City Holding Company · NASDAQ:CHCO
City — Keefe, Bruyette & Woods Atlanta & Orlando, June 3-4, 2014
44 slides from City's conference presentation, Jun 3, 2014
Slide 1: Keefe, Bruyette & Woods Atlanta & Orlando June 3-4, 2014
Keefe, Bruyette & Woods Atlanta & Orlando June 3-4, 2014
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 resul
Slide 3: City Holding at a glance
Total Assets $3.4 bil Branches 82 FTE 925 Market Cap $684 mil Institutional Ownership 63% Average Daily Volume $1.8 mil Date: May 28, 2014 *
Slide 4: Value in the banking sector? Checklist for success
Value in the banking sector? Checklist for success in current environment: 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 Grow
Slide 5: City Holding Company
City Holding Company 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 ea
Slide 6: City National Markets
City National Markets 1st Branch Share & 2nd Deposit Share (9%) In Charleston MSA/Huntington MSA; $10.6 Billion 1st Branch Share & 28% Deposit Share $2.5 Billion 2nd Branch Share & 2nd Deposit Share (17%) inStaunton MSA $2.4 Billion 3rd Branch Share & 6% Deposit Share in Winchester VA & Morgan, Berk
Slide 7: Acquisitions in Growth Markets
Acquisitions in Growth Markets *
Slide 8: Virginia Savings Bank
Virginia Savings Bank Closed May 31, 2012 5 branches in Virginia $73 million in loans $123 million in deposits 5,700 households Regional population of 185,000 Regional Households of 72,000 Projected Population growth of 5.0% over 5 yrs Our primary competitors in this market are BB&T, United Bank, Ba
Slide 9: Community Bank
Community Bank Closed January 10, 2013 10 branches in Virginia Eight Branches in Staunton, VA region Population of 205,000 Households of 79,000 Competitors: STEL, BBT, STI, BOA, UBSI Two Branches in Virginia Beach Region Population of 1.7 million Households of 625,000 $410 million in loans $380 mill
Slide 10: Retail Enhancements in Virginia
Retail Enhancements in Virginia 80% of Virginia Branches acquired are unprofitable due to low retail loan balances Solution: Originate More Retail Loans Under CHCO, Retail Loan Production: $39MM in 2013 Goal of over $50MM for 2014 Was not a focus for predecessors due to liquidity constraints Signifi
Slide 11: Retail Enhancements in Virginia
Retail Enhancements in Virginia Closed Harrisonburg Branch (Feb 2013) Had 288 households; Primarily Indirect Auto Focus Closed Lake James Branch (Dec 2013) Had 981 households Indirect Auto Loans down $12.4 MM (60%) since January 2013 Scale business Unacceptable risk-return balance Relocated Winchest
Slide 12: Financial Impact of Acquisitions
Financial Impact of Acquisitions: VSB - Before VSB – After Community – Before Community - After Branches 5 5 11 9 FTE 48 37 (-23%) 153 82 (-45%) Loans^ $73 MM (Mar 12 Call) $73 MM $371 MM $318 MM * Deposits $120 MM $139 MM $385 MM $314 MM ** Expenses $4.7MM (2011) $2.7MM (-42%) (YTD Ann) $14.7 MM (2
Slide 13: Accretion from Acquisitions
Accretion from Acquisitions *
Slide 14: Industry Challenges in 2014
Industry Challenges in 2014: Economic Activity & Loan Growth Mortgage Banking Downturn Branch Fees are stagnant Loan Competition – Terms & Price Regulatory Compliance Future Regulatory Agenda *
Slide 15: The key to City's success: an enviable deposit franchise
The key to City’s success: an enviable deposit franchise Branches 82 Average Deposits per Branch $34.5 MM Average Households per Branch 2,200 Average Deposit Share 12.5% Average Household Share* 23% * - Excludes Coastal Region *
Slide 16: Low cost and stable funding
Low cost and stable funding: Data: March 31, 2014 *
Slide 17: City's NIM has been very stable
Excluding Acquisition Accretion, Interest rate floors, and PSL’s – City’s NIM has been very stable: Peer Data as of December 31, 2013 3.77% March 2008 thru June 2011: NIM supported by Interest Rate Floors 2013 & Mar 2014: NIM supported by Accretion from acquisitions *
Slide 18: CHCO's 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 +400 Bp +3.9% +300 Bp +4.9% +200 Bp +4.2% +100 Bp +1.2% Data: March 31, 2014 Assumes that deposit mix changes as rates rise *
Slide 19: Strong deposit franchise drives top decile non-interest revenue
Strong deposit franchise drives top decile non-interest revenue: *As of March 31, 2014. Non-interest income excludes investment gains/(losses) Sample of 275 reporting publicly traded banks and thrifts with assets between $1 and $10 billion as of December 31, 2013, excluding investment gains/(losses)
Slide 20: Non-interest income is branch driven
Non-interest income is branch driven: 2008 2009 2010 2011 2012 2013 March 2014 Bankcard Revenues $8.6 $9.0 $9.9 $11.1 $12.4 $13.5 $3.7 Service Charges $37.4 $36.0 $30.1 $27.0 $26.3 $27.6 $6.2 Insurance $4.2 $5.6 $5.5 $5.9 $6.1 $5.8 $2.0 Investment Management $2.2 $2.3 $2.8 $3.1 $3.8 $4.0 $1.0 BOLI $
Slide 21: Past-due loan Trends (30+ days)
Past-due loan Trends (30+ days): *
Slide 22: Past Dues Originated & Acquired
Past Dues Originated & Acquired as of March 31, 2014 C&I CRE RRE HE Con Total Originated $0.1 $0.8 $4.1 $0.6 $0.3 $5.9 Acquired $0.1 $3.8 $0.8 - $0.4 $5.1 Total $0.2 $4.6 $4.9 $0.6 $0.7 $11.0 *
Slide 23: Charge-off trends
Charge-off trends: Source: FDIC, All Insured Depository Institutions Peer data as of December 31, 2013 *
Slide 24: Non-performing assets & OREO
Non-performing assets & OREO Source: FDIC, All Insured Depository Institutions Peer data as of December 31, 2013 *
Slide 25: Bank Director ranked City: A High Performing Bank
Bank Director ranked City: A High Performing Bank * #3 of largest 150 US banks in 2010 #8 among US Banks with assets between $1B - $5B in 2011 #19 among US Banks with assets between $1B - $5B in 2012 Named City 10th on the “Nifty Fifty” for best use of capital in 2013 & 2014
Slide 26: ROA
ROA Peer Data as of March 31, 2014 *
Slide 27: ROTCE
ROTCE Peer Data as of March 31, 2014 *
Slide 28: Efficiency Ratio
Efficiency Ratio Data as calculated using SNL Financial definition. Peer data as of March 31, 2014. *
Slide 29: Noninterest Income/Total Revenues
Noninterest Income/Total Revenues Peer Data as of March 31, 2014 *
Slide 30: Growth: CHCO is positioned to achieve reasonable growth
Growth: CHCO is positioned to achieve “reasonable growth” in its core franchise Commercial Retail Insurance Trust & Investment Management *
Slide 31: Commercial loan growth
Commercial loan growth: Success achieved due to community bank orientation, strong team, strong underwriting, and strong local economies Growth percentages exclude acquisitions in 2005, 2012 & 2013 *
Slide 32: Retail loan growth
Retail loan growth: Adjustable Rate Mortgages, Home Equity Loans, Installment credit *
Slide 33: Deposit growth opportunity
Deposit growth opportunity: CHCO has many small deposit relationships; peers tend to have larger commercial & public deposits Branches Deposits Deposits/Branch CHCO 82 $ 2.8 B $35 million BBT 65 $ 5.1 B $79 million UBSI 32 $ 1.8 B $55 million JPM 19 $ 1.3 B $68 million HBAN 16 $ 1.0 B $59 million In
Slide 34: CityInsurance: Growing Revenues
CityInsurance: Growing Revenues $5.8 Million CAGR 12% annually Lines of Business Acquisitions Personal Lines Dickens & Clark Workers Compensation Patton Insurance Health/Benefits/Life Ins Millcreek Insurance Property/Casualty Area Insurance Medical Malpractice Markets Charleston (3 locations) Huntin
Slide 35: Trust AUM & Revenues: Strong growth
Trust AUM & Revenues: Strong growth AUM CAGR 10.8% and Revenue CAGR 7.8% (Dec 31, 2005-Dec 31, 2013) *
Slide 36: Tangible Common Equity
Tangible Common Equity: strong following 2 acquisitions in 2012 & 2013 *
Slide 37: 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 Average Shares Outstanding HTT 2005 2006 2007 2008 2009 2010 2011 2012 2013 March 2014 City Holding Company
Slide 38: Average Daily Volume and Short Position in CHCO
Average Daily Volume and Short Position in CHCO *
Slide 39: Cash Dividends/Share Declared & Dividend Payout Ratio
Cash Dividends/Share Declared & Dividend Payout Ratio *
Slide 40: Growth per share
Growth per share (12/31/10 – 12/31/13): Loans per share: 8.5% CAGR Deposits per share: 6.5% CAGR Non-interest inc per share: 1.7% CAGR Expenses per share*: 5.4% CAGR Implication: While CHCO operates in relatively low growth markets, high profitability allows share repurchases, which have driven core
Slide 41: Acquisition philosophy
Acquisition philosophy: Historically less acquisitive than peers Acquisitions must truly be strategic or meaningfully accretive Opportunities have increased Actively looking: In-market Adjacent market Growth markets Size: Generally $100MM to $1B *
Slide 42: Acquisition territory
Acquisition territory: Dit
Slide 43: CHCO represents good value and stability
CHCO represents good value and stability Pricing Metrics*: Price to Book: 174% Price to Tangible Book: 215% Price to 2014 Projected Earnings** 13.1x Dividend Yield 3.7% Div Payout Ratio** 48% Tangible Capital/Tangible Assets*** 9.60% Institutional Ownership 63% * Based on Price of $43.54 (5/28/14) *
Slide 44: City Holding Company
City Holding Company
City Holding — Keefe, Bruyette & Woods Atlanta & Orlando, June 3-4, 2014 on 6ix