City Holding Restarts Loan Growth as Funding Costs Ease
Net interest income rose 1.9% QoQ to $60.8 million as loan yields improved.
City Holding (CHCO), the regional bank, increased net interest income by $1.1 million, or 1.9% QoQ, to $60.8 million, reversing the first quarter’s decline as higher loan yields and a $78.1 million increase in average balances at depository institutions supported revenue. Net interest income rose 3.1% YoY, while NIM held at 3.97%, 2 bps above the year-earlier level.
Funding costs continued to ease. The average cost of interest-bearing liabilities declined 1 bp QoQ and 20 bps YoY to 1.75%, while the rate paid on time deposits fell to 2.96% from 2.99% in the prior quarter and 3.39% a year earlier.
Period-end loans returned to growth, rising 0.2% QoQ to $4.50 billion after contracting 0.3% in the first quarter. Commercial-and-industrial loans drove the turn with a 2.8% increase, reversing the prior quarter’s decline, while home-equity growth offset reductions in residential real-estate and consumer balances. Average loans for the first half rose 4.6% YoY to $4.49 billion.
Average deposits increased 1.1% QoQ to $5.33 billion, helped by gains in noninterest-bearing demand and savings accounts, even as period-end deposits slipped by $3.5 million. The deposit mix and lower funding costs supported the margin as balance-sheet growth resumed.
Adjusted noninterest income rose 5.4% YoY to $20.7 million, led by a 14.4% increase in wealth and investment-management fees. Noninterest expense increased 1.5% to $39.8 million, a slower pace than the prior quarter’s 4.6% YoY growth, and the efficiency ratio improved 80 bps QoQ to 48.1%.
Capital levels strengthened during the quarter. Consolidated CET1 increased 19 bps QoQ to an estimated 17.06%, while City National Bank’s CET1 rose 66 bps to 15.01%. Tangible common equity advanced 20 bps QoQ and 45 bps YoY to 9.85%.
Credit costs remained contained, though the YoY comparison shifted from a $1.9 million recovery to a $0.4 million provision tied to a commercial-real-estate downgrade and a slightly higher historical loss rate for C&I loans. Net recoveries totaled $0.2 million, and nonperforming assets improved for a third consecutive quarter to 0.24% of loans and OREO from 0.27% QoQ and 0.33% a year earlier.