City Holding (CHCO)

Regional banking company City Holding (NASDAQ:CHCO) fell short of the markets revenue expectations in Q4 CY2025, but sales rose 6.8% year on year to $80.2 million. Its non-GAAP profit of $2.18 per share was 3.6% below 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.

From lending activities to service fees, most banks build their revenue model around two income sources. Interest rate spreads between loans and deposits create the first stream, with the second coming from charges on everything from basic bank accounts to complex investment banking transactions. Regrettably, City Holding’s revenue grew at a tepid 7.3% compounded annual growth rate over the last five years. This was below our standard for the banking sector and is a poor baseline for our analysis.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. City Holding’s recent performance shows its demand has slowed as its annualized revenue growth of 3.2% 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’s revenue grew by 6.8% year on year to $80.2 million, missing Wall Street’s estimates.

Net interest income made up 72.6% 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 remarkable 13.7% compounded annual growth rate over the last five years, higher than its 7.3% 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 shorter period to see if we are missing a change in the business.

For City Holding, its two-year annual EPS growth of 5.6% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q4, City Holding reported adjusted EPS of $2.18, up from $1.94 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates, but we care more about long-term adjusted EPS growth than short-term movements. Over the next 12 months, Wall Street expects City Holding’s full-year EPS of $8.94 to shrink by 1.6%. This is unusual as its revenue and operating margin are anticipated to increase, signaling the fall likely stems from "below-the-line" items such as taxes.

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.

This explains why tangible book value per share (TBVPS) stands as the premier banking metric. TBVPS strips away questionable intangible assets, revealing concrete per-share net worth that investors can trust. Other (and more commonly known) per-share metrics like EPS can sometimes be murky due to M&A or accounting rules allowing for loan losses to be spread out.

City Holding’s TBVPS grew at a mediocre 4.2% annual clip over the last five years. However, TBVPS growth has accelerated recently, growing by 14.4% annually over the last two years from $34.69 to $45.41 per share.

Over the next 12 months, Consensus estimates call for City Holding’s TBVPS to grow by 8.8% to $49.40, paltry 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 16.6%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity (ROE) reveals the profit generated per dollar of shareholder equity, which represents a key source of bank funding. Banks maintaining elevated ROE levels tend to accelerate wealth creation for shareholders via earnings retention, buybacks, and distributions.

Over the last five years, City Holding has averaged an ROE of 16.5%, excellent for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired. This is a bright spot for City Holding.

We struggled to find many positives in these results. Its EPS missed and its revenue fell slightly short of Wall Street’s estimates. Overall, this was a softer quarter. The stock remained flat at $124.13 immediately following the results.

Updated: January 21, 2026 at 4:07 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’s business quality ultimately falls short of our standards. For starters, its revenue growth was uninspiring over the last five years, and analysts expect its demand to deteriorate 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 2x. Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're fairly confident there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $129.60 on the company (compared to the current share price of $124.13).