EX-99.1 3 ex99-1.htm EXHIBIT 99.1, SLIDE PRESENTATION JMS INVESTOR MEETINGS ex99-1.htm
Janney, Montgomery,
Scott LLC
Chicago
October 4, 2011
 
 
 
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 may
 not continue to benefit from strong recovery efforts on previously securitized loans
 resulting in improved yields on these assets; (5) the Company could have adverse
 legal actions of a material nature; (6) the Company may face competitive loss of
 customers; (7) the Company may be unable to manage its expense levels; (8) the
 Company may have difficulty retaining key employees; (9) 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; (10)
 changes in general economic conditions and increased competition could adversely
 affect the Company’s operating results; (11) 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; (12) the Company may experience difficulties growing loan and
 deposit balances; (13) the current economic environment poses significant
 challenges for us and could adversely affect our financial condition and results of
 operations; (14) continued deterioration in the financial condition of the U.S. banking
 system may impact the valuations of investments the Company has made in the
 securities of other financial institutions resulting in either actual losses or other than
 temporary impairments on such investments; and (15) the effects of the Wall Street
 Reform and Consumer Protection Act (the “Dodd-Frank Act”) recently adopted by
 the United States Congress.  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.
 
 
 
• 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
 
 
 
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
• Growth
 – Liquidity to grow
 – Ability to grow share in
 market
 – Opportunity to grow into
 new markets
• Management
 
 
 
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 earnings, capital, and
 liquidity
• Growth: Growing and succeeding in slow-
 growth stable markets with targeted expansion
 into new markets
 
 
 
Key markets
1st Branch Share & 9% Deposit Share
in Huntington WV/Ashland KY MSA
$4.2 Billion
1st Branch Share & 10% Deposit Share
in WV’s largest market; $5.7 Billion
1st & 27% Deposit Share
$1.9 Billion
2ndBranch Share & 8% Deposit
Share in Morgan, Berkeley
& Jefferson Co. WV
$2.1Billion
 
 
 
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%
 
 
 
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 County, WV
$65,615
33%
3
38%
Paintsville, KY
$94,723
24%
2
22%
 
 
 

Low cost and stable deposits:
Data: December 31, 2010
 
 
 

Solid core deposits drive strong net
interest margin:
Peer Data as of June 30, 2011
3.89%
 
 
 

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
 
 
 
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)
 
 
 
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
 
 
 
City’s deposit franchise:
Branch Service
Charges
2008
2009
2010
2011
Fiscal Year
46.0
45.0
40.0
 
1st Nine Mo. of Year
34.5
33.4
30.4
28.7
1st Quarter
11.2
10.4
10.2
9.1
2nd Quarter
11.3
      
3rd Quarter
12.0
  
9.7
9.8
4th Quarter
11.5
  
9.6
 
Decreases in branch service charges reflect :
• Real-time processing in May 2010
• Regulation E in August 2011
 
 
 
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 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
 
 
 
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
City Holding Company
Peer Group

As of June 30, 2011
Sample of 283 publicly traded banks and thrifts with
assets between $1-$10 billion as of December 31, 2010
 
 
 
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 1st lien position
• 66% of home equity loans have an LTV < 80%
• Ave loan balance for residential real estate 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
 
 
 
Charge-off trends:
Source: FDIC, All Insured Depository Institutions
 
 
 
Non-performing assets & OREO
Source: FDIC, All Insured Depository Institutions
Peer data as of June 30, 2011
 
 
 
Net charge-offs: 2010
Net C/O: $7.4 MM (0.41% of Average Loans)
Provision $7.1 MM
 
 
 
Retail charge-offs: 2010
 
 
 
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% - 95th %ile
ROTE
22.4%
21.0%
11.4%
18.0%
15.1%
12.2% - 75th %ile
Tangible
Common
Equity/TA
 
 
10.1%
 
 
9.7%
 
 
8.83%
 
 
9.78%
 
 
10.01%
 
 
9.19% - 85th %ile
NIM
4.56%
4.34%
4.64%
4.18%
4.06%
3.98% - 55th %ile
Efficiency
Ratio
 
44.5%
 
45.9%
 
46.3%
 
50.0%
 
51.6%
 
58.9% - 95th %ile
Non-Int
Rev/Total
Rev*
 
 
36.3%
 
 
36.6%
 
 
35.9%
 
 
37.9%
 
 
36.3%
 
 
28.3% - 95th %ile
* Non-int rev excludes gain on Visa IPO; securities losses
 
 
 
Growth:
CHCO is positioned to achieve “reasonable
growth” in its core franchise
• Commercial
• Retail
• Insurance
• Trust & Investment Management
 
 
 
Commercial loan growth:
Success achieved due to community bank
orientation, strong team, strong underwriting,
and strong local economies
 
 
 
Deposit growth opportunity:
CHCO has many small deposit relationships;
peers tend to have larger commercial & public
deposits
 
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
 
 
 
Growth:
Expanding retail distribution to capture
additional retail households
Source: SNL
 
 
 
 
 
 
 
 
 
 
 
 
Sept 2010
Expansion into South
Charleston WV has
encouraging early results
 
 
 
 
 
 
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 (Teays Valley)
 Huntington     Patton Insurance - Nitro
 Ripley    Millcreek Insurance - Ripley
 Beckley     Ashland Area Insurance
 Martinsburg 
 Ashland
 
 
 
Trust AUM: Strong growth
CAGR (December 31, 2004-September 30,
2011) of 8.96%
 
 
 
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 9/30/11)
 - Dividend payout ratio 53% (Analyst est.EPS for 2011)
 • Share repurchases
 - Purchased 606,500 shares during 1st Nine Months
  of 2011 (3.9%)
 - Driven by CHCO’s strong profitability, CHCO can achieve
 greater long-term share repurchase activity than peers.
 
 
 
Share Count:
 
 
 
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 environment of
the last several years
 
 
 
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 territory:
 
 
 
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 Consumer
Bank One
44
2001
SVP Mortgage
United Bankshares
59
2004
SVP Trust
City National Bank
56
1985
SVP Insurance
Rogers; Principal
41
2007
Treasurer
City National Bank
44
1990
 
 
 
Value in the banking sector?
Checklist for success in current environment:
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 - Top decile
• Ability to control expenses - Top decile efficiency ratio
Growth
• Liquidity to grow - Extremely strong
• Ability to grow share in market - 5-mile branch share 32%; deposit share
 14%
• Opportunity to grow into new markets - Well positioned
• Management - Experienced team with great results
 
 
 
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 analyst estimate of $2.56 (average of 8)