City Holding Company · NASDAQ:CHCO
City — Scott & Stringfellow, LLC investor meeting, New York, March 20, 2012
53 slides from City's conference presentation, Mar 20, 2012
Slide 1: New York, NY March 20, 2012
New York, NY March 20, 2012 Scott & Stringfellow, LLC
Slide 2: 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 results differing from those pro
Slide 3: Company snapshot
• Total Assets $2.8 bil • Branches 68 • FTE 795 • Market Cap $512 mil • Institutional Ownership 63% • Average Daily Volume $1.9 mil Date: March 9, 2012
Slide 4: Value in the banking sector? Checklist for success
• Capital – Strongly capitalized • Markets – Solid distribution network – Stable geographic markets – Disciplined competition • Performance – Strong net interest margin – Strong NIM management – Strong fee income – Ability to control expenses • Growth – Liquidity to grow – Ability to grow share in m
Slide 5: City Holding Company
• Markets: Operates an extremely strong retail/commercial franchise in stable markets with disciplined competition • Asset Quality: Strong compared to peers and City’s management has recognized and dealt with issues • Performance: Has consistently outperformed peers with respect to earnings, capital
Slide 6: Key markets
Key markets 1 st Branch Share & 9% Deposit Share in Huntington WV/Ashland KY MSA $4.3 Billion 1 st Branch Share & 11% Deposit Share in WV’s largest market; $5.8 Billion 1 st & 29% Deposit Share $2.0 Billion 2 nd Branch Share & 9% Deposit Share in Morgan, Berkeley & Jefferson Co. WV $2.0Billion
Slide 7: The key to City's success: an enviable deposit franchise
• Branches 68 • Average Deposits per Branch $32.7 MM • Average Households per Branch 2,300 • Average Deposit Share 12.3% • Average Household Share 27% The key to City’s success: an enviable deposit franchise
Slide 8: City's deposit franchise
($000’s omitted) Deposits Share Branches Share Charleston MSA $604,632 11% 16 16% Huntington/Ashland MSA $366,211 9% 13 12% Beckley MSA $339,773 29% 7 25% Greenbrier County, WV (Lewisburg) $173,490 25% 6 33% Eastern Panhandle Counties $183,704 9% 7 13% Mason County, WV $83,945 26% 3 33% Braxton Coun
Slide 9: Low cost and stable funding
Data: December 31, 2011 Low cost and stable funding:
Slide 10: Net interest margin supported by interest rate floors
Peer Data as of September 30, 2011 3.89% March 2008 thru June 2011: NIM supported by Interest Rate Floors
Slide 11: CHCO is well positioned with respect to interest rate risk
Immediate Basis Point Change in Interest Rates Estimated Increase or Decrease in Net Income between 1-12 months +400 Bp +15.3% +300 Bp +9.9% +200 Bp 5.2% +100 Bp 0.6% Data: December 31, 2011 CHCO is well positioned with respect to interest rate risk:
Slide 12: Strong deposit franchise drives top decile non-interest revenue
*As of December 31, 2011. Non-interest income excludes investment gains/(losses) Strong deposit franchise drives top decile non-interest revenue:
Slide 13: Non-interest income is branch driven
2006 2007 2008 2009 2010 2011 Electronic Fee Income $7.3 $7.9 $8.6 $9.0 $9.9 $11.2 All Other Service Fee Income $35.3 $36.5 $37.4 $36.0 $30.1 $27.0 Insurance 2.3 4.1 4.2 5.6 5.5 5.9 Investment Management 2.1 2.0 2.2 2.3 2.8 3.1 BOLI 2.4 2.5 2.9 3.3 3.4 3.2 Non-interest income is branch driven:
Slide 14: City's deposit franchise: service fee income
All Other Service Fee Income 2009 2010 2011 Fiscal Year $36.0 $30.1 $27.0 1 st Quarter 2 nd Quarter 3 rd Quarter 7.0 4 th Quarter Decreases in branch service charges reflect : • May 2010 - Real-time Processing • Aug 2010 - Reg E - Opt in for Electronic Transactions • Oct 2011 - Ceased processing che
Slide 15: Regulatory changes affecting fee income
“NSF — real-time processing — May 2010 “NSF - Regulation E— August 2010 “NSF — Ceased processing checks in high to low dollar order - November 2011 *NSF — forthcoming OCC Guidance — 2012 *Durbin Amendment — Effective Fall 2011 Gity Holding Company
Slide 16: Service charge competitive landscape
Actions BB&T $10 monthly svc charge Chase $12 monthly svc charge United Still offers free checking Huntington Still offers free checking Fifth Third $15 monthly svc charge FCBC Still offers free checking Service Charge competitive landscape:
Slide 17: Overdraft fee comparison
Overdraft Fee Daily Overdraft Fee CHCO $36 None BBT $35 $33 every 7 days JPM $34 $15 daily after 5 days UBSI $36 $5 daily after 5 days HBAN 1 st -$23; $37.50 $7 daily after 5 days PNC 1 st -$25; $36 $7 daily after 5 days FITB 1 st- $25; 2 nd -4 th -$33;>4-$37 $8 daily after 3 days CHCO waives 1 st t
Slide 18: Asset quality: a function of culture and market
• City’s loans are 60% retail/40% commercial • City’s market area tends to be more stable • Real estate prices in City’s market area have been relatively stable • City’s past-due loan trends are stable • City’s non-performing asset levels are stronger than peers • City has been aggressive about char
Slide 19: Loan portfolio weighted toward retail
Sample of 272 publicly traded banks and thrifts with assets between $1-$10 billion as of September 30, 2011 Loan Portfolio weighted toward Retail But - CHCO’s markets have been more stable As of December 31, 2011
Slide 20: Retail loan facts
• Residential real estate are 1,3,5 and 10 Yr ARMs • No sub-prime, interest-only, option adjustable • 68% of home equity loans are 1 st lien position • 64% of home equity loans have an LTV < 80% • Ave loan balance for residential real estate is $91,000 • Ave loan balance for home equity loans is $38
Slide 21: Loan portfolio trends
Residential Home Equity _ Consumer ==CMRE cal Dec-09 Dec-10 Dec-11 Dec-05 Dec-06 Dec-07 Dec-08 Gity trolding Company
Slide 22: Charge-off trends
Source: FDIC, All Insured Depository Institutions Peer data as of September 30, 2011 Charge-off trends:
Slide 23: Non-performing assets & OREO
Source: FDIC, All Insured Depository Institutions Peer data as of September 30, 2011 Non-performing assets & OREO
Slide 24: Commercial loans
Commercial Loans 0.5 MM Real Estate Loans $2.4 MM
Slide 25: Commercial real estate loans by market
Loans made Prior to 2005 prior to 2001 from Classic turnaround Acquisition 2% Other 51% Eastern Panhandle 42% Gity Holding Company
Slide 26: A high performing bank for shareholders & employees
City Ranked #3 of Top 150 US Banks in 2010 by Bank Director A High Performing Bank for shareholders & employees :
Slide 27: CHCO consistently strong performance
2007 2008 2009 2010 2011 2011 Regional Peer Median Reported ROA 2.03% 1.12% 1.63% 1.47% 1.51% 1.07% - 91 st %ile ROATCE 21.0% 11.4% 18.0% 15.1% 15.7% 13.2% - 82 nd %ile Tangible Common Equity/TA 9.7% 8.83% 9.78% 10.01% 9.37% 9.11% - 55 th %ile NIM 4.34% 4.64% 4.18% 4.06% 3.89% 3.91% - 45 th %ile Eff
Slide 28: 2012 PSL interest income is projected
2012 PSL Interest Income is projected
Slide 29: Growth: positioned to achieve reasonable growth
• Commercial • Retail • Insurance • Trust & Investment Management Growth: CHCO is positioned to achieve “reasonable growth” in its core franchise
Slide 30: Growth by year
18.00% 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 2003 Growth in 2005 excludes Classic acquisition 2004 2005 2006 2007 2008 2009 2010 2011 Gity Holding Company
Slide 31: North Carolina loan portfolio
• Markets: Charlotte, Winston-Salem, Raleigh, & Norfolk, VA • Projects: Apartments 25%, High Tech Office Bldgs 10%, GSA 30%, Grocery Stores 10%; Medical Office Bldgs 15% • Loans Outstanding: $59.5 million • Debt Service Coverage * 1.52x • Loan to Value* 72% • Weighted Average Rate 4.57% • Average Lo
Slide 32: Deposit growth opportunity
Branches Deposits Deposits/Branch CHCO 68 $ 2.2 B $33 million BBT 36 $ 3.2 B $90 million JPM 24 $ 1.4 B $60 million UBSI 19 $ 1.1 B $60 million HBAN 15 $ 0.9 B $59 million WSBC 11 $0.3 B $30 million FITB 10 $ 0.3 B $30 million Includes branches within 5 miles of City branch Source: SNL Deposit growt
Slide 33: Growth: expanding retail distribution
Source: SNL Growth: Expanding retail distribution to capture additional retail households Pending VSB Acquisition
Slide 34: City opened four Wal-Marts in key markets
Slide 35: Branch renovations/expansions to meet customer demand
Slide 36: Eastern panhandle expansion exhibits strong demographics
Slide 37: Expansion into South Charleston WV has encouraging early results
Sept 2010 Expansion into South Charleston WV has encouraging early results
Slide 38: South Charleston deposits and consumer loans
$16,000,000 @ Average Deposits $14,000,000 = Average Consumer Loans $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $- Year 1 Year 2 Year 3 Year 4 Gity Holding Company
Slide 39: City Insurance: growing
Revenues Lines of Business • 2006 $2.3 million Personal Lines • 2007 $4.1 million Workers Compensation • 2008 $4.2 million Health/Benefits/Life Ins • 2009 $5.6 million Property/Casualty • 2010 $5.5 million • 2011 $5.9 million Markets Acquisitions Charleston (3 locations) Dickens & Clark (Teays Valle
Slide 40: Trust AUM: strong growth
Trust AUM: Strong growth CAGR (Dec 31, 2004-Dec 31, 2011) of 9.2%
Slide 41: CHCO: capital flexibility
• Tangible common equity at 12/31/11: 9.37% • No TARP!!!! • Dividends - Increased 10% in April 2004 to $0.88 - Increased 14% in April 2005 to $1.00 - Increased 12% in April 2006 to $1.12 - Increased 11% in April 2007 to $1.24 - Increased 10% in April 2008 to $1.36 • Share repurchases - Purchased 755
Slide 42: Average shares outstanding
19,000,000 18,000,000 17,000,000 16,000,000 15,000,000 14,000,000 13,000,000 12,000,000 Average Shares Outstanding 2005 2006 2007 2008 2009 2010 2011 Gity Holding Company
Slide 43: Shares outstanding and shorted
At February 29, 2012: 1,986,908 shares shorted 14,747,188 shares outstanding Gity trolding Company
Slide 44: Growth per share
• Loans per share: 5.9% CAGR • Deposits per share: 5.1% CAGR • Non-interest inc per share: 2.3% CAGR • Expenses per share: 4.0% CAGR Implication: While CHCO operates in relatively low growth markets, high profitability allows share repurchases, which have driven core earnings despite the economic en
Slide 45: Acquisition philosophy
• Historically less acquisitive than peers • Acquisitions must truly be strategic or meaningfully accretive • Opportunities have increased • Actively looking at FDIC and non-FDIC deals • In-market • Adjacent market • Growth markets • Size: Generally $100MM to $1B Acquisition philosophy:
Slide 46: Acquisition territory
Acquisition territory:
Slide 47: Virginia Savings Bank - a solid franchise
• Assets of $130 million • Loans of $88 million • Deposits of $117 million • Equity $11.7 million • 5 branches in Northwestern Virginia • Non-performing Loans of $1.0 million • OREO of $1.1 million • ALLL of $1.2 million Virginia Savings Bank - a solid franchise:
Slide 48: Virginia Savings Bank - pricing metrics
• VSB Share Equivalents: 1,899,984 • Terms – $6.17 cash or – 0.2100 share of CHCO • Valuation as of March 9, 2012: – Cash of $4.7 million – 240,000 shares ($34.61 on 3/9/12) valued at $8.3 million – Total value $13.0 million Virginia Savings Bank - pricing metrics:
Slide 49: Virginia Savings Bank - YTD income on stand-alone basis
2011 Net Interest Income $4,832,000 Less: Provision ($171,000) Non-Interest Income $1,093,000 Non-Interest Expense ($4,631,000) Pre-tax Net Income $1,122,000 Taxes ($410,000) Net income $711,000 Virginia Savings Bank - YTD Income on stand-alone basis
Slide 50: Virginia Savings Bank: next steps
• SEC Review and Clearance of S-4 Registration Statement • Federal Reserve Approval • OCC Approval • Virginia Bureau of Financial Institutions Approval • Satisfaction of Covenants, Representations & Warranties • Deposit Account Retention • Deal must be completed by May 31, 2012 Virginia Savings Bank
Slide 51: Management team
TITLE EXPERIENCE AGE JOINED CEO PPLS; CHCO CFO; PHD 49 2001 EVP - Retail PPLS 56 2001 EVP - Commercial One Valley; BB&T, CPA 62 2004 CFO Public Accounting, CPA 46 2005 CAO/CIO City National Bank 48 1989 SVP - Branches BB&T 43 2001 SVP - CCO United Bankshares, CPA 38 1998 SVP - CRO BB&T 55 2001 SVP C
Slide 52: Value in the banking sector? Checklist for success
Capital • Strongly capitalized - Top 10% Markets • Solid distribution network - Excellent • Stable geographic markets - Yes; WV & E Kentucky • Disciplined competition - Yes; see NIM Performance • Strong net interest margin - Yes • Strong NIM management - See results (floors) • Dependence on Non-Inte
Slide 53: CHCO represents good value and stability
• Pricing Metrics *: • Price to Book: 164% • Price to Tangible Book: 201% • Price to 2012 Projected Earnings** 13.1x • Dividend Yield 4.0% • Div Payout Ratio (First Call)** 53% • Tangible Capital/Tangible Assets 9.37% • Institutional Ownership 63% * Based on Price of $34.61 (3/9/12) ** Based on anal
City Holding — Scott & Stringfellow, LLC investor meeting, New York, March 20, 2012 on 6ix