City Holding Company · NASDAQ:CHCO
City — Investor Presentation (June 2005)
40 slides from City's investor presentation, Jun 21, 2005
Slide 1: June 21/22, 2005
June 21/22, 2005
Slide 2: Forward Looking Statements
Forward Looking Statements This news release 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: $2.5 Billion Commercial Bank headquartered in Charleston, WV
$2.5 Billion Commercial Bank headquartered in Charleston, WV 67 Banking Offices 165,000 households $635 million market capitalization* *As of 6/17/05
Slide 4: City Holding Company: Headquartered in Charleston WV
City Holding Company: Headquartered In Charleston WV
Slide 5: Key Markets
Key Markets 1st & 10% Market Share in Huntington WV/Ashland KY MSA 2nd & 12% Market Share in WV’s largest market 1st & 30% Market Share 8% Market Share in Morgan, Berkeley & Jefferson Co. WV
Slide 6: Themes
Themes: CHCO: Under Continuing Management CHCO: Consistently superior results CHCO: Growth in slow-growth markets
Slide 7: CHCO: Under Continuing Leadership
CHCO: Under Continuing Leadership Former CEO Jerry Francis engineered the turn-around of the Company CFO Skip Hageboeck assumed the role of CEO on February 1, 2005 City has assembled a team of top-notch talent over the last three years capable of continuing City’s strong performance
Slide 8: Engineering the Turn-around: Starting from Ground Zero
Engineering the Turn-around: Starting from Ground Zero $38 million loss reported in 2000 Formal Agreements with OCC and Federal Reserve $130 million in “problem loans” Stock trading at $5.125 per share from a high (in 1998) of $45 per share; discontinued common share cash dividends; deferred trust p
Slide 9: Mission Accomplished: Turn-around Complete & Continuing
Mission Accomplished: Turn-around Complete & Continuing 2004 1st Q 2005 ROA 2.10% 2.11% 1st Best ROE 22.4% 20.9% 10th Best NIM 4.29% 4.40% Efficiency Ratio 48.5% 47.4% Non-Int Rev/Total Rev 32% 34% Non-performing Loans/Loans 0.29% .28% ALLL/Non-perfoming Loans 487% 490% * Rankings among 186 public b
Slide 10: A New Team focused on the future
A new Team focused on the future CEO Skip Hageboeck Ph.D. in Economics 42 years old Treasurer of $10B bank CFO of $700MM community bank 1995-1999 CFO of City Holding Company 2001-2004
Slide 11: Why Own This Stock?
Why Own This Stock? 1. CHCO is highly profitable
Slide 12: Sustained High Performance
Sustained High Performance EPS (diluted) $-1.54 $1.90 $2.58 $2.75 2001 2002 2003 2004 ROA -1.07% 1.59% 2.18% 2.10% 2001 2002 2003 2004 ROE -16.8% 20.5% 24.5% 22.4% 2001 2002 2003 2004
Slide 13: Challenges for 2005
Challenges for 2005 Provision Expense At March 31, 2005, the ALLL was 1.22% of Loans No Provision expense has been recorded since the 2nd Quarter of 2002 when the ALLL was 2.31% of Loans 25 Bp of Provision expense would reduce earnings by about $2MM after-tax
Slide 14: Previously Securitized Loans & Retained Interests
Previously Securitized Loans & Retained Interests 2004 1 st Q 2005 2005 Projected Ave Balances $83.5 MM $54.9 MM $48.2 MM Rate 17.4% 22.4% 19-23% Gross Interest Revenue $14.5 MM $ 3.082 $ 10.8 MM * * Based on ave balances at 1st Q 2005 rate of 22.4%
Slide 15: Why Own This Stock?
Why Own This Stock? 1. CHCO is highly profitable 2. CHCO is well-positioned for the future Conservative Loan Portfolios Strong Asset Quality Exceptional Core Deposit Base Highly Liquid Very Efficient Strongly Capitalized Positioned to benefit from rising rates
Slide 16: Conservative Loan Portfolio Mix
Conservative Loan Portfolio Mix City Holding Company 28% 4% 28% 34% 5% Residential Real Estate Consumer/Other C&I Home Equity Commercial Real Estate Loan to Deposits 81.0% As of December 31, 2004 Peer Group 14% 45% 10% 5% 26% Residential Real Estate Consumer/Other C&I Home Equity Commercial Real Est
Slide 17: Strong Loan Quality
Strong Loan Quality .25% .47% 493% 328% Non Performing Loans/Loans ALLL/Non-Perf Loans CHCO* Peer *As of March 31, 2005 Sample of 186 publicly traded banks and thrifts with assets between $1 and $5 billion
Slide 18: Customer Profile: Retail Focused
Customer Profile: Retail Focused $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 $1,397,610 $467,256 $903,198 $447,431 $ Deposits $ Loans Retail Commercial Source: Internal data as of June 30, 2004
Slide 19: Deposits: Low Cost and Stable
Deposits: Low Cost and Stable 6% 25% 2% 10% 19% 14% 9% 1% 3% 8% 3% Equity MMS FHLB Non Interest DDA CDs Other Borrowing Interest DDA Jumbos Trust Preferred Savings Customer Repos Data: December 31, 2004
Slide 20: Favorable Revenue Profile
Favorable Revenue Profile City Holding Company 34% 66% Non Interest Income Net Interest Income *As of March 31, 2005. Non-interest income excludes security gains Peer Group 21.1% 78.9% Non Interest Income Net Interest Income Sample of 186 publicly traded banks and thrifts with assets between $1 and
Slide 21: City is Highly Efficient
City is Highly Efficient Efficiency Ratio 89(th)percentile 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 86.9% 62.8% 58.7% 60.7% 52.1% 62.2% 50.1% 60.4% 47.40% 59.30% 12/31/01 12/31/02 12/31/03 12/31/04 3/31/2005 CHCO Peer 2004 Efficiency Ratio adjusted to eliminate $5.5 million in revenue from Legal Settleme
Slide 22: CHCO is positioned to benefit from rising rates
CHCO is positioned to benefit from rising rates Immediate Basis Point Change in Interest Rates Estimated Increase of Decrease in Net Income between 1-12 months Estimated Increase or Decrease in Net Income between 13- 24 months +200 Bp +7% +9% +100 Bp +3% +4% -100 Bp -8% -11% -175 Bp -18% -23%
Slide 23: Interest Rate Dynamics
Interest Rate Dynamics 12 months ago, Fed Funds was at 1% and CHCO was positioned to strongly benefit from rising rates Over the last 12 months, the Prime rate and the Fed Funds rate have risen 200 Bps As Prime has increased, rates on home equity loans, commercial loans, and some commercial real est
Slide 24: Interest Rate Dynamics
Interest Rate Dynamics 8,000 7,500 7,000 6,500 6,000 5,500 1. IF rates remain flat, and IF loans and deposits do not grow, reported NII will fall as the balances of Previously Securitized Loans decrease from $50.6MM at 3/31/05 to a projected balance of less than $25MM at 3/31/07. These loans carried
Slide 25: Interest Rate Dynamics
Interest Rate Dynamics 8,000 7,500 7,000 6,500 6,000 5,500 2. But, the underlying dyamics of loans (excluding Previously Securitized Loans, Indirect Auto Loans, and unsecured consumer loans) and deposits at current interest rates is positive over the next 24 months. Jun - 05 Jul - 05 Aug - 05 Sep -
Slide 26: Interest Rate Dynamics
Interest Rate Dynamics 8,500 8,000 7,500 7,000 6,500 6,000 5,500 3. CHCO can avoid deterioration in NII over 24 months IF rates rise 100 bp AND loan balances grow 4.5% per year (and assuming equity accumulation is utilized for share repurchases rather than funding asset growth). Jun - 05 Jul - 05 Au
Slide 27: Key Capital Ratios
Key Capital Ratios 12/31/04 5/30/05 Equity/Assets 9.8% 10.9% Tang Equity/Tang Assets 9.5% 8.8% Leverage Ratio 10.7% 11.2% Tier I Capital Ratio 15.5% 13.8% Total Risk-based Capital Ratio 16.6% 14.8%
Slide 28: Strategic Opportunities: Capital Flexibility
Strategic Opportunities Capital Flexibility Dividends Increased 10% in April 2004 Increased 13.6% in April 2005 Share Repurchases Acquisitions
Slide 29: Why Own This Stock?
Why Own This Stock? 1. CHCO is highly profitable 2. CHCO is well-positioned for the future 2. CHCO is growing Internal Loan Growth Internal Deposit Growth Improvements to Retail Distribution System Acquisition
Slide 30: Growth in Targeted Lines of Business - Loans
Growth in Targeted Lines of Business - Loans Real Estate Secured Loans grew 9.1% in 2004 $800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- 01 01 01 01 02 02 02 02 03 03 03 03 04 04 04 04 05
Slide 31: Growth in Deposits: Totally Free Checking Accounts
Growth in Deposits: Totally Free Checking Accounts 2002-2004 130,000 125,000 120,000 115,000 110,000 105,000 100,000 95,000 90,000 7.7% CAGR Jan-02 Mar-02 May-02 Jul-02 Sep-02 Nov-02 Jan-03 Mar-03 May-03 Jul-03 Sep-03 Nov-03 Jan-04 Mar-04 May-04 Jul-04 Sep-04 Nov-04
Slide 32: In addition to dramatic growth in Fees
In addition to dramatic growth in Fees: 31% CAGR 1st Q 2001 to 1st Q 2005 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 Q1 2001 Q2 2001 Q3 2001 Q4 2001 Q1 2002 Q2 2002 Q3 2002 Q4 2002 Q1 2003 Q2 2003 Q3 2003 Q4 2003 Q1 2004 Q2 2004 Q3 2004 Q4 2004 Q1 2005
Slide 33: Restructuring the Retail Delivery System
Restructuring the Retail Delivery System City’s Retail Distribution can be Improved (In WV’s 60 densest markets, City is in only 33%) Wal-Mart Strategy Consolidations New Branches in growing areas of existing markets DeNovo entry into contiguous markets
Slide 34: City's Wal-Mart Strategy
City’s Wal-Mart Strategy Inexpensive distribution High-traffic Wal-Marts Supports existing retail distribution outlets in City’s major Markets Openings Charleston – Sept 2004 Huntington – Sept 2004 Beckley – May 2005 Ashland – August 2005 Ripley – 2006
Slide 35: Acquisition Parameters
Acquisition Parameters $100MM to $500MM in assets Markets in or adjacent to CHCO footprint Retail Deposit Franchise Accretive to EPS in first full year
Slide 36: Acquisition Territory
Acquisition Territory
Slide 37: Acquisition of Classic Bancshares
Acquisition of Classic Bancshares
Slide 38: Classic Bancshares Acquisition
Classic Bancshares Acquisition: Accretive to 3rd Q 2005 earnings Opportunity to build retail share: Share CHCO County Boyd Co. KY 9% $75MM $833M Lawrence Co. Ohio 12% $59MM $490M Greenup Co. KY 6% $21MM $350M Johnson Co. KY 31% $102MM $329M Carter Co. KY 4% $11MM $275M
Slide 39: Combined Balance Sheet: Strong
Combined Balance Sheet: Strong CHCO CLAS Combined 5/30/05 CLAS Contribution Assets $2,273 $310 $2,583 12% Loans $1,353 $256 $1,609 16% Deposits $1,682 $233 $1,915 12%
Slide 40: Why Own This Stock?
Why Own This Stock? CHCO is highly profitable CHCO earns high returns on a conservative platform Retail bank with strong core deposits Strong fee income Conservative loan portfolio Well capitalized Liquid & positioned to benefit from rising rates Extraordinary profitability CHCO is growing in ordina