City Holding Company Announces Approval of Stock Repurchase Plan

Rhea-AI Summary

City Holding Company (NASDAQ:CHCO) has announced a share repurchase program to buy back up to 1,000,000 of its common shares, representing approximately 7% of outstanding shares. The company rescinded the previous share repurchase plan and has already repurchased 849,681 shares. The decision was made due to the company's exceptional earnings and strong capital levels. City National Bank of West Virginia, the company's subsidiary, operates 98 branches across four states.

Insights

Financial Analyst

The authorization of a share repurchase program by City Holding Company signifies a strategic move to enhance shareholder value. Share buybacks are often employed by companies that perceive their shares to be undervalued or to return capital to shareholders in a tax-efficient manner. The decision to buy back 1,000,000 shares, which is approximately 7% of the outstanding shares, can be expected to have a positive effect on the earnings per share (EPS) metric, as it reduces the number of shares among which profits are distributed.

From a financial perspective, the lack of a time limit on the repurchase program provides the company with flexibility to adapt to changing market conditions. This can be particularly advantageous in volatile markets, allowing the company to purchase shares when prices are deemed favorable. However, investors should consider the opportunity cost of such a buyback, as the funds used for repurchases could alternatively be invested in business growth or used to pay down debt.

Given the company’s statement regarding its strong capitalization and growing capital due to exceptional earnings, the repurchase plan appears to be well-supported by its financial health. Nonetheless, it is crucial for investors to monitor the company's capital levels post-repurchase to ensure that it maintains sufficient liquidity and financial stability.

Market Research Analyst

City Holding Company's stock repurchase announcement could be interpreted as a signal of confidence in the company's financial performance and future prospects. It is essential to consider the broader banking industry context, where stock repurchases have become a common practice among well-capitalized banks seeking to optimize their capital structure and deliver value to shareholders.

The market's reaction to such news typically depends on the perceived rationale behind the buyback. If investors believe the buyback is a response to undervaluation, this could lead to a positive reassessment of the stock. Conversely, if the market views this action as a lack of viable growth opportunities, the response could be less favorable. Additionally, the company's position within the regional banking sector and its operational footprint across multiple states could influence investor sentiment and the stock's performance following the announcement.

Investors may also evaluate the rescission of the previous share repurchase plan and the progress made under it, as it provides insight into the company's commitment to its capital return strategies and the efficiency of its capital allocation decisions.

Economist

When analyzing the macroeconomic implications of City Holding Company's share repurchase program, it's important to consider the current economic climate, including interest rate trends, which directly affect the banking sector's profitability. In a rising interest rate environment, banks can benefit from wider net interest margins, potentially leading to increased earnings and stronger capital positions. This macroeconomic backdrop could support the company's assertion of exceptional earnings and a robust capital base.

Moreover, the repurchase program's impact on the stock market can be multifaceted. It may contribute to a reduction in market liquidity for the company's shares, which could lead to higher volatility. However, the reduction in outstanding shares could also support a higher stock price, all else being equal, which might appeal to certain investors looking for capital appreciation.

It is crucial for stakeholders to consider the long-term economic outlook and its potential effects on the banking sector's performance. This includes evaluating risks such as economic downturns or regulatory changes that could impact the company's ability to generate the exceptional earnings cited as a rationale for the repurchase program.

CHARLESTON, W.V.--(BUSINESS WIRE)-- City Holding Company, “the Company” (NASDAQ:CHCO), a $6.2 billion bank holding company headquartered in Charleston, today announced that the board authorized the Company to buy back up to 1,000,000 of its common shares (approximately 7% of outstanding shares) in open market transactions at prices that are accretive to the earnings per share of continuing shareholders. Management may commence or suspend purchases at any time or from time-to-time based on market and business conditions and without prior notice. No time limit has been placed on the duration of the share repurchase program. As part of its authorization, the Company rescinded the previous share repurchase plan approved May 25, 2022. Through January 31, 2024, the Company repurchased 849,681 shares under the May 2022 plan.

"As of January 31, 2024, the Company was very well capitalized and capital continues to grow due to our exceptional earnings. As a result, we view this repurchase plan as part of an ongoing strategy to build value for our stockholders while maintaining appropriate capital levels,” stated Charles R. Hageboeck, President & CEO. The Company currently has 14.8 million outstanding common shares. Repurchase of the Company's stock is subject to availability of the stock and may be discontinued at any time.

City Holding Company is the parent company of City National Bank of West Virginia. City National operates 98 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, 2022 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, 2023 Form 10-K. The Company will continue to evaluate the impact of any subsequent events on the preliminary December 31, 2023 results and will adjust the amounts if necessary.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240131353617/en/

David L. Bumgarner, Executive Vice President & CFO

(304) 769-1169

Source: City Holding Company

FAQ

What is the ticker symbol for City Holding Company?

The ticker symbol for City Holding Company is CHCO.

How many common shares is the company planning to repurchase?

The company plans to repurchase up to 1,000,000 of its common shares, which represents approximately 7% of outstanding shares.

How many shares has the company already repurchased under the previous plan?

Through January 31, 2024, the company repurchased 849,681 shares under the previous plan.

What is the business strategy behind the share repurchase program?

The company views the repurchase plan as part of an ongoing strategy to build value for stockholders while maintaining appropriate capital levels.

What is the business of City Holding Company?

City Holding Company is the parent company of City National Bank of West Virginia, which operates 98 branches across West Virginia, Kentucky, Virginia, and Ohio.