City Holding Company · NASDAQ:CHCO
City — KBW Regional Bank Conference 2008
44 slides from City's conference presentation, Feb 28, 2008
Slide 1: KBW Regional Bank Conference
KBW Regional Bank Conference Boston February 28, 2008
Slide 2: Forward Looking Statements
Forward Looking Statements 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. Such information involves risks and uncertainties that could result in the Company’s actual resul
Slide 3: Company key facts
n n n n n n n Total Assets at Dec 31, 2007 $2.5 bil Net Income in 2007 $51 mil Branches 69 FTE 811 Market Cap $625 mil Institutional Ownership 51% Avg Daily Volume $3.5 mil
Slide 4: Key Markets
Key Markets 1 st & 9% Market Share in Huntington WV/Ashland KY MSA $3.7 Billion 8% Market Share in Morgan, Berkeley & Jefferson Co. WV $1.9 Billion 1 st & 27% Market Share $1.7 Billion 2 nd & 12% Market Share in WV’s largest market; $4.7B
Slide 5: Today's Themes
n CHCO: superior results thru challenging times n CHCO: operating platform n CHCO: and succeeding in slow- growth markets n CHCO: in the Banking Sector Today’s Themes: Consistently Conservative Growing Value
Slide 6: CHCO is consistently and extraordinarily profitable
2004 2005 2006 2007 Reported ROA 2.10% 2.09% 2.11% 2.03% ROTE 23.2% 22.3% 22.4% 21.0% Tangible Equity/TA 9.7% 9.5% 10.1% 9.7% NIM 4.29% 4.49% 4.56% 4.34% Efficiency Ratio 48.7% 46.7% 44.5% 45.9% Non-Int Rev/Total Rev 33% 34% 34% 34% CHCO is consistently and extraordinarily profitable:
Slide 7: Normalization of provision and loss of PSL revenues
Since 2003 CHCO faced “normalization” of provision and loss of PSL revenues:
Slide 8: Strong bottom line results continue
ROA EPS Yet, strong bottom line results continue:
Slide 9: Previously Securitized Loans
2004 2005 2006 2007 2008 Projected 2009 Projected Average Balances $83.5 MM $42.9 MM $22.3 MM $10.5 MM $6.3 MM $4.3 MM Rate 17.4% 26.6% 42.2% 69.1% 91% 91% Gross Interest Revenue $14.5 MM $11.4 MM $9.4 MM $7.3 MM $5.7 MM $4.1MM Previously Securitized Loans: Core growth in revenues in 2003-2007 offse
Slide 10: Interest Rate Risk
Immediate Basis Point Change in Interest Rates Estimated Increase of Decrease in Net Income between 1-12 months +200 Bp +3.4% +100 Bp +0.9% -100 Bp +0.5% -200 Bp +1.0% Data: December 31, 2007 CHCO believes that it is well positioned with respect to interest rate risk: Interest Rate Risk:
Slide 11: Prime-based Floors
Notional Prime Rate Term Date $100MM 8% June 2011 $100MM 7.75% May 2011 $50MM 6.75% Nov 2009 $50MM 6.75% Nov 2008 $100MM 6% June 2010 $100MM 6% June 2009 protect against falling rates Prime-based Floors:
Slide 12: Interest Rate Risk Summary
t Fee income in top 10% of peer group t Decline in Previously Securitized Loans t Decline in Prime Rate for 8.25% to 6% Interest Rate Risk Summary: u CHCO is less dependent upon NII than its peers u CHCO’s balance sheet is traditionally asset- sensitive due to strong prime-based portfolio supported
Slide 13: Asset Quality Trends
Asset Quality Trends: A second challenge facing the banking industry in 2007/8
Slide 14: Net Charge-offs 2007
1. Predominantly Overdrafts 2. C/O’s are improving 3. C/O’s disproportionately associated with pre-turnaround loans $1.816 MM $155 M $563 M $144 M Net Charge-offs 2007
Slide 15: Gross and Net Charge-off Percentage
0.60% 0.50% 0.40% 0.30% 0.20% 0.10% 0.00% 2005 2006 2007 Gross Charge-off % -# Net Charge-off %
Slide 16: Pre-Turnaround Loans
FICO Total Balances 12/31/02 % Total Balances 12/1/07 % > 650 $228.3MM 41% $48.7MM 48% < 649 $333.7MM 59% $52.1MM 52% Total $562.0MM 100% $100.8MM 100% Mortgage Loans Originated Prior to July 2001 Pre-Turnaround Loans: Large source of Retail Loan Credit Issues
Slide 17: CHCO experiencing Asset Quality Deterioration
NPA’s to Loans & OREO Reflecting two large relationships which were placed on Non-accrual in the 1 st & 2 nd quarters CHCO experiencing Asset Quality Deterioration:
Slide 18: Largest Non-performing Assets at 12/31/07
n 4 spec homes and 3 lots; Borrower experiencing cash flow problems; Collateral & Guarantee dependent. n OREO Property . Home actively marketed. n Loan #3 $1.3 mil Commercial R.E. Owner-occupied real-estate. Business going thru Bankruptcy. n City took properties in lieu of foreclosure. Properties li
Slide 19: Past-Due Loans (30+ days)
12/31/05 12/31/06 12/30/07 Residential 1.14% 0.76% 0.91% Home Equity 0.37% 0.34% 0.63% Consumer 2.32% 0.99% 0.86% CMRE 0.11% 0.03% 0.26% C&I 0.12% 1.47% 0.02% Past-due loans show some trends toward deterioration but remain strong compared to peers: Past-Due Loans (30+ days)
Slide 20: Asset Quality Summary
Charge-offs are predominantly depository accounts Charge-offs have been decreasing, partly as poor quality loans originated prior to 2001 (former management team) run-off Increase in Non-performing Loans tied substantially to (2) loan relationships focused at the Greenbrier Resort Past-Due loans rel
Slide 21: Highly profitable, yet conservatively positioned
1. Cons ervativ e Loan portfolios 2. Strong Core Deposit Franchise 3. Highly Liquid 4. Strongly Capitalized 5. Strong Fee Income vs. NII Although highly profitable, CHCO is conservatively positioned:
Slide 22: Conservative Loan Portfolio Mix
Loan to Deposits 87.9% Loan to Deposits 94.5% Sample of 250 publicly traded banks and thrifts with assets between $1-$10 billion as of December 31, 2006 As of December 31, 2007 Conservative Loan Portfolio Mix
Slide 23: Solid Loan Quality - 2007
As of December 31, 2007 Sample of 193 and 224 reporting publicly traded banks and thrifts with assets between $1 and $10 billion as of December 31, 2007 Solid Loan Quality - 2007
Slide 24: Low Cost and Stable Deposits
Liabilities: Low Cost and Stable Deposits Data: December 31, 2007
Slide 25: CHCO's Cost of Funds Advantage
CHCO Peers Advantage CD’s 4.48% 4.70% 22 Bps Interest Bearing Deposits 3.08% 3.77% 75 Bps Total Deposits 2.60% 3.21% 61 Bps Interest Bearing Liabilities 3.23% 3.98% 75 Bps 95th percentile CHCO’s Cost of Funds Advantage:
Slide 26: Favorable Revenue Profile
22% 78% 66% * As of December 31, 2007. Non- interest income excludes security gains & gain on sale of Merchant Card Portfolio Sample of 223 reporting publicly traded banks and thrifts with assets between $1 and $10 billion as of December 31, 2007 91st percentile Favorable Revenue Profile for the cur
Slide 27: City is Highly Efficient
2004 Efficiency Ratio adjusted to eliminate $5.5 million in revenue from Legal Settlement and associated legal expenses of $500M; Peers: Sample of 225 reporting publicly traded banks and thrifts with assets between $1 to $10 Billion as of December 31, 2007 94th percentile City is Highly Efficient
Slide 28: Strong Capital facilitates growth
CHCO 12/31/07 Peer Median 9/30/07 Equity/Assets 9.3% Tang Equity/Tang Assets 9.7% 7.2% Leverage Ratio Tier I Capital Ratio 14.1% 10.6% Total Risk-based Capital Ratio 15.1% 12.0% Source: SNL for 205 reporting publicly traded banks with total assets from $1 to $10 billion 85th percentile Strong Capita
Slide 29: Growth in slow-growing markets
Improvements/Additions to Retail Distribution System Commercial Lending/Small Business Banking/Cash Management Insurance Acquisition Growth in slow-growing markets: u u u u
Slide 30: Remaking City's Retail Distribution
n Part of a Hub and Spoke distribution strategy n Openings Charleston - - 2004 Huntington - - 2004 Beckley - - 2005 Ashland - - 2005 Ripley - - 2007 Remaking City’s Retail Distribution: Wal-Mart Strategy u u u u u
Slide 31: Consolidations/Renovations/Relocations
Consolidations/Renovations/Relocatio ns: Our New Downtown Charleston Office Housing Retail, Trust, Commercial & Private Banking Opened 2006
Slide 32: Charles Town WV opened October 2006
October 2006: Opened Charles Town WV (Eastern Panhandle Location)
Slide 33: Martinsburg WV relocated July 2007
(Eastern Panhandle Location) Relocated in July 2007: Martinsburg WV
Slide 34: Bluefield WV-VA, November 2007
n Bluefield WV-VA u County Deposits: $1.7 billion u Branches: u Largest Market Competitors: BBT (27%), FCBC (26%) November 2007: Bluefield WV-VA
Slide 35: Hurricane, West Virginia: 2008
n County Deposits: $761 MM Branches: 18 CHCO Share: 12% Largest Market Competitors: Putnam Co. Bank(50%), BB&T (10%) Putnam Co. WV u u u Hurricane, West Virginia: 2008
Slide 36: Growth in retail branch service charges
Success in our Retail Banking unit has led to strong growth in retail branch service charges: Q1 2001 Q3 2001 Q1 2002 Q3 2002 Q1 2003 Q3 2003 Q1 2004 Q3 2004 Q1 2005 Q3 2005 Q12006 Q3 2006 Q1 2007 Q3 2007
Slide 37: Commercial Loan Growth
Growth in 2005 excludes Classic Acquisition Historically 10%+ Commercial Loan Growth:
Slide 38: Business Lending Opportunity
n City’s financial strength was built upon its exceptional retail banking platform. As a result, City is under represented (40%) in commercial lending relative to peers (60%). n City has launched a new small business lending initiative to address borrowing needs of smaller businesses. n City has lau
Slide 39: City Insurance Professionals
n 2006 Revenues $2.3 million n 2007 $4.1 million n Appointed new leadership Added Workers Compensation Department - 7 FTE Added Personal Lines Department - 6 FTE Opened Beckley WV Office n Continue to Build Personal Lines toward $3 million line of business Add offices - Huntington, Lewisburg, Martin
Slide 40: Acquisitions
$100MM to $500MM in assets WV, SE Ohio, Eastern KY, I81 Corridor from VA thru MD, SW Pennsylvania Acquisitions:
Slide 41: CHCO: Value in the Banking Sector
- Increased 10% in April 2004 to $0.88 - Increased 13.6% in April 2005 to $1.00 - Increased 12% in April 2006 to $1.12 - Increased 10.7% in April 2007 to $1.24 - - - - - Tangible Capital @ 10.1% @ 12/31/2006 - Purchased 1,314,112 shares in 2007 at average price of $36.70 (7.5% of outstanding) - Tang
Slide 42: CHCO: Value in the Banking Sector - Pricing Metrics
• Based on Price of $38.72 (close of business 2/14/08) ** Based on Analyst estimates for 2008 of $3.06 Pricing Metrics *: n Price to Book: 213% n Price to Tangible Book: 266% n Price to 2008 Projected Earnings** 12.7x n Institutional Ownership 51% CHCO: Value in the Banking Sector
Slide 43: CHCO: Consistently Superior Performance
n (branches, assets, income, market cap) CBU, CTBI, FCF, FCBC, FFBC, FPFC, FNB, HNBC,NBTB, PEBO, PRK, PVSA, RBCAA, SASR, STBA,UBSH, UBSI, UVSP, VFGI, WSBC n EPS Growth 2005-2007: 3rd ROA: 1st Net Interest Margin: 1st Efficiency Ratio: 2nd Tangible Equity/Tangible Assets:1st n 1 Year Stock Performanc
Slide 44: Questions?
Questions?