City Holding Company · NASDAQ:CHCO
City — KBW 2011 Boston Bank Conference
48 slides from City's conference presentation, Mar 2, 2011
Slide 1: KBW 2011 Boston Bank Conference
KBW 2011 Boston Bank Conference March 1-2, 2011
Slide 2: Forward Looking Statements
Forward Looking Statements n 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 res
Slide 3: City Holding at a glance
n n n n n n Total Assets $2.6 bil Branches 68 FTE 805 Market Cap $550 mil Institutional Ownership 65% Average Daily Volume $2.2 mil Date: February 3, 2011
Slide 4: Value in the Banking Sector? Checklist for success
n Strongly capitalized n Solid Distribution Network n Stable Geographic Markets n Disciplined Competition n Strong Net Interest Margin n Strong NIM Management n Strong Fee income n Ability to control expenses n Liquidity to grow n Ability to grow share in market n Opportunity to grow into new market
Slide 5: City Holding Company: Markets, Asset Quality, Performance, Growth
n Operates an extremely strong retail/commercial franchise in stable markets with disciplined competition n Strong compared to peers and City’s management has recognized and dealt with issues n Has Consistently outperformed peers with respect to earnings, capital, and liquidity n Growing and succeed
Slide 6: Key Markets
Key Markets 1 st Branch Share & 9% Deposit Share in Huntington WV/Ashland KY MSA $4.2Billion 1 st Branch Share & 10% Deposit Share in WV’s largest market; $5.7B 1 st & 27% Deposit Share $1.9 Billion 2 nd Branch Share & 8% Deposit Share in Morgan, Berkeley & Jefferson Co. WV $2.1Billion
Slide 7: Liabilities: Low cost and stable deposits
Data: December 31, 2010 Liabilities: Low Cost and stable deposits drives profitability
Slide 8: Net Interest Margin
Net Interest Margin Strong NIM driven by solid core deposit franchise & strong NIM management
Slide 9: Strong Deposit Franchise drives top decile Non-Interest Revenue
24% 76% 63% * As of December 31, 2009. Non- interest income excludes other than temporary impairment losses and VISA IPO gain Sample of 295 reporting publicly traded banks and thrifts with assets between $1 and $10 billion as of December 31, 2009, excluding investment gains/losses Strong Deposit Fra
Slide 10: City's Deposit Franchise
n City’s Non-Interest Income represents 36% of total revenues n CHCO Ave Deposits/Branch $32 MM n Peer Ave Deposits/Branch $41 MM n Average Depository Hhlds/Branch 2,200 n Industry Ave. Hhlds per Branch* 1,220 As compared to other $2.6B banks, City has more branches and in each of these branches, mo
Slide 11: Regulation E Time-Line
n May 12, 2010: Implemented “Passport” software providing “real-time” posting of debits/credits intra-day n April 1, 2010: Began Communication Effort regarding Regulation E n 49% of customers made election prior to implementation n Implementation: August 14 th n Additional 4% of customers have made
Slide 12: Regulation E: Bottom Line Impact on Service Charges
n Customers who have NEVER overdrawn their account: Response Rate: 37% Opt-In / Opt-Out / Force-out: 26% / 11% / 63% n Customers who HAVE overdrawn their account: Response Rate: 86% Opt-In/ Opt-Out / Force-out: 75% / 11% / 14% n 4 th Quarter 2009 $11.6 million 4 th Quarter 2010 $9.6 million Regulati
Slide 13: 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 14: Conservative Loan Portfolio Mix
Loan to Deposits 85.9% Loan to Deposits 86.5% Sample of 296 publicly traded banks and thrifts with assets between $1-$10 billion as of December 31, 2009 As of December 31, 2010 Conservative Loan Portfolio Mix
Slide 15: Retail Loan Facts
• Residential RE are 1,3,5 and 10 Yr ARMs • No Sub-prime, Interest-only, Option Adjustable • Home Equity loans include LOCs, fixed amortizing loans, non-purchase adjustable loans • 65% of Home Equity Loans are 1 st Lien Position • 66% of Home Equity Loans have a LTV < 80%. • Ave Loan Balance for Res
Slide 16: Stable Past-Due Loans (30+ days)
Past-due loans trends are stable and reflect better economics in City’s core markets Stable Past-Due Loans (30+ days)
Slide 17: NPA's to Loans & OREO
NPA’s to Loans & OREO
Slide 18: Non-performing Assets
Non-performing Assets: 1.12% of Total Loans (December 31, 2010) Greenbrier Spec Houses All Other Eastern Panhandle 28%
Slide 19: Net Charge-offs: 2010 Commercial
Commercial $2.9MM Net Charge-offs: 2010
Slide 20: Retail Charge-offs: 2010
Other 45% Retail Charge-offs: 2010
Slide 21: Greenbrier Resort Speculative Properties
Original Loan Balances $ 11.0 MM Current Loan Book Balance net of reserves $ 0.9 MM OREO after Charge-off’s $ 5.6 MM On-Balance Sheet: $ 6.5 MM (59% of orig loan) Greenbrier Resort Speculative Properties - 12/31/10 Sale of $1.7MM in 1 st Quarter 2011
Slide 22: CHCO consistently strong performance
2005 2006 2007 2008 2009 2010 2010 Peers** Median Reported ROA 2.09% 2.11% 2.03% 1.12% 1.63% 1.40% 0.88% - 95 th %ile ROTE 22.3% 22.4% 21.0% 11.4% 18.0% 15.1% 12.2% - 75th %ile Tangible Common Equity/TA 9.5% 10.1% 9.7% 8.83% 9.78% 10.01% 9.19% - 85 th %ile NIM 4.49% 4.56% 4.34% 4.64% 4.18% 4.06% 3.9
Slide 23: Growth: positioned for reasonable growth in core franchise
n Commercial n Retail n Insurance n Trust & Investment Management GROWTH: CHCO is positioned to achieve “reasonable growth” in its core franchise:
Slide 24: Commercial Loan Growth
Commercial Loan Growth: Success achieved due to community bank orientation, strong team, strong underwriting, and strong local economies 18.00% + 16.00% Growth in 2005 14.00% 12.00% + 10.00% + 8.00% + 6.00% + 4.00% 2.00% 0.00% Acquisition 2003 2004 2005 2006 2007 2008 2009 2010
Slide 25: Deposit Growth Opportunity
Branches Deposits Deposits/Branch CHCO 67 $ 2.2 B $33 million BBT 36 $ 3.3 B $92 million JPM 20 $ 1.2 B $60 million UBSI 20 $ 1.2 B $60 million HBAN 14 $ 0.9 B $64 million FITB 10 $ 0.4 B $40 million Includes branches within 5 miles of City Branch Source: SNL Deposit Growth Opportunity: CHCO has man
Slide 26: Growth: Expanding Retail Distribution
Growth: Expanding Retail Distribution to capture additional retail households
Slide 27: City Opened Wal-Marts in key markets
City Opened 4 Wal-Marts in key markets where it had significant share:
Slide 28: Branch Renovations/Expansions
Branch Renovations/Expansions to meet customer demand:
Slide 29: Eastern Panhandle Expansion exhibits strong demographics
Eastern Panhandle Expansion exhibits strong demographics
Slide 30: Expansion into South Charleston WV
Sept 2010: Expansion into South Charleston WV has encouraging early results
Slide 31: De Novo Branch Results
De Novo Branch Results $18,000,000 $16,000,000 = = Average Deposits $14,000,000 = Average Consumer Loans 3000, $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 —
Slide 32: CityInsurance
CityInsurance n 2006 Revenues $2.3 million n 2007 $4.1 million n 2008 $4.2 million n 2009 $5.6 million n 2010 $5.5 million Strategies: 2007: Added Workers Compensation Dept in 2007 Added Personal Lines Department in 2007 Opened Beckley WV Office in 2007 2008: Opened Martinsburg Office in 4 th Q 2008
Slide 33: Trust AUM
Trust AUM: CAGR (04-10) of 10.4% Grew AUM in 2008/10 despite market by taking share
Slide 34: CHCO: Capital Flexibility
- 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 - - - Purchased 2.2 million shares between 2007-2010 (12.5% of outstanding shares at 12/31/06) - Driven b
Slide 35: Growth Per Share (2004-2010)
n Loans Per Share: 8.2% CAGR n Deposits Per Share: 5.9% CAGR n Non-Interest Inc Per Share: 3.1% CAGR n Expenses Per Share: 4.3% CAGR Growth Per Share (12/31/04 - 12/31/10): Implication: While CHCO operates in relatively low growth markets, high profitability allows share repurchases, which have driv
Slide 36: Acquisition Philosophy
Acquisition Philosophy: • City has historically been less acquisition focused than peers - acquisitions must truly be strategic or meaningfully accretive • Going forward, City is likely to be more acquisitive than historically due to an increasing number of attractive opportunities • City will conti
Slide 37: Acquisition Philosophy
Acquisition Philosophy: • City will actively consider acquisition of banks in the $100 million to $1 billion range within its “acquisition footprint” • City will consider acquisition of certain under- performing banks larger than $1 billion in assets • Future acquisitions should: • Increase franchis
Slide 38: Acquisition Territory
Acquisition “Territory”:
Slide 39: An Experienced Management Team
n CEO PPLS; CHCO CFO,PHD 48 2001 n EVP-Retail PPLS 54 2001 n EVP-Comm One Valley; BB&T,CPA 60 2 004 n CFO Public Accounting,CPA 45 2005 n CAO/CIO City National Bank 46 1989 n SVP-Branches BB&T 41 2001 n SVP- CCO United Bankshares,CPA 36 1998 n SVP- CRO BB&T 54 200 1 n SVP Consumer Bank One 43 2001 n
Slide 40: Value in the Banking Sector? Checklist results
n Strongly capitalized n Solid Distribution Network - n Stable Geographic Markets - n Disciplined Competition - n Strong Net Interest Margin - n Strong NIM Management - n Dependence on NII n Ability to control expenses - n Liquidity to grow - n Ability to grow share in market - n Opportunity to grow
Slide 41: CHCO represents good value and stability
Pricing Metrics *: n Price to Book: 173% n Price to Tangible Book: 211% n Price to 2011 Projected Earnings** 14.2x n Dividend Yield 3.9% n Div Payout Ratio (First Call)** 55% n Tangible Capital/Tangible Assets 10.01% n Institutional Ownership 65% * Based on Price of $35.07 (2/3/11) ** Based on analy
Slide 42: Reference Slides
Reference Slides
Slide 43: Investment Portfolio at 12/31/10
Original Cost Other than Temporary Credit Impairment Charges (Cumm) Unrealized Gains/ (Losses) Carrying Value Municipals $ 66.1 $0 $0.3 $66.4 MBS $267.1 $0 $7.9 $274.9 Pool Bank Trust Pfd $ 27.1 ($19.2) ($4.5) $3.4 Single Issue Bank Trust Pfd; Bank Holding Company Pfd; Sub-debt of FI’s $93.2 ($1.7)
Slide 44: Previously Securitized Loans
2004 2005 2006 2007 2008 2009 2010 2011 Proj Average Balances $83.5 MM $42.9 MM $22.3 MM $10.5 MM $5.2 MM $3.9 MM $1.2 MM $0.7 MM Rate 17.4% 26.6 % 42.2 % 69.1% 108% 128% 333% 200% Gross Interest Revenue $14.5 MM $11.4 MM $9.4 MM $7.3 MM $5.6 MM $3.9 MM $4.0 MM $1.4 MM Previously Securitized Loans:
Slide 45: Prime-based Floors
Notional Prime Rate Term Date $100MM 8% June 2011 $100MM 7.75% May 2011 - Purchased $600 million during 2005-2006 - - Sold late 2008 - - Positions CHCO for rising rates Prime-based Floors:
Slide 46: Quarterly Prime Floor Income (After-tax)
Quarterly Prime Floor Income (After-tax) Gain from sale recognized over remaining lives $2,000,000 $1,800,000 $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $- of hedged LOANS Mar-09 Jan-11
Slide 47: Interest Rate Risk to Net Interest Margin
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 +300 Bp +10.9% +200 Bp 6.2% +100 Bp 0.9% Data: December 31, 2010 Interest Rate Risk to Net Interest Margin:
Slide 48: Interest Rate Risk Summary
CHCO is less dependent upon NII than its peers t Fee income in top 10% of peer group CHCO’s NIM is strong relative to peers based upon strong core deposit franchise In 4th Q of 2010, Prime-based floors will be worth approx. 13 bp of NIM In 4 th Q of 2010, Previously Securitized Loans will be worth a