City Holding Company · NASDAQ:CHCO
City — Keefe, Bruyette & Woods New York Conference 2012
48 slides from City's conference presentation, Aug 1, 2012
Slide 1: New York Conference July 31, 2012
New York Conference July 31, 2012 Keefe, Bruyette & Woods
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 Company at a glance
• Total Assets $2.9 bil • Branches 73 • FTE 831 • Market Cap $498 mil • Institutional Ownership 63% • Average Daily Volume $1.7 mil Date: Jul 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: Expansion into Virginia: May 2012
Expansion into Virginia: May 2012
Slide 8: Virginia Savings Bank
• Closed May 31, 2012 • Systems Conversion completed July 6, 2012 • Issued 240,000 shares of CHCO common stock and paid cash of $4.7 million • Projected Population growth of 5.5% over 5 years is much faster than CHCO’s historical footprint • Added: – 5 branches in Virginia – $73 million in loans – $
Slide 9: Market Position
Population CHCO Deposits Branches Branch Share Deposit Share Charleston MSA 305,000 $575 mil 17 1 st - 17% 10% Huntington /Ashland MSA 285,000 $366 mil 13 1 st - 12% 9% Beckley 80,000 $322 mil 7 1 st - 25% 27% Lewisburg 35,000 $179 mil 6 1 st - 33% 25% Eastern Panhandle 165,000 $173 mil 7 2 nd - 13%
Slide 10: The key to City's success: an enviable deposit franchise
• Branches 73 • Average Deposits per Branch $32.8 MM • Average Households per Branch 2,200 • Average Deposit Share 12.3% • Average Household Share 27% The key to City’s success: an enviable deposit franchise
Slide 11: Low cost and stable funding
Data: June 30, 2012 Low cost and stable funding:
Slide 12: Net interest margin
Peer Data as of December 31, 2011 3.94% March 2008 thru June 2011: NIM supported by Interest Rate Floors
Slide 13: Interest rate risk positioning
Immediate Basis Point Change in Interest Rates Estimated Increase or Decrease in Net Income between 1-12 months +400 Bp +22.2% +300 Bp +15.9% +200 Bp 9.8% +100 Bp 2.2% Data: June 30, 2012 CHCO is well positioned with respect to interest rate risk:
Slide 14: Strong deposit franchise drives top decile non-interest revenue
*As of June 30, 2012. Non-interest income excludes investment gains/(losses) Strong deposit franchise drives top decile non-interest revenue:
Slide 15: Non-interest income is branch driven
2007 2008 2009 2010 2011 YTD 2012 Electronic Fee Income $7.9 $8.6 $9.0 $9.9 $11.1 $6.2 All Other Service Fee Income $36.5 $37.4 $36.0 $30.1 $27.0 $12.5 Insurance 4.1 4.2 5.6 5.5 5.9 3.3 Investment Management 2.0 2.2 2.3 2.8 3.1 1.7 BOLI 2.5 2.9 3.3 3.4 3.2 1.5 Non-interest income is branch driven:
Slide 16: City's deposit franchise
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 6.5 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
Slide 17: 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 18: 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 19: 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 20: Loan portfolio weighted toward retail
Sample of 282 publicly traded banks and thrifts with assets between $1-$10 billion as of March 31, 2012 Loan Portfolio weighted toward Retail But - CHCO’s markets have been more stable As of June 30, 2012
Slide 21: Loan portfolio composition trends
Residential Home Equity _ Consumer ==CMRE cal June-12 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Gity trolding Company
Slide 22: Charge-off trends
Source: FDIC, All Insured Depository Institutions Peer data as of March 31, 2012 Charge-off trends:
Slide 23: Non-performing assets & OREO
Source: FDIC, All Insured Depository Institutions Peer data as of June 30, 2012 Non-performing assets & OREO
Slide 24: Commercial loans
Commercial Loans 0.5 MM Real Estate Loans $2.4 MM
Slide 25: 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 26: A High Performing Bank
City Ranked #3 of Top 150 US Banks in 2010 by Bank Director A High Performing Bank for shareholders & employees :
Slide 27: CHCO consistently strong performance
2008 2009 2010 2011 YTD 2012* 2011 Regional Peer Median Reported ROA 1.12% 1.63% 1.47% 1.51% 1.45% 1.07% - 91 st %ile ROATCE 11.4% 18.0% 15.1% 15.7% 15.3% 13.2% - 82 nd %ile Tangible Common Equity/TA 8.83% 9.78% 10.01% 9.37% 9.04% 9.11% - 55 th %ile NIM 4.64% 4.18% 4.06% 3.89% 3.94% 3.91% - 45 th %i
Slide 28: Growth: positioned for reasonable growth
• Commercial • Retail • Insurance • Trust & Investment Management Growth: CHCO is positioned to achieve “reasonable growth” in its core franchise
Slide 29: Growth chart
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 30: 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: $64.5 million • Debt Service Coverage * 1.53x • Loan to Value* 71% • Weighted Average Rate 4.57% • Average Lo
Slide 31: Deposit growth opportunity
Branches Deposits Deposits/Branch CHCO 73 $ 2.4 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 32: Growth: expanding retail distribution
Source: SNL Growth: Expanding retail distribution to capture additional retail households
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Slide 36: New Locations
• Relocated North Lewisburg WV Office • Mortgage Production Office in Morgantown WV New Locations
Slide 37: Average 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 38: 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 39: Trust AUM: Strong growth
Trust AUM: Strong growth CAGR (Dec 31, 2004-June 30, 2012) over 12.4%
Slide 40: CHCO: Capital flexibility
• Tangible common equity at 6/30/12: 9.04% • 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 41: 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 iin 2005 2006 2007 2008 2009 2010 2011 Jun-12 Gity Holding Company
Slide 42: Shares outstanding and shorted at June 30, 2012
At June 30, 2012: 2,326,824 shares shorted 14,820,633 shares outstanding Gity trolding Company
Slide 43: 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 44: 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 45: Acquisition territory
Acquisition territory:
Slide 46: Management team
TITLE EXPERIENCE AGE JOINED CEO PPLS; CHCO CFO; PHD 50 2001 EVP - Retail PPLS 56 2001 EVP - Commercial One Valley; BB&T, CPA 62 2004 CFO Public Accounting, CPA 47 2005 CAO/CIO City National Bank 48 1989 SVP - Branches BB&T 44 2001 SVP - CCO United Bankshares, CPA 39 1998 SVP - CRO BB&T 56 2001 SVP C
Slide 47: 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 48: CHCO represents good value and stability
• Pricing Metrics *: • Price to Book: 153% • Price to Tangible Book: 192% • Price to 2012 Projected Earnings** 12.2x • Dividend Yield 4.1% • Div Payout Ratio (First Call)** 52% • Tangible Capital/Tangible Assets 9.04% • Institutional Ownership 63% * Based on Price of $33.76 (7/23/12) ** Based on ana
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