City Holding Company · NASDAQ:CHCO
City — RBC Financial Institutions Conference 2006
50 slides from City's conference presentation, Sep 20, 2006
Slide 1: RBC Financial Institutions Conference September 2006
RBC Financial Institutions Conference September 2006 Skip Hageboeck Craig Stilwell President & CEO EVP-Retail Banking
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: City Holding Company
City Holding Company: • Headquartered In Charleston WV • $2.5 Billion in Total Assets • 67 Banking Offices
Slide 4: Key Markets
Key Markets 1 st & 10% Market Share in Huntington WV/Ashland KY MSA $3.6 Billion 8% Market Share in Morgan, Berkeley & Jefferson Co. WV $1.8 Billion 1 st & 30% Market Share $1.6 Billion 2 nd & 11% Market Share in WV’s largest market; $4.4B
Slide 5: Themes
Themes: n CHCO: Consistently superior results n CHCO: Conservative operating platform n CHCO: Growing and succeeding in slow-growth markets
Slide 6: 2005 Major Accomplishments
2005 Major Accomplishments n Maintained “High-Performing Bank” Metrics n Grew “Core EPS” n Acquisition of Classic Bancshares added 10 offices in KY and OH $256MM in loans $212MM in deposits n Achieved strong growth in commercial lending n Launched 2 nd Generation deposit products n Initiated improve
Slide 7: 2006 YTD Accomplishments
2006 YTD Accomplishments n Loan Growth of 5.8% annualized Commercial growth @ 12.7% annualized n Deposit Growth of 4.6% annualized n EPS growth of 4.9% despite: Provision Expense of $1.7MM vs. $0 in prior year Decrease in interest income on Previously Securitized Loans of $0.7MM n Non-interest incom
Slide 8: Why Own CHCO Stock?
* Rankings based on Core ROA among 239 public banks $1-$10 Billion 2004 2005 YTD 2006 n Reported ROA 2.10% 2.09% 2.12% best in class! n NIM 4.29% 4.49% 4.64% increasing! n Efficiency Ratio 48.7% 46.7% 44.7% decreasing! n Non-Int Rev/Total Rev 33% 34% 33% n Non-perf Assets/ Loans 0.29% 0.27% 0.25% de
Slide 9: Why Own This Stock?
Why Own This Stock? 1. CHCO is highly profitable 3. CHCO is focused on growth 4. CHCO has strong management talent 2. CHCO is conservatively positioned
Slide 10: Conservative Loan Portfolio Mix
Loan to Deposits 83.6% Loan to Deposits 92.0% Sample of 222 publicly traded banks and thrifts with assets between $1-$5 billion as of December 31, 2005 As of December 31, 2005 Conservative Loan Portfolio Mix
Slide 11: Strong Loan Quality
As of December 31, 2005 Sample of 222 publicly traded banks and thrifts with assets between $1 and $5 billion Strong Loan Quality
Slide 12: Deposits: Low Cost and Stable
Deposits: Low Cost and Stable Data: December 31, 2005
Slide 13: Loan/Deposits vs Peers
97.00% 92.00% 87.00% 82.00% 77.00% 72.00% — Peers CHCO Loan/Deposits
Slide 14: Favorable Revenue Profile
34% 21% 79% 66% * As of December 31, 2005. Non-interest income excludes security gains Sample of 222 publicly traded banks and thrifts with assets between $1 and $5 billion as of December 31, 2005 Favorable Revenue Profile
Slide 15: 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 222 publicly traded banks and thrifts with assets between $1 to $5 Billion as of December 31, 2005 91 st percentile City is Highly Efficient
Slide 16: Strong Capital facilitates growth
CHCO 6/30/06 Peer Median Equity/Assets 11.5% 8.7% Tang Equity/Tang Assets Tang Equity/Tang Assets 9.1% 9.1% 7.0% 7.0% Leverage Ratio 10.3% 12.5% Tier I Capital Ratio 14.6% 11.1% Total Risk-based Capital Ratio Total Risk-based Capital Ratio 15.5% 15.5% 12.5% Strong Capital facilitates growth:
Slide 17: Why Own This Stock?
Why Own This Stock? n 1. CHCO is highly profitable n 2. CHCO is well-positioned for the future n 3. CHCO is growing in slow-growth markets u Internal Loan Growth u Internal Deposit Growth u Improvements to Retail Distribution System u Acquisition
Slide 18: Banking in Slow-growth markets
Population Growth 2006-2011 Median Household Income 2006 CHCO franchise 1.6% $35,928 West Virginia 0.8% $34,207 U.S. 6.7% $51,546 Banking in Slow-growth markets: CHCO has succeeded despite the slow growing markets in which it operates
Slide 19: Local Demographics
Population Growth 2006-2011 Household Income Kanawha Co. (Charleston) -3.8% $39,847 Putnam Co. 4.4% $54,072 Jefferson Co. 13.15% $51,953 Local Demographics: Within any franchise there are pockets of better opportunity
Slide 20: Kanawha County is losing population
Kanawha County is losing population – but there is growth even in declining markets!
Slide 21: Commercial Loan Growth
Commercial Loan Growth: 9.8% 10.4% 33.4% incl. Classic 12.7% annualized
Slide 22: 0% T T T T
100% 80% 60% 40% 20% 0% T T T T 2002, «2003'S 2004 = 2005 = 2006 @ Commercial 1 Residential 1 Home Equity Mi Installment
Slide 23: Home Equity Loan Growth
Home Equity Loan Growth: 34.0% 9.1% 2.1% 7.8% annualized
Slide 24: Residential Loan Growth
Residential Loan Growth: 5.2% 26.2% incl. Classic 2.9% annualized
Slide 25: CHCO: A Retail Focused Franchise
Source: Internal data as of December 31, 2005 CHCO: A Retail Focused Franchise
Slide 26: City's Retail Business Model
n Best in class products n Strong distribution network n Very targeted marketing/promotion n Alignment between staff, key performance measures, and compensation City’s Retail Business Model
Slide 27: Best in Class Products: Totally Free Checking
2001-2003 n First to market n Little competition n High level of account growth n Strong Revenue lift Best in Class Products: an early adopter of Totally Free Checking
Slide 28: Best in Class Products: Totally Free Checking
By late 2004 n Every bank in market now offered free checking n Growth started to flatten n Sole focus on Free Checking resulted in 91% of all new accounts opened being put in this product type n Identified desire to diversify revenue stream Best in Class Products: Totally Free Checking
Slide 29: 2nd Generation transaction accounts
2005 n Simplified account offerings n Improved fee income opportunities in new account line up n Gave our front line an improved sales system combined with strong marketing n Goal was to lift the number of new accounts and lower the percentage that were sold free Best in class products 2 nd Generati
Slide 30: 2nd Generation transaction accounts
Best in class products 2 nd Generation transaction accounts
Slide 31: New Consumer DDA Account openings per month
Gave us the lift we wanted… New Consumer DDA Accounts openings per month Average of 2,657 in 2005 Average of 2,372 in 2004 Average of 2,674 YTD in 2006
Slide 32: And the corresponding revenues
20% CAGR 2 nd Q 2001 to 4 th Q 2005 And the corresponding revenues
Slide 33: Debit Card Revenue
Debit Card Revenue Current run rate is $5,000,000 in annual revenue
Slide 34: Debit Card Success
2003 2004 2005 Transactions 8,067,069 9,917,376 12,763,439 Sales Volume $183 Million $208 Million $283 Million Revenue $2,700,722 $3,001,842 $3,980,931 Revenue Growth (over prior year) 23% 11% 33% Active Cards 57,719 60,764 73,477 Penetration 75% 77% 80% Avg Transactions per account 9.2 10.5 11.8 De
Slide 35: New Partnership with Elan for Credit Card Products
New Partnership with Elan to provide Credit Card Products n The trend was not our friend n No easy way to differentiate products n Competing against teaser rates; rewards programs, affinity groups, etc n Strategic partnership allows us to maintain branded program with stronger products and support
Slide 36: City continues to innovate to offer the best products
City continues to innovate to offer the best products to our customers:
Slide 37: Optimizing our Retail Distribution System
Optimizing our Retail Distribution System Wal-Mart Strategy Consolidations/Renovations/ Relocations New Branches in growing areas of existing markets DeNovo entry into contiguous markets
Slide 38: City's Wal-Mart Strategy
§ Part of a Hub and Spoke distribution strategy § High-traffic Wal-Marts equal high volume in new accounts and service fee income § Supports existing retail distribution outlets in City’s major Markets with low capital outlay § Openings Charleston – Sept 2004 Huntington – Sept 2004 Beckley – May 200
Slide 39: Consolidations/Renovations/Relocations: New Downtown Charleston Office
Consolidations/Renovations/Relocatio ns: Our New Downtown Charleston Office Housing Retail, Trust, Commercial & Private Banking Opened 2006
Slide 40: New branches in growing areas of existing markets
New branches in growing areas of existing markets: Newest branch opening next month in high growth market in Eastern Panhandle (near Washington DC)
Slide 41: Our new flagship branch in the Eastern Panhandle
Our new “flagship branch” in the Eastern Panhandle
Slide 42: Other Strategic Opportunities: Capital Flexibility
Other Strategic Opportunities Capital Flexibility Dividends - 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 - Payout ratio in 2006: 37% Share Repurchases - Tangible Capital @ 9.1% @ 6/30/2006 - Purchased over 700,000 in 1 st half
Slide 43: Acquisitions
$100MM to $500MM in assets Markets in or adjacent to CHCO footprint Retail Opportunity Accretive to EPS in first full year Acquisitions:
Slide 44: Industry Challenges for 2007
n CHCO is less dependent on NII for revenue than peers CHCO has demonstrated strong management of NII/NIM by delivering promised results to rising rates n CHCO has purchased interest rate floors CHCO maintains significant short-term investment assets which could be moved into long-term bonds n CHCO’
Slide 45: Previously Securitized Loans
2004 2005 2006 Projected 2007 Projected 2008 Projected Average Balances $83.5 MM $42.9 MM $24.7 MM $16.5 MM $12.1 MM Rate 17.4% 26.6% 40% 40% 40% Gross Interest Revenue $14.5 MM $11.4 MM $9.6 MM $6.7 MM $4.9 MM Previously Securitized Loans: A unique challenge for CHCO which was met in 2005 and 2006
Slide 46: Net Interest Margin
Prime Rate CHCO Peers Net Interest Margin: CHCO has benefited from rising interest rates and demonstrated strong management of net interest margin
Slide 47: A Deep & Diverse Talent Pool
H/R Director Clorox 2005 CFO Public Accounting 2005 EVP – Commercial Lending BB&T 2004 SVP – Mortgage Lending United Bankshares 2004 Regional Branch Manager BB&T 2004 Chief Auditor BB&T 2001 SVP – Consumer Lending Bank One 2001 SVP – Branch Banking BB&T 2001 Senior Lender BB&T 2001 Commercial Workou
Slide 48: CHCO Checklist for success in slow growth markets
CHCO Checklist for success in slow growth markets: n Strong Net Interest Margin – n Disciplined competition – n Ability to grow share – n Efficient Cost Structure – n Tight Capital – but poses a significant opportunity to enhance EPS as more optimal capital structure is achieved! n Exploiting sub-ma
Slide 49: Pricing Metrics
• Based on Price of $39.82 (close of business 9/5/06) ** Based on Analyst estimates for 2007 of $3.16 Pricing Metrics * n Price to Book: 246% n Price to Tangible Book: 311% n Price to 2007 Projected Earnings** 12.6x n Institutional Ownership 46%
Slide 50: Questions?
Questions?
City Holding — RBC Financial Institutions Conference 2006 on 6ix