CITY HOLDING CO

Previous wording

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 June 30, 2024 estimate, the Company assumed a 2-year unemployment forecast range of 4.0% to 4.7%, changed from 3.9% to 4.7% for the March 31, 2024 estimate. Historical loss rates from periods where the average unemployment rate matches the forecast range are considered when calculating the forecast period loss rate. The change had no material impact.

Current wording

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, 2024 estimate, the Company assumed a 2-year unemployment forecast range of 4.3% to 4.9%, changed from 4.0% to 4.7% for the June 30, 2024 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 increased the reserve $0.2 million for the quarter.

Previous wording

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 $2.1 million impact on the reserve allocation. Changing each factor by 0.01% (moderate improvement or decline) would have a $4.3 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 June 30, 2024 estimate, no changes were made to the qualitative factors utilized in the previous quarter.

Current wording

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 $2.2 million impact on the reserve allocation. Changing each factor by 0.01% (moderate improvement or decline) would have a $4.3 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, 2024 estimate, no changes were made to the qualitative factors utilized in the previous quarter.

Previous wording

The calculation of the Company's acquisition and preliminary purchase price allocation is considered a critical accounting estimate as it involves a significant level of estimation and uncertainty, particularly in relation to the fair value and goodwill calculations. Under GAAP, management has up to twelve months following the date of the acquisition to finalize the fair value of acquired assets and liabilities. The measurement period ends as soon as the Company receives information it was seeking about facts and circumstances that existed as of the acquisition date or learns that more information is not obtainable. Any subsequent adjustments to the fair value of the acquired assets and liabilities, intangible assets or other purchase accounting adjustments will resultin adjustments to the goodwill recorded. As of June 30, 2024, twelve months have occurred since the date of acquisition on March 10, 2023, and the measurement period is now complete.

Current wording

The calculation of the Company's acquisition and preliminary purchase price allocation is considered a critical accounting estimate as it involves a significant level of estimation and uncertainty, particularly in relation to the fair value and goodwill calculations. Under GAAP, management has up to twelve months following the date of the acquisition to finalize the fair value of acquired assets and liabilities. The measurement period ends as soon as the Company receives information it was seeking about facts and circumstances that existed as of the acquisition date or learns that more information is not obtainable. Any subsequent adjustments to the fair value of the acquired assets and liabilities, intangible assets or other purchase accounting adjustments will resultin adjustments to the goodwill recorded. As of September 30, 2024, over twelve months have occurred since the date of acquisition on March 10, 2023, and the measurement period is now complete.

Previous wording

The Company's net interest income for the six months ended June 30, 2024 increased $0.1 million compared to the six months ended June 30, 2023 (see Net Interest Income). The Company recorded a provision for credit losses of $0.3 million for the six months ended June 30, 2024 compared to a provision of credit losses of $3.3 million for the six months ended June 30, 2023 (see Allowance for Credit Losses). As further discussed under the caption Non-Interest Income and Non-Interest Expense, non-interest income decreased $2.1 million and non-interest expense decreased $0.7 million for the six months ended June 30, 2024 from the six months ended June 30, 2023.

Current wording

The Company's net interest income for the nine months ended September 30, 2024 increased $0.1 million compared to the nine months ended September 30, 2023 (see Net Interest Income). The Company recorded a provision for credit losses of $1.5 million for the nine months ended September 30, 2024 compared to a provision of credit losses of $3.5 million for the nine months ended September 30, 2023 (see Allowance for Credit Losses). As further discussed under the caption Non-Interest Income and Non-Interest Expense, non-interest income increased $0.8 million and non-interest expense increased $1.9 million for the nine months ended September 30, 2024 from the nine months ended September 30, 2023.

Previous wording

The Company's net interest income for the three months ended June 30, 2024 decreased $0.9 million compared to the three months ended June 30, 2023 (see Net Interest Income). The Company recorded a $0.5 million provision for credit losses for the three months ended June 30, 2024 compared to a $0.4 million provision for credit losses for the three months ended June 30, 2023 (see Allowance for Credit Losses). As further discussed under the caption Non-Interest Income and Non-Interest

Current wording

The Company's net interest income was $55.6 million for the three months ended September 30, 2024 and September 30, 2023, respectively (see Net Interest Income). The Company recorded a $1.2 million provision for credit losses for the three months ended September 30, 2024 compared to a $0.2 million provision for credit losses for the three months ended September 30, 2023 (see Allowance for Credit Losses). As further discussed under the caption Non-Interest Income and

Previous wording

Expense, non-interest income decreased $1.4 million and non-interest expense increased $2.0 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

Current wording

Non-Interest Expense, non-interest income increased $2.9 million and non-interest expense increased $2.6 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

Previous wording

Cash and cash equivalents increased $61.7 million (39.5%) from December 31, 2023 to $218.0 million at June 30, 2024, due to a decrease in gross loans, an increase in FHLB long-term advances, and an increase in deposit balances. These increasing impacts were partially offset by an increase in investment securities and a decrease in federal funds purchased.

Current wording

Cash and cash equivalents increased $137.6 million (88.0%) from December 31, 2023 to $293.9 million at September 30, 2024, primarilydue to an increase in deposit balances and an increase in FHLB long-term advances. These increasing impacts were partially offset by an increase in investment securities.

Previous wording

Total investment securities increased$118.8 million (8.7%) from December 31, 2023 to$1.49 billion at June 30, 2024, primarily due to security purchases that were partially offset by maturities and calls.

Current wording

Total investment securities increased$124.6 million (9.1%) from December 31, 2023 to$1.49 billion at September 30, 2024, primarily due to security purchases that were partially offset by maturities and calls.

Previous wording

Total deposits increased $133.0 million (2.7%) from December 31, 2023 to $5.1 billion at June 30, 2024. Time deposit balances increased $104.6 million, interest-bearing demand deposit balances increased $42.2 million, and noninterest-bearing demand deposit balances increased $11.9 million. These increases were partially offset by a decrease in savings deposit balances of $25.6 million.

Current wording

Total deposits increased $168.4 million (3.4%) from December 31, 2023 to $5.1 billion at September 30, 2024. Time deposit balances increased $162.1 million and interest-bearing demand deposit balances increased $60.2 million. These increases were partially offset by a decrease in savings deposit balances of $50.6 million and a decrease in noninterest-bearing demand deposit balances of $3.3 million.

Previous wording

FHLB long-term advances increased $50.0 million from December 31, 2023 to June 30, 2024. During the first six months of 2024, the Company borrowed $50.0 million from the Federal Home Loan Bank at a rate of 4.39%.

Current wording

FHLB long-term advances increased $50.0 million from December 31, 2023 to September 30, 2024. During the first nine months of 2024, the Company borrowed an additional $50.0 million from the Federal Home Loan Bank at a rate of 4.39%.

Previous wording

The Company’s net interest income increased from $109.0 million for the six months ended June 30, 2023 to $109.1 million for the six months ended June 30, 2024. The Company’s tax equivalent net interest income remained flat at $109.5 million for both the six months ended June 30, 2024 and the six months ended June 30, 2023. Due to increases in the Federal Funds rate, net interest income increased by $22.7 million due to an increase in loan yields (net of loan fees and accretion) of 121 basis points and by $3.4 million due to an increase in investment yields of 47 basis points. In addition, an increase of 110 basis points in the yield on deposits in depository institutions increased net interest income by $0.7 million. These increases were essentially offset by an increase in the cost of interest bearing liabilities (113 basis points) which decreased net interest income by $20.2 million and a decrease in average loans ($121.9 million) which lowered interest income by $3.3 million. The Company’s reported net interest margin decreased from 4.02% for the six months ended June 30, 2023 to 3.91% for the six months ended June 30, 2024.

Current wording

These decreases were essentially offset by increases in the Federal Funds rate since the nine months ended September 30, 2023, which increased net interest income by $18.3 million due to an increase in loan yields (net of loan fees and accretion) of 62 basis points. Net interest income increased $4.7 million due to an increase in investment yields of 44 basis points and an increase in average loans ($92.0 million) which increased interest income by $3.3 million. In addition, an increase of 110 basis points in the yield on deposits in depository institutions increased net interest income by $1.0 million. The Company’s reported net interest margin decreased from 4.02% for the nine months ended September 30, 2023 to 3.90% for the nine months ended September 30, 2024.

Previous wording

The Company’s net interest income decreased from $55.5 million for the three months ended June 30, 2023 to $54.6 million for the three months ended June 30, 2024. The Company’s tax equivalent net interest income decreased $0.9 million, or 1.64%, from $55.8 million for the second quarter of 2023 to $54.9 million for the second quarter of 2024. The Company's net interest income declined by $7.5 million due to an increase in the cost of interest bearing liabilities of 84 basis points and by $1.7 million due to an increase in the average balance of interest bearing liabilities ($163.3 million).

Current wording

The Company’s net interest income was $55.6 million for both the three months ended September 30, 2023 and the three months ended September 30, 2024. The Company’s tax equivalent net interest income decreased approximately $0.1 million, from $55.9 million for the third quarter of 2023 to $55.8 million for the third quarter of 2024. The Company's net interest income declined by $5.7 million due to an increase in the cost of interest bearing liabilities of 65 basis points and by $2.0 million due to an increase in the average balance of interest bearing liabilities ($217.0 million).

Previous wording

These decreases in net interest income were partially offset by an increase in loan yields (44 basis points) and an increase in average loan balances ($196.2 million), which increased net interest income $4.2 million and $2.7 million, respectively. In addition, an increase of 60 basis points in the yield on investment securities increased net interest income by $2.1 million. Due to an increase in average interest-earning liabilities, the Company’s reported net interest margin decreased from 4.00% for the second quarter of 2023 to 3.87% for the second quarter of 2024.

Current wording

These decreases in net interest income were essentially offset by an increase in loan yields (35 basis points) and an increase in average loan balances ($176.6 million), which increased net interest income $3.4 million and $2.5 million, respectively. In addition, an increase of 37 basis points in the yield on investment securities increased net interest income by $1.3 million. The Company’s reported net interest margin decreased from 4.03% for the third quarter of 2023 to 3.87% for the third quarter of 2024.

Previous wording

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 decreased $18.6 million from December 31, 2023 to June 30, 2024.

Current wording

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 decreased $2.5 million from December 31, 2023 to September 30, 2024.

Previous wording

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 decreased $11.8 million from December 31, 2023 to June 30, 2024. At June 30, 2024, $2.2 million of the commercial real estate loans were for commercial properties under construction.

Current wording

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 $0.4 million from December 31, 2023 to September 30, 2024. At September 30, 2024, $2.7 million of the commercial real estate loans were for commercial properties under construction.

Previous wording

◦Commercial 1-4 Family loans decreased $10.2 million from December 31, 2023 to June 30, 2024. Commercial 1-4 Family loans consist of residential single-family, duplex, triplex, and fourplex rental properties and totaled $196.0 million as of June 30, 2024. 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.

Current wording

◦Commercial 1-4 Family loans decreased $11.6 million from December 31, 2023 to September 30, 2024. Commercial 1-4 Family loans consist of residential single-family, duplex, triplex, and fourplex rental properties and totaled $194.7 million as of September 30, 2024. 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.

Previous wording

◦Hotel loans increased $13.8 million from December 31, 2023 to June 30, 2024. The Hotel portfolio is comprised of all lodging establishments and totaled $371.0 million as of June 30, 2024. Risk characteristics relate to the demand for travel.

Current wording

◦Hotel loans increased $26.1 million from December 31, 2023 to September 30, 2024. The Hotel portfolio is comprised of all lodging establishments and totaled $383.2 million as of September 30, 2024. Risk characteristics relate to the demand for travel.

Previous wording

◦Multi-family loans increased $1.2 million from December 31, 2023 to June 30, 2024. Multi-family consists of 5 or more family residential apartment lending. The portfolio totaled $190.4 million as of June 30, 2024. Risk characteristics are driven by rental housing demand as well as economic and employment conditions.

Current wording

◦Multi-family loans increased $4.7 million from December 31, 2023 to September 30, 2024. Multi-family consists of 5 or more family residential apartment lending. The portfolio totaled $193.9 million as of September 30, 2024. Risk characteristics are driven by rental housing demand as well as economic and employment conditions.

Previous wording

◦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 $668.3 million at June 30, 2024 and decreased $12.3 million from December 31, 2023 to June 30, 2024.

Current wording

◦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 $665.2 million at September 30, 2024 and decreased $15.4 million from December 31, 2023 to September 30,

Previous wording

Nonresidential owner-occupied commercial real estate totaled $236.0 million at June 30, 2024 and decreased $4.3 million from December 31, 2023. Risk characteristics relate to levels of consumer spending and overall economic conditions.

Current wording

Nonresidential owner-occupied commercial real estate totaled $236.8 million at September 30, 2024 and decreased $3.5 million from December 31, 2023. Risk characteristics relate to levels of consumer spending and overall economic conditions.

Previous wording

Residential real estate loans increased $9.1 million from December 31, 2023 to June 30, 2024. 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 3, 5 and 7 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 June 30, 2024, $9.8 million of the residential real estate loans were for properties under construction.

Current wording

Residential real estate loans increased $18.4 million from December 31, 2023 to September 30, 2024. 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 3, 5 and 7 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, 2024, $7.6 million of the residential real estate loans were for properties under construction.

Previous wording

Home equity loans increased $12.4 million during the first six months of 2024. 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.

Current wording

Home equity loans increased $22.9 million during the first nine months of 2024. 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.

Previous wording

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 $2.9 million during the first six months of 2024.

Current wording

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 $6.5 million during the first nine months of 2024.

Previous wording

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 $0.5 million provision for credit losses in the second quarter of 2024 and recorded a provision for credit losses of $0.4 million in the second quarter of 2023.

Current wording

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 $1.2 million provision for credit losses in the third quarter of 2024 and recorded a provision for credit losses of $0.2 million in the third quarter of 2023.

Previous wording

The Allowance for Credit Losses decreased slightly from $22.7 million at December 31, 2023 to $22.7 million at June 30, 2024. The Company recorded a provision for credit losses of $0.5 million in the second quarter of 2024, compared to a provision for credit losses of $0.4 million for the comparable period in 2023, and a recovery of credit losses of $0.2 million for the first quarter of 2024. The provision for credit losses in the second quarter was primarily due to an increase in the loss rate for residential real estate loans.

Current wording

The Allowance for Credit Losses decreased slightly from $22.7 million at December 31, 2023 to $21.8 million at September 30, 2024. The Company recorded a provision for credit losses of $1.2 million in the third quarter of 2024, compared to a provision for credit losses of $0.2 million for the comparable period in 2023, and a provision for credit losses of $0.5 million for the second quarter of 2024. The provision for credit losses in the third quarter was primarily related to a commercial loan for a movie theater that had been originated in September 2014. The loan had paid according to terms but cash flows began deteriorating during the COVID-19 crisis which began in 2020. Due to further operating weaknesses during 2024, the loan was transferred to nonaccrual status and a $2.0 million charge-off was recorded in the quarter ending September 30, 2024, leaving an outstanding balance of approximately $6.7 million. The Company has only one other loan to a movie theater and the outstanding balance of that performing loan is under $5.0 million. This charge-off was partially offset by a $0.75 million reversal of a reserve on a purchase credit deteriorated loan that was paid-off in full during the quarter ended September 30, 2024.

Previous wording

Non-Interest Income: Non-interest income was $36.9 million for the six months ended June 30, 2024, as compared to $39.0 million for the six months ended June 30, 2023. During the six months ended June 30, 2024, the Company reported $0.2 million of unrealized fair value gains on the Company's equity securities compared to $0.8 million of realized fair value gains during the six months ended June 30, 2023.

Current wording

Non-Interest Income: Non-interest income was $57.2 million for the nine months ended September 30, 2024, as compared to $56.4 million for the nine months ended September 30, 2023. During the nine months ended September 30, 2024, the Company reported $0.6 million of unrealized fair value gains on the Company's equity securities compared to $0.1 million of unrealized fair value gains during the nine months ended September 30, 2023.

Previous wording

Excluding net investment securities gains, non-interest income decreased from $38.1 million for the six months ended June 30, 2023 to$36.7 million for the six months ended June 30, 2024. The decrease was largely attributable to a decrease in bank owned life insurance revenues ($2.3 million) and a decrease in other income ($0.8 million). These decreases were partially offset by an increase in trust and investment management fee income of $0.8 million (or 17.3%), increase in service charges of $0.5 million (or 4.1%), and increase in bankcard revenues of $0.3 million (or 1.8%).

Current wording

Excluding net investment securities gains, non-interest income increased from $56.3 million for the nine months ended September 30, 2023 to$56.7 million for thenine months ended September 30, 2024. The increase was largely attributable to an increase in trust and investment management fee income of $1.3 million (18.7%), an increase in service charges of

Previous wording

Non-Interest Expense: Non-interest expenses, less merger related expenses, increased $5.0 million (7.4%), from $67.7 million in the first six months of 2023 to $72.7 million in the first six months of 2024 primarily due to an increase in salaries and employee benefits ($1.5 million), other expenses ($1.4 million), and bankcard expenses ($1.1 million).

Current wording

Non-Interest Expense: Non-interest expenses, less merger related expenses, increased $7.5 million (7.3%), from $102.8 million in the first nine months of 2023 to $110.3 million in the first nine months of 2024 primarily due to an increase in salaries and employee benefits ($2.5 million), other expenses ($2.4 million), bankcard expenses ($1.2 million), equipment and software related expense ($0.7 million), and advertising expense ($0.4 million).

Previous wording

Income Tax Expense: The Company’s effective income tax rate for the six months ended June 30, 2024 was 19.6% compared to 19.9% for the six months ended June 30, 2023.

Current wording

Income Tax Expense: The Company’s effective income tax rate for the nine months ended September 30, 2024 was 19.6% compared to 20.3% for the nine months ended September 30, 2023.

Previous wording

Non-Interest Income: Non-interest income was $18.9 million during the quarter ended June 30, 2024, as compared to $20.3 million during the quarter ended June 30, 2023. During the second quarter of 2024, the Company reported $0.4 million of unrealized fair value gains on the Company’s equity securities as compared to $0.3 million of unrealized fair value losses on the Company’s equity securities during the second quarter of 2023.

Current wording

Non-Interest Income: Non-interest income was $20.3 million during the quarter ended September 30, 2024, as compared to $17.4 million during the quarter ended September 30, 2023. During the third quarter of 2024, the Company reported $0.4 million of unrealized fair value gains on the Company’s equity securities, as compared to $0.7 million of realized security losses during the third quarter of 2023.

Previous wording

Exclusive of these items, non-interest income decreased $2.1 million, or 10.2%, from $20.6 million for the second quarter of 2023 to $18.5 million for the second quarter of 2024. This decrease was largely attributable to a decrease of $2.4 million in bank owned life insurance due to lower death benefit proceeds. This decrease was partially offset by an increase of $0.4 million, or 18.1%, in trust and investment management fee income.

Current wording

Exclusive of these items, non-interest income increased $1.9 million, or 10.5%, from $18.1 million for the third quarter of 2023 to $20.0 million for the third quarter of 2024. This increase was attributable to an increase of $0.6 million (77.8%) in bank owned life insurance (due to death benefit proceeds), an increase of $0.5 million (21.3%) in trust and investment management fee income, an increase of $0.4 million (5.7%) in service fees, and an increase of $0.3 million (4.1%) in bankcard revenues.

Previous wording

Non-Interest Expense: Non-interest expenses increased $2.0 million, or 5.7%, from $34.8 million in the second quarter of 2023 to $36.8 million in the second quarter of 2024. This increase was largely due to an increase in other expenses of $0.9 million and bankcard expenses of $0.6 million. In addition, salaries and employee benefits increased $0.3 million and equipment and software related expenses increased $0.2 million.

Current wording

Non-Interest Expense: Non-interest expenses increased $2.6 million, or 7.4%, from $35.0 million in the third quarter of 2023 to $37.6 million in the third quarter of 2024. This increase was largely due to an increase in other expenses of $1.1 million and an increase in salaries and employee benefits of $1.0 million. In addition, equipment and software related expenses increased $0.6 million and advertising expenses increased $0.3 million.

Previous wording

Income Tax Expense: The Company's effective income tax rate for the three months ended June 30, 2024 and June 30, 2023 was 19.7%, and 19.4%, respectively.

Current wording

Income Tax Expense: The Company's effective income tax rate for the three months ended September 30, 2024 and September 30, 2023 was 19.7%, and 21.1%, respectively.

Previous wording

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

Current wording

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.

Previous wording

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 June 30, 2024, City National could pay dividends up to $98.4 million plus net profits for the remainder of 2024, as defined by statute, up to the dividend declaration date without prior regulatory permission.

Current wording

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, 2024, City National could pay dividends up to $128.2 million plus net profits for the remainder of 2024, as defined by statute, up to the dividend declaration date without prior regulatory permission.

Previous wording

Additionally, City Holding anticipates continuing the payment of dividends on its common stock, which are expected to approximate$42.0 million on an annualized basis over the next 12 months based on common shares outstanding at June 30, 2024. 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 $1.9 million of additional cash over the next 12 months. As of June 30, 2024, City Holding reported a cash balance of$29.1 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.

Current wording

Additionally, City Holding anticipates continuing the payment of dividends on its common stock, which are expected to approximate$43.5 million on an annualized basis over the next 12 months based on common shares outstanding at September 30, 2024. 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 $1.8 million of additional cash over the next 12 months. As of September 30, 2024, City Holding reported a cash balance of$19.2 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.

Previous wording

As illustrated in the consolidated statements of cash flows, the Company generated $60.5 million of cash from operating activities during the first six months of 2024, primarily from interest income received on loans and investments, net of interest expense paid on deposits and borrowings. The Company used $130.4 million of cash in investing activities during the first six months of 2024, primarily due to purchases of available-for-sale securities of $192.6 million, payments for low income housing credits of $8.3 million and purchases of premises and equipment of $1.1 million. These increases were partially offset by proceeds from maturities and calls of $57.7 million and a decrease in loans of $13.6 million. The Company generated $131.6 million of cash in financing activities during the first six months of 2024, principally as a result of an increase in interest-bearing deposits of $121.2 million, proceeds from long-term debt of $50.0 million, and an increase in non-interest-bearing deposits of $11.9 million. These increases were partially offset by a decrease in dividends paid of $21.4 million, purchases of treasury stock of $17.9 million, and a decrease in short-term borrowings of $12.2 million.

Current wording

As illustrated in the consolidated statements of cash flows, the Company generated $98.1 million of cash from operating activities during the first nine months of 2024, primarily from interest income received on loans and investments, net of interest expense paid on deposits and borrowings. The Company used $133.2 million of cash in investing activities during the first nine months of 2024, primarily due to purchases of available-for-sale securities of $192.6 million, an increase in loans of $30.9 million, payments for low income housing credits of $10.4 million, and purchases of premises and equipment of $1.8 million. These increases were partially offset by proceeds from maturities and calls of $100.4 million and proceeds from the bank-owned life insurance policies of $1.2 million. The Company generated $172.7 million of cash in financing activities during the first nine months of 2024, principally as a result of an increase in interest-bearing deposits of $171.8 million, proceeds from long-term debt of $50.0 million, and an increase in short-term borrowings of $4.3 million. These increases were partially offset by a decrease in dividends paid of $31.9 million, purchases of treasury stock of $17.9 million, and a decrease in non-interest-bearing deposits of $3.3 million.

Previous wording

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, 2024, City National had the capacity to borrow an additional $1.6 billion from these existing borrowing facilities. In addition, approximately $710 million of City National’s investment securities were pledged to collateralize customer repurchase agreements and various deposit accounts, leaving approximately $780 million of City National’s investment securities unpledged at June 30, 2024. 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.

Current wording

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, 2024, City National had the capacity to borrow an additional $1.6 billion from these existing borrowing facilities. In addition, approximately $765 million of City National’s investment securities were pledged to collateralize customer repurchase agreements and various deposit accounts, leaving approximately $730 million of City National’s investment securities unpledged at September 30, 2024. 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.

Previous wording

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. 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 64.5% as of June 30, 2024 and deposit balances fund 79.9% 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 June 30, 2024, and that exceeded the Company’s non-deposit sources of borrowing, which totaled $472.7 million. Further, the Company’s deposit mix has a high proportion of transaction and savings accounts that fund 61.8% 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.

Current wording

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 64.3% as of September 30, 2024 and deposit balances fund 79.3% 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, 2024, and that exceeded the Company’s non-deposit sources of borrowing, which totaled $489.2 million. Further, the Company’s deposit mix has a high proportion of transaction and savings accounts that fund 60.6% 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.

Previous wording

As the following table reflects, less than 15% (estimated) of the Company's deposits were uninsured (either with balances above $250,000 or not collateralized by investment securities) as of June 30, 2024.

Current wording

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, 2024.