depends on its ability to address the needs and preferences of its customers by using technology to provide products and services that enhance customer convenience and create additional efficiencies in operations ¹. The company may implement new lines of business, enter new market areas, or offer new products and services from time to time, which are associated with substantial risks and uncertainties ¹.

Management believes that its liquidity position is strong, with $131.4 million ⁸ of cash generated from operating activities during 2025 ⁸. City National had an additional $1.7 billion ⁹ and $1.5 billion ⁹ available from unused portions of lines of credit with the FHLB and Federal Reserve Discount Window at December 31, 2025, and 2024, respectively ⁹. The company's policy objective is to avoid negative fluctuations in net income of more than 15% ¹⁰ within a 12-month period, assuming an immediate parallel increase or decrease of 100 to 300 basis points ¹⁰.

The company's ability to raise additional capital, whether in the form of debt or equity, is dependent on several factors, including the condition of capital markets, investment demand, and the company's financial condition and performance ¹. The issuance of debt may increase capital costs and reduce liquidity, while the issuance of equity securities may reduce the value of common stock and have a dilutive effect on existing holders ¹.

The company faces significant risks from economic conditions in its market areas of West Virginia, Kentucky, Virginia, and southeastern Ohio, including potential downturns, prolonged increases in inflation, and increases in the cost of capital and credit, which could negatively impact loan delinquencies, problem assets, foreclosures, and collateral values ¹. The oil, natural gas, and coal industries, which play an important role in these economies, are subject to price volatility and decline, posing a risk to the company's customers and financial condition ¹. Credit risk is inherent in lending activities, with a substantial portion of the loan portfolio comprised of residential and commercial real estate loans, making the company vulnerable to fluctuations in real estate values and potential under-collateralization ¹. Changes in interest rates, influenced by factors beyond the company's control such as Federal Reserve policies, could adversely affect net interest income, earnings, and borrowers' ability to repay loans ¹. The allowance for credit losses, which is inherently subjective, may not be sufficient to cover actual losses, and regulatory agencies may require increases, leading to decreases in net income and capital ¹. Increased competition from various financial service providers, including non-bank and fintech companies, could hinder the company's ability to attract and retain customers, potentially reducing loan and deposit growth ¹. Operational risks include reliance on third-party vendors for critical systems, which could lead to disruptions, increased expenses, and reputational damage if these systems fail or are compromised ¹. Cybersecurity threats, including hacking, identity theft, and fraud, pose a risk of significant liability, reputational damage, and increased operating costs, despite the company's efforts to implement security controls ¹. The company's risk management practices may prove inadequate or not fully effective in identifying or mitigating all risks, potentially leading to unexpected losses ¹. The unexpected loss of key management personnel could adversely affect operations, as competition for skilled employees is intense and the hiring pool is limited by specific geographic markets ¹. Severe weather, natural disasters, acts of war or terrorism, and political instability could significantly impact the company's ability to conduct business, affecting loan repayments, collateral values, and deposit stability ¹. Climate change presents multi-faceted risks, including operational risk from physical effects on facilities, credit risk from exposed borrowers, transition risks to a less carbon-dependent economy, and reputational risk from stakeholder concerns ¹.

Management's message to shareholders conveys a commitment to prudent financial management and a strong capital position, with City Holding Company and City National Bank believed to be "well capitalized" as of December 31, 2025 ¹¹. The company anticipates continuing its dividend payments, projecting approximately $50.0 million ⁷ on an annualized basis for 2026, at a rate of $3.48 per share ⁷. Strategic priorities emphasize maintaining a conservative liquidity posture, effectively managing interest rate risk through asset and liability management strategies, and continuously evaluating and modifying underwriting standards for its loan portfolio ¹. Management also highlights its ongoing investment in employee development and competitive compensation programs, while adhering to regulatory guidelines on incentive compensation ¹. The company remains focused on its community banking segment, aiming to serve the credit, deposit, and wealth management needs of its customers across its geographical footprint ¹.