City Holding (CHCO)

Regional banking company City Holding (NASDAQ:CHCO) announced better-than-expected revenue in Q3 CY2025, with sales up 7% year on year to $81.26 million. Its GAAP profit of $2.41 per share was 11.8% above analysts’ consensus estimates.

Company Overview

With roots dating back to 1957 and a strategic presence along the I-64 and I-81 corridors, City Holding (NASDAQGS:CHCO) operates as a financial holding company providing banking, trust, and investment services through its subsidiary City National Bank across West Virginia, Kentucky, Virginia, and Ohio.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

City Holding competes with other regional banks operating in its four-state footprint, including WesBanco (NASDAQ:WSBC), United Bankshares (NASDAQ:UBSI), and Premier Financial Bancorp (NASDAQ:PFBI), as well as larger national institutions like JPMorgan Chase (NYSE:JPM) and Bank of America (NYSE:BAC) that have branches in its markets.

Two primary revenue streams drive bank earnings. While net interest income, which is earned by charging higher rates on loans than paid on deposits, forms the foundation, fee-based services across banking, credit, wealth management, and trading operations provide additional income. Over the last five years, City Holding grew its revenue at a decent 5.2% compounded annual growth rate. Its growth was slightly above the average banking company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. City Holding’s recent performance shows its demand has slowed as its annualized revenue growth of 3% over the last two years was below its five-year trend. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, City Holding reported year-on-year revenue growth of 7%, and its $81.26 million of revenue exceeded Wall Street’s estimates by 2%.

Net interest income made up 72.7% of the company’s total revenue during the last five years, meaning lending operations are City Holding’s largest source of revenue.

Markets consistently prioritize net interest income growth over fee-based revenue, recognizing its superior quality and recurring nature compared to the more unpredictable non-interest income streams.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

City Holding’s EPS grew at a spectacular 9.4% compounded annual growth rate over the last five years, higher than its 5.2% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its efficiency ratio didn’t improve.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For City Holding, its two-year annual EPS growth of 5.4% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.

In Q3, City Holding reported EPS of $2.41, up from $2.02 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects City Holding’s full-year EPS of $8.70 to shrink by 3.8%.

Banks are balance sheet-driven businesses because they generate earnings primarily through borrowing and lending. They’re also valued based on their balance sheet strength and ability to compound book value (another name for shareholders’ equity) over time.

Because of this, tangible book value per share (TBVPS) emerges as the critical performance benchmark. By excluding intangible assets with uncertain liquidation values, this metric captures real, liquid net worth per share. On the other hand, EPS is often distorted by mergers and flexible loan loss accounting. TBVPS provides clearer performance insights.

City Holding’s TBVPS grew at a mediocre 4.1% annual clip over the last five years. However, TBVPS growth has accelerated recently, growing by 21.4% annually over the last two years from $29.98 to $44.19 per share.

Over the next 12 months, Consensus estimates call for City Holding’s TBVPS to grow by 6.7% to $47.13, mediocre growth rate.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, City Holding has averaged a Tier 1 capital ratio of 16.5%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity, or ROE, tells us how much profit a company generates for each dollar of shareholder equity, a key funding source for banks. Over a long period, banks with high ROE tend to compound shareholder wealth faster through retained earnings, buybacks, and dividends.

Over the last five years, City Holding has averaged an ROE of 16.4%, exceptional for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired. This shows City Holding has a strong competitive moat.

We enjoyed seeing City Holding beat analysts’ tangible book value per share expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. Overall, we think this was a decent quarter with some key metrics above expectations. The stock traded up 1.9% to $122.53 immediately after reporting.

Updated: December 4, 2025 at 11:29 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in City Holding.

City Holding isn’t a terrible business, but it doesn’t pass our bar. First off, its revenue growth was uninspiring over the last five years, and analysts don’t see anything changing over the next 12 months. And while its market-beating ROE suggests it has been a well-managed company historically, the downside is its projected EPS for the next year is lacking. On top of that, its estimated net interest income for the next 12 months are weak.

City Holding’s P/B ratio based on the next 12 months is 2.2x. Investors with a higher risk tolerance might like the company, but we don’t really see a big opportunity at the moment. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $128.60 on the company (compared to the current share price of $122.44).