CITY HOLDING CO

Previous wording

City Holding Company (the "Company"), a West Virginia corporation headquartered in Charleston, West Virginia, is a registered financial holding company under the Bank Holding Company Act and conducts its principal activities through its wholly owned subsidiary, City National Bank of West Virginia ("City National"). 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). City National provides credit, deposit, and trust and investment management services to its customers in a broad geographical area that includes many rural and small community markets in addition to larger cities including Charleston (WV), Huntington (WV), Martinsburg (WV), Ashland (KY), Lexington (KY), Winchester (VA) and Staunton (VA). In the Company's key markets, the Company's primary subsidiary, City National, often ranks in the top three relative to deposit market share and the top two relative to branch share (Charleston/Huntington MSA, Beckley/Lewisburg counties, Staunton MSA and Winchester, VA/WV Eastern Panhandle counties). 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.

Current wording

City Holding Company (the "Company"), a West Virginia corporation headquartered in Charleston, West Virginia, is a registered financial holding company under the Bank Holding Company Act and conducts its principal activities through its wholly owned subsidiary, City National Bank of West Virginia ("City National"). City National is a retail and consumer-oriented community bank with 97 bank branches in West Virginia (58), Kentucky (22), Virginia (13) and southeastern Ohio (4). City National provides credit, deposit, and trust and investment management services to its customers in a broad geographical area that includes many rural and small community markets in addition to larger cities including Charleston (WV), Huntington (WV), Martinsburg (WV), Ashland (KY), Lexington (KY), Winchester (VA) and Staunton (VA). In the Company's key markets, the Company's primary subsidiary, City National, often ranks in the top three relative to deposit market share and the top two relative to branch share (Charleston/Huntington MSA, Beckley/Lewisburg counties, Staunton MSA and Winchester, VA/WV Eastern Panhandle counties). 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. See Note Twenty-Three for additional information on the Company's reportable business segment.

Previous wording

The Company uses a number of economic variables in its scenarios to estimate the allowance for credit losses, with the most significant drivers being an unemployment rate forecast and qualitative adjustments. 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. Based on sensitivity of the portfolio, the change had no material impact on the reserve.

Current wording

The Company uses a number of economic variables in its scenarios to estimate the allowance for credit losses, with the most significant drivers being an unemployment rate forecast and qualitative adjustments. In the December 31, 2024 estimate, the Company assumed an unemployment forecast range of 4.2% to 4.8%, compared to a range of 3.8% to 4.8% utilized in the December 31, 2023 estimate. Historical loss rates from periods where the average unemployment rate matches the forecast range are considered when calculating the forecast period loss rate. Based on sensitivity of the portfolio, the change had no material impact on the reserve.

Previous wording

Based on sensitivity analysis of all portfolios, a 0.0050% change (slight improvement or decline on bank's scale) in all 11 qualitative risk factors (where assigned) would have a $2.2 million impact on the reserve allocation. Changing each factor by 0.01% (moderate improvement or decline) would have a $4.3 million impact. Management recognizes that these are extreme scenarios and it is very unlikely that all risk factors would change by 0.005% or 0.01% simultaneously. 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. Additionally, management assigned a "decline," or 1.5 basis point increase, to the criticized/classified factor for the Commercial substandard loan pool and a "decline," or 1.5 basis point increase, to the loan growth factor for the non-owner occupied loan pool due to growth in the portfolio. In total, the qualitative changes increased the ACL by approximately $0.5 million for the year ended December 31, 2023.

Current wording

Based on sensitivity analysis of all portfolios, a 0.0050% change (slight improvement or decline on bank's scale) in all 11 qualitative risk factors (where assigned) would have a $2.2 million impact on the reserve allocation. Changing each factor by 0.01% (moderate improvement or decline) would have a $4.5 million impact. Management recognizes that these are extreme scenarios and it is very unlikely that all risk factors would change by 0.005% or 0.01% simultaneously. There were no changes to any qualitative factors for the year ended December 31, 2024.

Previous wording

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

Current wording

The calculation of the Company's acquisition and preliminary purchase price allocation is considered a critical accounting estimate as it involves a significant level of estimation and uncertainty, particularly in relation to the fair value and goodwill calculations. Under GAAP, management has up to twelve months following the date of the acquisition to finalize the fair value of acquired assets and liabilities. The measurement period ends as soon as the Company receives information it was seeking about facts and circumstances that existed as of the acquisition date or learns that more information is not obtainable. Any subsequent adjustments to the fair value of the acquired assets and liabilities, intangible assets or other purchase accounting adjustments will resultin adjustments to the goodwill recorded. As of December 31, 2024, over twelve months have occurred since the date of acquisition on March 10, 2023, and the measurement period is now complete.

Previous wording

Cash and cash equivalents decreased $43.7 million (21.9%) from $200.0 million at December 31, 2022, to $156.3 million at December 31, 2023 primarilydue to an increase in gross loans that were partially offset by a decrease in investment balances, an increase in FHLB long-term advances, and an increase deposit balances.

Current wording

Cash and cash equivalents increased $69.1 million (44.2%) from $156.3 million at December 31, 2023, to $225.4 million at December 31, 2024 primarilydue to an increase in deposit balances, cash provided by operations, and an increase in FHLB long-term advances that were partially offset by an increase in gross loans and an increase in investment balances.

Previous wording

Total deposits increased $64.4 million (1.3%) from December 31, 2022 to $4.9 billion at December 31, 2023 due to the Company's acquisition of Citizens ($298.7 million). Excluding the acquisition, depository balances declined $234.3 million, or 4.8% from December 31, 2022. Savings deposit balances decreased $208 million, noninterest-bearing demand deposit balances decreased $66.5 million, and interest-bearing demand deposit balances decreased $ 45.6 million. These decreases were partially offset by an increase in time deposit balances of $85.8 million.

Current wording

Total deposits increased $209.9 million (4.3%) from December 31, 2023 to $5.1 billion at December 31, 2024. Time deposit balances increased $208.1 million, interest-bearing demand deposit balances increased $44.2 million, and noninterest-bearing demand deposit balances increased $1.6 million. These increases were partially offset by a decrease in savings deposit balances of $44.1 million.

Previous wording

FHLB long-term advances increased $100.0 million from December 31, 2022 to December 31, 2023. 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%.

Current wording

FHLB long-term advances increased $50.0 million from December 31, 2023 to December 31, 2024. During the year ended December 31, 2024, the Company borrowed an additional $50.0 million from the Federal Home Loan Bank.

Previous wording

Non-interest income was $72.1 million for 2022 as compared to $69.6 million for 2021. The Company reported $1.6 million of unrealized fair value losses on the Company’s equity securities during 2022 compared to $0.3 million of realized security gains on the sale of investments and $0.5 million of unrealized fair value gains on the Company’s equity securities during 2021. 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. This increase was largely attributable to an increase of $2.8 million, or 10.9%, in service charges and a $1.7 million, or 42.7%, increase in bank owned life insurance due to higher death benefit proceeds received in 2022 compared to 2021. In addition, trust and investment management fee income and bankcard revenues each increased $0.4 million from the year ended December 31, 2021. These increases were partially offset by a decrease of $0.4 million in other income.

Current wording

Exclusive of these realized and unrealized gains and losses, non-interest income increased $0.9 million, or 1.2%, from $75.1 million for 2023 to $76.0 million for 2024. This increase was largely attributable to an increase of $1.7 million, or 17.7%, in trust and investment management fee income and an increase of $1.5 million, or 5.3%, from service charges. Additionally, bankcard revenues increased $0.5 million, or 1.9%, from the year ended December 31, 2023. These increases were partially offset by a decrease of $2.0 million from bank owned life insurance (lower death benefits) and $0.8 million in other income.

Previous wording

Non-interest expenses increased from $117.2 million for 2021 to $124.3 million for 2022. 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.

Current wording

Non-interest expenses increased $3.7 million, or 2.6%, from $143.5 million for 2023 to $147.2 million for 2024. This increase was primarily due to an increase in salaries and employee benefit expenses ($3.2 million due to salary adjustments (4.1%) and increased health insurance (5.0%)) and equipment and software related expense ($1.5 million). In addition, bankcard expense increased $1.1 million and advertising expenses increased $0.7 million. These expenses were partially offset by lower other expenses of $2.9 million that were primarily related to acquisition and integration expenses associated with the Citizens acquisition completed in 2023 ($5.2 million).

Previous wording

Non-interest expenses, excluding merger expenses, increased $14.3 million, or 12%, from $124.0 million for the year ended 2022 to $138.4 million for the year ended 2023. This increase was largely due to an increase in salaries and employee benefits of $6.6 million due to salary adjustments, Citizens personnel ($1.9 million), and increased health insurance along with increase in other expenses of $4.9 million. In addition, bankcard expense increased $1.4 million, FDIC expense increased $1.2 million and occupancy related expenses increased $0.6 million.

Current wording

Non-interest expenses increased $19.2 million, or 15.5%, from $124.3 million for 2022 to $143.5 million for 2023. This increase was primarily due to an increase in other expenses ($9.8 million, due primarily to higher acquisition and integration expenses associated with the completed acquisition of Citizens ($5.2 million)) and salaries and employee benefit expenses ($6.6 million due to salary adjustments, Citizens personnel ($1.9 million), and increased health insurance). In addition, bankcard expense increased $1.4 million, FDIC expense increased $1.2 million and occupancy related expenses increased $0.6 million.

Previous wording

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. 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.

Current wording

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 ($41.7 million) at December 31, 2024 and a net deferred tax asset position ($42.2 million) at December 31, 2023.

Previous wording

The Company evaluates the adequacy of liquidity at both the Parent Company level and at the banking subsidiary level. At the Parent Company level, the principal source of cash is dividends from its banking subsidiary, City National. Dividends paid by City National to the Parent Company are subject to certain legal and regulatory limitations. Generally, any dividends in amounts that exceed the earnings retained by City National in the current year plus retained net profits for the preceding two years must be approved by regulatory authorities. At December 31, 2023, City National could pay dividends up to $53.3 million without prior regulatory permission.

Current wording

The Company evaluates the adequacy of liquidity at both the Parent Company level and at the banking subsidiary level. At the Parent Company level, the principal source of cash is dividends from its banking subsidiary, City National. Dividends paid by City National to the Parent Company are subject to certain legal and regulatory limitations. Generally, any dividends in amounts that exceed the earnings retained by City National in the current year plus retained net profits for the preceding two years must be approved by regulatory authorities. At December 31, 2024, City National could pay dividends up to $48.2 million without prior regulatory permission.

Previous wording

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. 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. 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. Excluding the dividend payments discussed above, the Parent Company has no significant commitments or obligations in years after 2024.

Current wording

The Parent Company anticipates continuing the payment of dividends, which are expected to approximate $46.5 million on an annualized basis for 2025 based on common shareholders of record at December 31, 2024 at a dividend rate of $3.16 per share for 2025. 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 $1.8 million of additional cash over the next 12 months. As of December 31, 2024, the Parent Company reported a cash balance of $117.3 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. Excluding the dividend payments discussed above, the Parent Company has no significant commitments or obligations in years after 2025.

Previous wording

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. 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. City National had an additional $1.9 billion and $1.6 billion available from unused portions of lines of credit with the FHLB and Federal Reserve Discount Window at December 31, 2023 and 2022, respectively. No short-term or long-term funding has been utilized with certain other financial institutions the Company maintains business relationships as of December 31, 2023. City National maintains a contingency funding plan, incorporating these borrowing facilities, to address liquidity needs in the event of an institution-specific or systemic financial industry crisis. Also, although it has no current intention to do so, City National could liquidate its unpledged securities, if necessary, to provide an additional funding source. City National also segregates certain mortgage loans, mortgage-backed securities, and other investment securities in a separate subsidiary so that it can separately monitor the asset quality of these primarily mortgage-related assets, which could be used to raise cash through securitization transactions or obtain additional equity or debt financing if necessary.

Current wording

City National 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. 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. City National had an additional $1.5 billion and $1.9 billion available from unused portions of lines of credit with the FHLB and Federal Reserve Discount Window at December 31, 2024 and 2023, respectively. No short-term or long-term funding has been utilized with certain other financial institutions the Company maintains business relationships as of December 31, 2024 or December 31, 2023. City National maintains a contingency funding plan, incorporating these borrowing facilities, to address liquidity needs in the event of an institution-specific or systemic financial industry crisis. Also, although it has no current intention to do so, City National could liquidate its unpledged securities, if necessary, to provide an additional funding source. City National also segregates certain mortgage loans, mortgage-backed securities, and other investment securities in a separate subsidiary so that it can separately monitor the asset quality of these primarily mortgage-related assets, which could be used to raise cash through securitization transactions or obtain additional equity or debt financing if necessary.

Previous wording

The Company manages its asset and liability mix to balance its desire to maximize net interest income against its desire to minimize risks associated with capitalization, interest rate volatility, and liquidity. With respect to liquidity, the Company has chosen a conservative posture and believes that its liquidity position is strong. 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.

Current wording

With respect to liquidity, the Company has chosen a conservative posture and believes that its liquidity position is strong. As illustrated in the Consolidated Statements of Cash Flows, the Company generated $131.9 million of cash from operating activities during 2024, primarily from interest income received on loans and investments, net of interest expense paid on deposits and borrowings.

Previous wording

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.

Current wording

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 $1.45 billion at December 31, 2024, and that greatly exceeded the Company’s non-deposit sources of borrowing, which totaled $476 million.

Previous wording

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). 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.

Current wording

The Company’s net loan to asset ratio is 65.8% as of December 31, 2024 and deposit balances fund 79.6% of total assets as compared to 72.2% for its peers (Bank Holding Company Peer Group, as of the most recent data available as of September 30, 2024, which includes commercial banks with assets ranging from $3 billion to $10 billion). Further, the Company’s deposit mix has a very high proportion of transaction and savings accounts that fund 60.3% of the Company’s total assets and the Company uses time deposits over $250,000 to fund 6.8% of total assets compared to its peers, which fund 10.6% of total assets with such deposits.

Previous wording

During 2023, Shareholders’ Equity increased $99 million, or 17.2%, from $578 million at December 31, 2022 to $677 million at December 31, 2023. This increase was primarily due to net income of $114 million, the issuance of 667,000 shares of common stock for the acquisition of Citizens Commerce Bancshares, Inc. of $62 million, and other comprehensive income of $21 million that were partially offset by common share repurchases of $60 million and cash dividends declared of $41 million.

Current wording

During year ended December 31, 2024, Shareholders’ Equity increased $54 million, or 7.9%, from $677 million at December 31, 2023 to $731 million at December 31, 2024. This increase was primarily due to net income of $117 million that was partially offset by cash dividends declared of $45 million, common share repurchases of $18 million, and other comprehensive losses of $5 million.

Previous wording

During the year ended December 31, 2023, the Company repurchased approximately 666,575 common shares at a weighted average price of $90.21 per shareas 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.

Current wording

During the year ended December 31, 2024, the Company repurchased approximately 179,000 common shares at a weighted average price of $100.24 per share as part of a one million share repurchase plan authorized by the Board of Directors in January 2024. At December 31, 2024, the Company could repurchase an additional approximately 821,000 shares under the current plan.

Previous wording

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. 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 57% of the portfolio, while the remaining 43% were general obligation bonds. 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.

Current wording

The Company's municipal bond portfolio of $184 million as of December 31, 2024 has an average tax equivalent yield of 2.58% with an average maturity of 11.2 years. The average dollar amount invested in each security is $1.3 million. The portfolio has 92% 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 25% of the portfolio, while 75% has no additional credit support. Management aggregates by issuer, and re-underwrites all securities greater than $1 million in the portfolio on an annual basis, using the same guidelines that are used to underwrite its commercial loans. Revenue bonds were 58% of the portfolio, while the remaining 42% were general obligation bonds. Geographically, the portfolio supports the

Previous wording

The weighted average yield of the Company's investment portfolio is presented in the following table (dollars in thousands):

Current wording

The weighted average market yield of the Company's investment portfolio is presented in the following table (dollars in thousands):

Previous wording

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. Excluding the acquisition, total loans increased $225.0 million (6.2%) from December 31, 2022. Commercial real estate loans increased $101.4 million (7.3%); residential real estate loans increased $51.3 million (3.0%); commercial and industrial loans increased $38.4 million (10.3%); home equity loans increased $19.1 million (14.3%); and consumer loans increased $13.4 million (27.4%). The composition of the Company’s loan portfolio as of the dates indicated follows (in thousands):

Current wording

Loans increased $148.9 million (3.6%) from December 31, 2023 to $4.27 billion at December 31, 2024. The composition of the Company’s loan portfolio as of the dates indicated follows (in thousands):

Previous wording

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. C&I loans typically involve a higher level of risk than other loan types, including industry specific risks such as the pertinent economy, new technology, labor rates and cyclicality, as well as customer specific factors, such as cash flow, financial structure, operating controls and asset quality. Collateral securing these loans includes equipment, machinery, inventory, receivables and vehicles. 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.

Current wording

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. C&I loans typically involve a higher level of risk than other loan types, including industry specific risks such as the pertinent economy, new technology, labor rates and cyclicality, as well as customer specific factors, such as cash flow, financial structure, operating controls and asset quality. Collateral securing these loans includes equipment, machinery, inventory, receivables and vehicles. C&I loans decreased $7.1 million from December 31, 2023 to December 31, 2024.

Previous wording

Commercial real estate loans consist of commercial mortgages, which generally are secured by nonresidential and multi-family residential properties, including hotel/motel and apartment lending. Commercial real estate loans are 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. At December 31, 2023, $2 million of the commercial real estate loans were for commercial properties under construction.

Current wording

Commercial real estate loans consist of commercial mortgages, which generally are secured by nonresidential and multi-family residential properties, including hotel/motel and apartment lending. Commercial real estate loans are 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 $95.2 million to $1.77 billion at December 31, 2024. At December 31, 2024, $24.7 million of the commercial real estate loans were for commercial properties under construction.

Previous wording

◦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. Risk characteristics are driven by rental housing demand as well as economic and employment conditions. These properties exhibit greater risk than multi-family properties due to fewer income sources.

Current wording

◦Commercial 1-4 Family loans consist of residential single-family, duplex, triplex, and fourplex rental properties and totaled $197.3 million as of December 31, 2024. Risk characteristics are driven by rental housing demand as well as economic and employment conditions. These properties exhibit greater risk than multi-family properties due to fewer income sources.

Previous wording

◦The Hotel portfolio is comprised of all lodging establishments and totaled $357.1 million as of December 31, 2023. Risk characteristics relate to the demand for both business and personal travel.

Current wording

◦The Hotel portfolio is comprised of all lodging establishments and totaled $389.7 million as of December 31, 2024. Risk characteristics relate to the demand for both business and personal travel.

Previous wording

◦Multi-family consists of 5 or more family residential apartment lending. The portfolio totaled $189.2 million as of December 31, 2023. Risk characteristics are driven by rental housing demand as well as economic and employment conditions.

Current wording

◦Multi-family consists of 5 or more family residential apartment lending. The portfolio totaled $240.9 million as of December 31, 2024. Risk characteristics are driven by rental housing demand as well as economic and employment conditions.

Previous wording

◦Non-residential commercial real estate includes properties such as retail, office, warehouse, storage, healthcare, entertainment, religious, and other nonresidential commercial properties. The non-residential product type is further segmented into owner- and non-owner occupied properties. Nonresidential non-owner occupied commercial real estate totaled $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.

Current wording

◦Non-residential commercial real estate includes properties such as retail, office, warehouse, storage, healthcare, entertainment, religious, and other nonresidential commercial properties. The non-residential product type is further segmented into owner- and non-owner occupied properties. Nonresidential non-owner occupied commercial real estate totaled $707.3 million while nonresidential owner-occupied commercial real estate totaled $233.5 million as of December 31, 2024. Risk characteristics relate to levels of consumer spending and overall economic conditions.

Previous wording

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. 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). 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.

Current wording

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, 2024, City National was within its internally designated concentration limits. As of December 31, 2024, City National's loans to borrowers within the Lessors of Nonresidential Buildings (14%) and Lessors of Residential Buildings and Dwellings (11%) categories exceeded 10% of total loans. No other NAICS industry classification exceeded 10% of total loans as of December 31, 2024. Management also monitors non-owner occupied commercial real estate as a percent of risk based capital (based upon regulatory guidance). At December 31, 2024, the Company had $1.5 billion of commercial loans classified as non-owner occupied and was within its designated concentration threshold.

Previous wording

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. Residential real estate loans include loans for the purchase or refinance of consumers' residence and first-priority home equity loans allow consumers to borrow against the equity in their home. These loans primarily consist of single family three- and five-year adjustable rate mortgages with terms that amortize up to 30 years. City National also offers fixed-rate residential real estate loans. Residential purchase real estate loans are generally underwritten to comply with Fannie Mae and Freddie Mac guidelines, while first priority home equity loans are underwritten with typically less documentation, lower loan-to-value ratios and shorter maturities. Additionally, the Company periodically purchases residential mortgage loans. 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.

Current wording

Residential real estate loans increased $35.5 million from December 31, 2023 to $1.82 billion at December 31, 2024. Residential real estate loans include loans for the purchase or refinance of consumers' residence and first-priority home equity loans that allow consumers to borrow against the equity in their home. These loans primarily consist of single family five- and seven-year adjustable rate mortgages with terms that amortize up to 30 years. City National also offers fixed-rate residential real estate loans. Residential purchase real estate loans are generally underwritten to comply with Fannie Mae and Freddie Mac guidelines, while first priority home equity loans are underwritten with typically less documentation, lower loan-to-value ratios and shorter maturities. Additionally, the Company periodically purchases residential mortgage loans. The credit and collateral documents for each potential purchased loan are reviewed to ensure the credit metrics are acceptable to management. At December 31, 2024, $7.5 million of the residential real estate loans were for properties under construction.

Previous wording

Home equity loans increased $19.1 million from December 31, 2022 to $167 million at December 31, 2023, excluding $13.7 million of home equity loans acquired from Citizens. City National's home equity loans represent loans to consumers that are secured by a second (or junior) priority lien on a residential property. Home equity loans allow consumers to borrow against the equity in their home without paying off an existing first priority lien. 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. The amount of credit extended is directly related to the value of the real estate securing the loan at the time the loan is made.

Current wording

Home equity loans increased $32.0 million from December 31, 2023 to $199 million at December 31, 2024. City National's home equity loans represent loans to consumers that are secured by a second (or junior) priority lien on a residential property. Home equity loans allow consumers to borrow against the equity in their home without paying off an existing first priority lien. 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. The amount of credit extended is directly related to the value of the real estate securing the loan at the time the loan is made.

Previous wording

Consumer loans may be secured by automobiles, boats, recreational vehicles, certificates of deposit and other personal property, or they may be unsecured. The Company manages the risk associated with consumer loans by monitoring such factors as portfolio size and growth, internal lending policies and pertinent economic conditions. City National's underwriting standards are continually evaluated and modified based upon these factors. Consumer loans increased $13.4 million from 2022 to $65 million at December 31, 2023, excluding $3.0 million of consumer loans acquired from Citizens.

Current wording

Consumer loans may be secured by automobiles, boats, recreational vehicles, certificates of deposit and other personal property, or they may be unsecured. The Company manages the risk associated with consumer loans by monitoring such factors as portfolio size and growth, internal lending policies and pertinent economic conditions. City National's underwriting standards are continually evaluated and modified based upon these factors. Consumer loans decreased $7.4 million from 2023 to $58 million at December 31, 2024.

Previous wording

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. The increase in provision for the year ended December 31, 2023 was due to the acquisition of Citizens ($2.0 million), loan growth, and credit downgrades that were partially offset by lower historical loss rates in the portfolio.

Current wording

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 $1.8 million for the year ended December 31, 2024 and $3.2 million for the year ended December 31, 2023.

Previous wording

The ACL increased from $17.1 million at December 31, 2022 to $22.7 million at December 31, 2023. The allowance attributed to the commercial real estate loan portfolio increased $4.5 million from $6.6 million at December 31, 2022 to $11.1 million at December 31, 2023. This increase was due to the acquisition of Citizen's Commerce Bank, overall loan growth in the portfolio, and downgrades of certain loans.

Current wording

The ACL decreased from$22.7 million at December 31, 2023 to$21.9 million at December 31, 2024. The allowance attributed to the commercial real estate loan portfolio decreased $1.3 million from $11.1 million at December 31, 2023 to $9.8 million at December 31, 2024. This decrease was due to a reduction in reserves for purchase credit deteriorated loans that was partially offset by loan growth and the aforementioned movie theater charge off during the year ended December 31, 2024.

Previous wording

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. Goodwill is considered to be impaired when the carrying value of a reporting unit exceeds its estimated fair value. Indefinite-lived intangible assets are considered impaired if their carrying value exceeds their estimated fair value. As described in Note One of the Notes to Consolidated Financial Statements, the Company conducts its business activities through one reportable business segment – community banking. Fair values are estimated by reviewing the Company’s stock price as it compares to book value and the Company’s reported earnings. In addition, the impact of future earnings and activities is considered in the Company’s analysis. The Company had increased to approximately $150 million of goodwill at December 31, 2023 from $109 million at December 31, 2022 due to the acquisition of Citizens Commerce in March 2023 (see Note Three for further information). No impairment was required to be recognized in 2023 or 2022, as the estimated fair value of the Company has continued to exceed its book value.

Current wording

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. Goodwill is considered to be impaired when the carrying value of a reporting unit exceeds its estimated fair value. Indefinite-lived intangible assets are considered impaired if their carrying value exceeds their estimated fair value. As described in Note Twenty-Three of the Notes to Consolidated Financial Statements, the Company conducts its business activities through one reportable business segment – community banking. Fair values are estimated by reviewing the Company’s stock price as it compares to book value and the Company’s reported earnings. In addition, the impact of future earnings and activities is considered in the Company’s analysis. The Company had approximately $150 million of goodwill at December 31, 2024 and December 31, 2023. No impairment was required to be recognized in 2024 or 2023, as the estimated fair value of the Company has continued to exceed its book value.

Previous wording

The Company has time certificates of deposit that meet or exceed the FDIC insurance limit of $250,000 totaling an estimated $338.4 million. Scheduled maturities of uninsured time certificates of deposit are estimated at December 31, 2023 and are summarized in the table below (in thousands).

Current wording

The Company has time certificates of deposit that meet or exceed the FDIC insurance limit of $250,000 totaling an estimated $441.9 million at December 31, 2024. Scheduled maturities of uninsured time certificates of deposit are estimated at December 31, 2024 and are summarized in the table below (in thousands).

Previous wording

At December 31, 2023, approximately 23% of total assets, or $1.4 billion, consisted of financial instruments recorded at fair value. 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 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.

Current wording

At December 31, 2024, approximately 23% of total assets, or $1.5 billion, consisted of financial instruments recorded at fair value. 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, 2024, approximately $51 million of derivative liabilities were recorded at fair value using methodologies involving observable market data. 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.