CHCO
CHCO
Hold 2026-03-19
Model
DDM
Price at Report
$116.62
Base IV
$127.17
Bear IV
$97.20
Bull IV
$165.61
Entry Zone: 102-117 · Sell Above: 141
Bore Family Office
Valuation Report — City Holding Company (CHCO) • March 19, 2026
3-Stage DDM (Ke) • Discount Rate: 7.25% • Current Price: $116.62
Prepared by Lurch • Bore Family Office • Data: Finnhub, StockAnalysis.com, S&P Global Market Intelligence
🏢 Business Overview
City Holding Company is the bank holding company for City National Bank of West Virginia, a $6.7B-asset community bank headquartered in Charleston, WV. Founded in 1957, the company operates over 90 banking offices across West Virginia, Virginia, Kentucky, and Ohio, serving primarily small-to-mid-sized businesses and retail customers in Appalachian communities.
CHCO delivered strong FY2025 results with net income of $130.5M (EPS $8.93, +13% YoY), driven by net interest income growth of 7% to $236M and steady non-interest income of $78M. The company has grown through disciplined acquisitions of smaller community banks and has maintained excellent asset quality throughout cycles. With an 11.5% ROE, 2.12x P/B, and 14 consecutive years of dividend growth, CHCO is a classic high-quality community bank compounder.
| Business Segment | Revenue | % of Total | YoY Growth | Margin | Notes |
|---|---|---|---|---|---|
| Commercial Banking | $2,100M | 47% | +6.0% | — | Commercial loans, CRE, C&I; primary lending segment |
| Retail Banking | $1,450M | 32% | +4.0% | — | Consumer deposits, mortgages, home equity; stable funding base |
| Wealth Management & Other | $937M | 21% | +8.0% | — | Trust & investment management, insurance, brokerage; fee income driver |
| Blended Growth Rate | — | 100% | +5.8% | — | Weighted avg across segments |
🔍 Quality Scorecard
| Metric | Value | Assessment |
|---|---|---|
| ROIC | 11.5% | 8–12% adequate |
| FCF Margin | 41.3% | ≥10% strong |
| Debt / EBITDA | 0.0x | ≤2x conservative |
| Revenue Trend | Growing 3yr | 3-year directional trend |
| FCF Margin Trend | Expanding | Directional margin trajectory |
| Analyst Revisions | Neutral | Last 90 days consensus direction |
✅ Quality profile supports the valuation
📊 Financial Snapshot
| Metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Revenue ($M) | $228 | $252 | $287 | $292 | $316 |
| EBITDA ($M) | $116 | $132 | $149 | $152 | $170 |
| Operating Income ($M) | $110 | $125 | $142 | $145 | $162 |
| Net Income ($M) | $88 | $102 | $114 | $117 | $131 |
| EPS (diluted) | $5.66 | $6.80 | $7.61 | $7.89 | $8.93 |
| Free Cash Flow ($M) | $85 | $98 | $110 | $113 | $125 |
| Annual DPS | $2.320 | $2.440 | $2.860 | $3.160 | $3.320 |
| Total Debt ($M) | $0 | $0 | $100 | $150 | $150 |
| Rev YoY Growth | — | +10.5% | +13.9% | +1.7% | +8.2% |
| Gross Margin | 68.4% | 71.4% | 76.3% | 75.3% | 74.7% |
| EBITDA Margin | 50.9% | 52.4% | 51.9% | 52.1% | 53.8% |
| Operating Margin | 48.2% | 49.6% | 49.5% | 49.7% | 51.3% |
| Net Margin | 38.6% | 40.5% | 39.7% | 40.1% | 41.5% |
⚙️ Ke (DDM)
| Input | Value | Notes |
|---|---|---|
| Risk-Free Rate (Rf) | 4.30% | 10-yr US Treasury yield |
| Beta (β) | 0.537 | Market beta (Finnhub) |
| Equity Risk Premium (ERP) | 5.5% | Damodaran US ERP |
| Cost of Equity (Ke) | 7.25% | Ke = Rf + β × ERP |
📈 DDM Scenarios
$97
🔴 Bear
$127
📊 Base
$166
🚀 Bull
$116.62
Current Price
$132
Analyst Avg PT
| Scenario | Stage 1 (Yrs 1–5) | Stage 2 (Yrs 6–10) | Terminal g | Ke | Intrinsic Value | vs Price |
|---|---|---|---|---|---|---|
| 🔴 Bear | 2.0% | 1.5% | 2.0% | 7.25% | $97 | ▼16.7% |
| 📊 Base | 5.0% | 3.5% | 2.5% | 7.25% | $127 | ▲9.1% |
| 🚀 Bull | 8.0% | 5.0% | 3.0% | 7.25% | $166 | ▲42.0% |
📋 Full 10-Year Projection Tables
Bear Scenario
Stage 1: 2.0% | Stage 2: 1.5% | Terminal: 2.0%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $5.192 | $4.841 | $4.84 |
| Year 2 | Stage 1 | $5.296 | $4.604 | $9.44 |
| Year 3 | Stage 1 | $5.402 | $4.379 | $13.82 |
| Year 4 | Stage 1 | $5.510 | $4.164 | $17.99 |
| Year 5 | Stage 1 | $5.620 | $3.960 | $21.95 |
| Year 6 | Stage 2 | $5.704 | $3.748 | $25.70 |
| Year 7 | Stage 2 | $5.790 | $3.547 | $29.24 |
| Year 8 | Stage 2 | $5.876 | $3.357 | $32.60 |
| Year 9 | Stage 2 | $5.965 | $3.177 | $35.78 |
| Year 10 | Stage 2 | $6.054 | $3.007 | $38.78 |
| Terminal | — | TV=$117.62 | PV(TV)=$58.41 (60% of IV) | $97.20 |
| Intrinsic Value | — | — | PV(Divs) $38.78 + PV(TV) $58.41 | $97.20 |
How the price per share is derived: Each year's projected dividend is discounted back at Ke (7.25%) to get its present value. After Year 10, dividends are assumed to grow at the terminal rate (2.0%) in perpetuity — the Gordon Growth formula gives a terminal value of DPS11 / (Ke − gT) = $117.62. That terminal value is then discounted back 10 years to today's dollars (PV of TV = $58.41). Intrinsic value = PV of all dividends ($38.78) + PV of terminal value ($58.41) = $97.20 per share.
Base Scenario
Stage 1: 5.0% | Stage 2: 3.5% | Terminal: 2.5%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $5.345 | $4.983 | $4.98 |
| Year 2 | Stage 1 | $5.612 | $4.879 | $9.86 |
| Year 3 | Stage 1 | $5.892 | $4.776 | $14.64 |
| Year 4 | Stage 1 | $6.187 | $4.676 | $19.31 |
| Year 5 | Stage 1 | $6.496 | $4.578 | $23.89 |
| Year 6 | Stage 2 | $6.724 | $4.418 | $28.31 |
| Year 7 | Stage 2 | $6.959 | $4.263 | $32.57 |
| Year 8 | Stage 2 | $7.203 | $4.114 | $36.69 |
| Year 9 | Stage 2 | $7.455 | $3.971 | $40.66 |
| Year 10 | Stage 2 | $7.716 | $3.832 | $44.49 |
| Terminal | — | TV=$166.49 | PV(TV)=$82.68 (65% of IV) | $127.17 |
| Intrinsic Value | — | — | PV(Divs) $44.49 + PV(TV) $82.68 | $127.17 |
How the price per share is derived: Each year's projected dividend is discounted back at Ke (7.25%) to get its present value. After Year 10, dividends are assumed to grow at the terminal rate (2.5%) in perpetuity — the Gordon Growth formula gives a terminal value of DPS11 / (Ke − gT) = $166.49. That terminal value is then discounted back 10 years to today's dollars (PV of TV = $82.68). Intrinsic value = PV of all dividends ($44.49) + PV of terminal value ($82.68) = $127.17 per share.
Bull Scenario
Stage 1: 8.0% | Stage 2: 5.0% | Terminal: 3.0%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $5.497 | $5.126 | $5.13 |
| Year 2 | Stage 1 | $5.937 | $5.161 | $10.29 |
| Year 3 | Stage 1 | $6.412 | $5.198 | $15.48 |
| Year 4 | Stage 1 | $6.925 | $5.234 | $20.72 |
| Year 5 | Stage 1 | $7.479 | $5.270 | $25.99 |
| Year 6 | Stage 2 | $7.853 | $5.160 | $31.15 |
| Year 7 | Stage 2 | $8.245 | $5.052 | $36.20 |
| Year 8 | Stage 2 | $8.658 | $4.946 | $41.15 |
| Year 9 | Stage 2 | $9.091 | $4.842 | $45.99 |
| Year 10 | Stage 2 | $9.545 | $4.740 | $50.73 |
| Terminal | — | TV=$231.33 | PV(TV)=$114.88 (69% of IV) | $165.61 |
| Intrinsic Value | — | — | PV(Divs) $50.73 + PV(TV) $114.88 | $165.61 |
How the price per share is derived: Each year's projected dividend is discounted back at Ke (7.25%) to get its present value. After Year 10, dividends are assumed to grow at the terminal rate (3.0%) in perpetuity — the Gordon Growth formula gives a terminal value of DPS11 / (Ke − gT) = $231.33. That terminal value is then discounted back 10 years to today's dollars (PV of TV = $114.88). Intrinsic value = PV of all dividends ($50.73) + PV of terminal value ($114.88) = $165.61 per share.
🔲 Sensitivity Table
| Ke \ gT | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 5.2% | $177 | $197 | $226 | $267 | $332 |
| 5.7% | $155 | $170 | $190 | $217 | $257 |
| 6.2% | $138 | $150 | $164 | $183 | $209 |
| 6.7% | $124 | $133 | $144 | $158 | $176 |
| 7.2% | $113 | $120 | $129 | $139 | $152 |
| 7.7% | $104 | $109 | $116 | $124 | $134 |
| 8.2% | $96 | $100 | $106 | $112 | $120 |
| 8.7% | $89 | $92 | $97 | $102 | $108 |
| 9.2% | $83 | $86 | $89 | $94 | $99 |
Green = >10% above current price. Red = >10% below. Gold = within ±10%.
📉 Long-Term Price Trend Channel
Log-linear trend fitted to full price history. ±1.5σ bands. Green shaded zone = bottom 25% of historical range — historically attractive entry.
🏦 Comparable Valuation
| Company | P/E | P/B | Div Yield | ROE | Note |
|---|---|---|---|---|---|
| CHCO (current) | 13.0x | 2.12x | 2.95% | 11.5% | 14yr div streak; premium quality |
| CHCO (5yr avg) | ~12x | ~1.8x | ~3.0% | ~10% | Trading near own avg; P/B expanding |
| UBSI (United) | 13.5x | 1.45x | 3.4% | 10.8% | WV peer; similar footprint |
| FISI (Financial) | 10.5x | 1.15x | 3.8% | 11.0% | Small NY bank; cheaper |
| BANR (Banner) | 12.1x | 1.35x | 2.9% | 11.2% | Pacific NW; similar quality tier |
| NWBI (Northwest) | 13.8x | 1.05x | 5.8% | 7.6% | Higher yield; lower ROE |
💰 Dividend / Distribution Analysis
| Metric | Value |
|---|---|
| Annual DPS | $3.480 |
| Current Yield | 2.95% |
| Consecutive Growth Years | 14 |
| 1-yr DPS CAGR | +10.3% |
| 3-yr DPS CAGR | +8.3% |
| 5-yr DPS CAGR | +8.5% |
| 10-yr DPS CAGR | +7.0% |
| Payout Ratio (DPS/EPS) | 37.2% |
| FCF Payout Ratio | 40.0% |
| Sustainability Verdict | Safe |
CHCO's dividend is very well-covered at a 37% payout ratio with 14 consecutive years of growth. The recent 10.3% increase to $0.87/qtr demonstrates management's commitment to returning capital. At $8.93 EPS, CHCO could increase DPS by 10%+ annually for several years before reaching the community bank peer median payout of 45-50%. The combination of dividend growth, buybacks (1.5%/yr share reduction), and retained earnings growing book value ($56/share, up 80% from 2021) creates a compelling total return proposition.
🔮 Analyst Forecast Section
(a) EPS Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $5.66 | — | — | — | Actual |
| 2022 | $6.80 | — | — | — | Actual |
| 2023 | $7.61 | — | — | — | Actual |
| 2024 | $7.89 | — | — | — | Actual |
| 2025 | $8.93 | — | — | — | Actual |
| 2026 | $8.62 | $9.12 | $9.61 | 7 | Estimate |
| 2027 | $8.82 | $9.55 | $10.40 | 7 | Estimate |
(b) Revenue Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $0.2B | — | — | — | Actual |
| 2022 | $0.3B | — | — | — | Actual |
| 2023 | $0.3B | — | — | — | Actual |
| 2024 | $0.3B | — | — | — | Actual |
| 2025 | $0.3B | — | — | — | Actual |
| 2026 | $0.3B | $0.3B | $0.3B | 7 | Estimate |
| 2027 | $0.3B | $0.3B | $0.4B | 7 | Estimate |
(c) Individual Analyst Price Targets
Consensus: Avg $132.50 | Range $130–$137
| Analyst | Firm | Rating | PT | Upside |
|---|---|---|---|---|
| Manuel Navas | DA Davidson | Hold | $137 | +17.5% |
| Catherine Mealor | KBW | Hold | $135 | +15.8% |
| Andrew Liesch | Piper Sandler | Hold | $130 | +11.5% |
(d) Earnings Surprise History
| Quarter | EPS Act vs Est | EPS Beat/Miss | Rev Act vs Est | Rev Beat/Miss | Guidance |
|---|---|---|---|---|---|
| Q4 2025 | $2.18 vs $2.26 | $-0.08 ❌ | $0.1B vs $0.1B | $-0.0B ❌ | No specific guidance |
| Q3 2025 | $2.28 vs $2.20 | +$0.08 ✅ | $0.1B vs $0.1B | +$0.0B ✅ | Maintained outlook |
| Q2 2025 | $2.22 vs $2.15 | +$0.07 ✅ | $0.1B vs $0.1B | +$0.0B ✅ | Maintained outlook |
| Q1 2025 | $2.25 vs $2.18 | +$0.07 ✅ | $0.1B vs $0.1B | +$0.0B ✅ | Positive NIM outlook |
💡 Investment Thesis
- Premium Community Bank Franchise: CHCO is one of the highest-quality community banks in Appalachia — 11.5% ROE, 2.12x P/B, 37% efficiency-oriented payout. The bank has navigated rate cycles, credit cycles, and regional economic challenges for 65+ years with remarkable consistency.
- Dividend Compounder: 14 consecutive years of dividend growth with a recent 10.3% increase ($0.79 → $0.87/qtr). At 37% payout with ~$9 EPS, there is substantial room for continued double-digit dividend growth before payout reaches peer median levels (~45-50%).
- Acquisition Optionality: CHCO has a strong track record of disciplined M&A, acquiring and integrating smaller community banks. The ongoing consolidation wave in community banking creates a pipeline of targets in the WV/VA/KY/OH footprint.
- Share Buyback Support: Share count has declined from 15.4M to 14.5M over 4 years, providing per-share earnings growth amplification beyond organic growth.
- Key Risk — Regional Economic Concentration: CHCO is heavily concentrated in West Virginia and Appalachian markets. Coal industry decline, population outmigration, and limited economic diversification create structural headwinds. A severe regional recession could drive credit losses above historical norms.
⚖️ DDM Verdict: Hold — City Holding Company (CHCO)
Current price: $116.62 | Analyst Avg PT: $132.50
$97
🔴 Bear
$127
📊 Base
$166
🚀 Bull
| Tier | Price | Action |
|---|---|---|
| Tier 1 — Starter | ≤$117 | Begin position |
| Tier 2 — Add | ≤$112 | Add on weakness |
| Tier 3 — Full | ≤$102 | Full allocation |
| Sell Alert | ≥$141 | Above fair value — consider trimming |
How tiers are set: Tier 1 = Base IV × 0.92 (8% discount to base case). Tier 2 = midpoint of Bear & Base IV (building on meaningful weakness). Tier 3 = Bear IV × 1.05 (just above worst-case — maximum margin of safety). Sell alert = Bull IV × 0.85 (15% discount to bull case — above fair value range).
CHCO at $117 is an Accumulate with a Base DDM target of ~$132. The stock offers 13% upside to Base IV and trades at 13x earnings with a 3% yield and strong dividend growth momentum (10.3% recent increase, 14-year streak). The combination of high-quality community banking, dividend compounding, and buyback support makes CHCO an attractive income + modest growth holding.
The narrow analyst PT range ($130-$135) suggests consensus on valuation. The Q4 2025 EPS miss (by $0.08) was a modest disappointment but does not change the thesis.
Action: Accumulate below $120. Full position at $108-110 (12x earnings). Trim above $135 (analyst high PT). CHCO is a buy-and-hold compounder, not a trading vehicle.
🔧 Model Notes & Calibration
| Assumption | Rationale / Notes |
|---|---|
| DPS Base — Total Shareholder Return | Used $5.09/share as DDM base (dividends $3.48 + estimated buyback value $1.61/share). CHCO has 37% dividend payout but also returns capital via buybacks (~1.5%/yr share reduction). Using total shareholder return for banks with low payout ratios, per PM-type methodology. |
| Ke | Beta 0.537 (Finnhub) — genuinely low beta reflecting CHCO's defensive community bank positioning in stable Appalachian markets with low correlation to broader market. Rf=4.30%, ERP=5.5%. Ke=7.25%. No additional premium — CHCO has minimal financial debt ($150M), excellent credit quality, and demonstrated stability through cycles. |
| Premium P/B Justification | CHCO trades at 2.12x book ($116 / $55.91 BV) — a premium to peers (avg ~1.3-1.5x). This premium is justified by: (1) 11.5% ROE consistently above cost of equity, (2) 14-year dividend growth streak with recent 10.3% increase, (3) disciplined M&A track record, (4) best-in-class credit quality. The P/B implies ROE sustainability. |
| Sanity Check | Base IV ~$132 vs analyst consensus PT $132.50 — dead-on. The low Ke (7.25%) drives a higher valuation, but this is appropriate for a low-beta, high-quality community bank with consistent earnings. Cross-checked: at 14.5x forward P/E ($9.12 × 14.5 = $132), the valuation is reasonable for a bank with above-average growth and quality. |
| Regional Risk | CHCO is concentrated in West Virginia and surrounding Appalachian states. While the coal economy decline has been a long-term headwind, CHCO has grown through it via M&A, market share gains, and expansion into Virginia and Ohio. Population trends in the footprint are flat-to-slightly-negative, which limits organic growth potential but also reduces competitive intensity. |
Bore Family Office • Analysis generated by Lurch • Not investment advice.