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What changed in CITY HOLDING CO's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of CITY HOLDING CO's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+204 added−220 removedSource: 10-K (2024-02-28) vs 10-K (2023-02-22)

Top changes in CITY HOLDING CO's 2023 10-K

204 paragraphs added · 220 removed · 177 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

39 edited+2 added−8 removed110 unchanged
Biggest changeThe Company’s regulatory capital ratios for both City Holding and City National include the 2.5% capital conservation buffer and are illustrated in the following tables (dollars in thousands): December 31, 2022 Actual Minimum Required - Basel III Required to be Considered Well Capitalized Capital Amount Ratio Capital Amount Ratio Capital Amount Ratio CET 1 Capital City Holding Company $ 598,068 16.2 % $ 257,965 7.0 % $ 239,538 6.5 % City National Bank 508,586 13.9 % 256,520 7.0 % 238,197 6.5 % Tier 1 Capital City Holding Company 598,068 16.2 % 313,243 8.5 % 294,817 8.0 % City National Bank 508,586 13.9 % 311,488 8.5 % 293,166 8.0 % Total Capital City Holding Company 612,654 16.6 % 386,947 10.5 % 368,521 10.0 % City National Bank 523,172 14.3 % 384,780 10.5 % 366,457 10.0 % Tier 1 Leverage Ratio City Holding Company 598,068 10.0 % 238,954 4.0 % 298,692 5.0 % City National Bank 508,586 8.6 % 237,973 4.0 % 297,466 5.0 % 8 December 31, 2021 Actual Minimum Required - Basel III Required to be Considered Well Capitalized Capital Amount Ratio Capital Amount Ratio Capital Amount Ratio CET 1 Capital City Holding Company $ 555,532 16.1 % $ 241,772 7.0 % $ 224,503 6.5 % City National Bank 492,721 14.4 % 240,392 7.0 % 223,221 6.5 % Tier 1 Capital City Holding Company 555,532 16.1 % 293,581 8.5 % 276,311 8.0 % City National Bank 492,721 14.4 % 291,905 8.5 % 274,734 8.0 % Total Capital City Holding Company 570,336 16.5 % 362,659 10.5 % 345,389 10.0 % City National Bank 507,526 14.8 % 360,588 10.5 % 343,418 10.0 % Tier 1 Leverage Ratio City Holding Company 555,532 9.4 % 235,403 4.0 % 294,254 5.0 % City National Bank 492,721 8.5 % 233,342 4.0 % 291,678 5.0 % Management believes that, as of December 31, 2022, City Holding and City National meet all capital adequacy requirements under Basel III.
Biggest changeThe Company’s minimum required capital ratios for both City Holding and City National include the 2.5% capital conservation buffer and are illustrated in the following tables (dollars in thousands): December 31, 2023 Actual Minimum Required - Basel III Required to be Considered Well Capitalized Capital Amount Ratio Capital Amount Ratio Capital Amount Ratio CET 1 Capital City Holding Company $ 627,579 15.7 % $ 279,768 7.0 % $ 259,875 6.5 % City National Bank 549,031 13.8 % 278,692 7.0 % 258,785 6.5 % Tier 1 Capital City Holding Company 627,579 15.7 % 339,718 8.5 % 319,735 8.0 % City National Bank 549,031 13.8 % 338,412 8.5 % 318,505 8.0 % Total Capital City Holding Company 648,646 16.2 % 419,652 10.5 % 399,669 10.0 % City National Bank 570,099 14.3 % 418,038 10.5 % 398,131 10.0 % Tier 1 Leverage Ratio City Holding Company 627,579 10.2 % 245,468 4.0 % 306,835 5.0 % City National Bank 549,031 8.9 % 245,587 4.0 % 306,984 5.0 % 8 December 31, 2022 Actual Minimum Required - Basel III Required to be Considered Well Capitalized Capital Amount Ratio Capital Amount Ratio Capital Amount Ratio CET 1 Capital City Holding Company $ 598,068 16.2 % $ 257,965 7.0 % $ 239,538 6.5 % City National Bank 508,586 13.9 % 256,520 7.0 % 238,197 6.5 % Tier 1 Capital City Holding Company 598,068 16.2 % 313,243 8.5 % 294,817 8.0 % City National Bank 508,586 13.9 % 311,488 8.5 % 293,166 8.0 % Total Capital City Holding Company 612,654 16.6 % 386,947 10.5 % 368,521 10.0 % City National Bank 523,172 14.3 % 384,780 10.5 % 366,457 10.0 % Tier 1 Leverage Ratio City Holding Company 598,068 10.0 % 238,954 4.0 % 298,692 5.0 % City National Bank 508,586 8.6 % 237,973 4.0 % 297,466 5.0 % Management believes that, as of December 31, 2023, City Holding and City National meet all capital adequacy requirements under Basel III.
Certain provisions affecting the Company include: 7 • Simplifying regulatory capital requirements by providing that banks with less than $10 billion in total consolidated assets that meet a leverage ratio of tangible equity to average consolidated assets between eight and nine percent will be deemed to be in compliance with risk-based capital and leverage requirements. • Changing how federal financial institution regulators classify certain municipal securities assets under the liquidity coverage ratio rule; • Exempting certain reciprocal deposits from treatment as brokered deposits under the FDIC's brokered deposits rule; • Exempting banks with less than $10 billion in total consolidated assets from certain provisions under the Volcker Rule; and • Authorizing new banking procedures to better facilitate online transactions.
Certain provisions affecting the Company include: • Simplifying regulatory capital requirements by providing that banks with less than $10 billion in total consolidated assets that meet a leverage ratio of tangible equity to average consolidated assets between eight and nine percent will be deemed to be in compliance with risk-based capital and leverage requirements. • Changing how federal financial institution regulators classify certain municipal securities assets under the liquidity coverage ratio rule; 7 • Exempting certain reciprocal deposits from treatment as brokered deposits under the FDIC's brokered deposits rule; • Exempting banks with less than $10 billion in total consolidated assets from certain provisions under the Volcker Rule; and • Authorizing new banking procedures to better facilitate online transactions.
Further, City 6 National's authority to extend credit to the Company's directors, executive officers and principal shareholders, including their immediate family members, corporations and other entities that they control, is subject to the restrictions and additional requirements of the Federal Reserve Act and Regulation O promulgated thereafter.
Further, City National's authority to extend credit to the Company's directors, executive officers and principal shareholders, including their immediate family members, corporations and other entities that they control, is subject to the restrictions and additional requirements of the Federal Reserve Act and Regulation O promulgated thereafter.
The Company is listed on the Nasdaq Global Select Market ("NASDAQ") under the trading symbol "CHCO" and is subject to the rules of the NASDAQ for listed companies. 5 City National is organized as a national banking association under the National Bank Act of 1863, as amended (the "National Bank Act").
The Company is listed on the Nasdaq Global Select Market ("NASDAQ") under the trading symbol "CHCO" and is subject to the rules of the NASDAQ for listed companies. City National is organized as a national banking association under the National Bank Act of 1863, as amended (the "National Bank Act").
A change in statutes, regulations or regulatory policies applicable to the Company or our subsidiaries could have a material effect on the Company’s business, financial condition and results of operations. 11 Executive Officers of the Registrant At December 31, 2022, the executive officers of the Company were as follows: Name Age Positions Held with Registrant Charles R.
A change in statutes, regulations or regulatory policies applicable to the Company or our subsidiaries could have a material effect on the Company’s business, financial condition and results of operations. 11 Executive Officers of the Registrant At December 31, 2023, the executive officers of the Company were as follows: Name Age Positions Held with Registrant Charles R.
Management monitors industry concentrations against internally established risk-based capital thresholds. As of December 31, 2022, City National was within its internally designated concentration limits. Furthermore, with the exception of loans to borrowers within the "Lessors of Nonresidential Buildings" category, no other NAICS industry classification exceeded 10% of total loans at December 31, 2022.
Management monitors industry concentrations against internally established risk-based capital thresholds. As of December 31, 2023, City National was within its internally designated concentration limits. Furthermore, with the exception of loans to borrowers within the "Lessors of Nonresidential Buildings" category, no other NAICS industry classification exceeded 10% of total loans at December 31, 2023.
Proposals to change the laws and regulations governing the banking industry are frequently raised in Congress, in state legislatures, and before the various bank regulatory agencies. The likelihood and timing of any changes and the impact such changes might have on the Company are impossible to determine with any certainty.
Proposals to change the laws and regulations governing the banking industry are frequently raised in Congress, in state legislatures, and before the various bank regulatory agencies. The likelihood and timing of any changes and the impact such changes might have on the Company are difficult to determine with any certainty.
No dividends were paid in 2022 or 2021 that required regulatory approval. The payment of dividends by the Company and City National may also be limited by other factors, such as requirements to maintain adequate capital above regulatory guidelines.
No dividends were paid in 2023 or 2022 that required regulatory approval. The payment of dividends by the Company and City National may also be limited by other factors, such as requirements to maintain adequate capital above regulatory guidelines.
Market Area and Competition City National operates a network of 94 bank branches primarily along the I-64 corridor from Lexington, Kentucky through Lexington, Virginia and along the I-81 corridor through the Shenandoah Valley from Lexington, Virginia to Martinsburg, West Virginia.
Market Area and Competition City National operates a network of 98 bank branches primarily along the I-64 corridor from Lexington, Kentucky through Lexington, Virginia and along the I-81 corridor through the Shenandoah Valley from Lexington, Virginia to Martinsburg, West Virginia.
Although no portion of City National’s loan portfolio is concentrated within a single industry or group of related industries in excess of City National's internally designated limit, residential mortgage loans have historically comprised a significant portion of its loan portfolio. At December 31, 2022, approximately 50% of the Company’s loan portfolio was categorized as residential mortgage and home equity loans.
Although no portion of City National’s loan portfolio is concentrated within a single industry or group of related industries in excess of City National's internally designated limit, residential mortgage loans have historically comprised a significant portion of its loan portfolio. At December 31, 2023, approximately 47% of the Company’s loan portfolio was categorized as residential mortgage and home equity loans.
City National provides banking, trust and investment management and other financial solutions through its network of 94 bank branches and 909 full-time equivalent associates located in West Virginia, Kentucky, Virginia and southeastern Ohio. The Company’s business activities are currently limited to one reportable business segment, which is community banking.
City National provides banking, trust and investment management and other financial solutions through its network of 98 bank branches and 957 full-time equivalent associates located in West Virginia, Kentucky, Virginia and southeastern Ohio. The Company’s business activities are currently limited to one reportable business segment, which is community banking.
However, due to the fractured nature of residential mortgage lending, there is no concentration of credits that would be considered materially detrimental to the Company’s financial position or operating results. At December 31, 2022, approximately 48% of the Company’s loan portfolio was categorized as commercial and industrial and commercial real estate.
However, due to the fractured nature of residential mortgage lending, there is no concentration of credits that would be considered materially detrimental to the Company’s financial position or operating results. At December 31, 2023, approximately 51% of the Company’s loan portfolio was categorized as commercial and industrial and commercial real estate.
As of December 31, 2022, City National reported $374 million of loans classified as "Commercial and Industrial". 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.
As of December 31, 2023, City National reported $427 million of loans classified as "Commercial and Industrial". 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.
As of December 31, 2022, City National reported $1.69 billion of loans classified as "Residential Real Estate." City National's home equity loans represent loans to consumers that are secured by a second (or junior) priority lien on residential real property.
As of December 31, 2023, City National reported $1.79 billion of loans classified as "Residential Real Estate." City National's home equity loans represent loans to consumers that are secured by a second (or junior) priority lien on residential real property.
As of December 31, 2022, City National reported $3.4 million of loans classified as "DDA Overdrafts." City National’s loan underwriting guidelines and standards are updated periodically with suggested revisions presented to City National's Board of Directors for approval.
As of December 31, 2023, City National reported $4.9 million of loans classified as "DDA Overdrafts." City National’s loan underwriting guidelines and standards are updated periodically with suggested revisions presented to City National's Board of Directors for approval.
City National's branch network includes 58 branches in West Virginia, 19 branches in Kentucky, 13 branches in Virginia and 4 branches in Ohio.
City National's branch network includes 58 branches in West Virginia, 23 branches in Kentucky, 13 branches in Virginia and 4 branches in Ohio.
As of December 31, 2022, City National reported $1.39 billion of loans classified as "Commercial Real Estate." 1 In order to group loans with similar risk characteristics, the portfolio is further segmented by product types: • Commercial 1-4 Family loans consist of residential single-family, duplex, triplex, and fourplex rental properties and totaled $116.2 million as of December 31, 2022.
As of December 31, 2023, City National reported $1.67 billion of loans classified as "Commercial Real Estate." 1 In order to group loans with similar risk characteristics, the portfolio is further segmented by product types: • Commercial 1-4 Family loans consist of residential single-family, duplex, triplex, and fourplex rental properties and totaled $206.2 million as of December 31, 2023.
Loans to "Lessors of Nonresidential Buildings" were 14% of total loans at December 31, 2022. Management also monitors non-owner occupied commercial real estate as a percent of risk-based capital (based upon regulatory guidance). At December 31, 2022, the Company had $1.2 billion of commercial loans classified as non-owner occupied, which was within its designated concentration threshold.
Loans to "Lessors of Nonresidential Buildings" were 15% of total loans at December 31, 2023. Management also monitors non-owner occupied commercial real estate as a percent of risk-based capital (based upon regulatory guidance). At December 31, 2023, the Company had $1.4 billion of commercial loans classified as non-owner occupied, which was within its designated concentration threshold.
Michael T. Quinlan, Jr. 54 Executive Vice President of Retail Banking, City Holding Company and City National Bank, since January 2021. Jeffrey D. Legge 58 Executive Vice President, Chief Administration Officer and Chief Information Officer, City Holding Company and City National Bank, since December 2005.
Michael T. Quinlan, Jr. 55 Executive Vice President of Retail Banking, City Holding Company and City National Bank, since January 2021. Jeffrey D. Legge 59 Executive Vice President, Chief Administration Officer and Chief Information Officer, City Holding Company and City National Bank, since December 2005.
In Lawrence County, Ohio, where City National has three bank branches, City National has approximately 17% of the deposit market share. According to the most recent U.S. Census Bureau estimates (2021), in the West Virginia counties where City National's bank branches are located, the population was approximately 1.0 million and has decreased 1.5% since 2010.
In Lawrence County, Ohio, where City National has three bank branches, City National has approximately 18% of the deposit market share. According to the most recent U.S. Census Bureau estimates (2022), in the West Virginia counties where City National's bank branches are located, the population was approximately 1.0 million and has decreased 1.3% since 2010.
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. • The Hotel portfolio is comprised of all lodging establishments and totaled $340.4 million as of December 31, 2022.
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. • The Hotel portfolio is comprised of all lodging establishments and totaled $357.1 million as of December 31, 2023.
Specifically, the approval of the OCC is required prior to the payment of dividends by City National in excess of its earnings retained in the current year plus retained net profits for the preceding two years. At December 31, 2022, City National could pay dividends up to $59.2 million without prior regulatory permission.
Specifically, the approval of the OCC is required prior to the payment of dividends by City National in excess of its earnings retained in the current year plus retained net profits for the preceding two years. At December 31, 2023, City National could pay dividends up to $53.3 million without prior regulatory permission.
Our average quarterly employee turnover rate in 2022 was under 7%. As of December 31, 2022, approximately 82% of our current workforce is female, 18% is male, our average tenure is approximately 10 years and approximately 25% of our workforce has a college degree. Compensation and Benefits Programs: We provide competitive compensation and benefits programs to our employees.
Our average quarterly employee turnover rate in 2023 was under 7%. As of December 31, 2023, approximately 79% of our current workforce is female, 21% is male, our average tenure is approximately 10 years and approximately 18% of our workforce has a college degree. Compensation and Benefits Programs: We provide competitive compensation and benefits programs to our employees.
In eastern Kentucky, City National has approximately 21% of the deposit market share in the counties where its bank branches are located. In Virginia, City National has approximately 8% of the deposit market share in the counties along the I-81 corridor where its bank branches are located.
In eastern Kentucky, City National has approximately 22% of the deposit market share in the counties where its bank branches are located. In Virginia, City National has approximately 7% of the deposit market share in the counties along the I-81 corridor where its bank branches are located.
The population in the counties that City National serves in Kentucky has increased 4.9% since 2010 and the population in the counties City National serves in Virginia along the I-81 corridor has increased 10.9% since 2010, which are more comparable to the national average increase of approximately 7.5%. In Lawrence County, Ohio, the population has decreased 8.0% since 2010.
The population in the counties that City National serves in Kentucky has increased 4.5% since 2010 and the population in the counties City National serves in Virginia along the I-81 corridor has increased 12.1% since 2010, which are more comparable to the national average increase of approximately 7.9%. In Lawrence County, Ohio, the population has decreased 9.3% since 2010.
As of December 31, 2022, City National reported $134.3 million of loans classified as "Home Equity." All mortgage loans, whether fixed rate or adjustable rate, are originated in accordance with acceptable industry standards and comply with regulatory requirements.
As of December 31, 2023, City National reported $167.2 million of loans classified as "Home Equity." All mortgage loans, whether fixed rate or adjustable rate, are originated in accordance with acceptable industry standards and comply with regulatory requirements.
Hageboeck, Ph.D. 60 President and Chief Executive Officer, City Holding Company and City National Bank, since February 1, 2005. John A. DeRito 72 Executive Vice President of Commercial Banking, City Holding Company and City National Bank, since June 2004. David L. Bumgarner 57 Executive Vice President and Chief Financial Officer, City Holding Company and City National Bank, since February 2005.
Hageboeck, Ph.D. 61 President and Chief Executive Officer, City Holding Company and City National Bank, since February 1, 2005. John A. DeRito 73 Executive Vice President of Commercial Banking, City Holding Company and City National Bank, since June 2004. David L. Bumgarner 58 Executive Vice President and Chief Financial Officer, City Holding Company and City National Bank, since February 2005.
At December 31, 2022, the outstanding balance of commercial loans to markets outside of the geographical footprint of the bank's branches was approximately $372 million, or 21% of City National's outstanding commercial loan balances. City National has approximately 15% of the deposit market share in the counties of West Virginia where its bank branches are located.
At December 31, 2023, the outstanding balance of commercial loans to markets outside of the geographical footprint of the bank's branches was approximately $367 million, or 17% of City National's outstanding commercial loan balances. City National has approximately 14% of the deposit market share in the counties of West Virginia where its bank branches are located.
As of December 31, 2022, City National reported $48.8 million of loans classified as "Consumer." DDA overdraft balances reflect demand deposit accounts that have been overdrawn by deposit customers and have been reclassified as loans.
As of December 31, 2023, City National reported $65.2 million of loans classified as "Consumer." DDA overdraft balances reflect demand deposit accounts that have been overdrawn by deposit customers and have been reclassified as loans.
Our success is a testament to the quality of financial products and services we provide, but more importantly, to our team and our culture. Employee Demographics: As of December 31, 2022, we employed 929 full and part time employees (909 FTEs) across our 94 branches throughout West Virginia, Kentucky, Virginia and Southeastern Ohio.
Our success is a testament to the quality of financial products and services we provide, but more importantly, to our team and our culture. 4 Employee Demographics: As of December 31, 2023, we employed 973 full and part-time employees (957 FTEs) across our 98 branches throughout West Virginia, Kentucky, Virginia and Southeastern Ohio.
Nonresidential non-owner occupied commercial real estate totaled $586.0 million while nonresidential owner-occupied commercial real estate totaled $175.0 million as of December 31, 2022. Risk characteristics relate to levels of consumer spending and overall economic conditions.
Nonresidential non-owner occupied commercial real estate totaled $680.6 million while nonresidential owner-occupied commercial real estate totaled $240.3 million as of December 31, 2023. Risk characteristics relate to levels of consumer spending and overall economic conditions.
Risk characteristics relate to the demand for travel. • Multi-family consists of 5 or more family residential apartment lending. The portfolio totaled $174.8 million as of December 31, 2022.
Risk characteristics relate to the demand for business and personal travel. • Multi-family consists of 5 or more family residential apartment lending. The portfolio totaled $189.2 million as of December 31, 2023.
The Merger is expected to close in the first quarter of 2023, pending customary closing conditions, including receipt of required regulatory approvals and the approval by the shareholders of Citizens. 4 Human Capital We care about our employees and provide not only competitive compensation and benefit packages, but a work environment our employees characterize as "family." We are committed to integrity and the highest ethical standards in regard to how we treat both our customers and our employees.
Human Capital We care about our employees and provide not only competitive compensation and benefit packages, but a work environment our employees characterize as "family." We are committed to integrity and the highest ethical standards in regard to how we treat both our customers and our employees.
Under the Federal Deposit Insurance Act, as amended ("FDIA") the FDIC may terminate deposit insurance upon finding that an institution has engaged in unsafe or unsound practices, is in unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.
The increased expense was due to a final rule adopted by the FDIC in October 2022 that increased the initial base deposit insurance assessment rate schedules uniformly by 2 basis points beginning with the first quarterly assessment period of 2023. 10 Under the Federal Deposit Insurance Act, as amended ("FDIA") the FDIC may terminate deposit insurance upon finding that an institution has engaged in unsafe or unsound practices, is in unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.
These statutes and regulations impose specific limits on the amount of loans City National may make to directors and other insiders, and specify approval procedures that must be followed in making loans that exceed certain amounts.
These statutes and regulations impose specific limits on the amount of loans City National may make to directors and other insiders, and specify approval procedures that must be followed in making loans that exceed certain amounts. 6 The Community Reinvestment Act of 1977 ("CRA") requires depository institutions to assist in meeting the credit needs of their market areas consistent with safe and sound banking practice.
The Community Reinvestment Act of 1977 ("CRA") requires depository institutions to assist in meeting the credit needs of their market areas consistent with safe and sound banking practice. Under the CRA, each depository institution is required to help meet the credit needs of its market areas by, among other things, providing credit to low- and moderate-income individuals and communities.
Under the CRA, each depository institution is required to help meet the credit needs of its market areas by, among other things, providing credit to low- and moderate-income individuals and communities. Depository institutions are periodically examined for compliance with the CRA and are assigned ratings.
There are no anticipated material capital expenditures, or any expected material effects on earnings or the Company’s competitive position as a result of compliance with federal, state and local provisions enacted or adopted relating to environmental protection.
The National Bank Act generally requires each national bank to maintain reserves against deposits, restricts the nature and amount of loans that the bank may make and the interest the bank may charge on such loans, and restricts investments and other activities of the bank. 5 There are no anticipated material capital expenditures, or any expected material effects on earnings or the Company’s competitive position as a result of compliance with federal, state and local provisions enacted or adopted relating to environmental protection.
The bank and holding company are required to determine whether an incident arises to the level of requiring notification.
The bank and holding company are required to determine whether an incident arises to the level of requiring notification. See Item 1C for further discussion related to the Company's risk management, strategy, and governance of cybersecurity.
The Company's FDIC insurance expense for deposit assessments for the past three years is shown in the table below (in thousands). For the year ended December 31, 2022 2021 2020 FDIC insurance expense $ 1,673 $ 1,583 $ 884 10 On January 24, 2019, the Company was notified by the FDIC that it was eligible for small bank assessment credits.
The Company's FDIC insurance expense for deposit assessments for the past three years is shown in the table below (in thousands).
Removed
On October 18, 2022, the Company announced that City Holding had signed a definitive agreement in which City Holding will acquire Citizens Commerce Bancshares, Inc., ("Citizens") the parent company of Citizens Commerce Bank, Inc., Versailles, Kentucky (the “Merger” and the agreement the “Merger Agreement”).
Added
On March 10, 2023, the Company acquired 100% of the outstanding common shares of Citizens Commerce Bancshares, Inc. ("Citizens") and its principal banking subsidiary, Citizens Commerce Bank of Versailles, Kentucky. See Note Three for additional information on the acquisition.
Removed
Upon completion of the merger, the subsidiary bank of Citizens will merge with and into City National (the “Bank Merger”). The Boards of Directors of City and Citizens have approved the Merger, Bank Merger and the Merger Agreement.
Added
For the year ended December 31, 2023 2022 2021 FDIC insurance expense $ 2,922 $ 1,673 $ 1,583 The Company's FDIC insurance expense increased $1.2 million from the year ended December 31, 2022 to the year ended December 31, 2023.
Removed
Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger, Citizens shareholders will have the right to receive 0.1666 City common shares, par value of $2.50 per share for each Citizens common share, no par value. Cash will be paid in lieu of fractional shares and for unexercised Citizens options at closing.
Removed
The National Bank Act generally requires each national bank to maintain reserves against deposits, restricts the nature and amount of loans that the bank may make and the interest the bank may charge on such loans, and restricts investments and other activities of the bank.
Removed
Depository institutions are periodically examined for compliance with the CRA and are assigned ratings.
Removed
On September 30, 2018, the DIF reserve ratio reached 1.36%.
Removed
Because the reserve ratio exceeded 1.35%, two deposit assessment changes occurred under the FDIC regulations: (i) surcharges on large banks (total consolidated assets of $10 billion or more) ended and (ii) small banks (total consolidated assets of less than $10 billion) were awarded assessment credits for the portion of their assessments that contributed to the growth in the reserve ratio from 1.15% to 1.35%, to be applied when the reserve ratio is at least 1.38%.
Removed
The credit will be applied automatically each quarter that the reserve ratio is at least 1.38%, up to the full amount of the bank's credit or assessment, whichever is less. The Company fully utilized the credit during the third and fourth quarters of 2019 and during the first and second quarters of 2020.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

35 edited+2 added−17 removed126 unchanged
Biggest changeFurthermore, remediation costs and financial and other liabilities associated with an environmental hazard could have a material adverse effect on the Company’s financial condition and results of operations. 14 Changes to Interest Rates Could Impact the Financial Outcomes of the Company.
Biggest changeEnvironmental laws may require the Company to incur substantial expenses and may materially reduce the affected property’s value or limit the Company’s ability to use or sell the affected property. Furthermore, remediation costs and financial and other liabilities associated with an environmental hazard could have a material adverse effect on the Company’s financial condition and results of operations.
Acquisitions utilizing the Company’s common stock as consideration may dilute the value of the Company’s common stock, which dilution may not be recouped or recovered for a significant amount of time after the acquisition, if ever. 18 Any merger or acquisition opportunity that we decide to pursue will ultimately be subject to regulatory approval and other closing conditions.
Acquisitions utilizing the Company’s common stock as consideration may dilute the value of the Company’s common stock, which dilution may not be recouped or recovered for a significant amount of time after the acquisition, if ever. Any merger or acquisition opportunity that we decide to pursue will ultimately be subject to regulatory approval and other closing conditions.
The Company may suffer losses as a result of fraudulent activity committed against it, its customers, and other counterparties. 22 The Company could be adversely affected if one of its employees causes a significant operational breakdown or failure, either as a result of human error or where an individual purposefully sabotages or fraudulently manipulates the Company’s operations or systems.
The Company may suffer losses as a result of fraudulent activity committed against it, its customers, and other counterparties. The Company could be adversely affected if one of its employees causes a significant operational breakdown or failure, either as a result of human error or where an individual purposefully sabotages or fraudulently manipulates the Company’s operations or systems.
In addition, as regulations and markets in which the Company operates continue to evolve, its risk management framework may not always keep sufficient pace with those changes. If the Company's risk management framework does not effectively identify or 19 mitigate its risks, the Company could suffer unexpected losses and could be materially adversely affected.
In addition, as regulations and markets in which the Company operates continue to evolve, its risk management framework may not always keep sufficient pace with those changes. If the Company's risk management framework does not effectively identify or mitigate its risks, the Company could suffer unexpected losses and could be materially adversely affected.
Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse effect on the Company’s business and results of operations. 17 The Value of the Company's Investments Could Decline. The Company holds available-for-sale investment securities, which are carried at fair value.
Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse effect on the Company’s business and results of operations. The Value of the Company's Investments Could Decline. The Company holds available-for-sale investment securities, which are carried at fair value.
The Company’s business needs and future growth, including future acquisitions or organic growth into new markets and business lines, may require it to raise additional capital. One of the Company’s main sources for liquidity is customer deposits. Increased competition and the availability of alternative products may reduce the Company’s ability to attract and retain core deposits.
The Company’s business needs and future growth, including future acquisitions or organic growth into new markets and business lines, may require it to raise additional capital. 17 One of the Company’s main sources for liquidity is customer deposits. Increased competition and the availability of alternative products may reduce the Company’s ability to attract and retain core deposits.
If the loans that are collateralized by real estate become troubled during a time when market conditions are declining or have declined, then, in the event of foreclosure, we may not be able to realize the amount of collateral that we anticipated at the time of originating the loan.
If the loans that are collateralized by real estate become 13 troubled during a time when market conditions are declining or have declined, then, in the event of foreclosure, we may not be able to realize the amount of collateral that we anticipated at the time of originating the loan.
The Company’s success depends on its relationships with customers and general economic conditions. Because the Company’s customer base is geographically concentrated in West Virginia, Kentucky, Virginia, and Ohio, if the customers in those geographies are physically impacted by climate change, the Company may be financially impacted as well.
The Company’s success depends on its relationships with customers and general economic conditions. Because the Company’s customer base is geographically concentrated in West Virginia, Kentucky, Virginia, and southeastern Ohio, if the customers in those geographies are physically impacted by climate change, the Company may be financially impacted as well.
In developing and marketing new lines of business and/or products and services, the Company may invest significant time and resources. External factors, such as compliance with regulations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service.
In developing and marketing new lines of business and/or products and services, the Company may invest significant time and resources. External factors, such as compliance with regulations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a 16 new product or service.
A successful security breach could result in violations of applicable privacy and other laws, financial loss to the Company or to its customers, loss of confidence in its security measures, significant litigation exposure, and harm to its reputation, all of which could have a material adverse effect on the Company.
A successful security breach could result in violations of applicable privacy and other laws, financial loss to the Company or to its customers, loss 21 of confidence in its security measures, significant litigation exposure, and harm to its reputation, all of which could have a material adverse effect on the Company.
The Company faces competition from: • local, regional and national banks; • savings and loans associations; • Internet banks; 16 • credit unions; • mutual funds; • mortgage banking firms; • finance companies; • financial technology ("fin-tech") companies; • brokerage firms; • investment advisory and wealth management firms; • investment banking firms; and • other entities.
The Company faces competition from: • local, regional and national banks; • savings and loans associations; • Internet banks; • credit unions; • mutual funds; • mortgage banking firms; • finance companies; • financial technology ("fin-tech") companies; • brokerage firms; • investment advisory and wealth management firms; • investment banking firms; and • other entities.
In addition, the Company’s credit risk may be exacerbated when the collateral held by the Company cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the credit or derivative exposure due to the Company.
In addition, the Company’s credit risk may be exacerbated when the collateral held by 18 the Company cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the credit or derivative exposure due to the Company.
Although the Board of Directors has declared cash dividends in the past, the Company's current ability to pay dividends is largely dependent upon the receipt of dividends from City National. Federal laws impose restrictions on the ability of City National to pay dividends.
Although the Board of Directors has declared cash dividends in the past, the Company's current ability to pay dividends is largely dependent upon the receipt of dividends from City National. Federal laws impose restrictions on the 19 ability of City National to pay dividends.
Given the lower trading volume of the Company’s common stock, significant sales of the Company’s common stock, or the expectation of these sales, could cause the Company’s stock price to fall. Future Sales or the Issuance of Shares of the Company’s Common Stock Could Negatively Affect its Market Price.
Given the lower trading volume of the Company’s common stock, significant sales of the Company’s common stock, or the expectation of these sales, could cause the Company’s stock price to fall. 15 Future Sales or the Issuance of Shares of the Company’s Common Stock Could Negatively Affect its Market Price.
While the economic and business environments in West Virginia, Kentucky, Virginia and southeastern Ohio have shown resilience during the COVID-19 pandemic, and have shown improvement since the brief recession of 2020, there can be no assurance that such resilience and improvement will continue or that the economies in the Company’s market areas, or the United States as a whole, will not slip into another recession.
While the economic and business environments in West Virginia, Kentucky, Virginia and southeastern Ohio have shown resilience during the recovery from the COVID-19 pandemic, and have shown improvement since the brief recession of 2020, there can be no assurance that such resilience and improvement will continue or that the economies in the Company’s market areas, or the United States as a whole, will not slip into another recession.
Some examples of economic deterioration include declines in economic growth, declines in consumer and business confidence, increases in inflation, increases in the cost of capital and credit, and limitations in the availability of credit.
Some examples of economic deterioration include declines in economic growth, declines in consumer and business confidence, prolonged increases in inflation, increases in the cost of capital and credit, and limitations in the availability of credit.
In addition, an economic transition to mitigate climate change on a broader scale could have a negative or destabilizing impact on the general economic conditions of the country, which could also have a negative impact on the financial outcomes of the Company. 23 Item 1B. Unresolved Staff Comments None.
In addition, an economic transition to mitigate climate change on a broader scale could have a negative or destabilizing impact on the general economic conditions of the country, which could also have a negative impact on the financial outcomes of the Company. 22 Item 1B. Unresolved Staff Comments None.
The Company recently completed such an impairment analysis and concluded that no impairment charge was necessary for the year ended December 31, 2022. The Company cannot provide assurance whether it will be required to take an impairment charge in the future.
The Company recently completed such an impairment analysis and concluded that no impairment charge was necessary for the year ended December 31, 2023. The Company cannot provide assurance whether it will be required to take an impairment charge in the future.
Severe weather, natural disasters, health emergencies, acts of war or terrorism, and other adverse external events, especially those that directly affect the Company’s market areas, could have a significant impact on the Company’s ability to conduct business.
Severe weather, natural disasters, health emergencies (including COVID-19), acts of war or terrorism, and other adverse external events, especially those that directly affect the Company’s market areas, could have a significant impact on the Company’s ability to conduct business.
At December 31, 2022, the Company’s goodwill and other identifiable intangible assets were approximately $116 million. Under current accounting standards, if the Company determines goodwill or intangible assets are impaired, it would be required to write down the value of these assets. The Company conducts an annual review to determine whether goodwill and other identifiable intangible assets are impaired.
At December 31, 2023, the Company’s goodwill and other identifiable intangible assets were approximately $163 million. Under current accounting standards, if the Company determines goodwill or intangible assets are impaired, it would be required to write down the value of these assets. The Company conducts an annual review to determine whether goodwill and other identifiable intangible assets are impaired.
The Company’s business is concentrated in West Virginia, Kentucky, Virginia and southeastern Ohio. As a result, the Company’s results of operation, cash flows and financial condition are affected by local and regional economic conditions.
Economic Risks Economic Conditions in the Company's Market Areas Could Negatively Impact the Company's Business and Financial Condition. The Company’s business is concentrated in West Virginia, Kentucky, Virginia and southeastern Ohio. As a result, the Company’s results of operation, cash flows and financial condition are affected by local and regional economic conditions.
Whether such claims and legal action related to the Company's performance of its fiduciary responsibilities are founded or unfounded, if such matters are not resolved in a 21 manner favorable to the Company, they may result in significant financial liability.
Customers or beneficiaries could make claims and take legal action relating to the Company’s fiduciary activities. Whether such claims and legal action related to the Company's performance of its fiduciary responsibilities are founded or unfounded, if such matters are not resolved in a manner favorable to the Company, they may result in significant financial liability.
Misconduct by employees could include fraudulent, improper or unauthorized activities on behalf of customers or improper use of confidential information. Employee errors or misconduct could subject the Company to regulatory enforcement action, legal action, reputational damage, and other losses.
Misconduct by employees could include fraudulent, improper or unauthorized activities on behalf of customers or improper use of confidential information. Employee errors or misconduct could subject the Company to regulatory enforcement action, legal action, reputational damage, and other losses. For more information on how the Company manages cybersecurity risk, please refer to Item 1C. Cybersecurity .
A significant portion of the business conducted in the Company's trust division involves the Company assuming the special role of a fiduciary to its customers and to the beneficiaries of its customers' assets. Customers or beneficiaries could make claims and take legal action relating to the Company’s fiduciary activities.
The Company Is Subject to Possible Claims and Litigation Relating to Fiduciary Activities. A significant portion of the business conducted in the Company's trust division involves the Company assuming the special role of a fiduciary to its customers and to the beneficiaries of its customers' assets.
Although management believes it has implemented effective asset and liability management strategies, including the use of derivatives as hedging instruments, to reduce the potential effects of changes in interest rates on the Company’s results of operations, any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on the Company’s financial condition and results of operations.
Changes in interest rates may also negatively affect the ability of the Company's borrowers to repay their loans, particularly as interest rates rise and adjustable-rate loans become more expensive. 14 Although management believes it has implemented effective asset and liability management strategies, including the use of derivatives as hedging instruments, to reduce the potential effects of changes in interest rates on the Company’s results of operations, any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on the Company’s financial condition and results of operations.
In general, future dividend policy is subject to the discretion of the Board of Directors and will depend upon a number of factors, including the Company’s and City National’s future earnings, capital requirements, regulatory constraints and financial condition.
In general, future dividend policy is subject to the discretion of the Board of Directors and will depend upon a number of factors, including the Company’s and City National’s future earnings, capital requirements, regulatory constraints and financial condition. There can be no assurance that the Company will continue to pay dividends to its shareholders in the future.
An economic slowdown could have the following consequences: • Loan delinquencies may increase; • Problem assets and foreclosures may increase; • Demand for City National's products and services may decline; and • Collateral (including real estate) that secures loans made by City National may decline in value, in turn reducing customers’ borrowing power and making existing loans less secure. 13 The oil, natural gas and coal industries, and businesses ancillary thereto, play an important role in the economies of West Virginia, Kentucky, Virginia and southeastern Ohio.
An economic slowdown could have the following consequences: • Loan delinquencies may increase; • Problem assets and foreclosures may increase; • Demand for City National's products and services may decline; and • Collateral (including real estate) that secures loans made by City National may decline in value, in turn reducing customers’ borrowing power and making existing loans less secure.
There can be no assurance that the Company will continue to pay dividends to its shareholders in the future. 20 The Company and City National Are Extensively Regulated. The Company operates in a highly regulated environment and is subject to supervision and regulation by a number of governmental regulatory agencies, including the Federal Reserve Board, the OCC and the FDIC.
The Company and City National Are Extensively Regulated. The Company operates in a highly regulated environment and is subject to supervision and regulation by a number of governmental regulatory agencies, including the Federal Reserve Board, the OCC and the FDIC.
The market value of real estate, particularly real estate held for investment, can fluctuate significantly in a short period of time as a result of market conditions in the geographic area in which the real estate is located.
Credit and Interest Rate Risks The Value of Real Estate Collateral May Fluctuate Significantly Resulting in an Under-Collateralized Loan Portfolio. The market value of real estate, particularly real estate held for investment, can fluctuate significantly in a short period of time as a result of market conditions in the geographic area in which the real estate is located.
Criminals are committing fraud at an increasing rate and are using more sophisticated techniques.
Criminals are committing fraud at an increasing rate and are using more sophisticated techniques, including through use of artificial intelligence technologies.
The Company has limited direct exposure to coal industry specific loans. Prolonged low oil and gas prices, and continued decline in the coal industry, could result in downward pressure on businesses in the Company’s market area which could negatively affect City National’s customers (both individuals and businesses).
Prolonged low oil and gas prices, and continued decline in the coal industry, could result in downward pressure on businesses in the Company’s market area which could negatively affect City National’s customers (both individuals and businesses). As a result, the Company’s operating results and financial condition could be negatively impacted.
The Company faces threats to its reputation from many sources, including adverse sentiment about financial institutions generally, unethical practices, employee misconduct, failure to deliver expected standards of service or quality, regulatory compliance deficiencies, and questionable or fraudulent activities of the Company’s employees and customers.
The Company faces threats to its reputation from many sources, including adverse sentiment about financial institutions generally, unethical practices, employee misconduct, failure to deliver expected standards of service or quality, regulatory compliance deficiencies, and questionable or fraudulent activities of the Company’s employees and customers. 20 Negative publicity may arise regarding the Company’s business, employees, or customers, with or without merit, and could result in the loss of customers, investors and employees, costly litigation, a decline in revenue, and increased regulatory oversight.
Ongoing volatility in oil and gas prices since 2014 has negatively impacted oil and gas and other businesses in the Company’s market areas. Additionally, the coal industry continues to be in decline as a result of increased environmental and safety regulatory burden, increased competition from alternative energy sources and a decline in demand for coal.
Additionally, the coal industry continues to be in decline as a result of increased environmental and safety regulatory burden, increased competition from alternative energy sources and a decline in demand for coal. The Company has limited direct exposure to coal industry specific loans.
Management’s Discussion and Analysis of Financial Condition and Results of Operations located elsewhere in this report for further discussion related to the Company’s process for determining the appropriate level of the allowance for credit losses. The Company May Be Adversely Impacted By The Transition From LIBOR As A Reference Rate.
Management’s Discussion and Analysis of Financial Condition and Results of Operations located elsewhere in this report for further discussion related to the Company’s process for determining the appropriate level of the allowance for credit losses. Risks Related to an Investment in the Company's Securities The Value of the Company’s Common Stock Fluctuates.
Earnings also could be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings. Changes in interest rates may also negatively affect the ability of the Company's borrowers to repay their loans, particularly as interest rates rise and adjustable-rate loans become more expensive.
Earnings also could be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings.
Removed
Economic Risks The results of the ongoing recovery from the COVID-19 pandemic on our business and financial results remain unknown. The COVID-19 pandemic created extensive disruptions to the global economy and to the lives of individuals throughout the world.
Added
The oil, natural gas and coal industries, and businesses ancillary thereto, play an important role in the economies of West Virginia, Kentucky, Virginia and southeastern Ohio. Ongoing volatility in oil and gas prices since 2014 has negatively impacted oil and gas and other businesses in the Company’s market areas.
Removed
Business and consumer customers of the Company continue to experiencing varying degrees of financial distress as a result of the unprecedented uncertainty, volatility and disruption in the financial markets and in governmental, commercial and consumer activity caused by the COVID-19 pandemic.
Added
Changes to Interest Rates Could Impact the Financial Outcomes of the Company.
Removed
Though recovery from the COVID-19 pandemic is underway, given the ongoing and dynamic nature of the circumstances, it is not possible to accurately predict the extent, severity or duration of these conditions or when or if normal economic conditions will resume.
Removed
For this reason, the extent to which the COVID-19 pandemic affects our business, operations and financial condition, as well as our regulatory capital and liquidity ratios, remains uncertain and unpredictable and depends on, among other things, new information that may emerge concerning the scope, duration and severity of the COVID-19 pandemic.
Removed
The adverse impact on the markets in which we operate and on our business, operations and financial condition is expected to remain elevated until the pandemic fully subsides. Even after the COVID-19 pandemic subsides, it will likely take time for the U.S. economy to recover, and the length of the recovery period is unknown.
Removed
The Company's business could be materially and adversely affected during any such recovery period. To the extent the effects of COVID-19 adversely impact the Company's business and financial results, it might also have a heightening effect of the other risks described in this section. Economic Conditions in the Company's Market Areas Could Negatively Impact the Company's Business and Financial Condition.
Removed
As a result, the Company’s operating results and financial condition could be negatively impacted. Credit and Interest Rate Risks The Value of Real Estate Collateral May Fluctuate Significantly Resulting in an Under-Collateralized Loan Portfolio.
Removed
Environmental laws may require the Company to incur substantial expenses and may materially reduce the affected property’s value or limit the Company’s ability to use or sell the affected property.
Removed
The United Kingdom’s Financial Conduct Authority and the administrator of LIBOR announced that the publication of the most commonly used U.S. dollar London Interbank Offered Rate (“LIBOR”) settings will cease to be published or cease to be representative after June 30, 2023.
Removed
The Company discontinued originating LIBOR-based loans effective December 31, 2021 and is in the process of negotiating loans using its preferred replacement index, the Secured Overnight Financing Rate (“SOFR”). The transition from LIBOR has resulted in and could continue to result in added costs and employee efforts and could present additional risk.
Removed
Though many contracts have already been re-negotiated, the Company is subject to litigation 15 and reputational risks if it is unable to renegotiate and amend existing contracts with counterparties that are dependent on LIBOR, including contracts that do not have fallback language.
Removed
The timing and manner in which each customer’s contract transitions to AMERIBOR, SOFR or BSBY has varied on a case-by-case basis. Since AMERIBOR, SOFR and BSBY rates are calculated differently, payments under contracts referencing new rates will differ from those referencing LIBOR, which may lead to increased volatility as compared to LIBOR.
Removed
The transition has impacted the Company’s market risk profiles and required changes to its risk and pricing models, valuation tools, product design and hedging strategies, and the full impacts to the market risk profile changes are not yet known.
Removed
Although the transition has been underway, the Company is currently unable to assess what the ultimate impact of the transition from LIBOR will be.
Removed
As described in Note Two of Notes to the Consolidated Financial Statements, ma nagement has reviewed all contracts, identified those that will be affected, and is in the process of transitioning the LIBOR based loans to SOFR, or another index, by June 30, 2023.
Removed
Risks Related to an Investment in the Company's Securities The Value of the Company’s Common Stock Fluctuates.
Removed
Negative publicity may arise regarding the Company’s business, employees, or customers, with or without merit, and could result in the loss of customers, investors and employees, costly litigation, a decline in revenue, and increased regulatory oversight. The Company Is Subject to Possible Claims and Litigation Relating to Fiduciary Activities.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties City National owns the Company’s executive office, located at 25 Gatewater Road, Charleston, West Virginia. This facility has approximately 60,000 square feet and houses the Company's executive and administrative personnel. City National owns seventy-five bank branch locations and leases nineteen bank branch locations, pursuant to operating leases.
Biggest changeItem 2. Properties City National owns the Company’s executive office, located at 25 Gatewater Road, Charleston, West Virginia. This facility has approximately 60,000 square feet and houses the Company's executive and administrative personnel. As of December 31, 2023, City National owns seventy-eight bank branch locations and leases twenty bank branch locations, pursuant to operating leases.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+2 added−0 removed4 unchanged
Biggest changeAt December 31, 2022, City National could pay $59.2 million in dividends without prior regulatory permission. 25 Stock Performance The following graph sets forth the cumulative total shareholder return (assuming reinvestment of dividends) to the Company’s shareholders during the five-year period ended December 31, 2022, as well as the Nasdaq Composite Index and the KBW Nasdaq Bank Index. 2017 2018 2019 2020 2021 2022 City Holding Company $100.00 $102.85 $128.39 $112.76 $136.76 $160.39 NASDAQ Composite Index $100.00 $97.16 $132.81 $192.47 $235.15 $158.65 KBW Nasdaq Bank Index $100.00 $82.29 $112.01 $100.46 $138.97 $109.23 This graph shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, unless the Company specifically incorporates this report by reference.
Biggest changeAt December 31, 2023, City National could pay $53.3 million in dividends without prior regulatory permission. 25 Stock Performance The following graph sets forth the cumulative total shareholder return (assuming reinvestment of dividends) to the Company’s shareholders during the five-year period ended December 31, 2023, as well as the NASDAQ Composite Index and the KBW NASDAQ Bank Index. 2018 2019 2020 2021 2022 2023 City Holding Company $100.00 $124.83 $109.63 $132.97 $155.94 $190.17 NASDAQ Composite Index $100.00 $136.69 $198.10 $242.03 $163.28 $236.17 KBW Nasdaq Bank Index $100.00 $136.13 $122.09 $168.88 $132.75 $131.57 This graph shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, unless the Company specifically incorporates this report by reference.
Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Note Sixteen of Notes to Consolidated Financial Statements, the Company’s ability to pay dividends to its shareholders is dependent upon the ability of City National to pay dividends to the Company.
Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Note S even teen of Notes to Consolidated Financial Statements, the Company’s ability to pay dividends to its shareholders is dependent upon the ability of City National to pay dividends to the Company.
This table sets forth the cash dividends declared per share and information regarding the closing market prices per share of the Company’s common stock for the periods indicated. The price ranges are based on transactions as reported on the NASDAQ Global Select Market. At February 17, 2023 , there we re 2,432 shar eholders of record.
This table sets forth the cash dividends declared per share and information regarding the closing market prices per share of the Company’s common stock for the periods indicated. The price ranges are based on transactions as reported on the NASDAQ Global Select Market. At February 26, 2024, there were 2,516 shareholders of record.
The following table sets forth information regarding the Company's common stock repurchases transacted during the quarter ended December 31, 2022: Total Number Maximum Number of Shares Purchased of Shares that May as Part of Publicly Yet Be Purchased Total Number of Average Price Announced Plans Under the Plans Period Shares Purchased Paid per Share or Programs or Programs December 1 - December 31, 2022* 69,092 93.12 1,009,436 816,894 *There were no common stock repurchases in October or November 2022.
The following table sets forth information regarding the Company's common stock repurchases transacted during the quarter ended December 31, 2023: Total Number Maximum Number of Shares Purchased of Shares that May as Part of Publicly Yet Be Purchased Total Number of Average Price Announced Plans Under the Plans Period Shares Purchased Paid per Share or Programs or Programs October 1 - October 31, 2023* 69,606 90.61 849,681 150,319 *There were no common stock repurchases in November or December 2023.
Added
Subsequent to year-ended December 31, 2023, the Board of Directors of the Company authorized the Company to buy back up to 1,000,000 shares of its common stock. Similar to prior approval, no time limit was placed on the duration of the share repurchase program.
Added
As part of this authorization, the Company rescinded its previous repurchase program that was approved in May 2022. Item 6. Reserved 27

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

96 edited+21 added−18 removed58 unchanged
Biggest changeThese 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. 36 TABLE THREE NON-GAAP FINANCIAL MEASURES (In thousands) 2022 2021 2020 Net interest income ("GAAP") $ 180,033 $ 155,573 $ 154,644 Taxable equivalent adjustment 1,306 1,333 1,039 Net interest income, fully taxable equivalent $ 181,339 $ 156,906 $ 155,683 Average total interest earning assets $ 5,447,550 $ 5,432,581 $ 4,927,164 Net interest margin 3.33 % 2.89 % 3.16 % Accretion related to fair value adjustments (0.02) (0.04) (0.08) Net interest margin (excluding accretion) 3.31 % 2.85 % 3.08 % Equity to assets ("GAAP") 9.83 % 11.34 % 12.18 % Effect of goodwill and other intangibles, net (1.81) (1.76) (1.85) Tangible common equity to tangible assets 8.02 % 9.58 % 10.33 % Return on tangible equity ("GAAP") 20.3 % 15.3 % 15.6 % Impact of sale of VISA shares — — (2.4) Return on tangible equity, excluding the above items 20.3 % 15.3 % 13.2 % Return on assets ("GAAP") 1.71 % 1.49 % 1.66 % Impact of sale of VISA shares — — (0.24) Return on assets, excluding the above items 1.71 % 1.49 % 1.42 % 37 NON-INTEREST INCOME AND NON-INTEREST EXPENSE 2022 vs. 2021 Selected income statement fluctuations and ratios are summarized in the following table (dollars in millions): For the year ended December 31, 2022 2021 $ Change % Change Unrealized (losses) gains recognized on equity securities still held $ (1.6) $ 0.5 $ (2.1) (420) % Non-interest income, excluding net investment securities (losses) gains 73.7 68.8 4.9 7 % Non-interest expense 124.3 117.2 7.1 6 % Efficiency ratio 48.2 51.3 Full-time equivalent employees 909 905 Non-interest income was $72.1 million for 2022 as compared to $69.6 million for 2021.
Biggest changeThe 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): 36 TABLE THREE NON-GAAP FINANCIAL MEASURES (In thousands) 2023 2022 2021 Net interest income ("GAAP") $ 219,241 $ 180,033 $ 155,573 Taxable equivalent adjustment 1,025 1,306 1,333 Net interest income, fully taxable equivalent $ 220,266 $ 181,339 $ 156,906 Equity to assets ("GAAP") 10.98 % 9.83 % 11.34 % Effect of goodwill and other intangibles, net (2.41) (1.81) (1.76) Tangible common equity to tangible assets 8.57 % 8.02 % 9.58 % Return on average tangible equity ("GAAP") 23.8 % 20.3 % 15.3 % Impact of merger related expenses 0.8 — — Impact of merger related provision 0.3 — — Return on tangible equity, excluding merger related expenses and provision 24.9 % 20.3 % 15.3 % Return on assets ("GAAP") 1.87 % 1.71 % 1.49 % Impact of merger related expenses 0.07 — — Impact of merger related provision 0.03 — — Return on assets, excluding merger related expenses and provision 1.97 % 1.71 % 1.49 % Efficiency ratio 47.8 % 48.2 % 51.3 % Impact of merger expenses (1.8) — — Efficiency ratio, net of merger expenses 46.0 % 48.2 % 51.3 % 37 NON-INTEREST INCOME AND NON-INTEREST EXPENSE 2023 vs. 2022 Selected income statement fluctuations and ratios are summarized in the following table (dollars in millions): For the year ended December 31, 2023 2022 $ Change % Change Net realized investment security (losses) gains $ (4.9) $ — (4.9) N/A Unrealized (losses) gains recognized on equity securities still held $ 0.4 $ (1.6) $ 2.0 125 % Non-interest income, excluding net investment securities (losses) gains 75.1 73.7 1.4 2 % Merger-related expenses 5.2 0.3 4.9 1,822 % Non-interest expense, excluding merger-related expenses 138.4 124.0 14.3 12 % Efficiency ratio, excluding merger-related expenses 46.0 48.2 Full-time equivalent employees 957 909 Non-interest income was $70.6 million for the year ended December 31, 2023, as compared to $72.1 million for the year ended December 31, 2022.
There can be no assurance that current actions will have immaterial results, or that no material actions may be presented in the future. 49 RECENT ACCOUNTING PRONOUNCEMENTS AND DEVELOPMENTS Note Two , "Recent Accounting Pronouncements," of the Notes to Consolidated Financial Statements, discusses recently issued new accounting pronouncements and their expected impact on the Company’s consolidated financial statements. 50
There can be no assurance that current actions will have immaterial results, or that no material actions may be presented in the future. RECENT ACCOUNTING PRONOUNCEMENTS AND DEVELOPMENTS Note Two , "Recent Accounting Pronouncements," of the Notes to Consolidated Financial Statements, discusses recently issued new accounting pronouncements and their expected impact on the Company’s consolidated financial statements. 50
Banking institutions with a ratio of CET 1 capital to risk-weighted assets above the minimum but below the conservation buffer (or below the combined capital conservation buffer and countercyclical capital buffer, when the latter is applied) will face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall.
Banking institutions with a ratio of CET 1 capital to risk-weighted assets above the minimum but below the conservation buffer (or 40 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 40 Rules also provide for a "countercyclical capital buffer" that is applicable to only certain covered institutions and does not have any current applicability to City Holding Company or City National Bank.
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 City Holding Company or City National Bank.
LEGAL ISSUES The Company is engaged in various legal actions that it deems to be in the ordinary course of business. As these legal actions are resolved, the Company could realize impacts to its financial performance in the period in which these legal actions are ultimately decided.
LEGAL ISSUES The Company is engaged in various legal actions that it deems to be in the ordinary course of business. As these legal actions are resolved, the Company could realize impacts to its financial performance in the period in which these legal 49 actions are ultimately decided.
Exclusive of these realized and unrealized gains and losses, non-interest income increased from $68.8 million for the year ended December 31, 2021 to $73.7 million for the year ended December 31, 2022.
Exclusive of these realized and unrealized gains and losses, non-interest income increased from $68.8 38 million for the year ended December 31, 2021 to $73.7 million for the year ended December 31, 2022.
The Company does not believe that any changes in the unobservable inputs used to value the financial instruments mentioned above would have a material impact on the Company’s results of operations, liquidity, or capital resources. See Note Seventeen of the Notes to Consolidated Financial Statements for additional information regarding ASC Topic 820 and its impact on the Company’s financial statements.
The Company does not believe that any changes in the unobservable inputs used to value the financial instruments mentioned above would have a material impact on the Company’s results of operations, liquidity, or capital resources. See Note Eighteen of the Notes to Consolidated Financial Statements for additional information regarding ASC Topic 820 and its impact on the Company’s financial statements.
The Company categorizes commercial loans by industry according to the North American Industry Classification System ("NAICS") to monitor the portfolio for possible concentrations in one or more industries. Management monitors industry concentrations against internally established risk-based capital thresholds. As of December 31, 2022, City National was within its internally designated concentration limits.
The Company categorizes commercial loans by industry according to the North American Industry Classification System ("NAICS") to monitor the portfolio for possible concentrations in one or more industries. Management monitors industry concentrations against internally established risk-based capital thresholds. As of December 31, 2023, City National was within its internally designated concentration limits.
In total, the qualitative changes increased the ACL by approximately $0.5 million for the year ended December 31, 2022. Income Taxes The Income Taxes section of this Annual Report on Form 10-K provides management’s analysis of the Company’s income taxes. The Company is subject to federal and state income taxes in the jurisdictions in which it conducts business.
In total, the qualitative changes increased the ACL by approximately $0.5 million for the year ended December 31, 2023. Income Taxes The Income Taxes section of this Annual Report on Form 10-K provides management’s analysis of the Company’s income taxes. The Company is subject to federal and state income taxes in the jurisdictions in which it conducts business.
As of December 31, 2022, management believes that City Holding and City National meet all capital adequacy requirements. 41 In November 2019, the federal banking regulators published final rules implementing a simplified measure of capital adequacy for certain banking organizations that have less than $10 billion in total consolidated assets.
As of December 31, 2023, management believes that City Holding and City National meet all capital adequacy requirements. 41 In November 2019, the federal banking regulators published final rules implementing a simplified measure of capital adequacy for certain banking organizations that have less than $10 billion in total consolidated assets.
The Company believes that it is more likely than not that each of the deferred tax assets will be realized and that no significant valuation allowances were necessary as of December 31, 2022 or 2021. LIQUIDITY AND CAPITAL RESOURCES Liquidity The Company evaluates the adequacy of liquidity at both the Parent Company level and at the banking subsidiary level.
The Company believes that it is more likely than not that each of the deferred tax assets will be realized and that no significant valuation allowances were necessary as of December 31, 2023 or 2022. LIQUIDITY AND CAPITAL RESOURCES Liquidity The Company evaluates the adequacy of liquidity at both the Parent Company level and at the banking subsidiary level.
Excluding the dividend payments discussed above, the Parent Company has no significant commitments or obligations in years after 2023. City National manages its liquidity position in an effort to effectively and economically satisfy the funding needs of its customers and to accommodate the scheduled repayment of borrowings.
Excluding the dividend payments discussed above, the Parent Company has no significant commitments or obligations in years after 2024. City National manages its liquidity position in an effort to effectively and economically satisfy the funding needs of its customers and to accommodate the scheduled repayment of borrowings.
As disclosed in Note Fourteen of the Notes to Consolidated Financial Statements, the Company has entered into agreements with its customers to extend credit or to provide conditional commitments to provide payment on drafts presented in accordance with the terms of the underlying credit documents (including standby and commercial letters of credit).
As disclosed in Note Fifteen of the Notes to Consolidated Financial Statements, the Company has entered into agreements with its customers to extend credit or to provide conditional commitments to provide payment on drafts presented in accordance with the terms of the underlying credit documents (including standby and commercial letters of credit).
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, 2019 and forward. 30 The effective tax rate is calculated by taking the statutory rate and adjusting for permanent and discrete items.
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, 2020 and forward. 30 The effective tax rate is calculated by taking the statutory rate and adjusting for permanent and discrete items.
The Company also provides overdraft protection to certain demand deposit customers that represent an unfunded commitment. As a result of the Company’s off-balance sheet arrangements for 2022 and 2021, no material revenue, expenses, or cash flows were recognized.
The Company also provides overdraft protection to certain demand deposit customers that represent an unfunded commitment. As a result of the Company’s off-balance sheet arrangements for 2023 and 2022, no material revenue, expenses, or cash flows were recognized.
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 December 31, 2022 is adequate to provide for expected losses inherent in the Company’s 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 December 31, 2023 is adequate to provide for expected losses inherent in the Company’s loan portfolio.
The majority of the Company’s investment securities continue to be mortgage-backed securities. These securities are collateralized by both residential and commercial properties. The mortgage-backed securities in which the Company has invested are predominantly issued by government-sponsored agencies such as Fannie Mae (“FNMA”), Freddie Mac (“FHLMC”) and Ginnie Mae (“GNMA”).
The majority of the Company’s investment securities continue to be mortgage-backed securities. These securities are collateralized by both residential and commercial properties. The mortgage-backed securities in which the Company has invested are predominantly issued by government-sponsored agencies such as Fannie Mae, Freddie Mac and Ginnie Mae.
Geographically, the portfolio supports the Company's footprint, with 18% of the portfolio being from municipalities throughout West Virginia, and the remainder from communities in Texas, Washington, Ohio and various other states.
Geographically, the portfolio supports the Company's footprint, with 15% of the portfolio being from municipalities throughout West Virginia, and the remainder from communities in Texas, Washington, Ohio and various other states.
The increase in net deferred tax asset was largely due to a decrease in the Company's investment valuation, primarily in the mortgage-backed security portfolio. The components of the Company’s net deferred tax assets are disclosed in Note Eleven of the Notes to Consolidated Financial Statements.
The decrease in net deferred tax asset was largely due to a decrease in the Company's investment valuation, primarily in the mortgage-backed security portfolio. The components of the Company’s net deferred tax assets are disclosed in Note Twelve of the Notes to Consolidated Financial Statements.
As of December 31, 2022, City National's loans to borrowers within the Lessors of Nonresidential Buildings categories exceeded 10% of total loans (14%). No other NAICS industry classification exceeded 10% of total loans as of December 31, 2022. Management also monitors non-owner occupied commercial real estate as a percent of risk based capital (based upon regulatory guidance).
As of December 31, 2023, City National's loans to borrowers within the Lessors of Nonresidential Buildings categories exceeded 10% of total loans (15%). No other NAICS industry classification exceeded 10% of total loans as of December 31, 2023. Management also monitors non-owner occupied commercial real estate as a percent of risk based capital (based upon regulatory guidance).
The following table shows asset quality ratios as of December 31, 2022 and 2021: 2022 2021 Net charge offs to average loans 0.04 % 0.09 % Provision for (recovery of) credit losses to average loans 0.01 (0.09) Allowance for credit losses to nonperforming loans 317.28 290.15 Allowance for credit losses to total loans 0.47 0.51 Non-performing assets as a percentage of total loans and OREO 0.17 0.21 48 GOODWILL The Company evaluates the recoverability of goodwill and indefinite lived intangible assets annually as of November 30 th , or more frequently if events or changes in circumstances warrant, such as a material adverse change in the Company's business.
The following table shows asset quality ratios as of December 31, 2022 and 2021: 2023 2022 Net charge offs to average loans 0.01 % 0.04 % Provision for (recovery of) credit losses to average loans 0.08 0.01 Allowance for credit losses to nonperforming loans 290.56 317.28 Allowance for credit losses to total loans 0.55 0.47 Non-performing assets as a percentage of total loans and OREO 0.21 0.17 48 GOODWILL The Company evaluates the recoverability of goodwill and indefinite lived intangible assets annually as of November 30 th , or more frequently if events or changes in circumstances warrant, such as a material adverse change in the Company's business.
Based on the valuation techniques used and 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.
Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions, and estimates underlying those amounts, management has identified: (i) the determination of the allowance for credit losses (ii) income taxes and (iii) acquisition and preliminary purchase price accounting to be the accounting areas that require the most subjective or complex judgments and, as such, could be most subject to revision as new information becomes available.
For purposes of this table, non-accruing loans have been included in average balances and the following net loan fees (in thousands) have been included in interest income: 2022 2021 2020 Loan fees, net $ 568 $ 3,550 $ 1,842 2. Includes the Company's residential real estate and home equity loan categories. 33 3.
For purposes of this table, non-accruing loans have been included in average balances and the following net loan fees (in thousands) have been included in interest income: 2023 2022 2021 Loan fees, net $ 1,366 $ 568 $ 3,550 2. Includes the Company's residential real estate and home equity loan categories. 33 3.
Most of these financial instruments used valuation methodologies involving observable market data, collectively Level 1 and Level 2 measurements, to determine fair value. At December 31, 2022, approximately $65 million of derivative liabilities were recorded at fair value using methodologies involving observable market data.
Most of these financial instruments used valuation methodologies involving observable market data, collectively Level 1 and Level 2 measurements, to determine fair value. At December 31, 2023, approximately $49 million of derivative liabilities were recorded at fair value using methodologies involving observable market data.
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 $1.53 billion at December 31, 2022, and that greatly exceeded the Company’s non-deposit sources of borrowing, which totaled $291 million.
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 $1.37 billion at December 31, 2023, and that greatly exceeded the Company’s non-deposit sources of borrowing, which totaled $435 million.
The portfolio has 93% rated "A" or better and the remaining portfolio is unrated, as the issuances represented small issuances of revenue bonds. Additional credit support has been purchased by the issuer for 27% of the portfolio, while 73% has no additional credit support.
The portfolio has 93% rated "A" or better and the remaining portfolio is unrated, as the issuances represented small issuances of revenue bonds. Additional credit support has been purchased by the issuer for 24% of the portfolio, while 76% has no additional credit support.
Management re-underwrites 100% of the portfolio on an annual basis, using the same guidelines that are used to underwrite its commercial loans. Revenue bonds were 56% of the portfolio, while the remaining 44% were general obligation bonds.
Management re-underwrites 100% of the portfolio on an annual basis, using the same guidelines that are used to underwrite its commercial loans. Revenue bonds were 57% of the portfolio, while the remaining 43% were general obligation bonds.
In the December 31, 2022 estimate, the Company assumed an unemployment forecast range of 3.7% to 4.9%, compared to a range of 3.5% to 5.2% utilized in the December 31, 2021 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 the December 31, 2023 estimate, the Company assumed an unemployment forecast range of 3.8% to 4.8%, compared to a range of 3.7% to 4.9% utilized in the December 31, 2022 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 Company’s reported net interest margin declined from 3.16% for the year ended December 31, 2020 to 2.89% for the year ended December 31, 2021. 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").
The Company’s reported net interest margin increased from 2.89% for the year ended December 31, 2021 to 3.33% for the year ended December 31, 2022. 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").
Short-term borrowings and long-term debt represent borrowings of the Company and have stated maturity dates. Operating leases between the Company and the lessor have stated expiration dates and renewal terms.
Short-term borrowings and FHLB long-term advances represent borrowings of the Company and have stated maturity dates. Operating leases between the Company and the lessor have stated expiration dates and renewal terms.
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 December 31, 2022, City National could pay dividends up to $59.2 million without prior regulatory permission.
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 December 31, 2023, City National could pay dividends up to $53.3 million without prior regulatory permission.
INCOME TAXES Selected information regarding the Company's income taxes is presented in the table below (dollars in millions): For the year ended December 31, 2022 2021 2020 Income tax expense $ 25.3 $ 23.1 $ 21.7 Effective tax rate 19.8 % 20.8 % 19.5 % A reconciliation of the effective tax rate to the statutory rate is included in Note Eleven of the Notes to Consolidated Financial Statements.
INCOME TAXES Selected information regarding the Company's income taxes is presented in the table below (dollars in millions): For the year ended December 31, 2023 2022 2021 Income tax expense $ 28.7 $ 25.3 $ 23.1 Effective tax rate 20.1 % 19.8 % 20.8 % A reconciliation of the effective tax rate to the statutory rate is included in Note Twelve of the Notes to Consolidated Financial Statements.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company was in a net deferred tax asset position ($44.9 million) at December 31, 2022 and a net deferred tax asset position ($0.1 million) at December 31, 2021.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company was in a net deferred tax asset position ($42.2 million) at December 31, 2023 and a net deferred tax asset position ($44.9 million) at December 31, 2022.
As of December 31, 2022, the Parent Company reported a cash balance of $54.6 million and management believes that the Parent Company’s available cash balance, together with cash dividends from City National, will be adequate to satisfy its funding and cash needs over the next twelve months.
As of December 31, 2023, the Parent Company reported a cash balance of $64.0 million and management believes that the Parent Company’s available cash balance, together with cash dividends from City National, will be adequate to satisfy its funding and cash needs over the next twelve months.
Breakdown of Deposits by Categories, Average Balance and Average Rate Paid 33 b. Maturity Schedule of Uninsured Time Certificates of Deposit 49 VI. Return on Equity and Assets 31 VII.
Risk Elements 76 V. Deposits a. Breakdown of Deposits by Categories, Average Balance and Average Rate Paid 33 b. Maturity Schedule of Uninsured Time Certificates of Deposit 49 VI. Return on Equity and Assets 31 VII.
This increase was primarily due to an increase in salaries and employee benefit expenses ($4.7 million, due to higher salary adjustments during 2022, increased incentive compensation, and increased health insurance) and equipment and software related expenses ($1.3 million).
This increase was primarily due to an increase in salaries and employee benefit expenses ($4.7 million, due to higher salary adjustments during 2022, increased incentive compensation, and increased health insurance) and equipment and software related expenses ($1.3 million). In addition, occupancy related expenses increased $0.6 million, advertising increased $0.3 million, and merger-related expenses increased $0.3 million.
Management’s judgment is necessary to estimate fair value when quoted prices or observable market data are not available. At December 31, 2022, approximately 27% of total assets, or $1.6 billion, consisted of financial instruments recorded at fair value.
Management’s judgment is necessary to estimate fair value when quoted prices or observable market data are not available. At December 31, 2023, approximately 23% of total assets, or $1.4 billion, consisted of financial instruments recorded at fair value.
As illustrated in the Consolidated Statements of Cash Flows, the Company generated $115.8 million of cash from operating activities during 2022, primarily from interest income received on loans and investments, net of interest expense paid on deposits and borrowings.
As illustrated in the Consolidated Statements of Cash Flows, the Company generated $137.6 million of cash from operating activities during 2023, primarily from interest income received on loans and investments, net of interest expense paid on deposits and borrowings.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Statistical Information The information noted below is provided pursuant to Guide 3 -- Statistical Disclosure by Bank Holding Companies. Description of Information Page Reference Item I. Distribution of Assets, Liabilities and Stockholders' Equity; Interest Rates and Interest Differential a. Average Balance Sheets 33 b.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Statistical Information The information noted below is provided pursuant to Guide 3 - Statistical Disclosure by Bank Holding Companies and 17 CFR § 229.1400. Description of Information Page Reference Item I. Distribution of Assets, Liabilities and Stockholders' Equity; Interest Rates and Interest Differential a.
The portfolio totaled $174.8 million as of December 31, 2022. Risk characteristics are driven by rental housing demand as well as economic and employment conditions. ◦ Non-residential commercial real estate includes properties such as retail, office, warehouse, storage, healthcare, entertainment, religious, and other nonresidential commercial properties. The non-residential product type is further segmented into owner- and non-owner occupied properties.
Risk characteristics are driven by rental housing demand as well as economic and employment conditions. ◦ Non-residential commercial real estate includes properties such as retail, office, warehouse, storage, healthcare, entertainment, religious, and other nonresidential commercial properties. The non-residential product type is further segmented into owner- and non-owner occupied properties.
The Company's municipal bond portfolio of $268 million as of December 31, 2022 has an average tax equivalent yield of 2.73% with an average maturity of 12.8 years. The average dollar amount invested in each security is $1.2 million.
The Company's municipal bond portfolio of $213 million as of December 31, 2023 has an average tax equivalent yield of 2.45% with an average maturity of 12.1 years. The average dollar amount invested in each security is $0.8 million.
As a result of the Company’s analysis of the adequacy of the Allowance for Credit Losses, the Company recorded a provision for credit losses of $0.5 million for the year ended December 31, 2022, compared to a recovery of credit losses of $3.2 million for year ended December 31, 2021.
As a result of the Company’s analysis of the adequacy of the Allowance for Credit Losses, the Company recorded a provision for credit losses of $3.2 million for the year ended December 31, 2023 and $0.5 million for year ended December 31, 2022.
FINANCIAL SUMMARY The Company’s financial performance over the previous three years is summarized in the following table: 2022 2021 2020 Net income available to common shareholders (in thousands) $ 102,071 $ 88,080 $ 89,595 Earnings per common share, basic $ 6.81 $ 5.67 $ 5.55 Earnings per common share, diluted $ 6.80 $ 5.66 $ 5.55 Cash dividends declared $ 2.50 $ 2.34 $ 2.29 Book value per share $ 39.08 $ 45.22 $ 44.47 Dividend payout ratio 36.8 % 41.3 % 41.2 % ROA* 1.71 % 1.49 % 1.66 % ROE* 16.5 % 12.7 % 12.9 % ROATCE* 20.3 % 15.3 % 15.6 % *ROA (Return on Average Assets) is a measure of the effectiveness of asset utilization.
FINANCIAL SUMMARY The Company’s financial performance over the previous three years is summarized in the following table: 2023 2022 2021 Net income available to common shareholders (in thousands) $ 114,365 $ 102,071 $ 88,080 Earnings per common share, basic $ 7.62 $ 6.81 $ 5.67 Earnings per common share, diluted $ 7.61 $ 6.80 $ 5.66 Cash dividends declared $ 2.73 $ 2.50 $ 2.34 Book value per share $ 45.65 $ 39.08 $ 45.22 Dividend payout ratio 35.9 % 36.8 % 41.3 % ROA* 1.87 % 1.71 % 1.49 % ROE* 18.0 % 16.5 % 12.7 % ROATCE* 23.8 % 20.3 % 15.3 % *ROA (Return on Average Assets) is a measure of the effectiveness of asset utilization.
City National is a retail and consumer-oriented community bank with 94 bank branches in West Virginia (58), Kentucky (19), Virginia (13) and Ohio (4).
City National is a retail and consumer-oriented community bank with 98 bank branches in West Virginia (58), Kentucky (23), Virginia (13) and southeastern Ohio (4).
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: 2022 2021 2020 Residential real estate $ 298 $ 620 $ 630 Commercial, financial, and agriculture 642 1,198 2,445 Installment loans to individuals 45 87 143 Time deposits 83 193 622 Total $ 1,068 $ 2,098 $ 3,840 4.
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: 2023 2022 2021 Residential real estate $ 243 $ 298 $ 620 Commercial, financial, and agriculture 2,276 642 1,198 Installment loans to individuals 41 45 87 Time deposits 535 83 193 Total $ 3,095 $ 1,068 $ 2,098 4.
In addition, occupancy related expenses increased $0.6 million, advertising increased $0.3 million, and merger-related expenses increased $0.3 million. 2021 vs. 2020 Selected income statement fluctuations are summarized in the following table (dollars in millions): For the year ended December 31, 2021 2020 $ Change % Change Unrealized gains (losses) recognized on equity securities still held $ 0.5 $ (0.9) $ 1.4 156 % Sale of VISA shares — 17.8 (17.8) (100) % Non-interest income, excluding net investment securities (losses) gains and sale of VISA shares 68.8 65.6 3.2 5 % Non-interest expense 117.2 115.3 1.9 2 % Efficiency ratio 51.3 51.3 Full-time equivalent employees 905 926 Non-interest income was $69.6 million for 2021 as compared to $82.7 million for 2020.
In addition, bankcard expense increased $1.4 million, FDIC expense increased $1.2 million and occupancy related expenses increased $0.6 million. 2022 vs. 2021 Selected income statement fluctuations are summarized in the following table (dollars in millions): For the year ended December 31, 2022 2021 $ Change % Change Unrealized gains (losses) recognized on equity securities still held $ (1.6) $ 0.5 $ (2.1) (420) % Sale of VISA shares — — — — % Non-interest income, excluding net investment securities (losses) gains 73.7 68.8 4.9 7 % Non-interest expense, less merger related expenses 124.0 117.2 6.8 6 % Efficiency ratio 48.2 51.3 Full-time equivalent employees 909 905 Non-interest income was $72.1 million for 2022 as compared to $69.6 million for 2021.
Analysis of Net Interest Earnings 34 c. Rate Volume Analysis of Changes in Interest Income and Expense 34 II. Investment Portfolio a. Maturity Schedule of Investments 43 III. Loan Portfolio a. Types of Loans 43 b. Maturities and Sensitivity to Changes in Interest Rates 43 c. Other Interest Bearing Assets None d. Risk Elements 73 V. Deposits a.
Average Balance Sheets 33 b. Analysis of Net Interest Earnings 34 c. Rate Volume Analysis of Changes in Interest Income and Expense 34 II. Investment Portfolio a. Maturity Schedule of Investments 43 III. Loan Portfolio a. Types of Loans 44 b. Maturities and Sensitivity to Changes in Interest Rates 44 c. Other Interest Bearing Assets None d.
TABLE SEVEN MATURITY DISTRIBUTION OF UNINSURED CERTIFICATES OF DEPOSIT Amounts Three months or less $ 19,150 Over three months through six months 18,946 Over six months through twelve months 26,579 Over twelve months 44,819 Total $ 109,494 FAIR VALUE MEASUREMENTS The Company determines the fair value of its financial instruments based on the fair value hierarchy established in ASC Topic 820, whereby the fair value of certain assets and liabilities is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.
TABLE SEVEN MATURITY DISTRIBUTION OF UNINSURED CERTIFICATES OF DEPOSIT Amounts Three months or less $ 26,647 Over three months through six months 36,533 Over six months through twelve months 41,224 Over twelve months 31,949 Total $ 136,353 FAIR VALUE MEASUREMENTS The Company determines the fair value of its financial instruments based on the fair value hierarchy established in ASC Topic 820, whereby the fair value of certain assets and liabilities is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.
The Company’s net loan to asset ratio is 61.7% as of December 31, 2022 and deposit balances fund 82.8% of total assets as compared to 79.8% for its peers (Bank Holding Company Peer Group, as of the most recent data available as of September 30, 2022, which includes commercial banks with assets ranging from $3 billion to $10 billion).
The Company’s net loan to asset ratio is 66.5% as of December 31, 2023 and deposit balances fund 80.0% of total assets as compared to 72.9% for its peers (Bank Holding Company Peer Group, as of the most recent data available as of September 30, 2023, which includes commercial banks with assets ranging from $3 billion to $10 billion).
Excluding PPP loans, C&I loans increased $34 million from December 31, 2021 to December 31, 2022. 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.
C&I loans increased $38.4 million from December 31, 2022 to December 31, 2023, excluding $14.7 million of C&I loans acquired from Citizens. 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.
Further, the Company’s deposit mix has a very high proportion of transaction and savings accounts that fund 67.7% of the Company’s total assets and the Company uses time deposits over $250,000 to fund 4.6% of total assets compared to its peers, which fund 8.9% of total assets with such deposits.
Further, the Company’s deposit mix has a very high proportion of transaction and savings accounts that fund 63.1% of the Company’s total assets and the Company uses time deposits over $250,000 to fund 5.5% of total assets compared to its peers, which fund 12.3% of total assets with such deposits.
Nonresidential non-owner occupied commercial real 44 estate totaled $586.0 million while nonresidential owner-occupied commercial real estate totaled $175.0 million as of December 31, 2022. Risk characteristics relate to levels of consumer spending and overall economic conditions.
Nonresidential non-owner occupied commercial real 44 estate totaled $680.6 million while nonresidential owner-occupied commercial real estate totaled $240.3 million as of December 31, 2023. Risk characteristics relate to levels of consumer spending and overall economic conditions.
The credit and collateral documents for each potential purchased loan are reviewed to ensure the credit metrics are acceptable to management. At December 31, 2022, $21 million of the residential real estate loans were for properties under construction. Home equity loans increased $12 million from December 31, 2021 to $134 million at December 31, 2022.
The credit and collateral documents for each potential purchased loan are reviewed to ensure the credit metrics are acceptable to management. At December 31, 2023, $23 million of the residential real estate loans were for properties under construction.
In addition to its branch network, City National's delivery channels include automated-teller-machines ("ATMs"), interactive-teller-machines ("ITMs"), mobile banking, debit cards, interactive voice response systems, and Internet technology. The Company’s business activities are currently limited to one reportable business segment, which is community banking.
In addition to its branch network, City National's delivery channels include automated-teller-machines ("ATMs"), interactive-teller-machines ("ITMs"), mobile banking, debit cards, interactive voice response systems, and Internet technology. The Company’s business activities are currently limited to one reportable business segment, which is community banking. On March 10, 2023, the Company acquired 100% of the outstanding common shares of Citizens Commerce Bancshares, Inc.
In addition to these 39 anticipated cash needs, the Parent Company has operating expenses and other contractual obligations, which are estimated to require $1.5 million of additional cash over the next 12 months.
However, dividends to shareholders can, if necessary, be suspended. In addition to these anticipated cash needs, the Parent Company has operating expenses and other contractual obligations, which are estimated to require $1.6 million of additional cash over the next 12 months.
During the year ended December 31, 2022, the Company repurchased approximately 325,000 common shares at a weighted average price of $81.50 per share as part of a one million share repurchase plan authorized by the Board of Directors in May 2022. At December 31, 2022, the Company could repurchase approximately 817,000 shares under the current plan.
During the year ended December 31, 2023, the Company repurchased approximately 666,575 common shares at a weighted average price of $90.21 per share as part of a one million share repurchase plan authorized by the Board of Directors in May 2022. At December 31, 2023, the Company could repurchase an additional approximately 150,319 shares under the current plan.
Average yields on investments available-for-sale are computed based on amortized cost. Mortgage-backed securities have been allocated to their respective maturity groupings based on their contractual maturity. 43 TABLE FIVE LOAN PORTFOLIO Loans increased $102.4 million (2.9%) from December 31, 2021 to $3.64 billion at December 31, 2022.
Average yields on investments available-for-sale are computed based on amortized cost. Mortgage-backed securities have been allocated to their respective maturity groupings based on their contractual maturity. 43 TABLE FIVE LOAN PORTFOLIO Loans increased $479.7 million (13.2%) from December 31, 2022 to $4.13 billion at December 31, 2023. The Company’s acquisition of Citizens increased total loans by $254.7 million.
These loans include home equity lines of credit ("HELOC") and amortized home equity loans that require monthly installment payments. Second priority lien home equity loans are underwritten with less documentation than first priority lien residential real estate loans but typically have similar loan-to-value ratios and other terms as first priority lien residential real estate loans.
Second priority lien home equity loans are underwritten with less documentation than first priority lien residential real estate loans but typically have similar loan-to-value ratios and other terms as first priority lien residential real estate loans.
The Company’s reported net interest margin increased from 2.89% for the year ended December 31, 2021 to 3.33% for the year ended December 31, 2022. 35 2021 vs. 2020 The Company’s net interest income increased from $154.6 million for the year ended December 31, 2020 to $155.6 million for the year ended December 31, 2021.
The Company’s reported net interest margin increased from 3.33% for the year ended December 31, 2022 to 4.01% for the year ended December 31, 2023. 2022 vs. 2021 The Company’s net interest income increased from $155.6 million for the year ended December 31, 2021 to $180.0 million for the year ended December 31, 2022.
Funds are available to City National from a number of sources, including depository relationships, sales and maturities within the investment securities portfolio, and borrowings from the Federal Home Loan Bank ("FHLB") and other financial institutions. As of December 31, 2022, City National’s assets are significantly funded by deposits and capital.
Funds are available to City National from a number of sources, including depository relationships, sales and maturities within the investment securities portfolio, and borrowings from the Federal Home Loan Bank ("FHLB"), the Federal Reserve Discount Window, and other financial institutions.
At December 31, 2022, the Company had $1.2 billion of commercial loans classified as non-owner occupied and was within its designated concentration threshold. Residential real estate loans increased $145 million from December 31, 2021 to $1.69 billion at December 31, 2022.
At December 31, 2023, the Company had $1.5 billion of commercial loans classified as non-owner occupied and was within its designated concentration threshold. Residential real estate loans increased $51.3 million from December 31, 2022 to $1.79 billion at December 31, 2023, excluding $43.4 million of residential real estate loans acquired from Citizens.
The allocation of a portion of the allowance in one portfolio segment does not preclude its availability to absorb losses in other portfolio segments. 2022 2021 Amount Percent of Loans in Each Category to Total Loans Amount Percent of Loans in Each Category to Total Loans Commercial and industrial $ 3,568 10 % $ 3,480 10 % 1-4 Family 566 3 % 598 3 Hotels 2,332 10 % 2,426 9 Multi-family 380 5 % 483 6 Non Residential Non-Owner Occupied 2,019 16 % 2,319 18 Non Residential Owner Occupied 1,315 5 % 1,485 6 Commercial real estate 6,612 39 % 7,311 42 Residential real estate 5,427 46 % 5,716 44 Home equity 290 4 % 517 3 Consumer 110 1 % 106 1 DDA overdrafts 1,101 0 % 1,036 — Allowance for Credit Losses $ 17,108 100 % $ 18,166 100 % The ACL decreased from $18.2 million at December 31, 2021 to $17.1 million at December 31, 2022.
The allocation of a portion of the allowance in one portfolio segment does not preclude its availability to absorb losses in other portfolio segments. 2023 2022 Amount Percent of Loans in Each Category to Total Loans Amount Percent of Loans in Each Category to Total Loans Commercial and industrial $ 4,474 10 % $ 3,568 10 % 1-4 Family 1,402 5 % 566 3 Hotels 2,211 9 % 2,332 10 Multi-family 1,002 5 % 380 5 Non Residential Non-Owner Occupied 4,077 16 % 2,019 16 Non Residential Owner Occupied 2,453 6 % 1,315 5 Commercial real estate 11,145 41 % 6,612 39 Residential real estate 5,398 43 % 5,427 46 Home equity 490 4 % 290 4 Consumer 269 2 % 110 1 DDA overdrafts 969 — % 1,101 — Allowance for Credit Losses $ 22,745 100 % $ 17,108 100 % The ACL increased from $17.1 million at December 31, 2022 to $22.7 million at December 31, 2023.
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 $1.9 million impact on the reserve allocation. Changing each factor by 0.01% (moderate improvement or decline) would have a $3.8 million impact.
Based on sensitivity of the portfolio, the change had no material impact on the reserve. 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.
In order to group loans with similar risk characteristics, the portfolio is further segmented by product types: ◦ Commercial 1-4 Family loans consist of residential single-family, duplex, triplex, and fourplex rental properties and totaled $116.2 million as of December 31, 2022. Risk characteristics are driven by rental housing demand as well as economic and employment conditions.
At December 31, 2023, $2 million of the commercial real estate loans were for commercial properties under construction. In order to group loans with similar risk characteristics, the portfolio is further segmented by product types: ◦ Commercial 1-4 Family loans consist of residential single-family, duplex, triplex, and fourplex rental properties and totaled $206.2 million as of December 31, 2023.
NET INTEREST INCOME 2022 2021 2020 Total interest income $ 189,688 $ 165,467 $ 178,259 Total interest expense 9,655 9,894 23,615 Net interest income 180,033 155,573 154,644 2022 vs. 2021 The Company’s net interest income increased from $155.6 million for the year ended December 31, 2021 to $180.0 million for the year ended December 31, 2022.
NET INTEREST INCOME 2023 2022 2021 Total interest income $ 271,264 $ 189,688 $ 165,467 Total interest expense 52,023 9,655 9,894 Net interest income 219,241 180,033 155,573 2023 vs. 2022 The Company’s net interest income increased from $180.0 million for the year ended December 31, 2022 to $219.2 million for the year ended December 31, 2023.
Commercial real estate loans are to many of the same customers and carry similar industry risks as C&I loans, but have different collateral risk. Commercial real estate loans decreased $87 million to $1.39 billion at December 31, 2022. At December 31, 2022, $4 million of the commercial real estate loans were for commercial properties under construction.
Commercial real estate loans are to many of the same customers and carry similar industry risks as C&I loans, but have different collateral risk. Commercial real estate loans increased $101.4 million to $1.67 billion at December 31, 2023, excluding $179.8 million of commercial real estate loans acquired from Citizens.
These decreases were 31 partially offset by an increase in interest bearing demand deposits of $97.6 million and an increase in savings deposits of $49.4 million. 32 TABLE ONE AVERAGE BALANCE SHEETS AND NET INTEREST INCOME (In thousands) 2022 2021 2020 Average Balance Interest Yield/ Rate Average Balance Interest Yield/ Rate Average Balance Interest Yield/ Rate Assets Loan portfolio (1) : Residential real estate (2),(3) $ 1,755,772 $ 68,208 3.88 % $ 1,658,710 $ 64,492 3.89 % $ 1,768,789 $ 74,452 4.21 % Commercial, financial, and agriculture (3) 1,781,132 75,390 4.23 1,838,560 68,784 3.74 1,816,658 72,128 3.97 Installment loans to individuals (3),(4) 46,622 2,567 5.51 48,708 2,831 5.81 56,163 3,319 5.91 Previously securitized loans (5) — 373 — — 568 — — 599 — Total loans 3,583,526 146,538 4.09 3,545,978 136,675 3.85 3,641,610 150,498 4.13 Securities: Taxable 1,288,252 34,445 2.67 1,075,550 23,071 2.15 890,771 23,355 2.62 Tax-exempt (6) 218,588 6,217 2.84 242,125 6,362 2.63 164,740 4,954 3.01 Total securities 1,506,840 40,662 2.70 1,317,675 29,433 2.23 1,055,511 28,309 2.68 Deposits in depository institutions 357,184 3,794 1.06 568,928 693 0.12 230,043 492 0.21 Total interest-earning assets 5,447,550 190,994 3.51 5,432,581 166,801 3.07 4,927,164 179,299 3.64 Cash and due from banks 88,581 92,847 76,173 Bank premises and equipment 72,590 76,069 77,670 Goodwill and intangible assets 116,469 117,899 119,471 Other assets 271,685 216,493 221,864 Less: allowance for credit losses (17,687) (21,922) (22,770) Total assets $ 5,979,188 $ 5,913,967 $ 5,399,572 Liabilities Interest-bearing demand deposits $ 1,150,007 1,234 0.11 % $ 1,071,628 504 0.05 % $ 912,306 1,005 0.11 % Savings deposits 1,414,727 1,544 0.11 1,291,225 689 0.05 1,071,727 1,591 0.15 Time deposits (3) 983,046 4,666 0.47 1,157,502 8,213 0.71 1,329,841 19,927 1.50 Short-term borrowings 284,611 2,211 0.78 298,413 489 0.16 253,456 993 0.39 Long-term debt — — — — — — 830 100 12.05 Total interest-bearing liabilities 3,832,391 9,655 0.25 3,818,768 9,895 0.26 3,568,160 23,616 0.66 Noninterest-bearing demand deposits 1,429,415 1,315,801 1,035,801 Other liabilities 98,553 84,377 100,166 Total shareholders’ equity 618,829 695,021 695,445 Total liabilities and shareholders’ equity $ 5,979,188 $ 5,913,967 $ 5,399,572 Net interest income $ 181,339 $ 156,906 $ 155,683 Net yield on earning assets 3.33 % 2.89 % 3.16 % 1.
During the second quarter of 2023, the Company borrowed $100.0 million from the Federal Home Loan Bank at a weighted average rate of 4.01%. 32 TABLE ONE AVERAGE BALANCE SHEETS AND NET INTEREST INCOME (In thousands) 2023 2022 2021 Average Balance Interest Yield/ Rate Average Balance Interest Yield/ Rate Average Balance Interest Yield/ Rate Assets Loan portfolio (1) : Residential real estate (2),(3) $ 1,899,239 $ 88,083 4.64 % $ 1,755,772 $ 68,581 3.91 % $ 1,658,710 $ 65,060 3.92 % Commercial, financial, and agriculture (3) 1,935,038 120,783 6.24 1,781,132 75,390 4.23 1,838,560 68,784 3.74 Installment loans to individuals (3),(4) 66,636 3,828 5.74 46,622 2,567 5.51 48,708 2,831 5.81 Total loans 3,900,913 212,694 5.45 3,583,526 146,538 4.09 3,545,978 136,675 3.85 Securities: Taxable 1,273,674 48,335 3.79 1,288,252 34,445 2.67 1,075,550 23,071 2.15 Tax-exempt (5) 175,383 4,878 2.78 218,588 6,217 2.84 242,125 6,362 2.63 Total securities 1,449,057 53,213 3.67 1,506,840 40,662 2.70 1,317,675 29,433 2.23 Deposits in depository institutions 142,299 6,382 4.48 357,184 3,794 1.06 568,928 693 0.12 Total interest-earning assets 5,492,269 272,289 4.96 5,447,550 190,994 3.51 5,432,581 166,801 3.07 Cash and due from banks 74,443 88,581 92,847 Bank premises and equipment 72,582 72,590 76,069 Goodwill and intangible assets 153,937 116,469 117,899 Other assets 329,198 271,685 216,493 Less: allowance for credit losses (22,089) (17,687) (21,922) Total assets $ 6,100,340 $ 5,979,188 $ 5,913,967 Liabilities Interest-bearing demand deposits $ 1,291,234 11,048 0.86 % $ 1,150,007 1,234 0.11 % $ 1,071,628 504 0.05 % Savings deposits 1,332,527 7,979 0.60 1,414,727 1,544 0.11 1,291,225 689 0.05 Time deposits (3) 969,329 18,260 1.88 983,046 4,666 0.47 1,157,502 8,213 0.71 Short-term borrowings 290,440 12,027 4.14 284,611 2,211 0.78 298,413 489 0.16 FHLB long-term advances 66,849 2,709 4.05 — — — — — — Total interest-bearing liabilities 3,950,379 52,023 1.32 3,832,391 9,655 0.25 3,818,768 9,895 0.26 Noninterest-bearing demand deposits 1,389,295 1,429,415 1,315,801 Other liabilities 125,377 98,553 84,377 Total shareholders’ equity 635,289 618,829 695,021 Total liabilities and shareholders’ equity $ 6,100,340 $ 5,979,188 $ 5,913,967 Net interest income $ 220,266 $ 181,339 $ 156,906 Net yield on earning assets 4.01 % 3.33 % 2.89 % 1.
The Company’s regulatory capital ratios for both City Holding and City National include the 2.5% capital conservation buffer and are illustrated in the following tables (in thousands): December 31, 2022 Actual Minimum Required - Basel III Required to be Considered Well Capitalized Capital Amount Ratio Capital Amount Ratio Capital Amount Ratio CET 1 Capital City Holding Company $ 598,068 16.2 % $ 257,965 7.0 % $ 239,538 6.5 % City National Bank 508,586 13.9 % 256,520 7.0 % 238,197 6.5 % Tier 1 Capital City Holding Company 598,068 16.2 % 313,243 8.5 % 294,817 8.0 % City National Bank 508,586 13.9 % 311,488 8.5 % 293,166 8.0 % Total Capital City Holding Company 612,654 16.6 % 386,947 10.5 % 368,521 10.0 % City National Bank 523,172 14.3 % 384,780 10.5 % 366,457 10.0 % Tier 1 Leverage Ratio City Holding Company 598,068 10.0 % 238,954 4.0 % 298,692 5.0 % City National Bank 508,586 8.6 % 237,973 4.0 % 297,466 5.0 % December 31, 2021 Actual Minimum Required - Basel III Required to be Considered Well Capitalized Capital Amount Ratio Capital Amount Ratio Capital Amount Ratio CET 1 Capital City Holding Company $ 555,532 16.1 % $ 241,772 7.0 % $ 224,503 6.5 % City National Bank 492,721 14.4 % 240,392 7.0 % 223,221 6.5 % Tier 1 Capital City Holding Company 555,532 16.1 % 293,581 8.5 % 276,311 8.0 % City National Bank 492,721 14.4 % 291,905 8.5 % 274,734 8.0 % Total Capital City Holding Company 570,336 16.5 % 362,659 10.5 % 345,389 10.0 % City National Bank 507,526 14.8 % 360,588 10.5 % 343,418 10.0 % Tier 1 Leverage Ratio City Holding Company 555,532 9.4 % 235,403 4.0 % 294,254 5.0 % City National Bank 492,721 8.5 % 233,342 4.0 % 291,678 5.0 % As of December 31, 2022, 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 OCC and the FDIC.
The Company’s minimum required capital ratios for both City Holding and City National include the 2.5% capital conservation buffer and are illustrated in the following tables (in thousands): December 31, 2023 Actual Minimum Required - Basel III Required to be Considered Well Capitalized Capital Amount Ratio Capital Amount Ratio Capital Amount Ratio CET 1 Capital City Holding Company $ 627,579 15.7 % $ 279,768 7.0 % $ 259,875 6.5 % City National Bank 549,031 13.8 % 278,692 7.0 % 258,785 6.5 % Tier 1 Capital City Holding Company 627,579 15.7 % 339,718 8.5 % 319,735 8.0 % City National Bank 549,031 13.8 % 338,412 8.5 % 318,505 8.0 % Total Capital City Holding Company 648,646 16.2 % 419,652 10.5 % 399,669 10.0 % City National Bank 570,099 14.3 % 418,038 10.5 % 398,131 10.0 % Tier 1 Leverage Ratio City Holding Company 627,579 10.2 % 245,468 4.0 % 306,835 5.0 % City National Bank 549,031 8.9 % 245,587 4.0 % 306,984 5.0 % December 31, 2022 Actual Minimum Required - Basel III Required to be Considered Well Capitalized Capital Amount Ratio Capital Amount Ratio Capital Amount Ratio CET 1 Capital City Holding Company $ 598,068 16.2 % $ 257,965 7.0 % $ 239,538 6.5 % City National Bank 508,586 13.9 % 256,520 7.0 % 238,197 6.5 % Tier 1 Capital City Holding Company 598,068 16.2 % 313,243 8.5 % 294,817 8.0 % City National Bank 508,586 13.9 % 311,488 8.5 % 293,166 8.0 % Total Capital City Holding Company 612,654 16.6 % 386,947 10.5 % 368,521 10.0 % City National Bank 523,172 14.3 % 384,780 10.5 % 366,457 10.0 % Tier 1 Leverage Ratio City Holding Company 598,068 10.0 % 238,954 4.0 % 298,692 5.0 % City National Bank 508,586 8.6 % 237,973 4.0 % 297,466 5.0 % As of December 31, 2023, 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 OCC and the FDIC.
Capital Resources During 2022, Shareholders’ Equity decreased $103 million, or 15.2%, from $681 million at December 31, 2021 to $578 million at December 31, 2022.
Capital Resources During 2023, Shareholders’ Equity increased $99 million, or 17.2%, from $578 million at December 31, 2022 to $677 million at December 31, 2023.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES The accounting policies of the Company conform to 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.
("Citizens") and its principal banking subsidiary, Citizens Commerce Bank of Versailles, Kentucky. See Note Three for additional information on the acquisition. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The accounting policies of the Company conform to 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.
The composition of the Company’s loan portfolio as of the dates indicated follows (in thousands): 2022 2021 Commercial and industrial $ 373,890 $ 346,184 1-4 Family 116,192 107,873 Hotels 340,404 311,315 Multi-family 174,786 215,677 Non Residential Non-Owner Occupied 585,964 639,818 Non Residential Owner Occupied 174,961 204,233 Commercial real estate 1,392,307 1,478,916 Residential real estate 1,693,523 1,548,965 Home equity 134,317 122,345 Consumer 48,806 40,901 DDA overdrafts 3,415 6,503 Total loans $ 3,646,258 $ 3,543,814 The commercial and industrial ("C&I") loan portfolio consists of loans to corporate and other legal entity borrowers, primarily small to mid-size industrial and commercial companies.
The composition of the Company’s loan portfolio as of the dates indicated follows (in thousands): 2023 2022 Commercial and industrial $ 426,951 $ 373,890 1-4 Family 206,237 116,192 Hotels 357,142 340,404 Multi-family 189,165 174,786 Non Residential Non-Owner Occupied 680,590 585,964 Non Residential Owner Occupied 240,328 174,961 Commercial real estate 1,673,462 1,392,307 Residential real estate 1,788,149 1,693,523 Home equity 167,201 134,317 Consumer 65,246 48,806 DDA overdrafts 4,914 3,415 Total loans $ 4,125,923 $ 3,646,258 The commercial and industrial ("C&I") loan portfolio consists of loans to corporate and other legal entity borrowers, primarily small to mid-size industrial and commercial companies.
During 2022, the Parent Company used cash obtained from the dividends received primarily to: (1) pay common dividends to shareholders and (2) fund repurchases of the Company's common shares. Additional information concerning sources and uses of cash by the Parent Company is discussed in Note Eighteen of the Notes to Consolidated Financial Statements.
During 2023, the Parent Company used cash obtained from the dividends received primarily to: (1) pay common dividends to shareholders and (2) fund repurchases of the Company's common shares.
As the ultimate amount and timing of any future cash settlements 42 cannot be predicted with reasonable reliability, this estimated liability has been excluded from the contractual obligations table.
This liability represents an estimate of tax positions that the Company has taken in its tax returns that may ultimately not be sustained upon examination by tax authorities. As the ultimate amount and timing of any future cash settlements cannot be predicted with reasonable reliability, this estimated liability has been excluded from the contractual obligations table.
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 of the Notes to Consolidated Financial Statements included herein.
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.
These properties exhibit greater risk than multi-family properties due to fewer income sources. ◦ The Hotel portfolio is comprised of all lodging establishments and totaled $340.4 million as of December 31, 2022. Risk characteristics relate to the demand for both business and personal travel. ◦ Multi-family consists of 5 or more family residential apartment lending.
Risk characteristics relate to the demand for both business and personal travel. ◦ Multi-family consists of 5 or more family residential apartment lending. The portfolio totaled $189.2 million as of December 31, 2023.
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. Between December 31, 2021 and December 31, 2022, management assigned a "decline," or 1.5 basis point increase, to the interest rate risk factor for all pools due to the rising rate environment.
Between December 31, 2022 and December 31, 2023, management assigned a "moderate decline," or 1.0 basis point increase, to the interest rate risk factor for all pools due to the rising rate environment.
Computed on a fully federal tax-equivalent basis assuming a tax rate of approximately 21%. 34 TABLE TWO RATE/VOLUME ANALYSIS OF CHANGES IN INTEREST INCOME AND INTEREST EXPENSE (In thousands) 2022 vs. 2021 Increase (Decrease) Due to Change In: 2021 vs. 2020 Increase (Decrease) Due to Change In: Volume Rate Net Volume Rate Net Interest-earning assets: Loan portfolio Residential real estate $ 3,774 $ (58) $ 3,716 $ (4,633) $ (5,327) $ (9,960) Commercial, financial, and agriculture (2,148) 8,754 6,606 870 (4,214) (3,344) Installment loans to individuals (121) (143) (264) (441) (47) (488) Previously securitized loans — (195) (195) — (31) (31) Total loans 1,505 8,358 9,863 (4,204) (9,619) (13,823) Securities: Taxable 4,563 6,811 11,374 4,845 (5,129) (284) Tax-exempt (1) (618) 473 (145) 2,327 (919) 1,408 Total securities 3,945 7,284 11,229 7,172 (6,048) 1,124 Deposits in depository institutions (258) 3,359 3,101 725 (524) 201 Total interest-earning assets $ 5,192 $ 19,001 $ 24,193 $ 3,693 $ (16,191) $ (12,498) Interest-bearing liabilities: Interest-bearing demand deposits $ 37 $ 693 $ 730 $ 176 $ (677) $ (501) Savings deposits 66 789 855 326 (1,228) (902) Time deposits (1,238) (2,309) (3,547) (2,582) (9,132) (11,714) Short-term borrowings (23) 1,745 1,722 176 (680) (504) Long-term debt — — — (100) — (100) Total interest-bearing liabilities (1,158) 918 (240) (2,004) (11,717) (13,721) Net Interest Income $ 6,350 $ 18,083 $ 24,433 $ 5,697 $ (4,474) $ 1,223 1.
Computed on a fully federal tax-equivalent basis assuming a tax rate of approximately 21%. 34 TABLE TWO RATE/VOLUME ANALYSIS OF CHANGES IN INTEREST INCOME AND INTEREST EXPENSE (In thousands) 2023 vs. 2022 Increase (Decrease) Due to Change In: 2022 vs. 2021 Increase (Decrease) Due to Change In: Volume Rate Net Volume Rate Net Interest-earning assets: Loan portfolio Residential real estate $ 5,604 $ 13,898 $ 19,502 $ 3,774 $ (58) $ 3,716 Commercial, financial, and agriculture 6,514 38,879 45,393 (2,148) 8,754 6,606 Installment loans to individuals 1,102 159 1,261 (121) (143) (264) Previously securitized loans — — — — (195) (195) Total loans 13,220 52,936 66,156 1,505 8,358 9,863 Securities: Taxable (390) 14,280 13,890 4,563 6,811 11,374 Tax-exempt (1) (1,229) (110) (1,339) (618) 473 (145) Total securities (1,619) 14,170 12,551 3,945 7,284 11,229 Deposits in depository institutions (2,283) 4,871 2,588 (258) 3,359 3,101 Total interest-earning assets $ 9,318 $ 71,977 $ 81,295 $ 5,192 $ 19,001 $ 24,193 Interest-bearing liabilities: Interest-bearing demand deposits $ 152 $ 9,662 $ 9,814 $ 37 $ 693 $ 730 Savings deposits (90) 6,525 6,435 66 789 855 Time deposits (65) 13,659 13,594 (1,238) (2,309) (3,547) Short-term borrowings 45 9,771 9,816 (23) 1,745 1,722 FHLB long-term advances 2,709 — 2,709 — — — Total interest-bearing liabilities 2,751 39,617 42,368 (1,158) 918 (240) Net Interest Income $ 6,567 $ 32,360 $ 38,927 $ 6,350 $ 18,083 $ 24,433 1.
Exclusive of these items, non-interest income increased from $65.6 million for the year ended December 31, 2020 to $68.8 million for the year ended December 31, 2021. This increase was largely attributable to an increase of $3.9 million, or 17.0%, in bankcard revenues and a $0.7 million, or 8.8%, increase in trust and investment 38 management fee income.
This increase was largely attributable to an increase of $0.8 million, or 8.7%, in trust and investment management fee income and a $0.6 million, or 2.2%, increase in bankcard revenue. In addition, death benefits from bank owned life insurance increased $0.5 million from the year ended December 31, 2022.
Additionally, the Company reported $0.3 million of realized security gains on the sale of investment securities and $0.5 million of unrealized fair value gains on the Company’s equity securities during 2021 compared to $0.9 million of unrealized fair value losses on the Company’s equity securities during 2020.
In 2023, the Company reported $4.9 million of realized security losses and $0.4 million of unrealized security gains on the Company’s equity securities as compared to $1.6 million of unrealized security losses on the Company’s equity securities in 2022.
The Parent Company anticipates continuing the payment of dividends, which are expected to approximate $38.4 million on an annualized basis for 2023 based on common shareholders of record at December 31, 2022 at a dividend rate of $2.60 per share for 2023. However, dividends to shareholders can, if necessary, be suspended.
Additional information concerning sources and uses of cash by the Parent Company is discussed in Note Nin ete en of the Notes to Consolidated Financial Statements. 39 The Parent Company anticipates continuing the payment of dividends, which are expected to approximate $42.4 million on an annualized basis for 2024 based on common shareholders of record at December 31, 2023 at a dividend rate of $2.86 per share for 2024.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+0 added−0 removed10 unchanged
Biggest changeInternally, the Company considers a variety of interest rate scenarios that are deemed to be 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 (Decrease) in Net Income Over 12 Months December 31, 2022 +300 7.50 -4.5 % +200 6.50 -2.6 +100 5.50 -1.2 -100 3.50 -5.5 -200 2.50 -14.4 -300 1.50 -19.3 December 31, 2021 +400 4.25 % +13.4 % +300 3.25 +14.1 +200 2.25 +12.5 +100 1.25 +8.5 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.
Biggest changeInternally, the Company considers a variety of interest rate scenarios that are deemed to be 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 (Decrease) in Net Income Over 12 Months December 31, 2023 +300 8.50 -4.5 % +200 7.50 -2.4 +100 6.50 -1.6 -100 4.50 -7.2 -200 3.50 -8.3 -300 2.50 -13.9 December 31, 2022 +300 7.50 % -4.5 % +200 6.50 -2.6 +100 5.50 -1.2 -100 3.50 -5.5 -200 2.50 -14.4 -300 1.50 -19.3 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 51 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 2023 and 51 beyond. The estimates above do not necessarily imply that the Company will experience increases in net income if market interest rates rise.
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 2023 and beyond. The estimates above do not necessarily imply that the Company will experience increases in net income if market interest rates rise.

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