City Holding Company · NASDAQ:CHCO
City — KBW Community Bank Investor Conference 2021
35 slides from City's conference presentation, Aug 3, 2021
Slide 1: City Holding Company KBW Community Bank Investor Conference
City Holding Company KBW Community Bank Investor Conference August 3, 2021
Slide 2: Forward looking statements
Forward looking statements • This presentation contains certain forward-looking statements that are included pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such information involves risks and uncertainties that could result in the Company's actual res
Slide 3: Snapshot
Snapshot • Total Assets $5.9 billion • Branches 94 • FTE 912 • Market Cap $1.18 billion • Markets: Stable, Slow growing, & less competitive • Business Lines: Retail, Commercial, Investment Management • Asset Quality: Demonstrated strong track record • Performance: Long record as a high performer • G
Slide 4: Deposits mostly in WV and E. KY
Deposits mostly in WV and E. KY Key Deposit Markets Deposits West Virginia & E. Kentucky – dating to 1870 76% New Markets 24% 4
Slide 5: City National Deposit Markets
City National Deposit Markets 3rd Branch Share Winchester VA & WV Panhandle $7.1 Billion Major Competitors: TFC, UBSI, WFC 1st Branch Share & 2nd Deposit Share (14%) In Charleston MSA/Huntington MSA; $13.9 Billion Major Competitors: TFC, JPM, HBAN, UBSI T2nd Branch Share & 4th Deposit Share (11%) in
Slide 6: Internal DDA Growth
Internal DDA Growth New DDA Accounts per Net Growth in Year branch DDA Accounts 2016 31,680 3,100 2018 33,000 4,700 2020 *30,270 *6,770 2021 YTD 15,890 7,330 *Note: City’s lobbies were open by appointment 6 only for 6 months in 2020 due to COVID-19
Slide 7: Age Distribution of Customer Base
Age Distribution of Customer Base All City Customers New City Customers 20.0% 2020 18.0% 17.5% 16.6% 16.2% 30.0% 16.0% 16.0% 25.8% 13.5% 25.0% 14.0% 20.5% 12.0% 20.0% 10.2% 10.0% 10.0% 15.7% 15.0% 14.0% 8.0% 12.5% 6.0% 10.0% 7.5% 4.0% 5.0% 4.0% 2.0% 0.0% 0.0% <24 25-34 35-44 45-54 <24 25-34 35-44 45
Slide 8: Highest ranking in customer satisfaction by JD Power
City is very proud to have been awarded the highest ranking in customer satisfaction in the North Central District by JD Power (IN, OH, KY, MI, WV) from 2018 - 2020. 2018 2019 2020 8
Slide 9: Market Disruptions
Market Disruptions Provide Strong Growth Opportunities • Market: St. Albans WV • In 2017, there were 4 banks $120 4,600 with branches in $100 4,400 this market 4,360 4,262 • In 2018 one $80 4,200 closed 4,068 $107 $60 4,000 • In 2020 another Millions 3,898 $90 closed $40 3,800 3,723 $77 • City has 4
Slide 10: Market Disruptions
Market Disruptions Provide Strong Growth Opportunities • Market: Wayne Co. WV $70 2,322 2,500 • In 2017 thru 2019, there $60 1,925 1,931 2,241 2,000 were 2 banks with 2 $50 1,934 branches in $40 1,500 this market • In 2020, our Millions $30 $61 1,000 competitor $49 bank $20 announced it $10 $26 $27
Slide 11: Market Disruptions
Market Disruptions Provide Strong Growth Opportunities • Market: Ironton • In 2017, 2018 $70 2,116 2,500 and 2019, $60 1,920 2,055 there were 6 2,000 $50 1,739 1,798 banks with 8 1,500 branches in $40 this market Millions $30 $59 $56 1,000 • In 2020, there $46 $20 $34 $42 are 6 banks 500 $10 with 7
Slide 12: Impact of Technology? Customer Transactions by Channel
Impact of Technology? Customer Transactions by Channel Number of Accounts up by 19.4% Total Transactions up 24.9% Bill Pay 2015 Bill Pay 1.2% 2020 1.1% 0.3% ATM Mobile ATM 2.3% Mobile Deposits 3.0% 0.1% 9.9% Checks 15.6% Checks 22.4% Debit Card ACH Items 21.3% 58.9% Debit Card ACH Items 64.0% 12
Slide 13: Change in Transaction Mix: 2015-2020
Change in Transaction Mix: 2015-2020 Transaction Type % Chg CAGR 2015-2020 Checks -20.8% -4.6% ATM -2.5% -0.5% Bill Pay 16.8% 3.2% ACH 31.9% 5.7% Debit Cards 35.7% 6.3% Mobile 435% 39.8% 13
Slide 14: Diversified Commercial Loan Portfolio
Diversified Commercial Loan Portfolio Percent of Commercial Key Loan Markets Portfolio West Virginia & Eastern Kentucky – dating to 1870 46% Virginia/Eastern Panhandle Markets – acquired 16% 2012/13 Charlotte LPO – de novo 2006 9% Lexington, KY – acquired 2015 16% Columbus, OH & Pittsburgh PA 13% 14
Slide 15: City National Loan Markets
City National Loan Markets CHARLOTTE 15 Size of Bubbles are representative of City’s loan distribution
Slide 16: Market Position
Market Position City’s biggest markets have strong distribution, large share, and high profitability Deposits Deposit Branch Branch Market Population ($mm) Share Branches Share Rank Charleston/Huntington /Ashland MSA 611,000 $1,918 14% 36 19% 1st Beckley/Lewisburg WV 162,000 845 29% 16 26% 1st Winch
Slide 17: Market Demographics
Market Demographics Newer markets have high population growth and higher incomes Projected Projected Population Median Change in Change 2020- Household HHLD Income Market Population 2025 Income 2020-2025 Charleston/Huntington/ Ashland MSA 611,000 (2.3%) $46,000 4.5% Beckley 162,000 (2.9%) $42,000 3.
Slide 18: Analyst Expectations
Analyst Expectations 2021 2022 Analyst Analyst 2019 2020 2021 YTD Estimates Estimates Net Int $161.4 MM $154.6 MM $75.5 MM $150.8 MM $151.7 MM Income Provision/ ($1.3 MM) $10.7 MM $(2.4) MM $6.5 MM $8.0 MM (Recovery) Non-Int $68.5 MM $82.7 MM $34.1 MM $68.7 MM $72.0 MM Income ($64.8 MM w/o Visa Sale
Slide 19: Charge-offs During Last Recession
Charge-offs During Last Recession (w/o DDA Charge-offs) 3.00% 2.75% 2.50% 2.25% 2.00% 1.75% 1.50% 1.25% 1.00% 0.75% 0.50% 0.25% 0.00% 2005 2006 2007 2008 2009 2010 2011 CHCO w/o NSF's Industry Source: FDIC, All Insured Depository Institutions 19
Slide 20: Net Charge-off Details: 2012-2021
Net Charge-off Details: 2012-2021 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 ($1,000) YTD ($2,000) Commercial Retail NSF related 20
Slide 21: 2021 Opportunity: Rising Rates?
2021 Opportunity: Rising Rates? Immediate Basis Point Estimated Increase or Change in Interest Decrease in Net Income Rates between 1-12 months +400 Bp +27.5% +300 Bp +25.3% +200 Bp +20.5% +100 Bp +12.1% Assumes that deposit mix changes as rates rise Data: March 31, 2021 21
Slide 22: CHCO: A perennial high-performing bank
CHCO: A perennial high-performing bank 2.00% ROA 1.80% 1.60% 1.40% 1.20% 1.00% 0.80% 0.60% 2015 2016 2017 2018 2019 2020 YTD 6/30/21 CHCO CHCO excl M&A expenses/Visa Gain $1B - $10B 22 Source - S&P Global MI. Peer data as of March 31, 2021.
Slide 23: Why is CHCO Highly Valued?
Why is CHCO Highly Valued? • Proven Conservative Lender • Exceptionally Strong Retail Franchise • Acquisitions are Accretive and Strategic • Profits are Strong and Stable – In low interest rate environments, fee income and efficiency matter: City is exceptional at both 23
Slide 24: Deposit Franchise
DEPOSIT FRANCHISE One key to City’s enviable success • Branches 94 • Average Deposits per Branch $51 MM • Average Households per Branch 2,000 • Average Deposit Share 16.0% • Average Household Share* 28% • Average DDA Balance $10,200** • Average Business DDA $34,700 * - Excludes Lexington-Fayette KY
Slide 25: Non-interest income is branch driven
Non-interest income is branch driven (and in turn driven by franchise depth): $35,000 35.0% $30,000 30.0% $25,000 $20,000 25.0% $15,000 $10,000 20.0% $5,000 $0 15.0% 2016 2017 2018 2019 2020 YTD 6/30/21 Bankcard Revenues Service Charges Investment Management CHCO - % of Operating Revenues Peer - % o
Slide 26: Debit Card Revenues driven by Franchise Depth
Debit Card Revenues driven by Franchise Depth: 2020 Bank Card & Credit Card Headquarter Average Interchange Card Revenue/ Parent Company Ticker State Assets Fees Avg. Deposits City Holding Company CHCO WV $5.3 B $21.2 M 0.49% First Community Bank FCBC VA $2.9 B $10.4 M 0.43% Peoples Bank PEBO OH $4.
Slide 27: City's Exceptional Retail Strength Depends on Branch Distribution
City’s Exceptional Retail Strength Depends on Branch Distribution House- Deposits Deposit Branch Hold Market ($mm) Share Branches Share Share Charleston, WV $807 14.0% 13 28.3% 39.5% Huntington, WV 499 12.5% 10 16.4% 27.4% Ashland, KY 566 23.3% 12 22.6% 40.7% Beckley, WV 530 24.0% 9 28.1% 31.8% Lewi
Slide 28: Efficiency Ratio
Efficiency Ratio low despite a large number of small branches 70% 65% 60% 55% 50% 45% 2016 2017 2018 2019 2020 YTD 6/30/21 CHCO $1B - $10B •Data as calculated using S&P Global MI definition. 28 •Peer data as of March 31, 2021.
Slide 29: Capital Management: A Long-term Core Competency
Capital Management: A Long-term Core Competency • CHCO generates more capital than average • Allows CHCO to steadily increase TCE while balancing shareholder value: – History of increasing cash dividends – Active share repurchase program – Cash acquisition ? 29
Slide 30: Cash Dividends/Share Declared & Dividend Payout Ratio
Cash Dividends/Share Declared & Dividend Payout Ratio $2.40 70% Cash Dividends/Share Declared $2.20 60% Dividend Payout Ratio 50% $2.00 40% $1.80 30% $1.60 20% $1.40 10% $1.20 0% 2015 2016 2017 2018 2019 2020 Dividends/Share Dividend Payout Ratio 30
Slide 31: Share Activity: Millions YTD 6/30/21
Share Activity: City’s strong capital and high profitability have allowed aggressive share repurchases $40 600,000 $35 500,000 $30 572,917 400,000 $25 Millions $20 300,000 $15 290,491 260,674 292,016 200,000 $10 100,000 $5 $0 0 2018 2019 2020 YTD 6/30/21 Repurchase $ Shares Repurchased 31
Slide 32: Acquisition territory
Acquisition territory: Small Community Banks will struggle with lower net interest income, asset quality challenges, lack of scale, and limited liquidity for their stock. Underperforming small banks may be interested in joining a stronger partner rather than to continue to perform poorly. City is we
Slide 33: Bottom Line: CHCO is a Simple Model
Bottom Line: CHCO is a Simple Model Incredible Core Banking Franchise Well Managed (Expenses, Asset Quality, Etc.) Disciplined Growth Strategy focused on shareholders, customers and community service Highly Profitable Allows Strong Dividends & Accretive Share Repurchases 33
Slide 34: CHCO represents excellent value and stability
CHCO represents excellent value and stability • Pricing Metrics*: – Price to Book 168% – Price to Tangible Book 203% – Price to 2021 Projected Earnings** 16.1x • Dividend Yield 3.10% • Div Payout Ratio** 50% • Tangible Capital/Tangible Assets *** 10.0% • Institutional Ownership 65% • Average Daily V
Slide 35: Questions?
• Questions? 35
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