Company History and Growth

Founded in 1957 as The City Bank of Charleston, the company has grown organically and through strategic acquisitions to become a leading community bank in West Virginia, Kentucky, Virginia, and southeastern Ohio. In 1983, the company reorganized as a bank holding company, City Holding Company, to provide a broader array of financial services to its customers.

Over the years, City Holding has made several key acquisitions to expand its regional presence and capabilities. In the early years, City National Bank focused on serving the local Charleston community, providing credit, deposit, and trust services to individuals and businesses. The bank gradually expanded its footprint across West Virginia, opening new branches and acquiring smaller local banks. This steady organic and acquisition-driven growth allowed City National to establish itself as a leading community bank in its markets.

During the 1980s, City Holding faced its first major challenge as the U.S. experienced an economic recession and the banking industry grappled with high interest rates and rising loan defaults. The company successfully navigated this environment, maintaining profitability and continuing to grow its franchise. This demonstrated City Holding's ability to weather economic storms and reinforced its position as a stable, well-run community bank.

In the 1990s and 2000s, City Holding continued its expansion strategy, making strategic acquisitions in contiguous markets in Kentucky, Virginia, and Ohio. These acquisitions allowed the company to build out a regional banking franchise and diversify its geographic footprint beyond West Virginia. The company also invested in new delivery channels, such as ATMs, mobile banking, and online services, to meet evolving customer preferences and remain competitive.

In 2018, the company acquired Poage Bankshares, Inc., adding 14 branches in West Virginia and Kentucky. In 2023, City Holding completed the acquisition of Citizens Commerce Bancshares, Inc., strengthening its market position in the Lexington, Kentucky area.

Today, City National Bank, the company's principal subsidiary, operates a network of 97 branches, offering a comprehensive suite of banking, trust, and investment management services to its customers. The company's strategic focus on community banking, conservative risk management, and shareholder value creation has been a key driver of its consistent performance.

Financial Strength and Profitability

City Holding Company's financial results have been consistently strong, with the company reporting record net income of $117.1 million and diluted earnings per share of $7.89 for the year ended December 31, 2024. This represents a 2.4% increase in net income compared to the prior year, and the company's fifth consecutive year of record earnings.

The company's profitability metrics are equally impressive, with a return on assets (ROA) of 1.85% and a return on tangible common equity (ROTCE) of 21.2% for the full year 2024. These figures reflect City Holding's ability to effectively manage its balance sheet, generate robust net interest income, and maintain strong cost discipline.

City Holding's net interest margin, a key measure of profitability in the banking industry, was 3.86% for the year ended December 31, 2024, highlighting the company's skill in optimizing its funding sources and loan portfolio. The company's loan portfolio grew by 3.6% in 2024, driven by increases in commercial real estate, residential real estate, and home equity loans.

Financials

City Holding Company's financial performance has been consistently strong over the years. In addition to the record net income and earnings per share mentioned earlier, the company has maintained a solid balance sheet. As of December 31, 2024, total assets stood at $6.5 billion, with a well-diversified loan portfolio of $4.2 billion and total deposits of $5.3 billion.

The company's efficiency ratio, a measure of how well it manages its expenses relative to revenue, was 54.2% for the full year 2024, indicating strong operational efficiency. Non-interest income, which includes revenue from wealth management, trust services, and other fee-based activities, accounted for approximately 30% of total revenue, providing a stable source of income to complement the company's net interest income.

For the fiscal year 2024, City Holding reported annual revenue of $285.1 million, with annual net income reaching $117.1 million. The company's annual operating cash flow was $131.9 million, while annual free cash flow stood at $129.2 million.

In the most recent quarter (Q4 2024), City Holding generated revenue of $70.1 million and net income of $28.7 million. This represents a year-over-year growth of 3.7% in revenue and 5.4% in net income compared to Q4 2023.

The company's business activities are currently limited to one reportable business segment - community banking. City Holding primarily operates in West Virginia, Kentucky, Virginia, and southeastern Ohio, maintaining a strong presence in its key markets with leading deposit market share positions in the counties where its branches are located.

Liquidity

City Holding Company maintains a strong liquidity position to meet its operational needs and regulatory requirements. As of December 31, 2024, the company had $225.4 million in cash and cash equivalents. This robust liquidity buffer ensures that the company can meet unexpected funding needs and take advantage of growth opportunities as they arise.

The company's loan-to-deposit ratio stood at 79.2% at year-end 2024, indicating a conservative approach to lending and a strong deposit base. This healthy ratio provides City Holding with flexibility in managing its balance sheet and funding its lending activities.

City Holding's debt-to-equity ratio is 0.205, reflecting a conservative capital structure. The company has access to $1.5 billion in available credit from unused portions of lines of credit with the Federal Home Loan Bank (FHLB) and Federal Reserve Discount Window, further enhancing its liquidity position.

Disciplined Capital Management and Shareholder Returns

City Holding's commitment to shareholder value creation is evidenced by its disciplined capital management and consistent dividend payments. The company maintains a strong capital position, with a Common Equity Tier 1 (CET1) ratio of 16.5% and a Total Risk-Based Capital ratio of 17.0% as of December 31, 2024, well above regulatory requirements.

In 2024, the company returned $62.6 million to shareholders through a combination of $44.6 million in cash dividends and $18.0 million in share repurchases. The company's quarterly cash dividend of $0.79 per share, paid on October 31, 2024, represented a 10.5% increase from the prior quarter. City Holding has a track record of consistently increasing its dividend, having raised it for the past 47 consecutive years.

The company's strong financial performance and disciplined capital management have contributed to a healthy total shareholder return. Over the past five years, City Holding's stock has delivered a cumulative total return of 68.2%, outperforming the S&P 500 Banks Index by a wide margin.

Diversified Business Model and Risk Management

City Holding's business model is well-diversified, with a balanced mix of commercial and consumer banking, wealth management, and trust services. This diversification helps to mitigate risk and provides the company with multiple avenues for growth.

The company's loan portfolio is also well-diversified, with commercial and industrial loans, commercial real estate loans, residential real estate loans, and consumer loans each accounting for a significant portion of the overall portfolio. As of December 31, 2024, the loan portfolio composition was 47% residential mortgage and home equity loans, 51% commercial and industrial and commercial real estate loans, and the remaining 2% in consumer loans and demand deposit account overdrafts. City Holding actively monitors industry concentrations and manages its portfolio to maintain appropriate risk levels.

Risk management is a key priority for City Holding, and the company has a robust framework in place to identify, assess, and mitigate various risks, including credit risk, market risk, liquidity risk, and operational risk. The company's conservative approach to risk-taking has been a crucial factor in its ability to navigate economic cycles and maintain a strong financial position.

Throughout its history, City Holding has maintained a focus on sound risk management, strong underwriting standards, and prudent capital management. This conservative approach allowed the company to emerge from the 2008 financial crisis in a position of strength, while many of its peers struggled. City Holding's strong financial performance, commitment to its communities, and reputation for excellent customer service have been key factors in its long-term success.

Product and Service Offerings

City Holding Company, through its principal subsidiary City National Bank of West Virginia, offers a comprehensive range of financial products and services to its customers:

Commercial Banking: The bank provides a full suite of commercial banking services, including financing for commercial and industrial projects, income-producing commercial real estate, owner-occupied real estate, and construction and land development. City National also offers deposit services for commercial customers, such as treasury management, lockbox, and other cash management solutions, as well as merchant credit card services through a third-party vendor agreement.

Consumer Banking: For individual customers, City National offers checking, savings, and money market accounts, certificates of deposit, and individual retirement accounts. The bank also provides consumer installment loans, real estate loans, and lines of credit.

Mortgage Banking: The company's mortgage banking services include the origination and servicing of fixed and adjustable-rate mortgages, construction financing, land loans, and the production of conventional and government-insured mortgages. City National also engages in secondary marketing of mortgage loans.

Wealth Management and Trust Services: City National offers specialized wealth management, trust, investment, and custodial services for commercial and individual customers. These services include the administration of personal trusts and estates, management of investment accounts for individuals, employee benefit plans, and charitable foundations. The bank also provides corporate trust and institutional custody, financial and estate planning, and retirement plan services.

Outlook and Challenges

Looking ahead, City Holding Company remains well-positioned to continue its track record of consistent performance. The company's focus on serving the financial needs of its local communities, coupled with its disciplined growth strategy and prudent risk management, positions it for continued success.

However, the company is not immune to the challenges facing the banking industry, such as the prolonged low-interest-rate environment, intensifying competition from fintech companies, and increased regulatory scrutiny. City Holding will need to adapt to these industry dynamics while maintaining its commitment to customer service, operational efficiency, and shareholder value creation.

Conclusion

City Holding Company's long history of consistent financial performance, disciplined capital management, and shareholder-friendly policies make it a standout community bank in the industry. By leveraging its regional footprint, diversified business model, and conservative risk approach, the company has demonstrated its ability to navigate economic cycles and deliver value to its shareholders. As City Holding continues to execute on its strategic priorities, investors can expect the company to remain a reliable and resilient player in the banking sector.