City Holding Company (NASDAQ:CHCO), the holding company for City National Bank of West Virginia, reported its first quarter 2024 financial results, showcasing its resilience and strong performance amidst the evolving economic landscape.

Financials

For the full year 2023, City Holding reported net income of $114.37 million, with annual revenue reaching $341.43 million. The company's annual operating cash flow stood at $137.43 million, while its annual free cash flow was $134.47 million. These robust financial metrics demonstrate City Holding's ability to generate consistent and substantial returns for its shareholders.

In the first quarter of 2024, the company continued to build on its strong foundation, reporting net income of $29.52 million, up from $24.34 million in the same period last year. This translates to earnings per share of $1.98, surpassing the previous year's figure of $1.63. The company's revenue for the quarter came in at $73.76 million, slightly higher than the $73.40 million expected by analysts.

City Holding's performance was driven by several key factors. Firstly, the company's net interest income increased by $0.97 million, or 1.64%, from the first quarter of 2023, reaching $54.65 million. This was primarily due to an increase in loan yields and average loan balances, as well as the positive impact of the Citizens Commerce Bancshares, Inc. acquisition completed in March 2023.

Additionally, the company recorded a $0.18 million recovery of credit losses in the first quarter of 2024, compared to a $2.92 million provision for credit losses in the same period last year. This improvement in credit quality reflects City Holding's prudent risk management practices and the overall strength of its loan portfolio.

Non-interest income, excluding net investment securities gains and losses, increased by $0.57 million, or 3.4%, to $18.10 million. This was driven by higher service charges, trust and investment management fee income, and bankcard revenues, partially offset by a decrease in other income.

On the expense side, non-interest expenses, excluding merger-related costs, increased by $2.90 million, or 8.8%, to $35.90 million. This was primarily due to higher salaries and employee benefits, bankcard expenses, FDIC insurance expense, and other expenses.

Balance Sheet Strength

City Holding's balance sheet remains strong, with total assets of $6.31 billion as of March 31, 2024, up from $6.17 billion at the end of 2023. The company's loan portfolio decreased by $34.1 million, or 0.8%, to $4.09 billion, while total deposits increased by $121.5 million, or 2.5%, to $5.06 billion.

The company's capital ratios remain well above the regulatory requirements for "well-capitalized" institutions. As of March 31, 2024, City Holding's Common Equity Tier 1 (CET1) capital ratio was 16.2%, its Tier 1 capital ratio was 16.2%, and its total capital ratio was 16.7%.

Outlook

Looking ahead, City Holding provided guidance for the full year 2024. The company expects net income to be in the range of $115 million to $120 million, with earnings per share between $7.75 and $8.10. This guidance reflects the company's confidence in its ability to navigate the evolving market conditions and continue delivering strong financial performance.

Business Overview

City Holding's geographic footprint spans West Virginia, Kentucky, Virginia, and southeastern Ohio, with a network of 97 banking offices. The company's diversified business model, which includes commercial and industrial lending, commercial real estate, residential real estate, and consumer lending, has proven to be a key strength in navigating the dynamic economic environment.

In terms of revenue breakdown, City Holding's largest segment is commercial and industrial loans, which accounted for 39.7% of the total loan portfolio as of March 31, 2024. Commercial real estate loans, including 1-4 family, hotels, multi-family, and non-residential properties, made up 40.5% of the loan portfolio. Residential real estate loans and home equity loans comprised 18.2% of the total, while consumer loans represented 1.6%.

Liquidity

The company's liquidity position remains strong, with a net loan-to-asset ratio of 64.4% as of March 31, 2024. Deposit balances funded 80.1% of the company's total assets, providing a stable source of funding for its lending activities.

Risks and Challenges

City Holding's risk management practices have been a key driver of its success. The company's allowance for credit losses stood at $22.31 million as of March 31, 2024, down from $22.75 million at the end of 2023. The company's non-performing loans, including non-accrual loans and loans past due 90 days or more, totaled $10.79 million, or 0.26% of total loans, as of the end of the first quarter.

Conclusion

City Holding Company's first quarter 2024 results demonstrate its ability to deliver consistent financial performance and create value for its shareholders. The company's strong balance sheet, prudent risk management, and diversified business model position it well to navigate the evolving market conditions and capitalize on future growth opportunities. Investors should closely monitor City Holding's progress as it continues to execute its strategic initiatives and drive long-term sustainable growth.