City Holding Company · NASDAQ:CHCO
City — Sandler O'Neill DC Investor Conference 2020
35 slides from City's conference presentation, Sep 18, 2020
Slide 1: City Holding Company
City Holding Company Sandler O’Neill DC Investor Conference September 18, 2020
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: Highest customer satisfaction ranking by JD Power for 3rd consecutive year
City was very proud to recently announce that for the 3rd consecutive year, we were awarded the highest ranking in customer satisfaction in the North Central District by JD Power (IN, OH, KY, MI, WV). 2018 2019 2020 3
Slide 4: Presenters
Presenters: Skip Hageboeck CEO & President John DeRito EVP Commercial Banking Tim Whittaker Chief Credit Officer 4
Slide 5: Snapshot
Snapshot • Total Assets $5.5 billion • Branches 94 • FTE 913 • Market Cap $1.0 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 6: Deposits mostly in WV and E. KY
Deposits mostly in WV and E. KY Key Deposit Markets Deposits West Virginia & E. Kentucky – dating to 1870 76% New Markets 24% 6
Slide 7: City National Deposit Markets
City National Deposit 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; $12.7 Billion Major Competitors: BBT, JPM, HBAN, UBSI T1st Branch Share & 4th Deposit Share (13%) in
Slide 8: Diversified Commercial Loan Portfolio
Diversified Commercial Loan Portfolio Percent of Commercial Key Loan Markets Portfolio West Virginia & Eastern Kentucky – dating to 1870 47% Virginia/Eastern Panhandle Markets – acquired 15% 2012/13 Charlotte LPO – de novo 2006 9% Lexington, KY – acquired 2015 17% Columbus, OH & Pittsburgh PA 12% 8
Slide 9: City National Loan Markets
City National Loan Markets CHARLOTTE 9 Size of Bubbles are representative of City’s loan distribution
Slide 10: Market Position
Market Position City’s biggest markets have strong distribution, large share, and high profitability Deposits Deposit Branch Branch Market Population ($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 11: 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 12: COVID-19: Retail Banking Impact
COVID-19: Retail Banking Impact • 88 branches fully open although customers continuing to heavily use drive-thru locations and electronic customer delivery channels: – Interactive-teller machines (ITMs) – Automated-teller machines (ATMs) – Mobile banking platform – On-line banking platform – Interac
Slide 13: Retail Activity Remains Strong
Retail Activity Remains Strong • Retail mortgage volume was up over 2% YTD June 2020 compared to YTD June 2019 • Net new DDA openings up 2.3% annualized in “slow growth WV and Easter KY”! • Net new DDA openings up 2.8% annualized along I81 in Va/WV 13
Slide 14: COVID-19 Impact: Net Interest Income, Fee Income, and Provision
COVID-19 Impact: Net Interest Income, Fee Income ??, and Provision ??? 2019 2020 Analyst 2020 YTD 2021 Analyst Expectations Expectations Net Interest $161.4 MM $157.3 MM $78.5 MM $153.2 MM Income Provision ($1.3 MM) $22.7 MM $9.2 MM $17.2 MM Non-Interest $68.5 MM $78.5 MM $48.0 MM $67.2 MM Income ($
Slide 15: COVID-19 Impact: Asset Quality
COVID-19 Impact: Asset Quality Provision Expense $30.0 Ave. Analyst 2020 Loan Provision Forecast (!?!) $25.0 $20.0 $15.0 Versus Actual History for CHCO since 2007/8 $10.0 $5.0 $0.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 $5.0 Provision Expense 15
Slide 16: Charge-offs During Last Recession
Charge-offs During Last Recession (w/o DDA Charge-offs) 3.00% 2.75% 2.50% 2.25% 2.00% 1.75% 1.50% 1.25% 1.00% 0.75% 0.50% 0.25% 0.00% 2005 2006 2007 2008 2009 2010 2011 CHCO w/o NSF's Industry Source: FDIC, All Insured Depository Institutions 16
Slide 17: Net Charge-off Details: 2012-2020 Q2
Net Charge-off Details: 2012-2020Q2 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 2012 2013 2014 2015 2016 2017 2018 2019 YTD ($1,000) 6/30/20 ($2,000) Commercial Retail NSF related 17
Slide 18: Exposure to Commercial Sectors Most Impacted by COVID-19
Exposure to Commercial Sectors Most Impacted by COVID-19 As of 08/31/2020 All-Time % of Total Current Average Average $ in millions Pass Criticized Total COVID-19 Loans Deferments DSC LTV Deferments Nonresidential $463.7 $7.0 $470.7 12.9% $48.4 $17.2 1.34x 66% Properties Single/Multi-Family $333.2 $
Slide 19: COVID-19 Hotel Impacts - LTV
COVID-19 Hotel Impacts - LTV Avg. Years to 85% Current LTV # of Loans $ Outstanding (Millions) Avg. 2019 DSC LTV 80% to 85% 4 $43.2 1.16 1.95 74.5% to 79.9% 7 $66.3 2.73 1.52 69% to 74.4% 5 $27.9 4.36 1.51 Up to 69% 25 $159.1 16.19 1.75 • The table above reflects the number of loans, outstanding bal
Slide 20: Hotel Exposure
Hotel Exposure 23.4% Location Map 34.2% 23.2% WV KY 4.6% 14.6% OH VA Other 20
Slide 21: Multi-Family Housing Exposure
Multi-Family Housing Exposure Location map 21
Slide 22: 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 CHCO CHCO excl M&A expenses $1B - $10B Source - S&P Global MI. 22
Slide 23: CHCO Stock Performance
CHCO Stock Performance: • Stock Price chart for CHCO vs. KBW Bank Index, BBT, Chase, Hunt, United, AUB, 5/3 Since 1/1/2020 – CHCO (yellow) has outperformed AUB, UBSI, WSBC, PEBO, CTBI, FCBC 23
Slide 24: Why is CHCO Highly Valued?
Why is CHCO Highly Valued? • Proven Conservative Lender • 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 24
Slide 25: Deposit Franchise
DEPOSIT FRANCHISE One key to City’s enviable success • Branches 94 • Average Deposits per Branch $47 MM • Average Households per Branch 2,000 • Average Deposit Share 13.9% • Average Household Share* 27% • Average DDA Balance $7,100** • Average Business DDA $21,600 * - Excludes Lexington-Fayette KY R
Slide 26: Non-interest income is branch driven
Non-interest income is branch driven (and in turn driven by franchise depth): $30,000 35.0% $25,000 30.0% $20,000 $15,000 25.0% $10,000 20.0% $5,000 $0 15.0% 2016 2017 2018 2019 2020 YTD Bankcard Revenues Service Charges Investment Management CHCO - % of Operating Revenues Peer - % of Operating Reve
Slide 27: Debit Card Revenues driven by Franchise Depth
Debit Card Revenues driven by Franchise Depth: 2019 Bank Card & Credit Card Headquarter Average Interchange Card Revenue/ Parent Company Ticker State Assets Fees Avg. Deposits City Holding Company CHCO WV $4.9 B $19.3 M 0.48% First Community Bank FCBC VA $2.2 B $7.9 M 0.41% Peoples Bank PEBO OH $4.2
Slide 28: City's Exceptional Retail Strength Depends on Branch Distribution
City’s Exceptional Retail Strength Depends on Branch Distribution House- Deposits Deposit Branch Hold Market ($mm) Share Branches Share Share Charleston, WV $706 12.8% 13 27.7% 38.7% Huntington, WV 432 12.7% 10 15.9% 26.2% Ashland, KY 550 24.9% 12 22.2% 40.2% Beckley, WV 493 24.8% 9 27.3% 31.5% Lewi
Slide 29: Efficiency Ratio
Efficiency Ratio low despite a large number of small branches 70.0% 65.0% 60.0% 55.0% 50.0% 45.0% 2016 2017 2018 2019 2020 Q2 CHCO $1B - $10B •Data as calculated using S&P Global MI definition. 29 •Peer data as of March 31, 2020.
Slide 30: 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 ? 30
Slide 31: Cash Dividends/Share Declared & Dividend Payout Ratio
Cash Dividends/Share Declared & Dividend Payout Ratio $2.30 70% Cash Dividends/Share Declared $2.10 60% Dividend Payout Ratio 50% $1.90 40% $1.70 30% $1.50 20% $1.30 10% 5.0% 2.4% 7.0% 15.2% 7.5% $1.10 0% 2015 2016 2017 2018 2019 2020 Q1 Dividends/Share Dividend Payout Ratio 2020 projected dividend
Slide 32: 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 $10,000 261,134 231,132 $5,000 107,662 $0 2016 2017 2018 2019 2020 Q2 Repurchase $ Issuance $ Labels represent shares repurchased or issued.
Slide 33: 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 34: 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 34
Slide 35: CHCO represents excellent value and stability
CHCO represents excellent value and stability • Pricing Metrics*: – Price to Book 142% – Price to Tangible Book 171% – Price to 2020 Projected Earnings** 14.9x • Dividend Yield 3.7% • Div Payout Ratio** 56% • Tangible Capital/Tangible Assets *** 10.6% • Institutional Ownership 69% • Average Daily Vo
City Holding Company — Sandler O'Neill DC Investor Conference 2020 on 6ix