City Holding Company · NASDAQ:CHCO
City — RBC Conference 2012
50 slides from City's conference presentation, May 1, 2012
Slide 1: Boston May 1, 2012 RBC Conference
Boston May 1, 2012 RBC Conference
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: City Holding at a glance
• Total Assets $2.8 bil • Branches 68 • FTE 797 • Market Cap $484 mil • Institutional Ownership 63% • Average Daily Volume $1.6 mil Date: April 20, 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 $33.8 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: March 31, 2012 Low cost and stable funding:
Slide 10: Net interest margin vs peers
Peer Data as of December 31, 2011 3.98% 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 2012 Fiscal Year $36.0 $30.1 $27.0 1 st Quarter 2 nd Quarter 8.0 7.1 3 rd Quarter 7.2 7.0 4 th Quarter 7.0 6.5 Decreases in branch service charges reflect : • May 2010 - Real-time Processing • Aug 2010 - Reg E - Opt in for Electronic Transactions • Nov 201
Slide 15: 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 16: 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 17: 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 18: Loan portfolio weighted toward retail
Sample of 282 publicly traded banks and thrifts with assets between $1-$10 billion as of December 31, 2011 Loan Portfolio weighted toward Retail But - CHCO’s markets have been more stable As of March 31, 2012
Slide 19: Loan portfolio composition trend
Residential Home Equity _ Consumer ==CMRE cal March-12 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Gity trolding Company
Slide 20: Charge-off trends
Source: FDIC, All Insured Depository Institutions Peer data as of December 31, 2011 Charge-off trends:
Slide 21: Non-performing assets & OREO
Source: FDIC, All Insured Depository Institutions Peer data as of December 31, 2011 Non-performing assets & OREO
Slide 22: Commercial loans
Commercial Loans 0.5 MM Real Estate Loans $2.4 MM
Slide 23: Loans made prior to 2005
Loans made Prior to 2005 prior to 2001 from Classic turnaround Acquisition 2% Other 51% Eastern Panhandle 42% Gity Holding Company
Slide 24: 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 25: CHCO consistently strong performance
2008 2009 2010 2011 YTD 2012 2011 Regional Peer Median Reported ROA 1.12% 1.63% 1.47% 1.51% 1.47% 1.07% - 91 st %ile ROATCE 11.4% 18.0% 15.1% 15.7% 15.2% 13.2% - 82 nd %ile Tangible Common Equity/TA 8.83% 9.78% 10.01% 9.37% 9.54% 9.11% - 55 th %ile NIM 4.64% 4.18% 4.06% 3.89% 3.98% 3.91% - 45 th %il
Slide 26: Growth: reasonable growth in its core franchise
• Commercial • Retail • Insurance • Trust & Investment Management Growth: CHCO is positioned to achieve “reasonable growth” in its core franchise
Slide 27: Growth trend 2003-2011
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 28: 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 29: 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 30: Growth: expanding retail distribution
Source: SNL Growth: Expanding retail distribution to capture additional retail households Pending VSB Acquisition
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Slide 34: New Locations
• Relocated North Lewisburg WV Office • Mortgage Production Office in Morgantown WV New Locations
Slide 35: Branch deposits and consumer loans by year
$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 36: 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 37: Trust AUM: Strong growth
Trust AUM: Strong growth CAGR (Dec 31, 2004-Dec 31, 2011) of 9.4%
Slide 38: CHCO: Capital flexibility
• Tangible common equity at 3/31/12: 9.54% • 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 39: 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 iia 2005 2006 2007 2008 2009 2010 2011 Mar-12 Gity Holding Company
Slide 40: Shares outstanding and shorted
At March 30, 2012: 1,964,381 shares shorted 14,730,170 shares outstanding Gity trolding Company
Slide 41: 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 42: 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 43: Acquisition territory
Acquisition territory:
Slide 44: 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 45: 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 46: 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 47: Virginia Savings Bank: Next Steps
• SEC Review and Clearance of S-4 Registration Statement - • Anticipate Shareholder Approval: May 10, 2012 • Regulatory Approvals expected May 2012 – Federal Reserve – OCC – Virginia Bureau of Financial Institutions • Subject to Satisfaction of Covenants, Representations & Warranties • Anticipated C
Slide 48: Management team
TITLE EXPERIENCE AGE JOINED CEO PPLS; CHCO CFO; PHD 50 2001 EVP - Retail PPLS 57 2001 EVP - Commercial One Valley; BB&T, CPA 63 2004 CFO Public Accounting, CPA 48 2005 CAO/CIO City National Bank 49 1989 SVP - Branches BB&T 44 2001 SVP - CCO United Bankshares, CPA 39 1998 SVP - CRO BB&T 56 2001 SVP C
Slide 49: 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 50: CHCO represents good value and stability
• Pricing Metrics *: • Price to Book: 155% • Price to Tangible Book: 189% • Price to 2012 Projected Earnings** 12.6x • Dividend Yield 4.2% • Div Payout Ratio (First Call)** 53% • Tangible Capital/Tangible Assets 9.54% • Institutional Ownership 63% * Based on Price of $33.35 (4/20/12) ** Based on ana