City Holding Company Announces Record Annual Earnings | Q4 2024

CHARLESTON, W.Va.–(BUSINESS WIRE)–City Holding Company (“Company” or “City”) (NASDAQ:CHCO), a $6.5 billion bank holding company headquartered in Charleston, West Virginia, today announced record net income of $117.1 million and record diluted earnings of $7.89 per share for the year ended December 31, 2024. For the year ended December 31, 2024, the Company achieved a return on assets of 1.85% and a return on tangible equity of 21.2%.

“For the fifth time in the last seven years, City was once again honored to be ranked #1 in customer satisfaction for consumer banking in the North Central Region in the J.D. Power 2024 U.S. Retail Banking Satisfaction Study,” said City’s President and CEO Charles Hageboeck. “We believe that this award goes further than just providing excellent service to our customers. It reflects how our employees interact and support their customers, communities, and fellow employees on a daily basis. This dedication by our employees enables us to produce excellent results year after year.

“As we start 2025, City’s strengths from a year ago remain in place. We continue to have an exceptional customer franchise, an extraordinary team, an enviable cost of funds, strong asset quality, and some competitors who seem focused on making their customers banking experiences more difficult.”

Net Interest Income

The Company’s net interest income increased from $219.2 million for the year ended December 31, 2023 to $220.2 million for the year ended December 31, 2024. The Company’s tax equivalent net interest income increased $0.8 million, or 0.4%, from $220.3 million for the year ended December 31, 2023 to $221.1 million for the year ended December 31, 2024. Due to increases in loan yields (net of loan fees and accretion) of 40 basis points and an increase in average loan balances ($185.5 million), net interest income increased $15.2 million and $10.3 million, respectively. Additionally, an increase in the yield on investment securities of 34 basis points increased net interest income by $4.7 million and a 72 basis point increase on deposits in depository institutions increased net interest income by $1.0 million. The acquisition of Citizens Commerce Bancshares, Inc., and its subsidiary, Citizens Commerce Bank (“Citizens”) of Versailles, Kentucky, during the first quarter of 2023 added $2.8 million of net interest income during the year ended December 31, 2024.

These increases were partially offset by an increase in the cost of interest bearing liabilities (78 basis points) which decreased net interest income by $25.5 million and higher balances of interest bearing liabilities ($193.8 million) that lowered net interest income by $7.9 million. The Company’s reported net interest margin decreased from 4.01% for the year ended December 31, 2023 to 3.86% for the year ended December 31, 2024.

The Company’s net interest income remained flat at $55.6 million for both the fourth quarter of 2024 and the third quarter of 2024. The Company’s tax equivalent net interest income also remained flat at $55.8 million for both the fourth quarter of 2024 and the third quarter of 2024. Due to an increase in balances of interest bearing liabilities ($133.0 million), net interest income decreased $1.2 million and a decrease in the yield on loans (17 basis points, net of loan fees and accretion), decreased net interest income $1.2 million. Additionally, lower yields on investment securities (19 basis points) lowered net interest income $0.6 million. These decreases were essentially offset by an increase in the balance of deposits in depository institution balances ($113.7 million) that increased net interest income $1.6 million and an increase in loan balances ($82.4 million) which increased net interest income $1.3 million. The Company’s reported net interest margin decreased from 3.87% for the third quarter of 2024 to 3.75% for the fourth quarter of 2024.

Credit Quality

The Company’s ratio of nonperforming assets to total loans and other real estate owned increased from 0.21%, or $8.6 million, at December 31, 2023 to 0.35%, or $15.0 million at December 31, 2024. This increase is primarily due to a commercial loan for a movie theater (originated in 2014) that experienced operating weakness during the third quarter of the year ended December 31, 2024. As a result, the Company recognized a $2.0 million charge-off for this loan and moved the remaining balance to nonaccrual. Total past due loans decreased from $10.9 million, or 0.27% of total loans outstanding, at December 31, 2023 to $8.8 million, or 0.21% of total loans outstanding, at December 31, 2024.

As a result of the Company’s quarterly analysis of the adequacy of the Allowance for Credit Losses, the Company recorded a provision for credit losses of $0.3 million for the fourth quarter of 2024 and a provision for credit losses of $1.8 million for the year ended December 31, 2024, compared to a $0.3 million recovery of credit losses for the fourth quarter and a provision for credit losses of $3.2 million for the year ended December 31, 2023. The provision for credit losses recognized during 2024 related primarily to the aforementioned movie theater ($2.0 million), loan growth during the year ending December 31, 2024, and an increase in the loss rate for residential real estate loans. These increases were partially offset by $1.7 million of reversals of reserves due primarily to payoffs on purchase credit deteriorated loans during the year ending December 31, 2024. Additionally, the provision for credit losses for the year ended December 31, 2023 included $2.0 million of credit loss expense associated with loans acquired from Citizens.

Non-interest Income

Non-interest income was $73.3 million for the year ended December 31, 2024, as compared to $70.6 million for the year ended December 31, 2023. In 2024, the Company reported $2.8 million of realized security losses and $0.2 million of unrealized security gains on the Company’s equity securities as compared to $4.9 million realized security losses and $0.4 million of unrealized security gains on the Company’s equity securities in 2023. The realized security losses during both 2024 and 2023, which lowered diluted earnings per share by $0.15 and $0.25, respectively, and were executed to reposition a portion of our investment securities.

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.

During the quarter ended December 31, 2024, non-interest income was $16.1 million as compared to $14.2 million during the quarter ended December 31, 2023. During the fourth quarter of 2024, the Company reported $2.8 million of realized security losses and $0.4 million of unrealized fair value losses on the Company’s equity securities as compared to $5.0 million of realized security losses and $0.4 million of unrealized fair value gains on the Company’s equity securities during the fourth quarter of 2023.

Exclusive of these realized and unrealized gains and losses, non-interest income increased from $18.8 million for the fourth quarter of 2023 to $19.3 million for the fourth quarter of 2024. Higher service charges of $0.5 million, or 7.3%, and trust and investment management fee income of $0.4 million, or 15.0%, were partially offset by lower death benefits from bank owned life insurance of $0.4 million.

Non-interest Expenses

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 which were primarily related to acquisition and integration expenses associated with the Citizens acquisition completed in 2023 ($5.2 million).

In the fourth quarter of 2024, non-interest expenses increased $1.8 million (5.2%) from $35.1 million in the fourth quarter of 2023 to $36.9 million. This increase was largely due to an increase in equipment and software related expense of $0.9 million and salaries and employee benefits of $0.7 million. In addition, advertising expenses increased $0.3 million.

Balance Sheet Trends

Loans increased $148.9 million (3.6%) from December 31, 2023 to $4.27 billion at December 31, 2024. Commercial real estate loans increased $95.2 million (5.7%); residential real estate loans increased $35.5 million (2.0%); and home equity loans increased $32.0 million (19.1%). These increases were partially offset by decreases in consumer loans ($7.4 million) and commercial and industrial loans ($7.1 million).

Period-end deposit balances increased $209.9 million, or 4.3%, from December 31, 2023, to December 31, 2024. Average depository balances for the year ended December 31, 2024 increased $59.2 million from the year ended December 31, 2023 to $5.04 billion. Average time deposits increased $180.4 million and average interest bearing demand deposits increased $32.3 million. These increases were partially offset by a decrease in average savings deposits of $100.8 million and a decrease in noninterest bearing demand deposits of $52.7 million. The cost of interest bearing liabilities for the Company for the quarter ending December 31, 2024 were as follows: interest bearing demand deposits – 115 basis points; savings deposits – 73 basis points; and time deposits – 367 basis points.

Income Tax Expense

The Company’s effective income tax rates for the quarter and year ended December 31, 2024 were 16.9% and 19.0%, respectively, compared to 19.5% and 20.1% for the comparable periods in 2023.

Capitalization and Liquidity

The Company’s gross loan to deposit ratio was 83.1% and its gross loan to asset ratio was 66.2% at December 31, 2024. The Company maintained investment securities totaling 22.5% of assets as of the same date. The Company’s deposit mix is weighted toward checking and saving accounts that fund 60.3% of total assets at December 31, 2024. Time deposits fund 19.3% of total assets at December 31, 2024, with only 14.7% of time deposits having balances of more than $250,000, reflecting the core retail orientation of the Company.

City Holding Company is the parent company of City National Bank of West Virginia (“City National”). City National has borrowing facilities with the Federal Reserve Bank and the Federal Home Loan Bank that can be accessed as necessary to fund operations and to provide contingency funding. These borrowing facilities are collateralized by various loans held on City National’s balance sheet. As of December 31, 2024, City National had the capacity to borrow an additional $1.5 billion from these existing borrowing facilities. In addition, approximately $695 million of City National’s investment securities were pledged to collateralize customer repurchase agreements and various deposit accounts, leaving approximately $755 million of City National’s investment securities unpledged at December 31, 2024.

The Company continues to be strongly capitalized with tangible equity of $571 million at December 31, 2024. The Company’s tangible equity ratio increased from 8.6% at December 31, 2023 to 9.1% at December 31, 2024. This increase was attributable to the Company’s net income for 2024 less dividends.

At December 31, 2024, City National’s Leverage Ratio was 8.7%, its Common Equity Tier I ratio was 13.6%, its Tier I Capital ratio was 13.6%, and its Total Risk-Based Capital ratio was 14.1%. These regulatory capital ratios are significantly above levels required to be considered “well capitalized,” which is the highest possible regulatory designation.

On November 20, 2024, the Company’s Board of Directors approved a quarterly cash dividend of $0.79 cents per share payable January 31, 2025, to shareholders of record as of January 15, 2025. During the year ended December 31, 2024, the Company repurchased 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. As of December 31, 2024, the Company could repurchase an additional approximately 821,000 shares under the current plan. As a result of lower share repurchases in 2024, City Holding Company had a cash balance of $117 million at December 31, 2024 and annual expenditures are approximately $45 million (based on the Company’s operating expenses, contractual obligations and current quarterly dividend ($0.79 per share).

City National operates 97 branches across West Virginia, Kentucky, Virginia, and Ohio.

Forward-Looking Information

This news release contains certain forward-looking statements that are included pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements express only management’s beliefs regarding future results or events and are subject to inherent uncertainty, risks, and changes in circumstances, many of which are outside of management’s control. Uncertainty, risks, changes in circumstances and other factors could cause the Company’s actual results to differ materially from those projected in the forward-looking statements. Factors that could cause actual results to differ from those discussed in such forward-looking statements include, but are not limited to those set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 under “ITEM 1A Risk Factors” and the following: (1) general economic conditions, especially in the communities and markets in which we conduct our business; (2) credit risk, including risk that negative credit quality trends may lead to a deterioration of asset quality, risk that our allowance for credit losses may not be sufficient to absorb actual losses in our loan portfolio, and risk from concentrations in our loan portfolio; (3) changes in the real estate market, including the value of collateral securing portions of our loan portfolio; (4) changes in the interest rate environment; (5) operational risk, including cybersecurity risk and risk of fraud, data processing system failures, and network breaches; (6) changes in technology and increased competition, including competition from non-bank financial institutions; (7) changes in consumer preferences, spending and borrowing habits, demand for our products and services, and customers’ performance and creditworthiness; (8) difficulty growing loan and deposit balances; (9) our ability to effectively execute our business plan, including with respect to future acquisitions; (10) changes in regulations, laws, taxes, government policies, monetary policies and accounting policies affecting bank holding companies and their subsidiaries, including changes in deposit insurance premiums; (11) deterioration in the financial condition of the U.S. banking system may impact the valuations of investments the Company has made in the securities of other financial institutions; (12) regulatory enforcement actions and adverse legal actions; (13) difficulty attracting and retaining key employees; and (14) other economic, competitive, technological, operational, governmental, regulatory, and market factors affecting our operations. Forward-looking statements made herein reflect management’s expectations as of the date such statements are made. Such information is provided to assist stockholders and potential investors in understanding current and anticipated financial operations of the Company and is included pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances that arise after the date such statements are made. Further, the Company is required to evaluate subsequent events through the filing of its December 31, 2024 Form 10-K. The Company will continue to evaluate the impact of any subsequent events on the preliminary December 31, 2024 results and will adjust the amounts if necessary.