EX-99.1 2 ex99_1.htm EXHIBIT 99.1, SLIDE PRESENTATION TO RBC CAPITAL MARKETS CONFERENCE Exhibit 99.1, Slide Presentation to RBC Capital Markets Conference
 
 
RBC Financial Institutions Conference
September 2006
 
Skip Hageboeck                    Craig Stilwell
President & CEO       EVP-Retail Banking
 
 
 
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 projected in the forward-looking statements. Important
factors that could cause actual results to differ materially from those discussed in such
forward-looking statements include, but are not limited to, (1) the Company may incur
additional loan loss provision due to negative credit quality trends in the future that may
lead to a deterioration of asset quality; (2) the Company may incur increased charge-offs
in the future; (3)  the Company may experience increases in the default rates on previously
securitized loans that would result in impairment losses or lower the yield on such loans;
(4) the Company could have adverse legal actions of a material nature; (5) the Company
may face competitive loss of customers; (6) the Company may be unable to manage its
expense levels; (7) the Company may have difficulty in retaining key employees; (8)
changes in the interest rate environment may have results on the Company's operations
materially different from those anticipated by the Company's market risk management
functions; (9) changes in general economic conditions and increased competition could
adversely affect the Company's operating results; (10) changes in other regulations and
government policies affecting bank holding companies and their subsidiaries, including
changes in monetary policies, could negatively impact the Company's operating results;
and (11) the Company may experience difficulties growing loan and deposit balances.
  Forward-looking statements made herein reflect management’s expectations as of the
date such statements are made. Such information is provided to assist stockholders and
potential investors in understanding current and anticipated financial operations of the
Company and is included pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. The Company undertakes no obligation to update any
forward-looking statement to reflect events or circumstances that arise after the date such
statements are made.
 
 
 
 
City Holding Company:
•
Headquartered In Charleston WV
•
$2.5 Billion in Total Assets
•
67 Banking Offices
 
 
 
 
Key Markets
1st & 10% Market Share
in Huntington WV/Ashland KY MSA
$3.6 Billion
8% Market Share in Morgan,
Berkeley & Jefferson Co. WV
$1.8 Billion
1st & 30% Market Share
$1.6 Billion
2nd & 11% Market Share
in WV’s largest market; $4.4B
 
 
 
Themes:
 
n
CHCO: Consistently superior results
 
n
CHCO: Conservative operating platform
 
n
CHCO: Growing and succeeding in
slow-growth markets
 
 
 
 
 
2005 Major Accomplishments
n
Maintained “High-Performing Bank”
Metrics
n
Grew “Core EPS”
n
Acquisition of Classic Bancshares added
u
10 offices in KY and OH
u
$256MM in loans
u
$212MM in deposits
n
Achieved strong growth in commercial
lending
n
Launched 2nd Generation deposit products
n
Initiated improvements to retail distribution
network
 
 
 
 
2006 YTD Accomplishments
n
Loan Growth of 5.8% annualized
u
Commercial growth @ 12.7% annualized
n
Deposit Growth of 4.6% annualized
n
EPS growth of 4.9% despite:
u
Provision Expense of $1.7MM vs. $0 in
prior year
u
Decrease in interest income on Previously
Securitized Loans of $0.7MM
n
Non-interest income up 9.8%
n
Net interest margin up 20 bp to 4.64%
 
 
 
 
* Rankings based on Core ROA among 239 public banks $1-$10 Billion
 
 
2004
2005
YTD
2006
  
n
 Reported ROA
2.10%
2.09%
2.12%
best in class!
n
 NIM
4.29%
4.49%
4.64%
increasing!
n
 Efficiency Ratio
48.7%
46.7%
44.7%
decreasing!
n
 Non-Int
  Rev/Total Rev
33%
34%
33%
  
n
 Non-perf
Assets/ Loans
0.29%
0.27%
0.25%
decreasing!
Why Own CHCO Stock?
1. CHCO is consistently and
     extraordinarily profitable:
 
 
 
Why Own This Stock?
1. CHCO is highly profitable
 
2. CHCO is conservatively positioned
 
3. CHCO is focused on growth
 
4. CHCO has strong management talent
 
 
 
 
Loan to Deposits 83.6%
 
Loan to Deposits 92.0%
 
Sample of 222 publicly traded banks
and thrifts with assets between $1-$5
billion as of December 31, 2005
As of December 31, 2005
 
Conservative Loan Portfolio
Mix
 
 
 
As of December 31, 2005
 
Sample of 222 publicly traded banks
and thrifts with assets between $1
and $5 billion
Strong Loan Quality
 
 
 
 
 
Deposits: Low Cost and Stable
Data: December 31, 2005
 
 
 
CHCO is highly liquid
 
 
 
34%
 
21%
 
79%
 
66%
 
*As of December 31, 2005.
Non-interest income excludes
security gains
Sample of 222 publicly traded banks
and thrifts with assets between $1
and $5 billion as of December 31,
2005
Favorable Revenue Profile
 
 
 
2004 Efficiency Ratio adjusted to eliminate $5.5 million in revenue
from Legal Settlement and associated legal expenses of $500M;
  Peers: Sample of 222 publicly traded banks and thrifts with assets
between $1 to $5 Billion as of December 31, 2005
91st percentile
City is Highly Efficient
 
 
 
 
CHCO
6/30/06
Peer
Median
Equity/Assets
11.5%
8.7%
Tang Equity/Tang
Assets
Tang Equity/Tang Assets
9.1%
9.1%
7.0%
7.0%
Leverage Ratio
10.3%
  
12.5%
Tier I Capital Ratio
14.6%
11.1%
Total Risk-based Capital Ratio
Total Risk-based
Capital Ratio
15.5%
15.5%
12.5%
Strong Capital facilitates growth:
 
 
 
Why Own This Stock?
n
1. CHCO is highly profitable
n
2. CHCO is well-positioned for the
future
n
3. CHCO is growing in slow-growth
markets
u
Internal Loan Growth
u
Internal Deposit Growth
u
Improvements to Retail Distribution
System
u
Acquisition
 
 
 
 
 
Population
Growth
2006-2011
Median
Household
Income 2006
CHCO franchise
1.6%
$35,928
West Virginia
0.8%
$34,207
U.S.
6.7%
$51,546
Banking in Slow-growth markets: 
CHCO has succeeded despite the slow growing
markets in which it operates
 
 
 
 
Population
Growth
2006-2011
Household
Income
Kanawha Co.
(Charleston)
-3.8%
$39,847
Putnam Co.
4.4%
$54,072
Jefferson Co.
13.15%
$51,953
Local Demographics: 
Within any franchise there are pockets of better opportunity
 
 
 
Kanawha County is losing
population – but there is growth
  even in declining markets!
 
 
 
9.8%
10.4%
33.4% 
incl. Classic
12.7%
annualized
Commercial Loan Growth:
 
 
 
 
 
 
 
Loan Mix: 
 
 
 
34.0%
9.1%
2.1%
7.8%
annualized
Home Equity Loan Growth:
 
 
 
 
 
 
 
5.2%
26.2% incl.
Classic
2.9%
annualized
Residential Loan Growth:
 
 
 
 
 
 
 
Source: Internal data as of December 31, 2005
 
CHCO:
A Retail Focused Franchise
 
 
 
City’s Retail Business Model
n
Best in class products
n
Strong distribution network
n
Very targeted marketing/promotion
n
Alignment between staff, key
performance measures, and
compensation
 
 
 
 
Best in Class Products:
an early adopter of Totally Free
Checking 
2001-2003
n
First to market
n
Little competition
n
High level of account growth
n
Strong Revenue lift 
 
 
 
Best in Class Products:
Totally Free Checking 
By late 2004
n
Every bank in market now offered free
checking
n
Growth started to flatten 
n
Sole focus on Free Checking resulted in
91% of all new accounts opened being put
in this product type
n
Identified desire to diversify revenue
stream 
 
 
 
Best in class products
2nd Generation transaction accounts 
2005
n
Simplified account offerings
n
Improved fee income opportunities in
new account line up
n
Gave our front line an improved sales
system combined with strong marketing
n
Goal was to lift the number of new
accounts and lower the percentage that
were sold free 
 
 
 
Best in class products 
2nd Generation transaction accounts
 
 
 
Average of
2,657 in 2005
Average of
2,372 in 2004
Average of
2,674 YTD in
2006
Gave us the lift we wanted…
New Consumer DDA Accounts openings per month
 
 
 
20% CAGR
2nd Q 2001 to 4th Q 2005
And the corresponding revenues
 
 
 
Debit Card Revenue
 
Current run rate
is $5,000,000 in
annual revenue
 
 
 
 
2003
2004
2005
Transactions
8,067,069
9,917,376
12,763,439
Sales Volume
$183 Million
$208 Million
$283 Million
Revenue
$2,700,722
$3,001,842
$3,980,931
Revenue
Growth
(over prior year)
23%
11%
33%
Active Cards
57,719
60,764
73,477
Penetration
75%
77%
80%
Avg Transactions
per account
9.2
10.5
11.8
Debit Card Success
 
 
 
New Partnership with Elan to
provide Credit Card Products
n
The trend was not our
friend
n
No easy way to
differentiate products
n
Competing against teaser
rates; rewards programs,
affinity groups, etc
n
Strategic partnership
allows us to maintain
branded program with
stronger products and
support
 
 
 
City continues to innovate to offer
the best products to our customers:
 
 
 
Wal-Mart Strategy 
Consolidations/Renovations/ Relocations
New Branches in growing areas of existing
markets
DeNovo entry into contiguous markets
Optimizing our Retail Distribution
System
 
 
 
§
Part of a Hub and Spoke distribution strategy
§
High-traffic Wal-Marts equal high volume in
        
  new accounts and service fee income
§
Supports existing retail distribution outlets in
City’s major Markets with low capital outlay
§
Openings
t
Charleston – Sept 2004
t
Huntington – Sept 2004
t
Beckley – May 2005
t
Ashland – August 2005
t
Ripley – 1st Quarter 2007
t
Hurricane - 2007
 
 
City’s Wal-Mart Strategy
 
 
 
Consolidations/Renovations/Relocations:
Our New Downtown Charleston Office
Housing Retail, Trust, Commercial & Private Banking
Opened 2006
 
 
 
New branches in growing areas of
existing markets:
Newest branch opening next month in high growth market in Eastern Panhandle (near Washington DC)
 
 
 
Our new “flagship branch”
in the Eastern Panhandle
 
 
 
Other Strategic Opportunities
 
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
-
Payout ratio in 2006: 37%
 
Share Repurchases
-
Tangible Capital @ 9.1% @ 6/30/2006
-
Purchased over 700,000 in 1st half of 2006
-
Holding Company has $35 million in cash
-
CHCO’s strong profitability allows greater long-term
share repurchase activity than peers
 
 
 
 
 
 
 
$100MM to $500MM in assets
Markets in or adjacent to CHCO footprint
Retail Opportunity
Accretive to EPS in first full year
Acquisitions:
 
 
 
Industry Challenges for 2007
n
Flat Yield Curve & NIM Compression
u
CHCO is less dependent on NII for revenue than peers
u
CHCO has demonstrated strong management of
NII/NIM by delivering promised results to rising rates
 
n
Lower short-term rates would be
challenging
u
CHCO has purchased interest rate floors
u
CHCO maintains significant short-term investment
assets which could be moved into long-term bonds
 
n
Asset Quality is at its peak
u
CHCO’s loan to deposit ratio is less than peers
u
CHCO has focused on real-estate secured lending
u
Real estate prices in CHCO markets have been subdued
 
n
Housing is in decline
u
CHCO’s profitability has not been dependent upon
mortgage banking
u
Housing in CHCO’s markets has been generally stable 
 
 
 
 
 
2004
2005
2006
Projected
2007
Projected
2008
Projected
Average
Balances
$83.5 MM
$42.9 MM
$24.7 MM
$16.5 MM
$12.1 MM
Rate
17.4%
26.6%
40%
40%
40%
Gross
Interest
Revenue
$14.5 MM
$11.4 MM
$9.6 MM
$6.7 MM
$4.9 MM
Previously Securitized Loans:
A unique challenge for CHCO which was met in 2005 and 2006 thru loan growth and a balance sheet positioned to benefit from rising
rates
 
 
 
Prime Rate
CHCO
Peers
Net Interest Margin: CHCO has benefited
from rising interest rates and
demonstrated strong management of net
interest margin
 
 
 
H/R Director
Clorox
2005
CFO
Public Accounting
2005
EVP – Commercial Lending
BB&T
2004
SVP – Mortgage Lending
United Bankshares
2004
Regional Branch Manager
BB&T
2004
Chief Auditor
BB&T
2001
SVP – Consumer Lending
Bank One
2001
SVP – Branch Banking
BB&T
2001
Senior Lender
BB&T
2001
Commercial Workout Manager
Huntington
2001
CEO
INB/NBD/PPLS
2001
EVP – Retail
PPLS/BKD
2001
A Deep & Diverse Talent Pool
Talented additions have been made where additional strength was needed:
 
 
 
CHCO Checklist for success in slow
growth markets:
n
Strong Net Interest Margin – Yes
n
Disciplined competition – True in most markets
n
Ability to grow share – Yes
n
Efficient Cost Structure – Yes
n
Tight Capital – No, but poses a significant opportunity to
enhance EPS as more optimal capital structure is
achieved!
n
Exploiting sub-market growth: Yes
n
Opportunity to grow into adjacent markets – A few
opportunities are available undertake this opportunity
n
Management – Strong as demonstrated by long-term
sustained performance
 
 
 
 
 
 
 
 
•
Based on Price of $39.82 (close of business 9/5/06)
** Based on Analyst estimates for 2007 of $3.16
Pricing Metrics*
n
Price to Book: 246%
n
Price to Tangible Book:            311%
n
Price to 2007 Projected Earnings**   12.6x
n
Institutional
Ownership        46%
 
 
 
 
Questions?