City Holding Company · NASDAQ:CHCO
City — RBC Capital Markets Martha's Vineyard conference 2007
46 slides from City's conference presentation, Sep 26, 2007
Slide 1: RBC Capital Markets Martha's Vineyard September 25, 2007
RBC Capital Markets Martha’s Vineyard September 25, 2007
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: City Holding at a glance
n n n n n n n Total Assets at June 30, 2007 $2.5 bil Net Income in 2006 $53 mil Branches 68 FTE 807 Market Cap $647 mil Institutional Ownership 54% Avg Daily Volume $2.7 mil
Slide 4: Key Markets
Key Markets 1 st & 9% Market Share in Huntington WV/Ashland KY MSA $3.7 Billion 8% Market Share in Morgan, Berkeley & Jefferson Co. WV $1.9 Billion 1 st & 27% Market Share $1.7 Billion 2 nd & 12% Market Share in WV’s largest market; $4.7B
Slide 5: Today's Themes
n CHCO: Consistently superior results thru challenging times n CHCO: Conservative operating platform n CHCO: Growing and succeeding in slow-growth markets n CHCO: Value in the Banking Sector Today’s Themes:
Slide 6: CHCO is consistently and extraordinarily profitable
2004 2005 2006 YTD 2007 Reported ROA 2.10% 2.09% 2.11% 2.02% ROTE 23.2% 22.3% 22.4% 20.7% Tangible Equity/TA 9.7% 9.5% 10.1% 9.6% NIM 4.29% 4.49% 4.56% 4.36% Efficiency Ratio 48.7% 46.7% 44.5% 45.3% Non-Int Rev/Total Rev 33% 34% 34% 35% CHCO is consistently and extraordinarily profitable:
Slide 7: Normalization of provision and loss of PSL revenues
Since 2003 CHCO faced “normalization” of provision and loss of PSL revenues:
Slide 8: Strong bottom line results continue: ROA and EPS
ROA EPS Yet, strong bottom line results continue:
Slide 9: Previously Securitized Loans
2004 2005 2006 2007 Projected 2008 Projected 2009 Projected Average Balances $83.5 MM $42.9 MM $22.3 MM $12.1 MM $7.5 MM $5.5 MM Rate 17.4% 26.6% 42.2% 64% 71% 71% Gross Interest Revenue $14.5 MM $11.4 MM $9.4 MM $7.0 MM $5.4 MM $4.0MM Previously Securitized Loans: Core growth in revenues in 2003-20
Slide 10: Industry Challenge: Net Interest Margin
Prime Rate CHCO NIM 5 yr swap Sale of Credit Card Portfolio CHCO impacted by Previously Securitized Loans, Credit Card Sale, Deposit Repricing & Remixing Industry Challenge: Net Interest Margin
Slide 11: CD repricing has been detrimental to NII
Maturing CD’s ($) Renewed Rate (%) Maturing Rate (%) CD’s: Repricing has been detrimental to NII.
Slide 12: Re-mixing of deposit balances has hurt the NIM
12/31/06 12/31/05 Change Avg Rate for 2006 IB DDA $423 $438 ($15) 1.22% Savings $321 $303 $18 1.27% Time $920 $812 $108 3.96% ST Borrowing $136 $152 ($16) 3.55% LT Debt $48 $98 ($50) 5.33% DDA $321 $376 ($55) 0.00% Equity & OL $337 $323 $14 0.00% Note: Used EOP Data due to Classic Acquisition Re-mix
Slide 13: Interest Rate Risk
Immediate Basis Point Change in Interest Rates Estimated Increase of Decrease in Net Income between 1-12 months +200 Bp +3.7% +100 Bp +1.6% -100 Bp -2.1% -200 Bp -4.2% Data: June 30, 2007 CHCO’s strong core-funded balance sheet makes it sensitive to a decrease in the fed funds rate: Interest Rate Ri
Slide 14: Interest Rate Risk Summary
t Fee income in top 10% of peer group t NIM in top 15% of peer group t Decline in Previously Securitized Loans t Sale of Credit Card Portfolio t Migration from low-cost deposits to high-cost deposits t CHCO has purchased floors on Prime to partially protect against this risk Interest Rate Risk Summa
Slide 15: Asset Quality Trends
Asset Quality Trends: A second challenge facing the banking industry in 2007/8
Slide 16: YTD Gross Charge-offs 2007
1. Overdrafts are significant source of C/O for CHCO 2. Acquired Loans were of lower credit quality but were reserved at acquisition $1.816 MM $155 M $563 M $144 M YTD Gross Charge-offs 2007
Slide 17: NPAs to Loans & OREO
NPA’s to Loans & OREO Reflecting two large relationships which were placed on Non-accrual in the 1 st & 2 nd quarters CHCO experiencing Asset Quality Deterioration:
Slide 18: Non-accrual relationship details
n 4 spec homes and 3 lots in exclusive neighborhood of vacation homes; Borrower experiencing cash flow problems; Collateral & Guarantee dependent. n Home & additional lot in exclusive neighborhood of vacation homes. Customer Bankrupt. Loan represents 87% of cost. CHCO will take possession of home on
Slide 19: Past-Due Loans (30+ days)
12/31/05 12/31/06 8/30/07 Residential 1.14% 0.76% 0.63% Home Equity 0.37% 0.34% 0.20% Consumer 2.32% 0.99% 0.90% CMRE 0.11% 0.03% 0.06% C&I 0.12% 1.47% 0.19% Excluding Non-accruals, Past-due loans continue to improve reflecting stronger underwriting implemented since 2002 Past-Due Loans (30+ days)
Slide 20: Asset Quality Summary
Increase in Non-performing Loans tied substantially to (2) real-estate secured credits Charge-off’s are predominantly depository accounts Past-Due loans remain stable CHCO has focused on real-estate secured lending - residential, home equity, commercial real-estate Real estate prices: CHCO markets h
Slide 21: Although highly profitable, CHCO is conservatively positioned
1. Conservative Loan portfolios 3. Strong Core Deposit Franchise 5. Highly Liquid 7. Strongly Capitalized 9. Solid Asset Quality 11. Strong Fee Income vs. NII Although highly profitable, CHCO is conservatively positioned:
Slide 22: Conservative Loan Portfolio Mix
Loan to Deposits 84.5% Loan to Deposits 94.5% Sample of 250 publicly traded banks and thrifts with assets between $1-$10 billion as of December 31, 2006 As of December 31, 2006 Conservative Loan Portfolio Mix
Slide 23: Solid Loan Quality
As of June 30, 2007 Sample of 257 publicly traded banks and thrifts with assets between $1 and $10 billion as of June 30, 2007 Solid Loan Quality
Slide 24: Low Cost and Stable Deposits
Liabilities: Low Cost and Stable Deposits Data: December 31, 2006
Slide 25: CHCO's Cost of Funds Advantage
CHCO Peers Advantage CD’s 3.96% 4.23% 27 Bps Interest Bearing Deposits 2.71% 3.19% 48 Bps Total Deposits 2.25% 2.77% 52 Bps Interest Bearing Liabilities 2.90% 3.54% 64 Bps Data: 2006. Peers are $1 to $10 billion banks CHCO’s Cost of Funds Advantage:
Slide 26: Favorable Revenue Profile
34% 21% 79% 66% * As of December 31, 2006. Non-interest income excludes security gains Sample of 250 publicly traded banks and thrifts with assets between $1 and $10 billion as of December 31, 2006 Favorable Revenue Profile for the current yield curve environment:
Slide 27: City is Highly Efficient
City is Highly Efficient 2004 Efficiency Ratio adjusted to eliminate $5.5 million in revenue from Legal Settlement and associated legal expenses of $500M; Peers: Sample of 206 publicly traded banks and thrifts with assets between $1 to $10 Billion as of December 31, 2006 92nd percentile
Slide 28: Strong Capital facilitates growth
CHCO 8/30/07 Peer Median 6/30/07 Equity/Assets 11.5% 9.3% Tang Equity/Tang Assets 9.4% 7.1% Leverage Ratio 10.5% Tier I Capital Ratio 15.0% 10.8% Total Risk-based Capital Ratio 15.9% 12.1% Source: SNL for 257 publicly traded banks with total assets from $1 to $10 billion Strong Capital facilitates g
Slide 29: Growth in slow-growing markets
Improvements/Additions to Retail Distribution System Commercial Lending/Small Business Banking/Cash Management Insurance Acquisition Growth in slow-growing markets: u u u u
Slide 30: Best in class Products & Promotion
Best in class Products & Promotion
Slide 31: City continues to innovate to offer the best products
City continues to innovate to offer the best products to our customers
Slide 32: Remaking City's Retail Distribution: Wal-Mart Strategy
n Part of a Hub and Spoke distribution strategy n Openings Charleston - 2004 Huntington - 2004 Beckley - 2005 Ashland - 2005 Ripley - 2007 Remaking City’s Retail Distribution: Wal-Mart Strategy u u u u u
Slide 33: Consolidations/Renovations/Relocations
Consolidations/Renovations/Relocatio ns: Our New Downtown Charleston Office Housing Retail, Trust, Commercial & Private Banking Opened 2006
Slide 34: Opened Charles Town WV
October 2006: Opened Charles Town WV (Eastern Panhandle Location)
Slide 35: Relocated in July 2007: Martinsburg WV
(Eastern Panhandle Location) Relocated in July 2007: Martingsburg WV
Slide 36: De Novo Entry: Bluefield WV-VA
n County Deposits: $1.7 billion Branches: 50 Largest Market Competitors: BBT (27%), FCBC (26%) DeNovo Entry into new markets: November 2007: Bluefield WV-VA Bluefield WV-VA u u u
Slide 37: Hurricane, West Virginia
u County Deposits: $761 MM u Branches: 18 CHCO Share: 12% u Largest Market Competitors: Putnam Co. Bank(50%), BB&T (10%) Hurricane, West Virginia: 1 st Q 2008 n Putnam Co. WV
Slide 38: Strong growth in retail branch service charges
18% CAGR 2 nd Q 2001 to 2nd Q 2007 Success in our Retail Banking unit has led to strong growth in retail branch service charges:
Slide 39: Commercial Loan Growth
Growth in 2005 excludes Classic Acquisition Historically 10%+ Commercial Loan Growth:
Slide 40: Business Lending Opportunity
n City financial strength was built upon its exceptional retail banking platform. As a result, City is under represented (40%) in commercial lending relative to peers (60%). n City has launched a new small business lending initiative to address borrowing needs of smaller businesses. n City has launc
Slide 41: City Insurance Professionals
n 2006 Revenues $2.3 million n 2007 (annualized Revenues) $3.8 million n Added Workers Compensation Department - 7 FTE Added Personal Lines Department - 6 FTE Opened Beckley WV Office Hired Sales Manager/Sr. Operations Officer n Continue to Build Personal Lines toward $3 million line of business Add
Slide 42: Capital Flexibility
Dividends - Increased 10% in April 2004 to $0.88 - Increased 13.6% in April 2005 to $1.00 - Increased 12% in April 2006 to $1.12 - - Share Repurchases - Tangible Capital @ 10.06% @ 12/31/2006 - Purchased 580,200 shares YTD in 2007 at average price of $39.14 (3.4% of outstanding) - Tangible Capital @
Slide 43: Acquisitions
Acquisitions: $100MM to $500MM in assets WV, SE Ohio, Eastern KY, I81 Corridor from VA thru MD, SW Pennsylvania
Slide 44: CHCO trades at a discounted P/E relative to peers
Pricing Metrics *: n Price to Book: 221% n Price to Tangible Book: 276% n Price to 2008 Projected Earnings** 12.2x n Institutional Ownership 54% • Based on Price of $38.52 (close of business 9/18/07) ** Based on Analyst estimates for 2008 of $3.15 CHCO trades at a discounted P/E ratio relative to Pe
Slide 45: CHCO: Consistently Superior Performance
n CTBI, FCBC, FFBC, HNBC, PEBO, PRK, PVSA, RBCAA, SASR, STBA,UBSH, UBSI, UVSP, VFGI, WSBC n ROA: 1st Net Interest Margin: 2nd Efficiency Ratio: 1st Tangible Equity/Tangible Assets:1st Non-Performing Assets/Assets: 1 st n 1 Year Stock Performance: 3 of 16 2 Year Stock Performance: 3 of 16 CHCO: Consi
Slide 46: Questions?
Questions?
City Holding — RBC Capital Markets Martha's Vineyard conference 2007 on 6ix