City Holding Company · NASDAQ:CHCO
City — Davidson Midwest Bank Tour (November 2019)
32 slides from City's conference presentation, Nov 20, 2019
Slide 1: City Holding Company – Davidson Midwest Bank Tour
City Holding Company Davidson Midwest Bank Tour Chicago November 20, 2019
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 res
Slide 3: Snapshot
Snapshot • Total Assets $5.0 billion • Branches 95 • FTE 916 • Market Cap $1.3 billion • Markets: Stable, Slow growing, & less competitive • Business Lines: Retail, Commercial, Investment Management • Asset Quality: Demonstrated strong track record • Performance: Long record as a high performer • Gr
Slide 4: Snapshot: City National Markets
Snapshot: City National Markets 3rd Branch Share Winchester VA & WV Panhandle $6.2 Billion Major Competitors: BBT, UBSI, WFC 1st Branch Share & 3rd Deposit Share (14%) In Charleston MSA/Huntington MSA; $12.7 Billion Major Competitors: BBT, JPM, HBAN, UBSI T1st Branch Share & 4th Deposit Share (13%)
Slide 5: West Virginia: A Slow Growth, Rural/Small Town Market
West Virginia: A Slow Growth, Rural/Small Town Market WV Compared to: Source Employment 737,000 727,000 US Bureau of Labor (Sept 2019) (Low: Mar 2015) Statistics Unemployment Rate 4.7% 8.8% US Bureau of Labor (US – Sept 19 – 3.5%) (September 2019) (High: Oct 2010) Statistics Coal Employment 14,000 2
Slide 6: Market Position
Market Position City’s biggest markets have strong distribution, large share, and high profitability Deposits Deposit Branch Branch Market Population ($mm) Share Branches Share Rank Charleston/Huntington /Ashland MSA 611,000 $1,729 14% 36 20% 1 Beckley/Lewisburg WV 162,000 783 30% 16 25% 1 Wincheste
Slide 7: Market Demographics
Market Demographics Newer markets have high 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 3.8% Winchest
Slide 8: Deposit Franchise
DEPOSIT FRANCHISE One key to City’s enviable success • Branches 95 • Average Deposits per Branch $42 MM • Average Households per Branch 1,900 • Average Deposit Share 13.7% • Average Household Share* 27% • Average DDA Balance $6,494** • Average Business DDA $21,100 * - Excludes Lexington-Fayette KY R
Slide 9: Non-interest income is branch driven
Non-interest income is branch driven: $30,000 40.0% 35.0% $25,000 30.0% $20,000 25.0% $15,000 20.0% 15.0% $10,000 10.0% $5,000 5.0% $0 0.0% 2015 2016 2017 2018 YTD 9/30/19 Bankcard Revenues Service Charges Investment Management CHCO - % of Operating Revenues Peer - % of Operating Revenues Sample of
Slide 10: Franchise Strength: Debit Cards
Franchise Strength: Debit Cards Card Revenue to Deposits CBSH Missouri $0.73 MSL Louisiana $0.52 CHCO West Virginia $0.47 PEBK North Carolina $0.43 KTYB Kentucky $0.43 OVBC Ohio $0.42 USB $0.40 / $0.80 RF $0.40 / $0.80 CMA $0.40 / $0.80 THFF Indiana $0.38 FCBC Virginia $0.38 Caveat: PNC $0.37 / $0.7
Slide 11: Efficiency Ratio
Efficiency Ratio low despite a large number of small branches 70.0% 65.0% 60.0% 55.0% 50.0% 45.0% 2015 2016 2017 2018 2019 Q3 CHCO $1B - $5B • 2015 Efficiency Ratio for CHCO excludes Gain from Sale of Insurance Division 11 • Data as calculated using S&P Global MI definition.
Slide 12: Diversified Commercial Loan Portfolio
Diversified Commercial Loan Portfolio Percent of Commercial Key Loan Markets Portfolio West Virginia & Eastern Kentucky – dating to 1870 48% Virginia/Eastern Panhandle Markets – acquired 15% 2012/13 Charlotte LPO – de novo 2006 10% Lexington, KY – acquired 2015 17% Columbus, OH & Pittsburgh PA 10% 1
Slide 13: Commercial loan growth
Commercial loan growth: Success achieved due to community bank orientation, strong team, strong underwriting, and exposure to new higher growth markets. $2,000 $1,750 $1,500 $1,250 $1,000 $750 $500 2015 2016 2017 2018 2019 CRE C&I 13
Slide 14: Retail loans
Retail loans Primarily residential related – demonstrates long-term steady and predictable growth; Recent challenges due to flat yield curve $2,000 $1,750 $1,500 $1,250 $1,000 $750 $500 2015 2016 2017 2018 2019 Residential Real Estate Home Equity Consumer 14
Slide 15: A long history of strong asset quality at CHCO
A long history of strong asset quality at CHCO 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% 2015 2016 2017 2018 2019 Q3 CHCO NPA/Assets Industry Source: FDIC, All Insured Depository Institutions Peer data as of June 30, 2019 15
Slide 16: Net Charge-off trends
Net Charge-off trends $8,000 0.6% $7,000 0.5% $6,000 $5,000 0.4% $4,000 0.3% $3,000 0.2% $2,000 $1,000 0.1% $0 2015 2016 2017 2018 YTD 9/30/19 0.0% ($1,000) ($2,000) -0.1% Commercial Retail NSF related CHCO Industry Source: FDIC, All Insured Depository Institutions 16 Peer data as of June 30, 2019
Slide 17: Deposit growth opportunity
Deposit growth opportunity: CHCO has many small deposit transaction relationships; Peers tend to have larger commercial & public deposits; So liquidity is readily available as needed. Branches Deposits Deposits/Branch CHCO 95 $ 4.0 B $42 million BBT 56 $ 5.7 B $102 million UBSI 35 $ 3.6 B $102 milli
Slide 18: City's Deposit Franchise provides access to low cost and stable funding
City’s Deposit Franchise provides access to low cost and stable funding 4% 2% Equity 13% Non Interest DDA 13% Interest DDA Savings MMS 16% CDs Jumbos (>$100K) 15% Customer Repos Other 10% 18% 9% Key Deposit Markets Deposits WV & Eastern KY (dating to 1870’s) 76% New Markets 24% 18 Data: September 30
Slide 19: EPS & ROA
CHCO: A perennial high-performing bank $5.50 EPS & ROA 2.00% $5.00 1.80% $4.50 1.60% $4.00 1.40% $3.50 1.20% $3.00 1.00% $2.50 0.80% $2.00 0.60% 2015 2016 2017 2018 2019 Q3 EPS EPS excl M&A Expenses CHCO CHCO excl M&A expenses $1B - $5B 2019 Q3 EPS annualized based on results through September 30, 2
Slide 20: Capital Management: A Long-term Core Competency
Capital Management: A Long-term Core Competency • CHCO generates more capital than average • Allows CHCO to steadily increase TCE while balancing shareholder value: – History of increasing cash dividends – Active share repurchase program – Cash acquisition 20
Slide 21: Cash Dividends/Share Declared & Dividend Payout Ratio
Cash Dividends/Share Declared & Dividend Payout Ratio $2.30 55% Cash Dividends/Share Declared $2.10 50% Dividend Payout Ratio $1.90 15.2% 7.5% $1.70 45% 7.0% $1.50 5.0% 2.4% 40% $1.30 $1.10 35% 2015 2016 2017 2018 2019 Q3 Dividends/Share Dividend Payout Ratio 2019 projected dividend payout ratio (41
Slide 22: Share Activity
Share Activity: City’s strong capital and high profitability have allowed aggressive share repurchases $30,000 $25,000 440,604 $20,000 $15,000 290,491 260,674 $10,000 231,132 $5,000 107,662 150,385 $0 2015 2016 2017 2018 2019 Q3 Repurchase $ Issuance $ Labels represent shares repurchased or issued.
Slide 23: Customer Service: Community Bank Style!
Customer Service: Community Bank Style! 2018 2019 JD Power: Highest Customer Satisfaction in 23 North Central District (IN,OH,KY,MI,WV)
Slide 24: Acquisition Choices: the Tortoise or Hare?
Acquisition Choices: the Tortoise or Hare? • Tortoise Markets – Slow Growth Markets – Less Competitive (and more profitable) – Stable Deposit base – Better Dividends & Share Repurchase – Comparable Total Shareholder Return to: • Urban/High-Growth Markets – Faster Growth – More Competitive (and less
Slide 25: Acquisition philosophy
Acquisition philosophy: • Actively looking for strong franchises • Generally $100MM to $1B • Most likely in WV, VA, KY • Less acquisitive than peers because City: • Insists that combinations be accretive • Have compatible cultures • Have a strategic rationale 25
Slide 26: Acquisition territory: Requires Willing Sellers
Acquisition territory: But – Requires Willing Sellers…See slides which follow! 26
Slide 27: Acquisition History (since 2005)
Acquisition History (since 2005): • Classic Bancshares – $340 million. Allowed City to solidify position in Huntington WV/Ashland KY MSA. Completed in May 2005 • Virginia Savings Bancorp - $130 million. City expanded its branch network in the Eastern Panhandle of WV and expanded into Northern VA. Co
Slide 28: Opportunities from Poage & Farmers Acquisitions
Opportunities from Poage & Farmers Acquisitions • Enhanced presence in Lexington KY MSA • Commercial Loan Office – Cincinnati OH • Low Loan/Deposit Ratio allows expansion of mortgage lending across franchise • Expanded Wealth Management opportunities • Allows City to make Larger Loans • Positions Ci
Slide 29: Successful because
Successful because: • In-market: City was known and respected • Banks were Small (meaning inefficient) • Small in-market acquisitions mean significant cost savings of 45-50% • Highly Accretive • Both franchises had strong customer franchises • Good Talent in slow-growth markets • Good Currency • Dis
Slide 30: Sale of Virginia Beach Branch to Select Bank & Trust
Sale of Virginia Beach Branch to Select Bank & Trust • Rationale: – 200 miles from City’s closest branch – Single location in large urban market • Transaction: – CHCO kept: Loans – Select Bank got: Deposits, Facility, Staff – Completed: June 28, 2019 30
Slide 31: 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, and community service Highly Profitable Allows Strong Dividends & Accretive Share Repurchases 31
Slide 32: CHCO represents excellent value and stability
CHCO represents excellent value and stability • Pricing Metrics*: – Price to Book 200% – Price to Tangible Book 246% – Price to 2020 Projected Earnings** 15.4x • Dividend Yield 2.85% • Div Payout Ratio** 44% • Tangible Capital/Tangible Assets *** 10.9% • Institutional Ownership 68% • Average Daily V
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