CTBI Community Trust Bancorp Inc

Community Trust Bancorp, Inc. (NASDAQ:CTBI): � � � � � � � � � � � Earnings Summary � � � � � (in thousands except per share data) � 2Q 2008 � 1Q 2008 � 2Q 2007 � 6 Months 2008 � 6 Months 2007 Net income $ 8,620 $ 8,545 $ 8,858 $ 17,165 $ 16,880 Earnings per share $ 0.58 $ 0.57 $ 0.58 $ 1.14 $ 1.11 Earnings per share (diluted) $ 0.57 $ 0.57 $ 0.57 $ 1.13 $ 1.09 � Return on average assets 1.19% 1.18% 1.18% 1.19% 1.13% Return on average equity 11.22% 11.20% 12.16% 11.21% 11.75% Efficiency ratio 57.25% 56.39% 58.22% 56.82% 61.40% � Dividends declared per share $ 0.29 $ 0.29 $ 0.27 $ 0.58 $ 0.54 Book value per share $ 20.43 $ 20.48 $ 19.17 $ 20.43 $ 19.17 � Weighted average shares 14,989 15,000 15,216 14,995 15,203 Weighted average shares (diluted) � � 15,152 � � 15,116 � � 15,448 � � 15,145 � � 15,421 Community Trust Bancorp, Inc. (NASDAQ:CTBI) reports earnings for the quarter ended June 30, 2008 of $0.58 per basic share, an increase from the $0.57 earned during the quarter ended March 31, 2008 and flat to the $0.58 per basic share earned during the second quarter of 2007. Earnings for the quarter increased 0.9% to $8.6 million compared to the $8.5 million earned during the first quarter 2008 and decreased 2.7% compared to the $8.9 million earned during the second quarter 2007. Earnings for the six months ended June 30, 2008 increased to $17.2 million or $1.14 per basic share from the $16.9 million or $1.11 per basic share earned for the first six months of 2007. Second Quarter 2008 Highlights CTBI's basic earnings per share for the second quarter 2008 increased 1.8% from prior quarter as the result of a 10.7% increase in noninterest income. Year-to-date basic earnings per share increased 2.7% from prior year. The total 100 basis point decline in interest rates that occurred beginning on March 18, 2008 has negatively impacted our net interest margin during the second quarter since 37% of our loans reprice within 30 days. Our net interest margin decreased 12 basis points from prior quarter but increased 2 basis points from prior year second quarter. Net interest income decreased $0.6 million from prior quarter and $0.9 million from prior year second quarter. The decrease in net interest income from prior year second quarter resulted from a $104 million decline in average earning assets as management continues to manage its net interest margin. Management has utilized the liquidity from its investment portfolio to fund loans and repay $40 million in Federal Home Loan Bank advances while allowing deposits to decline $98.9 million during the past 12 months as loan demand has been curtailed and other investment opportunities have been limited by current economic conditions. Noninterest income for the quarter increased 10.7% over prior quarter and 7.9% over prior year second quarter with increases in deposit service charges, trust revenue, and the fair value of mortgage servicing rights. Gains on sales of loans increased from prior year, but decreased from prior quarter. Noninterest expense for the first six months of 2008 has decreased $3.0 million or 6.9% from prior year primarily due to no accrual for the company-wide incentive-based compensation plan and the 2007 charge from unamortized debt issuance costs with the redemption of trust preferred securities. Nonperforming loans increased $1.6 million at June 30, 2008 to $44.2 million compared to $42.6 million at prior quarter-end and $23.9 million for prior year quarter ended June 30, 2007. CTBI experienced a decline in nonperforming loans in its Eastern and Northeastern Regions while nonperforming loans remained relatively flat in the South Central Region and increased in the Central Kentucky Region. The increase in the Central Kentucky Region is primarily attributable to two borrowers adversely impacted by the continuing weakness in the housing market and the resulting increase in time required by the legal process for movement from foreclosure to liquidation. Our loan portfolio increased an annualized 3.9% during the quarter with $21.8 million in growth. Loan growth from prior year second quarter was $58.6 million. Our investment portfolio, which is a source of liquidity to fund loan growth, increased an annualized 6.3% from prior quarter but declined 27.2% from prior year second quarter. Management has utilized this liquidity in lieu of increased deposit costs (deposits have declined $98.9 million year over year) to support loan growth and for margin management. Our efficiency ratio was 57.25% for the quarter ended June 30, 2008 compared to 56.39% and 58.22% for the quarters ended March 31, 2008 and June 30, 2007, respectively. Return on average assets for the quarter was 1.19% compared to 1.18% for both the first quarter 2008 and the quarter ended June 30, 2007. Return on average equity for the quarter was 11.22% compared to 11.20% for the first quarter 2008 and 12.16% for the quarter ended June 30, 2007. Net Interest Income Our quarterly net interest margin decreased 12 basis points from prior quarter; however, the margin increased 2 basis points from prior year second quarter. Net interest income for the quarter of $25.7 million was a 2.4% decrease from prior quarter and a 3.5% decrease from prior year second quarter. The yield on average earnings assets decreased 50 basis points from prior quarter and 96 basis points from prior year second quarter in comparison to the 44 basis point and 113 basis point decreases in the cost of interest bearing funds during the same periods. Average earning assets increased 0.7% from prior quarter but decreased 3.7% from prior year second quarter. Noninterest Income Noninterest income for the second quarter 2008 increased 10.7% over prior quarter and 7.9% over prior year second quarter with increases in deposit service charges, trust revenue, and loan related fees. Gains on sales of loans increased from prior year, but decreased from prior quarter. The increase in loan related fees resulted from the increase in the fair value of mortgage servicing rights of $0.7 million quarter over quarter and $0.2 million year over year resulting from decreased prepayment speeds and increased interest rates. Year-to-date noninterest income increased 5.5% over prior year. Noninterest Expense Noninterest expense for the quarter increased 2.2% from prior quarter but decreased 2.4% from prior year second quarter. Year-to-date noninterest expense has decreased 6.9% from prior year primarily due to the 2007 charge from unamortized debt issuance costs with the redemption of trust preferred securities and no accrual for the company-wide incentive-based compensation plan. Balance Sheet Review CTBI�s total assets at $2.9 billion declined an annualized 3.6% from prior quarter and 4.1% from the $3.0 billion at June 30, 2007. Loans outstanding at June 30, 2008 were $2.3 billion reflecting an annualized 3.9% growth during the quarter and a 2.6% growth from June 30, 2007. CTBI's investment portfolio increased an annualized 6.3% from prior quarter but decreased 27.2% from June 30, 2007 with the majority of the decline consisting of auction rate securities. Deposits, including repurchase agreements, at $2.4 billion decreased an annualized 5.5% from prior quarter and 3.9% from prior year second quarter as management continued our focus on net interest margin management. Shareholders� equity at June 30, 2008 was $306.2 million compared to $306.8 million at March 31, 2008 and $291.7 at June 30, 2007. CTBI's annualized dividend yield to shareholders as of June 30, 2008 was 4.42%. Asset Quality Economic conditions continue to be challenging for both our business and individual customers. Nonperforming loans increased during the second quarter by $1.6 million. Nonperforming loans decreased in our Eastern and Northeastern Regions, remained relatively flat in our South Central Region, but increased in our Central Kentucky Region. Nonperforming loans in this region increased $4.3 million during the second quarter 2008. The increase in nonperforming loans in the Central Kentucky Region is primarily attributable to two borrowers adversely impacted by the weak real estate market in Central Kentucky which continues to experience the most stress from the current housing crisis. We are experiencing a cumulative effect in the increase in nonperforming loans as the legal system has increased the time required for movement from foreclosure to sale. CTBI's total nonperforming loans at June 30, 2008 were $44.2 million compared to $42.6 million at March 31, 2008 and $23.9 million at June 30, 2007, while our 30-89 days past due loans declined 12.4% from $20.0 million to $17.6 million. All nonperforming commercial loans in excess of $100 thousand are individually reviewed with specific reserves established when appropriate. We anticipate nonperforming loans to remain higher than recent history as the normal legal collection time period for real estate secured assets has been slowed due to increased volumes in the industry. Our loan portfolio management processes focus on maintaining appropriate reserves for potential losses. Foreclosed properties increased during the second quarter 2008 to $9.1 million from the $7.4 million at March 31, 2008 and the $3.9 million at June 30, 2007. Sales of foreclosed properties during the first six months of 2008 totaled $3.0 million while new foreclosed properties totaled $4.2 million. Net loan charge-offs for the quarter of $2.2 million, or 0.38% of average loans annualized, was an increase from prior quarter's 0.33% of average loans annualized and the 0.23% for prior year second quarter. Allocations to loan loss reserve were $2.6 million for the quarter ended June 30, 2008 compared to $2.4 million for the quarter ended March 31, 2008 and $1.8 million for the quarter ended June 30, 2007. Our loan loss reserve as a percentage of total loans outstanding at June 30, 2008 increased to 1.28% compared to 1.27% at March 31, 2008 and 1.25% at June 30, 2007. The adequacy of our loan loss reserve is analyzed quarterly and adjusted as necessary. Forward-Looking Statements Certain of the statements contained herein that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. CTBI�s actual results may differ materially from those included in the forward-looking statements. Forward-looking statements are typically identified by words or phrases such as "believe," "expect," "anticipate," "intend," "estimate," "may increase," "may fluctuate," and similar expressions or future or conditional verbs such as "will," "should," "would," and "could." These forward-looking statements involve risks and uncertainties including, but not limited to, economic conditions, portfolio growth, the credit performance of the portfolios, including bankruptcies, and seasonal factors; changes in general economic conditions including the performance of financial markets, the performance of coal and coal related industries, prevailing inflation and interest rates, realized gains from sales of investments, gains from asset sales, and losses on commercial lending activities; results of various investment activities; the effects of competitors� pricing policies, of changes in laws and regulations on competition and of demographic changes on target market populations� savings and financial planning needs; industry changes in information technology systems on which we are highly dependent; failure of acquisitions to produce revenue enhancements or cost savings at levels or within the time frames originally anticipated or unforeseen integration difficulties; the adoption by CTBI of an FFIEC policy that provides guidance on the reporting of delinquent consumer loans and the timing of associated credit charge-offs for financial institution subsidiaries; and the resolution of legal proceedings and related matters. In addition, the banking industry in general is subject to various monetary and fiscal policies and regulations, which include those determined by the Federal Reserve Board, the Federal Deposit Insurance Corporation, and state regulators, whose policies and regulations could affect CTBI�s results. These statements are representative only on the date hereof, and CTBI undertakes no obligation to update any forward-looking statements made. Community Trust Bancorp, Inc., with assets of $2.9 billion, is headquartered in Pikeville, Kentucky and has 71 banking locations across eastern, northeast, central, and south central Kentucky, six banking locations in southern West Virginia, and five trust offices across Kentucky. Additional information follows. Community Trust Bancorp, Inc. Financial Summary (Unaudited) June 30, 2008 (in thousands except per share data and # of employees) � � � � � ThreeMonthsEndedJune 30, 2008 ThreeMonthsEndedMarch 31, 2008 ThreeMonthsEndedJune 30, 2007 SixMonthsEndedJune 30, 2008 SixMonthsEndedJune 30, 2007 Interest income $ 41,670 $ 44,680 $ 50,085 $ 86,350 $ 99,264 Interest expense � 15,988 � 18,372 � 23,474 � 34,360 � 46,763 Net interest income 25,682 26,308 26,611 51,990 52,501 Loan loss provision 2,648 2,369 1,846 5,017 2,316 � Gains on sales of loans 494 546 316 1,040 612 Deposit service charges 5,503 5,099 5,330 10,602 10,134 Trust revenue 1,298 1,191 1,180 2,489 2,379 Loan related fees 1,079 299 867 1,378 1,888 Securities gains - (50) - (50) - Other noninterest income � 1,307 � 1,658 � 1,281 � 2,965 � 2,459 Total noninterest income 9,681 8,743 8,974 18,424 17,472 � Personnel expense 10,600 10,711 11,100 21,311 22,214 Occupancy and equipment 2,822 2,679 2,875 5,501 5,864 Amortization of core deposit intangible 159 158 158 317 317 Other noninterest expense � 6,862 � 6,453 � 6,805 � 13,315 � 15,039 Total noninterest expense � 20,443 � 20,001 � 20,938 � 40,444 � 43,434 � Net income before taxes 12,272 12,681 12,801 24,953 24,223 Income taxes � 3,652 � 4,136 � 3,943 � 7,788 � 7,343 Net income $ 8,620 $ 8,545 $ 8,858 $ 17,165 $ 16,880 � Memo: TEQ interest income $ 42,015 $ 45,047 $ 50,463 $ 87,062 $ 100,034 � Average shares outstanding 14,989 15,000 15,216 14,995 15,203 Basic earnings per share $ 0.58 $ 0.57 $ 0.58 $ 1.14 $ 1.11 Diluted earnings per share $ 0.57 $ 0.57 $ 0.57 $ 1.13 $ 1.09 Dividends per share $ 0.29 $ 0.29 $ 0.27 $ 0.58 $ 0.54 � Average balances: Loans, net of unearned income $ 2,264,175 $ 2,239,608 $ 2,199,233 $ 2,251,892 $ 2,182,465 Earning assets 2,697,670 2,679,069 2,801,966 2,688,369 2,788,376 Total assets 2,915,382 2,900,533 3,020,931 2,907,957 3,007,806 Deposits 2,301,477 2,288,910 2,379,683 2,295,194 2,369,237 Interest bearing liabilities 2,137,503 2,142,185 2,275,637 2,139,844 2,268,097 Shareholders' equity 308,969 306,961 292,096 307,965 289,664 � Performance ratios: Return on average assets 1.19% 1.18% 1.18% 1.19% 1.13% Return on average equity 11.22% 11.20% 12.16% 11.21% 11.75% Yield on average earning assets (tax equivalent) 6.26% 6.76% 7.22% 6.51% 7.23% Cost of interest bearing funds (tax equivalent) 3.01% 3.45% 4.14% 3.23% 4.16% Net interest margin (tax equivalent) 3.88% 4.00% 3.86% 3.94% 3.85% Efficiency ratio (tax equivalent) 57.25% 56.39% 58.22% 56.82% 61.40% � Loan charge-offs $ 2,818 $ 2,410 $ 1,843 $ 5,228 $ 3,494 Recoveries � (667) � (586) � (608) � (1,253) � (1,340) Net charge-offs $ 2,151 $ 1,824 $ 1,235 $ 3,975 $ 2,154 � Market Price: High $ 31.96 $ 30.87 $ 37.98 $ 31.96 $ 41.50 Low 26.25 23.38 31.40 23.38 31.40 Close 26.26 29.30 32.30 26.26 32.30 Community Trust Bancorp, Inc. Financial Summary (Unaudited) June 30, 2008 (in thousands except per share data and # of employees) � � As ofJune 30, 2008 � As ofMarch 31, 2008 � As ofJune 30, 2007 Assets: Loans, net of unearned $ 2,273,646 $ 2,251,846 $ 2,215,057 Loan loss reserve � (29,096 ) � (28,599 ) � (27,688 ) Net loans 2,244,550 2,223,247 2,187,369 Loans held for sale 1,494 1,310 3,899 Securities AFS 306,869 299,831 425,058 Securities HTM 29,296 31,137 36,689 Other equity investments 28,703 28,064 28,038 Other earning assets 10,994 62,049 69,072 Cash and due from banks 84,169 85,414 78,214 Premises and equipment 52,448 52,823 54,369 Goodwill and core deposit intangible 66,658 66,817 67,293 Other assets � 53,163 � � 53,792 � � 50,829 � Total Assets $ 2,878,344 � $ 2,904,484 � $ 3,000,830 � � Liabilities and Equity: NOW accounts $ 17,939 $ 18,691 $ 16,470 Savings deposits 625,574 650,686 669,598 CD's >=$100,000 434,352 439,430 445,725 Other time deposits � 752,581 � � 762,727 � � 796,443 � Total interest bearing deposits 1,830,446 1,871,534 1,928,236 Noninterest bearing deposits � 447,677 � � 434,033 � � 436,702 � Total deposits 2,278,123 2,305,567 2,364,938 Repurchase agreements 142,453 148,739 154,531 Other interest bearing liabilities 120,030 110,710 157,871 Noninterest bearing liabilities � 31,587 � � 32,619 � � 31,833 � Total liabilities 2,572,193 2,597,635 2,709,173 Shareholders' equity � 306,151 � � 306,849 � � 291,657 � Total Liabilities and Equity $ 2,878,344 � $ 2,904,484 � $ 3,000,830 � � Ending shares outstanding 14,989 14,979 15,217 Memo: Market value of HTM securities $ 29,157 $ 31,384 $ 35,314 � 90 days past due loans $ 15,651 $ 14,365 $ 7,684 Nonaccrual loans 28,501 28,239 16,159 Restructured loans - - 43 Foreclosed properties 9,076 7,425 3,898 � Tier 1 leverage ratio 10.52 % 10.49 % 9.71 % Tier 1 risk based ratio 13.40 % 13.33 % 12.32 % Total risk based ratio 14.65 % 14.58 % 13.52 % FTE employees 1,006 996 1,012 Community Trust Bancorp, Inc. Financial Summary (Unaudited) June 30, 2008 (in thousands except per share data and # of employees) � Community Trust Bancorp, Inc. reported earnings for the three and six months ending June 30, 2008 and 2007 as follows: � � � � Three Months Ended Six Months Ended June 30 June 30 2008 2007 2008 2007 Net income $ 8,620 $ 8,858 $ 17,165 $ 16,880 � Basic earnings per share $ 0.58 $ 0.58 $ 1.14 $ 1.11 � Diluted earnings per share $ 0.57 $ 0.57 $ 1.13 $ 1.09 � Average shares outstanding 14,989 15,216 14,995 15,203 � Total assets (end of period) $ 2,878,344 $ 3,000,830 � Return on average equity 11.22 % 12.16 % 11.21 % 11.75 % � Return on average assets 1.19 % 1.18 % 1.19 % 1.13 % � Provision for loan losses $ 2,648 $ 1,846 $ 5,017 $ 2,316 � Gains on sales of loans $ 494 $ 316 $ 1,040 $ 612