City Holding Lifts Net Interest Margin After a Flat Quarter

The Tip Desk · October 27, 2026 · 4 min read

The Charleston holding company reported a 4.04% net interest margin and $2.43 a share as loan yields and average loan balances lifted net interest income 3.0% sequentially.

City Holding Company (CHCO), a $6.8 billion bank holding company headquartered in Charleston, West Virginia, reported net interest income of $62.6 million for the quarter ended September 30, 2026, a 3.0% sequential increase that was faster than the 1.9% rise in the prior quarter.

The reported net interest margin expanded 7 basis points to 4.04% after remaining unchanged at 3.97% in the second quarter. The company said the lift came from a 3 basis point increase in the yield on loans and a 5 basis point increase in the yield on investments. Average loan balances rose $36.1 million to $4.53 billion, adding $0.5 million of net interest income; the higher loan yield added $1.1 million. Investment yield and average investment balances contributed $0.4 million and $0.2 million, respectively. Those gains were partly offset by a $49.0 million decline in average deposits in depository institutions, which reduced net interest income by $0.5 million and reversed the prior quarter’s $78.1 million increase in that balance.

Gross loans increased $48.4 million, or 1.1%, to $4.55 billion at September 30. Commercial and industrial loans rose $20.1 million, or 4.4%. Commercial real estate loans increased $12.9 million, or 0.7%. Residential real estate loans rose $8.8 million, or 0.5%, and home equity loans increased $8.2 million, or 3.6%. Period-end deposits rose $18.0 million. Total average depository balances increased $26.5 million, or 0.5%, to $5.35 billion. Average noninterest-bearing demand balances rose $28.0 million and average savings deposits rose $11.0 million, offset by a $9.5 million decline in average time deposits. The loan-to-deposit ratio was 84.9%.

Credit quality held steady. Nonperforming assets to total loans and other real estate owned remained at 0.24%, or $10.9 million, after falling from 0.27%, or $12.2 million, at March 31. Past-due loans declined to $8.3 million, or 0.18% of loans outstanding. The company recorded a $0.1 million recovery of credit losses after a $0.4 million provision in the second quarter. It attributed the recovery primarily to the upgrade of a commercial real estate loan and a marginal decrease in historical loss rates for commercial and residential real estate loans, partially offset by revisions to qualitative adjustment factors and the downgrade of a commercial loan of $0.25 million. The allowance for credit losses was $19.6 million, or 0.43% of loans outstanding.

Non-interest income was $21.4 million. Year over year, the line rose $0.9 million, with service charges up $0.5 million, or 6.0%, and wealth and investment management fee income up $0.3 million, or 10.5%. Non-interest expenses were $40.9 million, up $2.6 million from a year earlier, largely from $1.1 million higher salaries and employee benefits tied to salary adjustments, increased incentive compensation, and higher health insurance costs, plus $0.5 million of other expenses and $0.4 million of advertising. The efficiency ratio was 48.0%.

Net income was $34.6 million, or $2.43 a share, a record quarterly diluted result. Return on assets was 2.03% and return on tangible equity was 20.9%. The effective income tax rate was 19.9%.

City National’s Common Equity Tier 1 ratio was 15.5% and its leverage ratio was 10.2% at September 30. The company’s tangible equity ratio declined to 9.4% from 9.9% at year-end 2025, which it attributed primarily to unrealized security losses during the nine months ended September 30. Unrealized security losses are not incorporated into regulatory capital, it said. Tangible equity was $625 million. City National had capacity to borrow an additional $1.8 billion from Federal Reserve and FHLB facilities, and about $801 million of investment securities were unpledged.

The board raised the quarterly cash dividend 15% to $1.00 a share from $0.87, payable October 30, 2026. City Holding had a cash balance of $74 million and dividends available from City National of about $120 million at September 30. City National operates 95 branches across West Virginia, Kentucky, Virginia, and Ohio.