City Holding Company · NASDAQ:CHCO
City — Janney Montgomery Scott investor meetings, Chicago (October 2011)
44 slides from City's conference presentation, Oct 4, 2011
Slide 1: Chicago October 4, 2011 Janney, Montgomery, Scott LLC
Chicago October 4, 2011 Janney, Montgomery, Scott LLC
Slide 2: 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 results differing from those pro
Slide 3: City Holding at a glance
• Total Assets $2.7 bil • Branches 68 • FTE 795 • Market Cap $407 mil • Institutional Ownership 63% • Average Daily Volume $2.1 mil Date: September 30, 2011
Slide 4: Value in the banking sector? Checklist for success
• Capital – Strongly capitalized • Markets – Solid distribution network – Stable geographic markets – Disciplined competition • Performance – Strong net interest margin – Strong NIM management – Strong fee income – Ability to control expenses • Growth – Liquidity to grow – Ability to grow share in m
Slide 5: City Holding Company investment case
• Markets: Operates an extremely strong retail/commercial franchise in stable markets with disciplined competition • Asset Quality: Strong compared to peers and City’s management has recognized and dealt with issues • Performance: Has consistently outperformed peers with respect to earnings, capital
Slide 6: Key markets
Key markets 1 st Branch Share & 9% Deposit Share in Huntington WV/Ashland KY MSA $4.2 Billion 1 st Branch Share & 10% Deposit Share in WV’s largest market; $5.7 Billion 1 st & 27% Deposit Share $1.9 Billion 2 nd Branch Share & 8% Deposit Share in Morgan, Berkeley & Jefferson Co. WV $2.1Billion
Slide 7: The key to City's success: an enviable deposit franchise
• Branches 68 • Average Deposits per Branch $32.9 MM • Average Households per Branch 2,291 • Average Deposit Share 12.5% • Average Household Share 42% The key to City’s success: an enviable deposit franchise
Slide 8: City's deposit franchise
($000’s omitted) Deposits Share Branches Share Charleston MSA $574,866 10% 17 17% Huntington/Ashland MSA $366,184 9% 13 12% Beckley MSA $322,515 28% 7 25% Greenbrier County, WV (Lewisburg) $179,306 25% 6 33% Eastern Panhandle Counties $172,615 8% 7 13% Mason County, WV $83,879 26% 3 33% Braxton Coun
Slide 9: Low cost and stable deposits
Data: December 31, 2010 Low cost and stable deposits:
Slide 10: Solid core deposits drive strong net interest margin
Peer Data as of June 30, 2011 Solid core deposits drive strong net interest margin: 3.89%
Slide 11: CHCO is well positioned with respect to interest rate risk
Immediate Basis Point Change in Interest Rates Estimated Increase or Decrease in Net Income between 1-12 months +400 Bp +17.5% +300 Bp +12.0% +200 Bp 6.8% +100 Bp 1.4% Data: June 30, 2011 CHCO is well positioned with respect to interest rate risk:
Slide 12: Strong deposit franchise drives top decile non-interest revenue
*As of December 31, 2010. Non-interest income excludes investment gains/(losses) Sample of 284 reporting publicly traded banks and thrifts with assets between $1 and $10 billion as of December 31, 2010, excluding investment gains/(losses) Strong deposit franchise drives top decile non-interest reven
Slide 13: Non-interest income is branch driven
2006 2007 2008 2009 2010 2011 YTD Branch Service Charges 42.6 44.4 46.0 45.0 40.0 28.7 Insurance 2.3 4.1 4.2 5.6 5.5 4.5 Investment Management 2.1 2.0 2.2 2.3 2.8 2.2 BOLI 2.4 2.5 2.9 3.3 3.4 2.3 2011 Data as of September 30, 2011 Non-interest income is branch driven:
Slide 14: City's deposit franchise: branch service charges
Branch Service Charges 2008 2009 2010 2011 Fiscal Year 46.0 45.0 40.0 1 st Nine Mo. of Year 34.5 33.4 30.4 28.7 1 st Quarter 11.2 10.4 10.2 9.1 2 nd Quarter 11.3 3 rd Quarter 12.0 9.7 9.8 4 th Quarter 11.5 9.6 Decreases in branch service charges reflect : • Real-time processing in May 2010 • Regulat
Slide 15: Service charge challenges
• NSF - real-time processing - May 2010 • NSF - Regulation E - August 2010 • NSF - forthcoming OCC Guidance - 2012 • Durbin Amendment - Effective Fall 2011 Service Charge challenges:
Slide 16: Service charge competitive landscape
Actions BB&T $10 monthly svc charge Chase $12 monthly svc charge United Still offers free checking Huntington Still offers free checking Fifth Third $15 monthly svc charge FCBC Still offers free checking Service Charge competitive landscape:
Slide 17: Asset quality: a function of culture and market
• City’s loans are 60% retail/40% commercial • City’s market area tends to be more stable • Real estate prices in City’s market area have been relatively stable • City’s past-due loan trends are stable • City’s non-performing asset levels are stronger than peers • City has been aggressive about char
Slide 18: Conservative loan portfolio mix
City Holding Company Peer Group Sample of 283 publicly traded banks and thrifts with assets between $1-$10 billion as of December 31, 2010 Conservative loan portfolio mix As of June 30, 2011
Slide 19: Retail loan facts
• Residential real estate are 1,3,5 and 10 Yr ARMs • No sub-prime, interest-only, option adjustable • Home equity loans include LOCs, fixed amortizing loans, non-purchase adjustable loans • 65% of home equity loans are 1 st lien position • 66% of home equity loans have an LTV < 80% • Ave loan balanc
Slide 20: Stable past-due loans (30+ days)
Stable past-due loans (30+ days) Past-due loans trends are stable and reflect better economics in City’s core markets
Slide 21: Charge-off trends
Source: FDIC, All Insured Depository Institutions Charge-off trends:
Slide 22: Non-performing assets & OREO
Source: FDIC, All Insured Depository Institutions Peer data as of June 30, 2011 Non-performing assets & OREO
Slide 23: Net charge-offs: 2010
Net charge-offs: 2010 Net C/O: $7.4 MM (0.41% of Average Loans) Provision $7.1 MM
Slide 24: Retail charge-offs: 2010
Retail charge-offs: 2010
Slide 25: CHCO consistently strong performance
2006 2007 2008 2009 2010 2010 Regional Peer Median Reported ROA 2.11% 2.03% 1.12% 1.63% 1.47% 0.88% - 95 th %ile ROTE 22.4% 21.0% 11.4% 18.0% 15.1% 12.2% - 75 th %ile Tangible Common Equity/TA 10.1% 9.7% 8.83% 9.78% 10.01% 9.19% - 85 th %ile NIM 4.56% 4.34% 4.64% 4.18% 4.06% 3.98% - 55 th %ile Effic
Slide 26: Growth: positioned to achieve reasonable growth in core franchise
• Commercial • Retail • Insurance • Trust & Investment Management Growth: CHCO is positioned to achieve “reasonable growth” in its core franchise
Slide 27: Commercial loan growth
Commercial loan growth: Success achieved due to community bank orientation, strong team, strong underwriting, and strong local economies
Slide 28: Deposit growth opportunity
Branches Deposits Deposits/Branch CHCO 68 $ 2.2 B $33 million BBT 36 $ 3.3 B $92 million JPM 20 $ 1.2 B $60 million UBSI 20 $ 1.2 B $60 million HBAN 14 $ 0.9 B $64 million FITB 10 $ 0.4 B $40 million Includes branches within 5 miles of City branch Source: SNL Deposit growth opportunity: CHCO has man
Slide 29: Growth: expanding retail distribution
Source: SNL Growth: Expanding retail distribution to capture additional retail households
Slide 30: City opened four Wal-Marts in key markets
Slide 31: Branch renovations/expansions to meet customer demand
Slide 32: Eastern panhandle expansion exhibits strong demographics
Slide 33: Expansion into South Charleston WV has encouraging early results
Sept 2010 Expansion into South Charleston WV has encouraging early results
Slide 34: Average deposits and consumer loans by year
$18,000,000 $16,000,000 = Average Deposits $14,000,000 _ Average Consumer Loans $12,000,000 - $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 l $- r 1 1 year 2 year 3 year 4 year Gity Holding Company
Slide 35: CityInsurance: Growing
Revenues Lines of Business • 2006 $2.3 million Personal Lines • 2007 $4.1 million Workers Compensation • 2008 $4.2 million Health/Benefits/Life Ins • 2009 $5.6 million Property/Casualty • 2010 $5.5 million • 2011 YTD (9/30) $4.5 million Markets Acquisitions Charleston (3 locations) Dickens & Clark (
Slide 36: Trust AUM: Strong growth
Trust AUM: Strong growth CAGR (December 31, 2004-September 30, 2011) of 8.96%
Slide 37: CHCO: Capital flexibility
• Tangible common equity at 6/30/11: 9.56% • No TARP!!!! • Dividends - Increased 10% in April 2004 to $0.88 - Increased 14% in April 2005 to $1.00 - Increased 12% in April 2006 to $1.12 - Increased 11% in April 2007 to $1.24 - Increased 10% in April 2008 to $1.36 - Dividend yield of 5.00% (as of 9/3
Slide 38: Average shares outstanding
19,000,000 18,000,000 17,000,000 16,000,000 15,000,000 14,000,000 13,000,000 12,000,000 Ave Shares Out 2005 2006 2007 2008 2009 2010 YTD 9/30/11 Gity Holding Company
Slide 39: Growth per share (12/31/04 - 12/31/10)
• Loans per share: 8.2% CAGR • Deposits per share: 5.9% CAGR • Non-interest inc per share: 3.1% CAGR • Expenses per share: 4.3% CAGR Implication: While CHCO operates in relatively low growth markets, high profitability allows share repurchases, which have driven core earnings despite the economic en
Slide 40: Acquisition philosophy
• Historically less acquisitive than peers • Acquisitions must truly be strategic or meaningfully accretive • Opportunities have increased • Actively looking at FDIC and non-FDIC deals • In-market • Adjacent market • Growth markets • Size: Generally $100MM to $1B Acquisition philosophy:
Slide 41: Acquisition territory
Acquisition territory:
Slide 42: Management team
TITLE EXPERIENCE AGE JOINED CEO PPLS; CHCO CFO; PHD 49 2001 EVP - Retail PPLS 55 2001 EVP - Commercial One Valley; BB&T, CPA 61 2004 CFO Public Accounting, CPA 46 2005 CAO/CIO City National Bank 47 1989 SVP - Branches BB&T 42 2001 SVP - CCO United Bankshares, CPA 37 1998 SVP - CRO BB&T 55 2001 SVP C
Slide 43: Value in the banking sector? Checklist for success
Capital • Strongly capitalized - Top 10% Markets • Solid distribution network - Excellent • Stable geographic markets - Yes; WV & E Kentucky • Disciplined competition - Yes; see NIM Performance • Strong net interest margin - Yes • Strong NIM management - See results (floors) • Dependence on NII - To
Slide 44: CHCO represents good value and stability
• Pricing Metrics *: • Price to Book: 131% • Price to Tangible Book: 160% • Price to 2011 Projected Earnings** 10.5x • Dividend Yield 5.0% • Div Payout Ratio (First Call)** 53% • Tangible Capital/Tangible Assets 9.56% • Institutional Ownership 63% * Based on Price of $26.99 (9/30/11) ** Based on ana
City Holding — Janney Montgomery Scott investor meetings, Chicago (October 2011) on 6ix