City Holding Company · NASDAQ:CHCO
City — Sandler O'Neill Partners Conference June 2022
39 slides from City's conference presentation, Jun 2, 2022
Slide 1: Sandler O'Neill Partners June 2, 2022
Sandler O’Neill Partners June 2, 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 $6 billion • Branches 94 • FTE 897 • Market Cap $1.2 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 • Grow
Slide 4: CHCO: A perennial high-performing bank
CHCO: A perennial high- performing bank ROA 4 Source - S&P Global MI. Peer data as of March 31, 2022.
Slide 5: 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 5
Slide 6: Total Shareholder Return
Total Shareholder Return 2/1/05-2/1/22 CHCO vs UBSI, WSBC, TFC, AUB,HBAN, PEBO,FCF, STBA 6
Slide 7: Challenges and Opportunities
Challenges and Opportunities • Challenges – Deposit Customers: Already high market share in slow-growth demographic markets – Geographic markets are somewhat “loan challenged” – Prior years had ALLL recoveries and PPP loans – Regulatory Environment reflects uninformed activism • Opportunities – Inte
Slide 8: Deposit Franchise mostly in slow-growth WV and E. KY
Deposit Franchise mostly in slow-growth WV and E. KY Key Deposit Markets Deposits West Virginia & E. Kentucky 75% – dating to 1870 New Markets 25% 8
Slide 9: City National Deposit Markets
City National Deposit Markets 3rd Branch Share Winchester VA & WV Panhandle $8.1 Billion Major Competitors: TFC, UBSI, WFC 1st Branch Share & 2nd Deposit Share (14%) In Charleston MSA/Huntington MSA; $15.1 Billion Major Competitors: TFC, JPM, HBAN, UBSI T2nd Branch Share & 4th Deposit Share (13%) in
Slide 10: Deposit Franchise: One key to City's enviable success
DEPOSIT FRANCHISE One key to City’s enviable success • 94 Branches 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 $12,800 (based upon 2016 Federal Reserve Survey of Consu
Slide 11: Market Position
Market Position City’s biggest markets have strong distribution, large share, and high profitability Deposits Deposit Branch Branch Market Population ($mm) Share Branches Share Rank Charleston/Huntington/ Ashland MSA 611,000 $2,129 14% 36 19% 1st Beckley/Lewisburg WV 162,000 $913 29% 16 26% 1st Winc
Slide 12: Market Demographics
Market Demographics Newer markets have high population growth and higher incomes Projected Projected Population Median Change in Change Household HHLD Income Market Population 2020-2025 Income 2020-2025 Charleston/Huntington/ Ashland MSA 611,000 (2.3%) $46,000 4.5% Beckley/Lewisburg 162,000 (2.9%) $
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 $807 14.0% 13 28.3% 40.3% Huntington, WV 499 12.5% 10 16.4% 27.9% Ashland, KY 566 23.3% 12 22.6% 41.5% Beckley, WV 530 24.0% 9 28.1% 32.4% Lewi
Slide 14: 2021 Debit Card Revenues
2021 Debit Card Revenues Debit Card Assets Revenues Summit $3.6 Billion $5.9 million City $6.0 Billion $27 million Stockyard $6.9 Billion $17 million Summit – 2021 Revenues, Source: Press Release City – 2021 Revenues, Source Annual Report Stockyards – est. based upon $4.1mm in 1st Q 2022 from Press
Slide 15: Internal DDA Growth
Internal DDA Growth New DDA Net Growth in DDA Year Accounts 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 only for 6 months in 2020 due to COVID-19 15
Slide 16: Age Distribution of Customer Base 2021
Age Distribution of Customer Base 2021 16
Slide 17: City National Loan Markets
City National Loan Markets CHARLOTTE 17 Size of Bubbles are representative of City’s loan distribution
Slide 18: Diversified Commercial Loan Portfolio
Diversified Commercial Loan Portfolio Percent of Commercial Key Loan Markets Portfolio West Virginia & Eastern Kentucky – dating to 1870 54% Virginia/Eastern Panhandle Markets – acquired 15% 2012/13 Lexington, KY – acquired 2015 16% Columbus, OH & Pittsburgh PA 14% 18
Slide 19: Provision and PPP Loans
Provision and PPP Loans • Provision/Recoveries – 2020 $10.7 million Provision – 2021 $3.2 million RECOVERY – 2022 ytd $0.8 million RECOVERY (associated with real estate loan recovery from 2013 acquisition) • PPP Revenue – 2020 $1.6 million – 2021 $4.0 million – 2022 ytd $0.4 million 19
Slide 20: Overdraft Facts
Overdraft Facts • Regulation E – 24% of City customers have “OPTED IN”. (61% paid no overdraft fees in 2019. (They “Opt-In” to protect against the possible emergency needs) – 13% of new DDA customers “OPTED IN” in 2019 – More existing customers “OPT-IN” than “OPT- OUT” – Overdrafts occur due to: ▪ D
Slide 21: Overdraft Mitigation at City
Overdraft Mitigation at City Communication • Daily letters go to every customer who incurs an overdraft of insufficient fund charge. • Quarterly letters are sent by 94 branch managers to every customer experiencing more than 6 OD’s of NSF’s in the last quarter offering assistance. • Monthly statemen
Slide 22: 2022 Opportunity: Rising Rates?
2022 Opportunity: Rising Rates? Immediate Basis Point Estimated Increase or Change in Interest Decrease in Net Income Rates between 1-12 months +400 Bp +7.8% +300 Bp +9.7% +200 Bp +9.0% +100 Bp +5.5% • As reflected in 3/31/2022 10Q • Rate risk shown relative to Projected NI / EPS for 2022 • Model as
Slide 23: Variable Priced Assets as of 3/31/2022
Variable Priced Assets as of 3/31/2022 • Home Equity Loans tied to Prime $180 M • Commercial Loans – tied to Prime/LIBOR $970 M • Variable Rate Investments $ 55 M • Off-Balance Sheet Hedge tied to Fed Funds $150 M • Cash at Fed Reserve tied to Fed Funds $540 M • Total $1.9 B 23
Slide 24: Asset Quality: At Historic Highs
Asset Quality: At Historic Highs • Non-Performing Assets (18bp) – – Lowest in 20+ yrs • Past-Due Loans (19bp) – Lowest in 20+ years • OREO (1.1MM) – Lowest in 15+ years • Net Consumer Loan Charge-offs – Lowest in 15+ years Average Provision Expense 2005-2021 21bp 24
Slide 25: Net Charge-off Details: 2012-2021
Net Charge-off Details: 2012-2021 25
Slide 26: Provision Expense
Provision Expense 0.70% 0.60% 0.50% 0.40% 0.30% 0.20% 0.10% 0.00% \) -0.10%S aS -0.20% City Holding Company
Slide 27: Analyst Expectations
Analyst Expectations 2022 Analyst 2023 Analyst 2020 2021 2022 YTD Estimates Estimates Net Int $154.6 MM $155.6MM $37.9MM $160.3MM $173.1MM Income Provision/ $10.7 MM $(3.2) MM $(0.8)MM $3.0MM $6.2MM (Recovery) Non-Int $82.7 MM $69.6MM $17.4MM $70.4MM $70.4MM Income ($64.8 MM w/o Visa Sale) Non-Int $
Slide 28: Market Disruptions
Market Disruptions Provide Strong Growth Opportunities • Market: St. Albans WV • In 2017, there were 4 banks with branches in this market • In 2018 one closed • In 2020 another closed 28
Slide 29: Capital Management: A Long-term Core Competency
Capital Management: A Long-term Core CompetencyDeclared Cash Dividends/Share & Dividend Payout Ratio 29
Slide 30: Share Activity
Share Activity: City’s strong capital and high profitability have allowed aggressive share repurchases 30
Slide 31: 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 32: Acquisition territory
Acquisition territory: Small Community Banks may 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 wel
Slide 33: 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 33 Allows Strong Dividends & Accretive Share
Slide 34: 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 34
Slide 35: CHCO represents excellent value and stability
CHCO represents excellent value and stability • Pricing Metrics*: – Price to Book 195% – Price to Tangible Book 240% – Price to 2022 Projected Earnings** 14.7x • Dividend Yield 2.89% • Div Payout Ratio** 43% • Tangible Capital/Tangible Assets *** 8.75% • Institutional Ownership 66% • Average Daily V
Slide 36: Questions?
• Questions? 36
Slide 37: Non-interest income is branch driven
Non-interest income is branch driven (and in turn driven by franchise depth): Source - S&P Global MI. Peer data as of December 31, 2021. Sample of reporting publicly traded banks and thrifts with assets between $1 and $10 billion for each period, excluding investment gains/(losses). 37
Slide 38: Customer Transactions by Channel
Impact of Technology? Customer Transactions by Channel Number of Accounts CAGR 3.6% Total Transactions CAGR 6.1% 38
Slide 39: Low despite a large number of small branches
low despite a large number of small branches • Data as calculated using S&P Global MI definition. 39 • Peer data as of March 31, 2021.
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