City Holding Company · NASDAQ:CHCO
City — Sandler O'Neill + Partners, LP conference (September 2016)
46 slides from City's conference presentation, Sep 14, 2016
Slide 1: City Holding Company – Sandler O'Neill + Partners, September 14, 2016
Sandler O’Neill + Partners, LP Washington, DC September 14, 2016 City Holding Company
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: Snapshot
• Total Assets $3.8 bil • Branches 85 • FTE 852 • Market Cap $747 mil • Markets: Stable, Slow growing, and less competitive • Business Lines: Retail, Commercial, Investment Mgmt • Asset Quality: Demonstrated strong track record • Performance: Long record as a high performer • Growth: Succeeding in s
Slide 4: City National Markets
City National Markets 1st Branch Share & 2nd Deposit Share (10%) In Charleston MSA/Huntington MSA; $10.5 Billion Major Competitors: BBT, JPM, HBAN, UBSI 1st Branch Share & 31% Deposit Share $2.0 Billion Major Competitors: JPM, UBSI, BBT 2nd Branch Share & 2nd Deposit Share (15%) in Staunton MSA $1.4
Slide 5: Market Position
Market Position Market Population Deposits ($mm) Deposit Share Branches Branch Share Branch Rank Charleston/Huntington/ Ashland MSA 583,000 1,098 11% 30 15% 1 Beckley/Lewisburg WV 175,000 $703 29% 16 25% 1 Winchester/Martinsburg 351,000 344 6% 12 9% 3 Valley Region 205,000 259 12% 8 14% 3 Lexington
Slide 6: Market Demographics
Market Demographics Market Population Projected Population Change 2016-2021 Median Household Income Projected Change in HHLD Income 2016-2021 Charleston/Huntington/ Ashland MSA 583,000 (0.8%) $45,700 8.0% Beckley 122,000 (1.4%) $40,000 6.3% Winchester/Martinsburg 134,000 4.2% $56,000 7.5% Staunton-W
Slide 7: Deposits mostly in Legacy Markets
Deposits mostly in Legacy Markets Key Deposit Markets Deposits Core West Virginia Markets – dating to 1870 72% New Markets 28% 7
Slide 8: Commercial Loan Growth coming from new markets
Commercial Loan Growth coming from new markets Key Loan Markets Percent of Commercial Portfolio Core West Virginia Markets – dating to 1870 52% Virginia/Eastern Panhandle Markets – acquired 2012/13 20% Charlotte LPO – de novo 2006 8% Lexington, KY – acquired 2015 11% Columbus, OH & Pittsburgh PA 9%
Slide 9: West Virginia Economy Statistics
West Virginia Economy Statistics WV Compared to: Source Employment 734,000 (June 2016 Projection) 741,000 (June 2011) US Bureau of Labor Statistics Unemployment Rate 6.0% (June 2016 Projection) 7.9% (June 2011) US Bureau of Labor Statistics Coal Employment 18,159 (2014) 20,533 (2006) West Virginia C
Slide 10: West Virginia Overview
West Virginia Overview • Small State – 1.8 million people • Population lives in small cities & towns with low density • Slow growth • Economy historically very stable • Strong deposit markets • Less competitive than larger markets • Enormous long-term potential in energy reserves and ancillary indus
Slide 11: CHCO: A perennial high-performing bank
CHCO: A perennial high-performing bank -1.50% -1.00% -0.50% 0.00% 0.50% 1.00% 1.50% 2.00% 2009 2010 2011 2012 2013 2014 2015 YTD 2016 CHCO W/O Merger Costs $1B - $5B Peer Data as of March 31, 2016 11 ROA
Slide 12: Stock Price Performance
Stock Price Performance (2/1/05-7/27/15) Slow growth markets CAN provide exceptional performance 12 Charles Hageboeck named CEO on Feb 1, 2005
Slide 13: Deposit Franchise
DEPOSIT FRANCHISE One key to City’s enviable success • Branches 85 • Average Deposits per Branch $36 MM • Average Households per Branch 1,900 • Average Deposit Share 12.9% • Average Household Share* 20% * - Excludes Coastal & Lexington-Fayette Regions 13
Slide 14: Deposit Franchise provides access to low cost and stable funding
City’s Deposit Franchise provides access to low cost and stable funding 11% 17% 18% 10% 11% 18% 10% 4% 0.4% 1% 0.4% Equity Non Interest DDA Interest DDA Savings MMS CDs Jumbos Customer Repos FHLB Other Trust Preferred Data: December 31, 2015 14
Slide 15: Deposit franchise provides NIM strength in higher rate environments
City’s strong deposit franchise provides NIM strength in higher rate environments 3.00% 3.50% 4.00% 4.50% 5.00% 2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD 2016 $1 to $5B Peer CHCO CHCO excluding PSLs, floors & accretion When rates were higher – City’s NIM was nearly 100bp higher than peers Pee
Slide 16: Sensitivity to interest rate risk
CHCO’s sensitivity to interest rate risk : Immediate Basis Point Change in Interest Rates Estimated Increase or Decrease in Net Income between 1-12 months +300 Bp +8.7% +200 Bp +8.4% +100 Bp +4.8% -50 Bp -6.3% Data: Internal Model as of March 31, 2016. Model assumes that deposit mix will change as r
Slide 17: Top decile non-interest revenue
Strong deposit franchise drives top decile non-interest revenue: 31.7% 68.2% City Holding Company Non Interest Income Net Interest Income *As of December 31, 2015. Non-interest income excludes investment gains/(losses) & gain from sale of insurance division. Sample of 278 reporting publicly traded b
Slide 18: Non-interest income is branch driven
Non-interest income is branch driven: 2009 2010 2011 2012 2013 2014 2015 YTD 2016 Bankcard Revenues $9.0 $9.9 $11.1 $12.4 $13.5 $15.1 $15.9 $8.2 Service Charges $36.0 $30.1 $27.0 $26.3 $27.6 $26.6 $26.3 $12.9 Insurance $5.6 $5.5 $5.9 $6.1 $5.8 $6.0 SOLD Investment Management $2.3 $2.8 $3.1 $3.8 $4.0
Slide 19: Efficiency Ratio low despite a large number of small branches
Efficiency Ratio low despite a large number of small branches 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 2009 2010 2011 2012 2013 2014 2015 YTD 2016 CHCO $1B - $5B • 2015 Efficiency Ratio for CHCO excludes Gain from Sale of Insurance Division • Data as calculated using SNL Financial definition. Peer data a
Slide 20: Long history of strong asset quality
A long history of strong asset quality at CHCO even following the 2007 recession 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% 2009 2010 2011 2012 2013 2014 2015 YTD 2016 CHCO NPA/Assets Industry Source: FDIC, All Insured Depository Institutions Peer data as of March 31, 2016 20
Slide 21: Charge-off trends
Charge-off trends: 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 2009 2010 2011 2012 2013 2014 2015 YTD 2016 CHCO Net Charge-off % Industry Source: FDIC, All Insured Depository Institutions Peer data as of March 31, 2016 21
Slide 22: 2015/6 Charge-offs
2015/6 Charge-offs 22 2015 Net C/O 2015 Bp 2016 YTD Net C/O 2016 Bp Annual Rate Residential Mortgages $0.945 MM 7 bp $0.652 MM 9 bp Home Equity $0.312 MM 21 bp $0.175 MM 24 bp Commercial & Industrial $4.977MM 300 bp $0.041 MM <1 bp Commercial RE $0.214 MM 2 bp $0.667 MM 12 bp Consumer/OD $0.646 MM 1
Slide 23: West Virginia Floods – June 2016
23 West Virginia Floods – June 2016
Slide 24: Flood impact on communities and City's loans
• Absolutely Devastating within several WV communities but within highly localized areas • 26 deaths • Up to 1200 homes destroyed or significantly damaged • Flooding overlapped City’s franchise most specifically in Greenbrier County • Precise impact on CHCO still unknown - BUT - • Within zip codes w
Slide 25: Growth: reasonable growth despite slow growth markets
Growth: CHCO has achieved, and will continue to achieve “reasonable growth” despite the slow growth nature of our markets • Commercial • Retail Lending • Trust & Investment Management • Deposits 25
Slide 26: Commercial loan growth
Commercial loan growth: Success achieved due to community bank orientation, strong team, strong underwriting, and strong local economies -4.00% -2.00% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0
Slide 27: Retail loan growth
Retail loan growth Adjustable Rate Mortgages, Home Equity Loans, Installment credit $1,200 $1,250 $1,300 $1,350 $1,400 $1,450 $1,500 $1,550 $1,600 $1,650 $1,700 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Loans $M M Residential Real Estate Home Equity Consumer 27
Slide 28: Trust AUM & Revenues: Strong growth
Trust AUM & Revenues: Strong growth AUM CAGR 11.7% and Revenue CAGR 10.2% (Dec 31, 2006-Dec 31, 2015) $- $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $0 $200 $400 $600 $800 $1,000 R ev e n u e s A UM $M M AUM (MM$) Revenues 28
Slide 29: Deposit growth opportunity
Deposit growth opportunity: CHCO has many small deposit transaction relationships; Peers tend to have larger commercial & public deposits; So liquidity is readily available as needed. Branches Deposits Deposits/Branch CHCO 85 $ 3.1 B $36 million BBT 70 $ 5.3 B $76 million UBSI 31 $ 1.9 B $61 million
Slide 30: Acquisition philosophy
Acquisition philosophy: • Opportunities have increased • Actively looking • Size: Generally $100MM to $1B • Historically less acquisitive than peers because City’s strategy is driven by creating shareholder value – not merely size driven • Acquisitions must truly be strategic or meaningfully accreti
Slide 31: Acquisitions in Growth Markets
Acquisitions in Growth Markets 31
Slide 32: Community Bank
Community Bank • Closed January 10, 2013 • 9 branches in Virginia • Community was a poorly performing bank with significant asset quality problems but good retail distribution and some great talent. • City was a significant shareholder of Community. • Projected Population growth of 3.1% over 5 years
Slide 33: Virginia Savings Bank
Virginia Savings Bank • Closed May 31, 2012 • 5 branches in Winchester, VA market • VSB was an underperforming small bank with little market visibility but some great talent • Projected Population growth of 5.0% over 5 yrs • City’s strategy has been increased visibility, significant improvements in
Slide 34: Facility Enhancements Woodstock, Virginia
Facility Enhancements Woodstock, Virginia BEFORE AFTER 34
Slide 35: Facility Enhancements Winchester, Virginia
Facility Enhancements Winchester, Virginia BEFORE AFTER 35
Slide 36: Branches from American Founders Bank
Branches from American Founders Bank • Closed November 6, 2015 • 3 branches in Lexington, KY – $119 million in loans (chosen by City) – $145 million in deposits – 3,100 households – Strong talent • Projected Population growth of 4.3% over 5 years in Lexington-Fayette, KY region, with exceptional dem
Slide 37: Financial Impact of Acquisitions
Financial Impact of Acquisitions: VSB – Before VSB – After Community – Before Community - After Branches 5 5 11 9 FTE 48 30 (-38%) 153 58 (-62%) Loans^ $73 MM $87 MM $371 MM $295 MM * Deposits $120 MM $152 MM $385 MM $303 MM ** Expenses $4.7 MM (2011) $2.4 MM (-49%) (2015) $14.7 MM (2012) $4.5 MM (-
Slide 38: Acquisition territory
Acquisition territory: 38
Slide 39: Tangible Common Equity
Tangible Common Equity: strong following acquisitions in 2012, 2013 & 2015 6.00% 7.00% 8.00% 9.00% 10.00% 11.00% 2008 2009 2010 2011 2012 2013 2014 2015 Jun 2016 39
Slide 40: Share Count: aggressive share repurchases
Share Count: strong capital and high profitability allow aggressive share repurchases 13,000,000 13,500,000 14,000,000 14,500,000 15,000,000 15,500,000 16,000,000 16,500,000 17,000,000 17,500,000 18,000,000 Average Shares Outstanding 40
Slide 41: Cash Dividends/Share Declared & Dividend Payout Ratio
Cash Dividends/Share Declared & Dividend Payout Ratio 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 $1.60 $1.80 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 D ivide n d P ay ou t R at io Ca sh D ivide n d s/
Slide 42: Growth per share
Growth per share (12/31/10 – 12/31/15): • Loans per share: 8.8% CAGR • Deposits per share: 6.8% CAGR • Non-interest inc per share*: 0.8% CAGR • Expenses per share**: 3.7% CAGR Implication: While CHCO operates in relatively low growth markets, high profitability allows share repurchases, which have d
Slide 43: Industry Challenges in 2016
Industry Challenges in 2016: • Economic Activity & Loan Growth • Mortgage Banking Slowdown • Branch Fees are stagnant • Loan Competition – Terms & Price • Regulatory Compliance • Future Regulatory Agenda 43 Challenges specific to CHCO: • Downturn in Mining? •City’s direct exposure to mining extremel
Slide 44: CHCO overcomes challenges
CHCO overcomes challenges thru: • Excellent distribution network • Exceptional Customer Depth driving strong non-interest income • Markets characterized by disciplined competition - and even perhaps “receding” competition • Discipline in managing expenses • Strong liquidity from a strong depository
Slide 45: CHCO represents good value and stability
CHCO represents good value and stability • Pricing Metrics*: • Price to Book: 174% • Price to Tangible Book: 214% • Price to 2016 Projected Earnings** 15.4x • Dividend Yield 3.5% • Div Payout Ratio** 53% • Tangible Capital/Tangible Assets*** 9.38% • Institutional Ownership 62% • Average Daily Volume
Slide 46: City Holding Company
City Holding Company
City Holding — Sandler O'Neill + Partners, LP conference (September 2016) on 6ix