City Holding Company · NASDAQ:CHCO
City — Davidson 2023 Financial Institutions Conference
43 slides from City's conference presentation, May 16, 2023
Slide 1: City Holding Company – Davidson 2023 Financial Institutions Conference
City Holding Company Davidson 2023 Financial Institutions Conference May 16-17, 2023
Slide 2: Forward looking statements
Forward looking statements This Annual Report on Form 10-K contains certain forward-looking statements that are included pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements express only management's beliefs regarding future resul
Slide 3: Snapshot
Snapshot • Total Assets $6.2 billion • Branches 99 • FTE 958 • Market Cap $1.3 billion • Markets: Stable, Slow growing, & less competitive • Customers Robust retail customer base • Business Lines: Retail, Commercial, Investment Management • Asset Quality: Demonstrated strong track record • Performan
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% 2016 2017 2018 2019 2020 2021 2022 2023 YTD CHCO (adjusted for M&A exp & VISA gain) $1B - $10B 4 Source - S&P Global MI. Peer data as of March 31, 2023.
Slide 5: Total Shareholder Return 1/1/06-12/31/22
Total Shareholder Return 1/1/06-12/31/22 CHCO vs UBSI, WSBC, TFC, AUB, HBAN, PEBO, FCF, STBA 5
Slide 6: Total Shareholder Return 1/1/23-5/12/23
Total Shareholder Return 1/1/23-5/12/23 CHCO vs UBSI, WSBC, TFC, AUB, HBAN, PEBO, FCF, STBA 6
Slide 7: JD Power: Highest Customer Satisfaction
JD Power: Highest Customer Satisfaction North Central Region, 2018, 2019, 2020 and 2022 7
Slide 8: Challenges and Opportunities
Challenges and Opportunities • Challenges – Increases in deposit rates – Geographic markets are considered “loan challenged” – Deposit Customers: Already high market share in slow-growth demographic markets • Opportunities – Asset Quality – Competitor Behavior (driving customers away) – Acquisition
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 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% 10
Slide 11: Deposit Franchise: One key to City's enviable success
DEPOSIT FRANCHISE One key to City’s enviable success • 99 Branches Among Top 100 Banks • Average Deposits per Branch $52 MM • Average Households per Branch 2,000 • Average DDA Balance $12,170** • Average Business DDA $44,100 ** - National Average of $13,440 (based upon 2016 Federal Reserve Survey of
Slide 12: Uninsured Deposit Data
Uninsured Deposit Data (as of & for the quarter ended March 31, 2023) Average Balance By Deposit Type (in 000’s) Uninsured Percent Noninterest-Bearing Demand Deposits $1,420,676 19% Interest-Bearing Deposits Demand Deposits 1,234,981 8% Savings Deposits 1,376,317 11% Time Deposits 902,583 14% Total
Slide 13: Internal DDA Growth
Internal DDA Growth New DDA Net Growth in % Increase in Year Accounts DDA Accounts DDA Accounts 2018 30,400* 4,310* 2.2% 2019 32,040 3,720 1.7% 2020 30,360 6,740 3.0% 2021 32,800 8,860 3.8% 2022 28,440 4,540 1.9% 2023 YTD 8,470* 1,640* 2.8%** Household Growth = 2.5% U.S. Population Growth: 0.6% * -
Slide 14: Market Position
Market Position City’s biggest markets have strong distribution, large share, and high profitability Deposits Deposit Branch Branch Market Population ($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 15: 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%) $42,000 3.
Slide 16: City's Exceptional Retail Strength Depends on Branch Distribution
City’s Exceptional Retail Strength Depends on Branch Distribution House- Deposits Deposit Branch Hold Market ($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 $466 28.8% 7 26.9% 57.3%
Slide 17: Market Disruptions
Market Disruptions Provide Strong Growth Opportunities • Market: St. Albans WV $140 6,000 4,926 $120 5,000 4,262 $100 4,068 3,723 3,898 4,000 4,436 $80 3,000 Millions $102 $120 $60 $102 2,000 $40 $84 $72 1,000 $20 $62 $0 0 2017 2018 2019 2020 2021 2022 City's Branch Deposit City HHLDs • In 2017, the
Slide 18: Age Distribution of Customer Base
Age Distribution of Customer Base 2022 All City Customers New City Customers 20.0% 18.0% 2022 18.0% 17.4% 23.7% 25.0% 16.0% 15.1% 14.1% 14.0% 20.0% 12.4% 17.3% 12.0% 11.3%11.7% 16.0% 14.6%14.2% 15.0% 10.0% 8.0% 10.0% 8.6% 6.0% 5.7% 4.0% 5.0% 2.0% 0.0% 0.0% <24 25-34 35-44 45-54 <24 25-34 35-44 45-54
Slide 19: 2022 Debit Card Revenues
2022 Debit Card Revenues Debit Card Assets Revenues Summit $3.9 Billion $6.2 million City $6.0 Billion $27 million Stockyard $7.5 Billion $19 million Peoples $7.2 Billion $21 million Wesbanco $16.9 Billion $20 million 19
Slide 20: 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 21: 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 22: City's strong deposit franchise provides NIM strength
City’s strong deposit franchise provides NIM strength in higher rate environments 4.75% 4.50% 4.25% 4.00% 3.75% 3.50% 3.25% 3.00% 2.75% 2.50% CHCO $1B to $10B Peer Source - S&P Global MI. Peer Data as of March 31, 2023 22
Slide 23: 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 Fed Fund Target started at 1.75% and 2020 $154.6 MM plunged to 25bp in March due to Covid 2021 $155.6 MM Fed F8nd Target was 0.25% throughout 2022 $180.0 MM Fed Funds
Slide 24: Deposit Costs
Deposit Costs 1.50% 6.00% 5.00% 1.00% 4.00% 3.00% 0.50% 2.00% 1.00% 0.00% 0.00% 12/31/18 12/31/19 12/31/20 12/31/21 9/30/22 12/31/22 3/31/2023 Qtr Qtr Qtr Qtr Qtr Qtr Qtr Interest Bearing Deposits Fed Funds 24
Slide 25: How City is Funded at March 31, 2023
How City is Funded at March 31, 2023 26.2% 25.0% 5.4% 25.7% 17.7% Interest-bearing DDA's Savings deposits Time deposits Repos Noninterest bearing DDA's 25
Slide 26: CHCO: Variable Priced Assets
CHCO: Variable Priced Assets • Home Equity Loans tied to Prime $187 M • Commercial Loans - Prime/LIBOR $913 M • Variable Rate Investments $ 55 M • Off-Balance Sheet Hedge $150 M • Cash held at Federal Reserve @ 3/31/2023 $226 M • Total $1.5 B Roughly 25% of assets reprice with increases in Fed Funds
Slide 27: Loans vs. Deposits
Loans vs. Deposits (Average Quarterly Balances) 95.0% $5,000,000 $4,500,000 90.0% $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 $1,000,000 60.0% $500,000 55.0% $- 50.0% 12/31/18 12/31/19 12/31/20 12/31/21 9/30/22 12/31/22 3/31/23 Qtr Qtr Qtr Qtr Qtr
Slide 28: City National Loan Markets
City National Loan Markets CHARLOTTE 28 Size of Bubbles are representative of City’s loan distribution
Slide 29: Diversified Commercial Loan Portfolio
Diversified Commercial Loan Portfolio Percent of Commercial Key Loan Markets Portfolio West Virginia & Eastern Kentucky – dating to 1870 46% Virginia/Eastern Panhandle Markets – acquired 15% 2012/13 Lexington, KY – acquired 2015 18% Columbus, OH 14% Other 7% 29
Slide 30: Commercial Sectors Information
Commercial Sectors Information As of March 31, 2023 Commercial Sector $ (in thousands) % of Total Loans Avg DSC Avg LTV Natural Gas Extraction $25,179 0.65% 3.68 64% Natural Gas Distribution 23,711 0.61% 2.61 N/A Masonry Contractors 23,017 0.59% 1.13 84% Sheet Metal Work Manufacturing 23,491 0.60% 1
Slide 31: Provision
Provision • Provision/Recoveries – 2020 $10.7 million Provision – 2021 $3.2 million RECOVERY – 2022 $0.4 million Provision – 2023 YTD $2.9 million Provision ($2.0 million related to Citizens acquisition 31
Slide 32: Asset Quality: At Historic Highs
Asset Quality: At Historic Highs • Non-Performing Assets (17bp) – – Lowest in 20+ years • Past-Due Loans (15bp) – Lowest in 20+ years • OREO ($0.8MM) – Lowest in 15+ years • Net Consumer Loan Charge-offs – Lowest in 15+ years Average Provision Expense 2005-2022 20bp 32
Slide 33: Net Charge-off Details: 2012-2022
Net Charge-off Details: 2012-2022 $8,000 Average Net Charge-Offs/Year: $7,000 Commercial $1.8 M 43% Retail $1.5 M 37% $6,000 NSF $0.8 M 20% Total $4.1 M $5,000 $4,000 $3,000 $2,000 $1,000 $0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 ($1,000) YTD ($2,000) Commercial Retail NSF relat
Slide 34: Cash Dividends/Share Declared
Capital Management: A Long-term Core Competency Cash Dividends/Share Declared & Dividend Payout Ratio $2.60 70% Cash Dividends/Share Declared $2.40 60% Dividend Payout Ratio $2.20 50% $2.00 40% $1.80 30% $1.60 20% $1.40 10% $1.20 0% 2015 2016 2017 2018 2019 2020 2021 2022 Dividends/Share Dividend Pa
Slide 35: Share Activity: Millions
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 324,513 400,000 $30 290,491 260,674 300,000 $20 218,249 $81.50 200,000 $10 $63.68 $77.20 $92.10 100,000 $69.78 $74.54 $0 0 2
Slide 36: 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 37: 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 38: Acquisition of Citizens Commerce Bancshares, Inc.
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 39: 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 40: 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 40
Slide 41: 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 41
Slide 42: CHCO represents excellent value and stability
CHCO represents excellent value and stability • Pricing Metrics*: – Price to Book 201% – Price to Tangible Book 269% – Price to 2023 Projected Earnings** 11.9x • Dividend Yield 3.00% • Div Payout Ratio** 36% • Tangible Capital/Tangible Assets *** 8.1% • Institutional Ownership 71% • Average Daily Vo
Slide 43: Questions?
• Questions? 43
City Holding Company — Davidson 2023 Financial Institutions Conference on 6ix