City Holding Company · NASDAQ:CHCO
City — 2022 Hovde Group Financial Services Conference
41 slides from City's conference presentation, Nov 3, 2022
Slide 1: City Holding Company – 2022 Hovde Group Financial Services Conference
City Holding Company 2022 Hovde Group Financial Services Conference November 3-4, 2022
Slide 2: Forward looking statements
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 resul
Slide 3: Snapshot
Snapshot • Total Assets $5.95 billion • Branches 94 • FTE 903 • Market Cap $1.5 billion • Markets: Stable, Slow growing, & less competitive • Customers Robust retail customer base • Business Lines: Retail, Commercial, Investment Management • Asset Quality: Demonstrated strong track record • Performa
Slide 4: CHCO: A perennial high-performing bank
CHCO: A perennial high-performing bank 2.00% ROA 1.80% 1.60% 1.40% 1.20% 1.00% 0.80% 0.60% 2015 2016 2017 2018 2019 2020 2021 YTD 2022 CHCO (adjusted for M&A exp & VISA gain) $1B - $10B 4 Source - S&P Global MI. Peer data as of June 30, 2022.
Slide 5: Total Shareholder Return 2/1/05-2/1/22
Total Shareholder Return 2/1/05-2/1/22 CHCO vs UBSI, WSBC, TFC, AUB, HBAN, PEBO, FCF, STBA 5
Slide 6: JD Power: Highest Customer Satisfaction
JD Power: Highest Customer Satisfaction North Central Region, 2018, 2019, 2020 and 2022 North Central Region: WV, KY, OH, IN & MI 6
Slide 7: Challenges and Opportunities
Challenges and Opportunities • Challenges – Deposit Customers: Already high market share in slow-growth demographic markets – Geographic markets are considered “loan challenged” – Prior years had ALLL recoveries and PPP loans – Regulatory Environment characterized by “bank haters” • Opportunities –
Slide 8: Deposit Franchise mostly in slow-growth WV and eastern KY
Deposit Franchise mostly in slow-growth WV and eastern KY Key Deposit Markets Deposits West Virginia & E. Kentucky 76% – dating to 1870 New Markets 24% 8
Slide 9: City National Deposit Markets
City National Deposit Markets 3rd Branch Share Winchester VA & WV Panhandle $8.8 Billion Major Competitors: TFC, UBSI, WFC 1st Branch Share & 2nd Deposit Share (15%) In Charleston MSA/Huntington MSA; $15.5 Billion Major Competitors: TFC, JPM, HBAN, UBSI 1st Branch Share & 4th Deposit Share (12%) in
Slide 10: Deposit Franchise: One key to City's enviable success
DEPOSIT FRANCHISE One key to City’s enviable success • 94 Branches among Top 100 Banks • Average Deposits per Branch $53 MM • Average Households per Branch 2,000 • Average DDA Balance $10,200** • Average Business DDA $34,700 ** - National Average of $12,800 (based upon 2016 Federal Reserve Survey of
Slide 11: Market Position
Market Position City’s biggest markets have strong distribution, large share, and high profitability Deposits Deposit Branch Branch Market Population ($mm) Share Branches Share Rank Charleston/Huntington /Ashland MSA 611,000 $2,342 15% 36 20% 1st Beckley/Lewisburg WV 162,000 $945 29% 16 27% 1st Winc
Slide 12: Market Demographics
Market Demographics Newer markets have high population growth and higher incomes Projected Projected Population Median Change in Change 2020- Household HHLD Income Market Population 2025 Income 2020-2025 Charleston/Huntington/ Ashland MSA 611,000 (2.3%) $46,000 4.5% Beckley 162,000 (2.9%) $42,000 3.
Slide 13: City's Exceptional Retail Strength Depends on Branch Distribution
City’s Exceptional Retail Strength Depends on Branch Distribution House- Deposits Deposit Branch Hold Market ($mm) Share Branches Share Share Charleston, WV $1,092 16.5% 13 30.2% 40.6% Huntington, WV $587 13.7% 10 17.9% 28.3% Ashland, KY $590 21.4% 12 24.0% 41.0% Beckley, WV $583 22.5% 9 27.3% 31.8%
Slide 14: Internal DDA Growth
Internal DDA Growth New DDA Net Growth in Year Accounts DDA Accounts 2016 28,650 2,820 2018 30,400 4,310 2020 *30,360 *6,740 2021 32,800 8,860 Household Growth = 2.5% U.S. Population Growth: 0.6% *Note: City’s lobbies were open by appointment 14 only for 6 months in 2020 due to COVID-19
Slide 15: Market Disruptions
Market Disruptions Provide Strong Growth Opportunities • Market: St. Albans WV $140 4,600 $120 4,436 4,400 • In 2017, there 4,262 were 4 banks $100 4,200 with branches in 4,068 $80 $120 4,000 this market 3,898 • In 2018 one Millions $60 $102 3,800 3,723 closed $40 $84 3,600 • In 2020 another $72 $20
Slide 16: Age Distribution of Customer Base
Age Distribution of Customer Base 2021 All City Customers New City Customers 20.0% 19.0% 2021 18.0% 45.0% 15.8% 14.9% 38.9% 16.0% 14.6% 40.0% 14.1% 14.0% 35.0% 12.3% 12.0% 30.0% 10.0% 9.3% 25.0% 8.0% 20.0% 16.0% 6.0% 15.0% 13.6% 11.7% 10.2% 4.0% 10.0% 5.9% 2.0% 5.0% 3.6% 0.0% 0.0% <24 25-34 35-44 45
Slide 17: 2021 Debit Card Revenues
2021 Debit Card Revenues Debit Card Assets Revenues Summit $3.6 Billion $6.2 million City $6.0 Billion $27 million Stockyard $6.1 Billion $15 million Peoples $7.1 Billion $21 million Wesbanco $16.9 Billion $19 million 17
Slide 18: Overdraft Facts
Overdraft Facts • Regulation E – 24% of customers have “OPTED IN”. (61% paid no overdraft fees in 2019. (They “Opt-In” as protection against the possibility of needing funds in emergencies) – 13% of new DDA customers “OPTED IN” in 2019 – More customers CHANGE by “OPTING-IN” than “OPTING-OUT” – Overd
Slide 19: Overdraft Mitigation at City
Overdraft Mitigation at City • Every overdraft results in a letter to the customer informing them of an overdraft or insufficient fund charge. • Quarterly letters to out to any customer experiencing more than 6 OD’s of NSF’s in the last quarter offering assistance. • City offers free automated trans
Slide 20: City's strong deposit franchise provides NIM strength in higher rate environments
City’s strong deposit franchise provides NIM strength in higher rate environments 4.00% 3.75% 3.50% 3.25% 3.00% 2.75% 2.50% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 YTD CHCO excluding PSLs, PPP Fees, & Accretion $1B to $10B Peer Source - S&P Global MI. 2022 Peer Data as of June 30, 202
Slide 21: Deposit Costs – Headed Up??
Deposit Costs – Headed Up?? 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 12/31/18 Qtr 12/31/19 Qtr 12/31/20 Qtr 12/31/21 Qtr 9/30/22 Qtr Interest Bearing Deposits Fed Funds 21
Slide 22: How City is Funded at September 30, 2022
How City is Funded at September 30, 2022 15.6% 48.2% 19.4% 13.1% 3.7% Interest-bearing DDA's Savings deposits Time deposits Repos Noninterest bearing DDA's 22
Slide 23: Loans vs. Deposits
Loans vs. Deposits (Average Quarterly Balances) 95.0% $5,000,000 90.0% $4,500,000 $4,000,000 85.0% $3,500,000 80.0% $3,000,000 75.0% $2,500,000 70.0% $2,000,000 65.0% $1,500,000 60.0% $1,000,000 $500,000 55.0% $- 50.0% 12/31/18 Qtr 12/31/19 Qtr 12/31/20 Qtr 12/31/21 Qtr 9/30/22 Qtr Loans Deposits Lo
Slide 24: Net Interest Income
Net Interest Income Net Interest Notes Income Fed Fund Target was 2.50% thru August 1 2019 $161.4 MM then dropped to 1.75 by year-end 2nd Quarter 2019 $40.9 MM Fed Fund Target was 2.50% throughout Fed Fund Target started at 1.75 and plunged 2020 $154.6 MM to 25bp in March due to Covid 2021 $155.6 MM
Slide 25: CHCO: Variable Priced Assets
CHCO: Variable Priced Assets • Home Equity Loans tied to Prime $183 M • Commercial Loans - Prime/LIBOR $917 M • Variable Rate Investments $ 55 M • Off-Balance Sheet Hedge $150 M • Cash held at Federal Reserve @ 9/30/22 $225 M • Total $1.5 B Roughly 25% of assets reprice with increases in Fed Funds,
Slide 26: City National Loan Markets
City National Loan Markets CHARLOTTE 26 Size of Bubbles are representative of City’s loan distribution
Slide 27: Diversified Commercial Loan Portfolio
Diversified Commercial Loan Portfolio Percent of Commercial Key Loan Markets Portfolio West Virginia & Eastern Kentucky – dating to 1870 51% Virginia/Eastern Panhandle Markets – acquired 15% 2012/13 Lexington, KY – acquired 2015 18% Columbus, OH & Pittsburgh PA 14% 27
Slide 28: Provision and PPP Loans
Provision and PPP Loans • Provision/Recoveries – 2020 $10.7 million Provision – 2021 $3.2 million RECOVERY – 2022 ytd $0.03 million RECOVERY • PPP Revenue – 2020 $1.6 million – 2021 $4.0 million – 2022 $0.3 million 28
Slide 29: Asset Quality: At Historic Highs
Asset Quality: At Historic Highs • Non-Performing Assets (18bp) – – Lowest in 20+ years • Past-Due Loans (14bp) – Lowest in 20+ years • OREO ($1.0MM) – Lowest in 15+ years • Net Consumer Loan Charge-offs – Lowest in 15+ years Average Provision Expense 2005-2021 21bp 29
Slide 30: Net Charge-off Details: 2012-2022
Net Charge-off Details: 2012-2022 $8,000 Average Net Charge-Offs/Year: $7,000 Commercial $1.9 M 45% Retail $1.6 M 37% $6,000 NSF $0.8 M 18% Total $4.3 M $5,000 $4,000 $3,000 $2,000 $1,000 $0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 ($1,000) YTD ($2,000) Commercial Retail NSF related 30
Slide 31: Cash Dividends/Share Declared
Capital Management: A Long-term Core Competency Cash Dividends/Share Declared & Dividend Payout Ratio $2.40 70% Cash Dividends/Share Declared $2.20 60% Dividend Payout Ratio 50% $2.00 40% $1.80 30% $1.60 20% $1.40 10% $1.20 0% 2015 2016 2017 2018 2019 2020 2021 Dividends/Share Dividend Payout Ratio
Slide 32: Share Activity
Share Activity: City’s strong capital and high profitability have allowed aggressive share repurchases $70 760,033 800,000 $60 700,000 572,917 600,000 $50 500,000 $40 Millions 400,000 $30 290,491 260,674 255,421 300,000 $20 200,000 $10 $63.68 $77.20 $78.36 100,000 $69.78 $74.54 $0 0 2018 2019 2020 2
Slide 33: Acquisition Strategy
Acquisition Strategy: Buy banks that make shareholders richer, not the CEO. City’s exceptional performance is due to: • HAVING A deep and profitable retail banking franchise • NOT unnecessarily DILUTING that franchise • Remaining a community bank focused on: • Exceptional customer service (proven, n
Slide 34: Acquisition territory
Acquisition territory: Small Community Banks will struggle with lower net interest income, asset quality challenges, lack of scale, and limited liquidity for their stock. Underperforming small banks may be interested in joining a stronger partner rather than to continue to perform poorly. City is we
Slide 35: Acquisition of Citizens Commerce Bancshares: Transaction Rationale & Highlights
Acquisition of Citizens Commerce Bancshares, Inc. Transaction Rationale & Highlights • Strategic acquisition of Kentucky-based community bank Franchise • Natural extension of branch network in the Lexington, Kentucky MSA Strengthening • Combined Central Kentucky Branches - 12 Strategic • Consistent
Slide 36: Overview of Key Transaction Terms
Overview of Key Transaction Terms Transaction Value¹: $61.0 million, or $15.43 per Citizens Commerce share Structure: 100% stock consideration with a fixed exchange ratio of 0.1666x Pro Forma Ownership: 96% City Holding / 4% Citizens Commerce Implied Market Premium2: 97% Price / Tangible Book Value2
Slide 37: Pro Forma Branch Footprint
Pro Forma Branch Footprint CHCO Branches (94) Proximity of CCVS Branches to CCVS Branches (5) CHCO Branches: 1-mile 20% 5-mile 40% 10-mile 80% Source - S&P Global MI.
Slide 38: Bottom Line: CHCO is a Simple Model
Bottom Line: CHCO is a Simple Model Incredible Core Banking Franchise Well Managed (Expenses, Asset Quality, Etc.) Disciplined Growth Strategy focused on shareholders, customers and community service Highly Profitable Allows Strong Dividends & Accretive Share Repurchases 38
Slide 39: Why is CHCO Highly Valued?
Why is CHCO Highly Valued? • Proven Conservative Lender • Exceptionally Strong Retail Franchise • Acquisitions are Accretive and Strategic • Profits are Strong and Stable – In low interest rate environments, fee income and efficiency matter: City is exceptional at both 39
Slide 40: CHCO represents excellent value and stability
CHCO represents excellent value and stability • Pricing Metrics*: – Price to Book 273% – Price to Tangible Book 347% – Price to 2023 Projected Earnings** 14.2x • Dividend Yield 2.58% • Div Payout Ratio** 37% • Tangible Capital/Tangible Assets *** 7.41% • Institutional Ownership 68% • Average Daily V
Slide 41: Questions?
• Questions? 41
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