City Holding Company Announces Quarterly Results

Published: 2024-04-23 07:31:05 ET CHCO

City Holding Company (“Company” or “City”) (NASDAQ:CHCO), a $6.3 billion bank holding company headquartered in Charleston, West Virginia, today announced net income of $29.5 million and diluted earnings of $1.97 per share for the quarter ended March 31, 2024. For the quarter ended March 31, 2024, the Company achieved a return on assets of 1.92% and a return on tangible equity of 22.7%.

Net Interest Income

The Company’s net interest income decreased approximately $0.2 million, or 0.4%, from $54.7 million during the fourth quarter of 2023 to $54.4 million during the first quarter of 2024. The Company’s tax equivalent net interest income decreased approximately $0.2 million, or 0.4%, from $54.9 million for the fourth quarter of 2023 to $54.6 million for the first quarter of 2024. Due to an increase in the cost of interest bearing liabilities (20 basis points), net interest income declined $1.7 million. Additionally, lower yields on investment securities lowered net interest income by $0.4 million and an increase in the average balance of interest bearing liabilities ($48.4 million) decreased net interest income by $0.2 million. These decreases were partially offset by an increase in average loan balances of $46.6 million, which increased net interest income by $0.7 million, an increase of 15 basis points on loans yields which increased net interest income by $0.7 million, and an increase of 23 basis points on deposits in depository institutions yield which increased net interest income by $0.6 million. The Company’s reported net interest margin declined from 3.98% for the fourth quarter of 2023 to 3.95% for the first 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 0.28%, or $11.5 million, at March 31, 2024. Total past due loans decreased from $10.9 million, or 0.27% of total loans outstanding, at December 31, 2023, to $6.7 million, or 0.16% of total loans outstanding, at March 31, 2024.

As a result of the Company’s quarterly analysis of the adequacy of the allowance for credit losses, the Company recorded a recovery of credit losses of $0.2 million in the first quarter of 2024, compared to a provision for credit losses of $2.9 million for the comparable period in 2023, and a recovery of credit losses of $0.3 million for the fourth quarter of 2023. The recovery of credit losses was primarily related to a decline in loan balances from the fourth quarter of 2023 and a reduction in the loss rate of residential real estate loans that were partially offset by net charge-offs during the first quarter of 2024.

Non-interest Income

Non-interest income was $17.9 million during the quarter ended March 31, 2024, as compared to $18.7 million during the quarter ended March 31, 2023. During the first quarter of 2024, the Company reported $0.2 million of unrealized fair value gains on the Company’s equity securities compared to $0.8 million of realized gains from the sale of investment securities and $0.4 million of unrealized fair value gains on the Company’s equity securities during the first quarter of 2023.

Exclusive of these items, non-interest income increased $0.6 million, or 2.9%, from $17.5 million for the first quarter of 2023 to $18.1 million for the first quarter of 2024. This increase was largely attributable to an increase of $0.5 million, or 7.2%, in service charges, an increase of $0.4 million, or 16.4%, in trust and investment management fee income, and a $0.2 million, or 3.0%, increase in bankcard revenues. These increases were partially offset by a decrease in other income of $0.6 million.

Non-interest Expenses

Non-interest expenses decreased $2.7 million, or 7.1%, from $38.6 million in the first quarter of 2023 to $35.9 million in the first quarter of 2024. During the quarter ended March 31, 2023, the Company recognized $5.6 million of acquisition and integration expenses (included in other expenses) associated with the completed acquisition of Citizens Commerce Bancshares, Inc. (“Citizens”) and its principal banking subsidiary, Citizens Commerce Bank, on March 10, 2023. Excluding these expenses, non-interest expenses increased $2.9 million from $33.0 million in the quarter ended March 31, 2023 to $35.9 million in the quarter ended March 31, 2024. This increase was largely due to an increase in salaries and employee benefits of $1.2 million due to salary adjustments and increased health insurance costs. In addition, bankcard expenses increased $0.5 million, other expenses increased $0.5 million, and FDIC insurance expense increased $0.3 million.

Balance Sheet Trends

Loans declined $34.1 million (0.8%) from December 31, 2023 to $4.09 billion at March 31, 2024. Commercial and industrial loans decreased $19.2 million and commercial real estate loans decreased $14.6 million during the quarter ended March 31, 2024. These decreases were partially offset by an increase in home equity loans of $4.1 million (2.5%).

Period-end deposit balances increased $121.5 million from December 31, 2023, to March 31, 2024. Total average depository balances remained flat from the quarter ended December 31, 2023 to the quarter ended March 31, 2024, at $4.93 billion. Average savings deposit balances decreased $20.5 million, average interest-bearing demand deposit balances decreased $15.8 million, and average noninterest-bearing demand deposit balances decreased $11.5 million. These decreases were essentially offset by an increase in average time deposit balances of $47.2 million.

Income Tax Expense

The Company’s effective income tax rate for the first quarter of 2024 was 19.5% compared to 20.1% for the year ended December 31, 2023, and 20.5%, for the quarter ended March 31, 2023.

Capitalization and Liquidity

The Company’s loan to deposit ratio was 80.9% and the loan to asset ratio was 64.8% at March 31, 2024. The Company maintained investment securities totaling 21.8% of assets as of the same date. The Company’s deposit mix is weighted heavily toward checking and saving accounts, which fund 62.6% of assets at March 31, 2024. Time deposits fund 17.4% of assets at March 31, 2024, with only 13.0% 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 March 31, 2024, City National had the capacity to borrow an additional $1.5 billion from these existing borrowing facilities. In addition, approximately $660 million of City National’s investment securities were pledged to collateralize customer repurchase agreements and various deposit accounts, leaving approximately $720 million of City National’s investment securities unpledged at March 31, 2024.

The Company continues to be strongly capitalized with tangible equity of $520 million at March 31, 2024. The Company’s tangible equity ratio declined slightly from 8.6% at December 31, 2023 to 8.5% at March 31, 2024. At March 31, 2024, City National’s Leverage Ratio was 9.4%, its Common Equity Tier I ratio was 14.6%, its Tier I Capital ratio was 14.6%, and its Total Risk-Based Capital ratio was 15.1%. These regulatory capital ratios are significantly above levels required to be considered “well capitalized,” which is the highest possible regulatory designation.

On March 27, 2024, the Board of Directors of the Company approved a quarterly cash dividend of $0.715 per share payable April 30, 2024, to shareholders of record as of April 15, 2024. On January 31, 2024, the Company announced that the Board of Directors authorized the Company to buy back up to 1,000,000 shares of its common stock (approximately 7% of outstanding shares) in open market transactions at prices that are accretive to the earnings per share of continuing shareholders (the “2024 Program”). No time limit was placed on the duration of the share repurchase program. As part of this authorization, the Company terminated its previous repurchase program that was approved in May 2022. The Company had repurchased 849,681 shares under the 2022 program. During the quarter ended March 31, 2024, the Company repurchased 36,000 common shares at a weighted average price of $100.24 per share as part of 2024 Program. As of March 31, 2024, the Company could repurchase 964,000 additional shares under the 2024 program.

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

On April 8, 2024, City National announced that it had been 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. City National has claimed the top honor in five of the last seven years and outscored all other banks in West Virginia, Kentucky, Ohio, Indiana, and Michigan.

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 March 31, 2024 Form 10-Q. The Company will continue to evaluate the impact of any subsequent events on the preliminary March 31, 2024 results and will adjust the amounts if necessary.

CITY HOLDING COMPANY AND SUBSIDIARIES

Financial Highlights

(Unaudited)

Earnings

Net Interest Income (fully taxable equivalent)

54,647

54,889

55,855

55,757

53,767

Net Income available to common shareholders

29,523

27,452

29,839

32,733

24,341

Per Share Data

Earnings per share available to common shareholders:

Basic

1.98

1.84

1.98

2.16

1.63

Diluted

1.97

1.84

1.98

2.16

1.63

Weighted average number of shares (in thousands):

Basic

14,795

14,758

14,922

14,994

14,818

Diluted

14,819

14,785

14,945

15,012

14,844

Period-end number of shares (in thousands)

14,825

14,832

14,901

15,007

15,260

Cash dividends declared

0.72

0.65

Book value per share (period-end)

46.02

45.65

40.94

42.39

42.66

Tangible book value per share (period-end)

35.10

34.69

29.98

31.50

31.91

Market data:

High closing price

111.40

115.77

99.49

97.92

100.27

Low closing price

99.28

87.43

87.51

83.57

89.17

Period-end closing price

104.22

110.26

90.35

89.99

90.88

Average daily volume (in thousands)

Treasury share activity:

Treasury shares repurchased (in thousands)

109

269

218

Average treasury share repurchase price

100.24

90.61

89.33

88.93

92.10

Key Ratios (percent)

Return on average assets

1.92

1.78

1.94

2.12

1.63

Return on average tangible equity

22.7

23.5

24.1

27.4

19.9

Yield on interest earning assets

5.33

5.23

5.08

4.87

4.66

Cost of interest bearing liabilities

1.90

1.70

1.46

1.22

0.86

Net Interest Margin

3.95

3.98

4.03

4.00

4.05

Non-interest income as a percent of total revenue

25.0

25.6

24.6

27.1

24.7

Efficiency Ratio

48.5

47.4

46.4

44.6

45.7

Price/Earnings Ratio (a)

13.17

14.95

11.40

10.40

13.95

Capital (period-end)

Average Shareholders' Equity to Average Assets

11.09

10.27

10.73

10.38

10.31

Tangible equity to tangible assets

8.46

8.57

7.55

7.90

8.05

CET I

16.15

15.70

15.36

15.47

15.64

Tier I

16.15

15.70

15.36

15.47

15.64

Total

16.69

16.23

15.89

16.01

16.18

Leverage

10.45

10.23

10.05

9.80

10.20

City National Bank risk based capital ratios (b):

CET I

14.60

13.79

14.73

14.82

14.08

Tier I

14.60

13.79

14.73

14.82

14.08

Total

15.14

14.32

15.27

15.36

14.63

Leverage

9.42

8.94

9.61

9.36

9.18

Other (period-end)

Branches

FTE

953

957

966

963

958

Assets per FTE (in thousands)

6,625

6,447

6,291

6,383

6,483

Deposits per FTE (in thousands)

5,304

5,157

5,120

5,208

5,362

(b) March 31, 2024 risk-based capital ratios are estimated.

59,128

57,755

55,582

52,352

47,004

12,040

12,336

12,432

11,794

11,773

830

832

910

950

1,162

1,570

941

1,265

2,585

1,591

73,568

71,864

70,189

67,681

61,530

14,097

12,479

10,551

8,567

5,690

3,621

3,693

2,990

2,963

2,381

1,423

1,026

1,034

649

19,141

17,198

14,575

12,179

8,071

54,427

54,666

55,614

55,502

53,459

(180

)

(300

)

200

425

2,918

54,607

54,966

55,414

55,077

50,541

)

(4,951

)

(730

)

773

(152

)

365

(294

)

361

7,035

7,158

7,124

6,906

6,563

6,800

7,109

7,058

7,190

6,603

2,623

2,563

2,409

2,339

2,252

927

1,218

807

3,208

804

716

774

742

952

1,326

17,948

14,236

17,410

20,301

18,682

18,878

18,772

18,289

18,429

17,673

2,840

2,917

2,950

2,811

2,640

2,929

2,824

2,830

2,883

3,092

711

868

919

690

445

867

588

790

974

760

2,039

2,014

2,188

1,736

1,509

666

615

668

596

647

453

477

457

591

420

482

478

529

558

470

600

614

568

623

606

229

(50

)

5,206

4,992

4,800

4,848

10,345

35,900

35,109

35,028

34,761

38,623

36,655

34,093

37,796

40,617

30,600

7,132

6,641

7,957

7,884

6,259

29,523

27,452

29,839

32,733

24,341

10,505

10,508

10,554

9,668

9,833

18,757

16,696

19,004

22,774

14,294

29,262

27,204

29,558

32,442

24,127

14,795

14,758

14,922

14,994

14,818

14,819

14,785

14,945

15,012

14,844

1.98

1.84

1.98

2.16

1.63

1.97

1.84

1.98

2.16

1.63

121,853

123,033

67,402

69,622

76,223

196,829

33,243

43,314

161,659

226,587

318,682

156,276

110,716

231,281

302,810

1,347,657

1,338,137

1,358,219

1,419,933

1,456,259

30,681

30,966

29,022

29,262

24,728

1,378,338

1,369,103

1,387,241

1,449,195

1,480,987

4,091,788

4,125,923

4,007,482

3,922,142

3,894,686

(22,310

)

(22,745

)

(23,128

)

(22,751

)

(22,724

)

4,069,478

4,103,178

3,984,354

3,899,391

3,871,962

118,875

118,122

117,979

117,173

124,238

71,623

72,146

72,682

73,118

73,430

21,759

20,290

19,223

17,973

18,395

43,969

42,216

58,811

46,944

42,146

161,832

162,568

163,461

163,426

164,099

129,627

124,153

161,659

148,333

132,715

6,314,183

6,168,052

6,076,126

6,146,834

6,210,782

1,359,072

1,342,804

1,333,474

1,373,106

1,420,990

1,330,268

1,291,011

1,319,783

1,337,445

1,356,017

1,266,211

1,259,457

1,282,642

1,343,571

1,397,523

1,100,250

1,040,990

1,009,235

960,941

962,235

5,055,801

4,934,262

4,945,134

5,015,063

5,136,765

25,000

304,941

309,856

278,671

271,714

293,256

150,000

100,000

121,210

121,868

142,187

123,865

129,711

5,631,952

5,490,986

5,465,992

5,510,642

5,559,732

47,619

175,747

177,424

177,113

176,746

177,529

799,024

780,299

763,425

744,248

721,727

(218,555

)

(217,737

)

(211,430

)

(201,973

)

(179,436

)

(119,023

)

(107,958

)

(163,171

)

(127,026

)

(112,967

)

(2,581

)

(2,581

)

(3,422

)

(3,422

)

(3,422

)

(121,604

)

(110,539

)

(166,593

)

(130,448

)

(116,389

)

682,231

677,066

610,134

636,192

651,050

6,314,183

6,168,052

6,076,126

6,146,834

6,210,782

644,235

627,579

615,798

605,661

606,675

644,235

627,579

615,798

605,661

606,675

665,707

648,646

637,245

626,730

627,718

3,989,171

3,996,688

4,009,798

3,913,870

3,878,994

407,770

426,950

424,647

417,847

390,861

202,378

206,237

197,081

184,919

181,442

354,929

357,142

321,236

324,745

327,554

186,555

189,165

192,329

191,483

195,042

682,609

680,590

651,498

612,703

617,357

232,440

240,328

222,544

222,852

223,096

1,658,911

1,673,462

1,584,688

1,536,702

1,544,491

1,786,764

1,788,150

1,768,358

1,746,618

1,737,604

171,292

167,201

159,630

151,012

151,341

63,556

65,246

65,586

65,201

66,994

3,495

4,914

4,573

4,762

3,395

4,091,788

4,125,923

4,007,482

3,922,142

3,894,686

6,651

2,459

2,533

3,361

4,715

19,709

23,066

20,056

20,470

25,224

22,745

23,128

22,751

22,724

17,108

(306

)

(84

)

(69

)

(31

)

(256

)

(117

)

(19

)

(68

)

(88

)

(20

)

(32

)

(27

)

(21

)

(112

)

(200

)

(67

)

(115

)

(10

)

(109

)

(62

)

(356

)

(416

)

(422

)

(357

)

(450

)

(854

)

(600

)

(888

)

(872

)

(614

)

597

158

407

368

321

315

398

599

517

1,065

474

676

(255

)

(83

)

177

(398

)

(180

)

(300

)

200

425

2,918

2,811

(175

)

22,310

22,745

23,128

22,751

22,724

4,091,788

4,125,923

4,007,482

3,922,142

3,894,686

0.55

0.58

206.8

290.6

440.1

405.5

400.1

4,092,529

4,045,889

3,956,871

3,896,284

3,700,194

0.02

0.01

(0.02

0.04

(0.01)

3,452

2,849

2,839

2,774

2,700

121

111

3,405

2,211

716

741

994

3,807

2,387

1,355

1,821

1,931

10,786

7,558

4,986

5,396

5,679

270

269

215

10,786

7,828

5,255

5,611

5,679

752

731

720

874

843

11,538

8,559

5,975

6,485

6,522

0.28

0.21

0.15

0.17

5,035

8,059

6,247

5,884

4,783

1,028

1,235

1,278

784

551

435

568

142

138

715

1,478

238

148

129

406

364

398

341

276

6,708

10,937

10,053

7,446

5,859

0.16

0.27

0.25

0.19

0.15

1,953,647

24,148

4.97

1,945,185

23,673

4.83

1,840,828

20,007

4.41

2,070,054

33,980

6.60

2,031,089

33,038

6.45

1,795,309

26,248

5.93

68,828

999

5.84

69,615

1,046

5.96

64,057

749

4.74

4,092,529

59,127

5.81

4,045,889

57,757

5.66

3,700,194

47,004

5.15

1,200,310

12,040

4.03

1,194,448

12,336

4.10

1,322,060

11,773

3.61

160,847

1,051

2.63

153,204

1,053

2.73

204,957

1,471

2.91

1,361,157

13,091

3.87

1,347,652

13,389

3.94

1,527,017

13,244

3.52

115,953

1,570

5.45

71,624

941

5.21

160,031

1,590

4.03

5,569,639

73,788

5.33

5,465,165

72,087

5.23

5,387,242

61,838

4.66

98,966

87,633

67,975

71,954

72,435

71,422

162,257

163,220

124,546

306,278

342,669

327,442

(23,142

)

(23,532

)

(18,143

)

6,185,952

6,107,590

5,960,484

1,283,868

3,439

1.08

1,299,683

3,467

1.06

1,234,981

1,741

0.57

1,254,253

2,273

0.73

1,274,726

2,369

0.74

1,376,317

1,348

0.40

1,073,083

8,385

3.14

1,025,870

6,644

2.57

902,583

2,601

1.17

313,623

3,621

4.64

312,941

3,693

4.68

281,861

2,381

3.43

136,813

1,423

4.18

100,000

1,026

4.07

4,061,640

19,141

1.90

4,013,220

17,199

1.70

3,795,742

8,071

0.86

1,322,540

1,334,021

1,420,676

115,589

132,862

129,411

686,183

627,487

614,655

6,185,952

6,107,590

5,960,484

54,647

54,888

53,767

3.95

3.98

4.05

133

201

518

1,065

702

177

131

1,179

937

266

54,427

54,666

55,614

55,502

53,459

220

223

243

255

308

54,647

54,889

55,857

55,757

53,767

10.81

10.98

10.04

10.35

10.48

(2.35

(2.41

(2.49

(2.45

(2.43

8.46

8.57

7.55

7.90

8.05

25,143

0.61%

3.71

N/A

12,800

0.31%

5.46

N/A

22,804

0.55 %

1.04

84%

25,887

0.63%

1.22

68%

25,414

0.62%

3.28

N/A

43,985

1.07%

4.76

65%

429,615

10.42%

1.89

66%

185,436

4.50%

2.97

67%

177,726

4.31%

1.84

64%

600,853

14.58%

1.70

65%

125,922

3.05%

1.64

62%

50,920

1.24%

1.43

61%

27,273

0.66%

1.38

61%

355,343

8.62%

1.45

63%

446

511

120

2024 YTD

7,935

1,121

0.4

2023*

31,745

4,768

1.9

2022

28,442

4,544

1.9

2021

32,800

8,860

3.8

2020

30,360

6,740

3.0

2019

32,040

3,717

1.7

2018*

30,400

4,310

2.2

2017

28,525

2,711

1.4

2016

28,650

2,820

1.5

View source version on businesswire.com: https://www.businesswire.com/news/home/20240423491883/en/