EX-99.1 3 exhibit99-1.htm EXHIBIT 99.1, CHCO SLIDE PRESENTATION exhibit99-1.htm
 
  Rodman & Renshaw
Annual Global Investment Conference
September 2010
 
 
 
Forward Looking Statements
 
 
 
n Total Assets      $2.6 bil
n Branches      67
n FTE      812
n Market Cap     $445 mil 
n Institutional Ownership   62% 
n Average Daily Volume   $3.0 mil
 Date: August 30, 2010
 
 
 
Value in the Banking Sector?
Checklist for success in current environment:
Capital
n Strongly capitalized
Markets
n Solid Distribution Network
n Stable Geographic Markets
n Disciplined Competition
Performance
n Strong Net Interest Margin
n Strong NIM Management
n Strong Fee income
n Ability to control expenses
Growth
n Liquidity to grow
n Ability to grow share in market
n Opportunity to grow into new markets
Management
 
 
 
City Holding Company:
n Markets: Operates an extremely strong
 retail/commercial franchise in stable markets with
 disciplined competition
n Asset Quality: Strong compared to peers and City’s
 management has recognized and dealt with issues
n Performance: Has Consistently outperformed
 peers with respect to earnings, capital, and liquidity
n Growth: Growing and succeeding in slow-growth
 stable markets with targeted expansion into new
 markets
 
 
 
1st Branch Share & 9% Deposit Share
in Huntington WV/Ashland KY MSA
$3.8 Billion
1st Branch Share & 10% Deposit Share
in WV’s largest market; $5.3B
1st & 27% Deposit Share
$2.0 Billion
2nd Branch Share & 8% Deposit
Share in Morgan, Berkeley
& Jefferson Co. WV
$1.9 Billion
Key Markets
 
 
 
Liabilities: Low Cost and stable
deposits drives profitability
Data: December 31, 2009
 
 
 
CHCO’s Cost of Funds Advantage:
 

CHCO
Peers
Ave

Advantage
CD’s
3.16%
2.75%
(41 Bps)
Interest Bearing
Deposits
1.95%
1.90%
(5 Bps)
Total Deposits
1.65%
1.69%
4 Bps
Interest Bearing
Liabilities
1.87%
2.18%
31 Bps
Data: 2009. Peers reflect publicly traded $1 to $10
billion banks reporting these rates
 
 
 
Net Interest Margin
Strong NIM driven by solid core deposit
franchise & strong NIM management
 
 
 
Strong Deposit Franchise drives top
decile Non-Interest Revenue:
24%
76%
63%
*As of December 31, 2009. Non-
interest income excludes other than
temporary impairment losses and
VISA IPO gain
Sample of 295 reporting publicly traded
banks and thrifts with assets between
$1 and $10 billion as of December 31,
2009, excluding investment
gains/losses
94th percentile
 
 
 
City’s Deposit Franchise:
n City’s Non-Interest Income represents 36% of total
 revenues
n CHCO Ave Deposits/Branch    $32 MM
n Peer Ave Deposits/Branch    $41 MM
 
n Average Depository Hhlds/Branch    2,200
n Industry Ave. Hhlds per Branch*    1,220
 As compared to other $2.6B banks, City has more
 branches and in each of these branches, more
 households than larger branches, resulting in City’s
 exceptionally strong retail deposit franchise.
* FIS
 
 
 
Real-time Processing Implementation
n May 12, 2010: Implemented “Passport”
 software providing “real-time” posting of
 debits/credits intra-day
Regulation E Time-Line
n April 1, 2010: Began Communication Effort
 regarding Regulation E
n 49% of customers made election prior to
 implementation
n Implementation: August 14th
n Additional 4% of customers have made
 election post-implementation
 
 
 
Regulation E
n Customers who have NEVER overdrawn their
 account:
 u Response Rate:     37%
 u Opt-In / Opt-Out / Force-out: 26% / 11% /63%
n Customers who HAVE overdrawn their account:
 u Response Rate:      86%
 u Opt-In/ Opt-Out / Force-out: 75% /11% /14%
n Estimated impact to Total Service Charge Revenues
 from Reg E & “Passport” :    -12 to 15%
 
 
 
 
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 charging
 down non-performing loans
 
 
 
Conservative Loan Portfolio Mix
Loan to Deposits 82.8%
Loan to Deposits 86.5%
Sample of 296 publicly traded banks
and thrifts with assets between $1-$10
billion as of December 31, 2009
As of December 31, 2009
 
 
 
Retail Loan Facts:
•Residential RE 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 1st Lien Position
•66% of Home Equity Loans have a LTV < 80%.
•Ave Loan Balance for Residential RE is $78,000
•Ave Loan Balance for Home Equity loans is $35,000
 
 
 
Stable Past-Due Loans (30+ days)
Past-due loans trends are stable and reflect better
economics in City’s core markets
 
 
 
NPA’s to Loans & OREO
 
 
 
31%
44%
 
 
 
Commercial
$0.770MM
Net Charge-offs: 2010 YTD
 
 
 
Greenbrier Resort Speculative
Properties - 6/30/10
Original Loan Balances    $ 18.0 MM
Current Loan Book Balance net of reserves $ 1.0 MM
OREO after Charge-off’s     $ 9.3 MM
On-Balance Sheet:      $ 10.3 MM
       (57% of orig loan)  
Sale of $1.7MM in 3rd Quarter
 
 
 
CHCO’s performance is
exceptionally strong……..
 
2010
YTD
Reported ROA
1.51%
ROTE
15.6%
Tangible Common
Equity/TA
9.86%
NIM
4.18%
Efficiency Ratio
53.4%
Non-Int Rev/Total Rev*
36.2%
 
 
 
CHCO consistently among the strongest:
 
2005
2006
2007
2008
2009
2009 Peers**
Median
Reported ROA
2.09%
2.11%
2.03%
1.12%
1.63%
0.46% - 95th
%ile
ROTE
22.3%
22.4%
21.0%
11.4%
18.0%
6.62% - 95th
%ile
Tangible Common
Equity/TA
9.5%
10.1%
9.7%
8.83%
9.78%
7.4% - 95th
%ile
NIM
4.49%
4.56%
4.34%
4.64%
4.18%
3.76%- 90th
%ile
Efficiency Ratio
46.7%
44.5%
45.9%
46.3%
50.0%
59.9% - 100th
%ile
Non-Int
Rev/Total Rev*
34%
34%
34%
36%
37.9%
 28.1% -
100th %ile
* Non-Int Rev excludes gain on Visa IPO; Securities Losses
•** Peer Group of 19 Regional Banks of comparable size & geography
 
 
 
GROWTH: CHCO is positioned
to achieve “reasonable growth”
in its core franchise:
n Commercial
n Retail
n Insurance
n Trust & Investment Management
 
 
 
Deposit Growth Opportunity:
CHCO has many small deposit
relationships; peers tend to have larger
commercial & public deposits
 
Branches
Deposits
Deposits/Branch
CHCO
67
$ 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
 
 
 
 
 
 
Growth: Expanding Retail Distribution
to capture additional retail households
 
 
 
City Opened 4 Wal-Marts in key markets
where it had significant share:
 
 
 
Branch Renovations/Expansions to
meet customer demand:
 
 
 
 
 
 
Sept 2010: Expansion into
South Charleston WV has
encouraging early results
 
 
 
CityInsurance
n 2006 Revenues   $2.3 million
n 2007     $4.1 million
n 2008    $4.2 million
n 2009     $5.6 million
Strategies:
 u 2007: Added Workers Compensation Dept in 2007
   Added Personal Lines Department in 2007
  Opened Beckley WV Office in 2007
 u 2008: Opened Martinsburg Office in 4th Q 2008
  Opened Ashland Office in 4th Q 2008
  Acquired Nitro-based Patton Ins. Agency
    Added enhanced Med Mal Representation
 u 2009: Acquired Dickens & Clark Agency
 u 2010: Acquired Ripley WV Insurance Office
 
 
 
Trust AUM: CAGR (04-10) of 8%
Grew AUM in 2008/10 despite market by taking share
 
 
 
CHCO: Capital Flexibility
  Tangible Common Equity at 6/30/10: 9.86%
  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 4.80% (as of 8/30/10)
 - Dividend Payout Ratio 54% (Analyst Est.EPS for 2010)
  Share Repurchases
 - Purchased 1,784,458 shares in 2007, 2008 and 2009
 (10.2% of outstanding shares at 12/31/06);
 - Purchased over 400,000 shares year-to-date in 2010
 - Driven by CHCO’s strong profitability, CHCO can
 achieve greater long-term share repurchase activity
 than peers.
 
 
 
Growth Per Share (12/31/04 - 12/31/09):
n Loans Per Share:   8.7% CAGR
n Deposits Per Share:   6.4% CAGR
n Non-Interest Inc Per Share: 4.5% CAGR
n Expenses Per Share:  4.4% CAGR
   
Implication: While CHCO operates in relatively
low growth markets, high profitability allows
share repurchases, which have driven core
earnings despite the economic environment of the
last several years
 
 
 
Acquisition Philosophy:
• City has historically been less acquisition
 focused than peers - acquisitions must truly
 be strategic or meaningfully accretive
• Going forward, City is likely to be more
 acquisitive than historically due to an
 increasing number of attractive
 opportunities
• City will continue to explore both FDIC and
 non-FDIC acquisitions
• City does not anticipate many FDIC-assisted
 transactions within it’s “acquisition
 footprint”
 
 
 
Acquisition Philosophy:
• City will actively consider acquisition of banks
 in the $100 million to $1 billion range within its
 “acquisition footprint”
• City will consider acquisition of certain under-
 performing banks larger than $1 billion in
 assets
• Future acquisitions should:
 • Increase franchise in existing markets
 • Extend franchise meaningfully into adjacent
 markets
 • Extend and balance City’s strong deposit &
 stable market franchise into new markets
 with meaningful long-term growth
 opportunities
 • Be accretive
 
 
 
Acquisition “Territory”:
 
 
 
Value in the Banking Sector?
Checklist for success in current environment:
Capital
n Strongly capitalized - Top 10%
Markets
n Solid Distribution Network - Excellent
n Stable Geographic Markets - Yes - WV & E Kentucky
n Disciplined Competition -  Yes - see NIM
Performance
n Strong Net Interest Margin - Yes
n Strong NIM Management - See Results (Floors)
n Dependence on NII- Top Decile
n Ability to control expenses - Top Decile Efficiency Ratio
Growth
n Liquidity to grow - Extremely Strong
n Ability to grow share in market - 5-mile branch share 32%;
 deposit share 14%
n Opportunity to grow into new markets - Well Positioned
n Management  - Experienced Team with Great Results
 
 
 
Pricing Metrics*:
n Price to Book:      142%
n Price to Tangible Book:     174%
n Price to 2010 Projected Earnings** 11.3x
n Dividend Yield     4.8%
n Div Payout Ratio (First Call)**   54%
n Tangible Capital/Tangible Assets  9.86%
n Institutional Ownership    62%
* Based on Price of $28.35 (8/30/10)
** Based on analyst estimate of $2.52 (average of 6)
CHCO represents good value and stability