CTBI Community Trust Bancorp Inc

Community Trust Bancorp, Inc. (NASDAQ: CTBI)

    Earnings Summary                       (in thousands except per share data)    

3Q2013

   

2Q2013

   

3Q2012

   

9 Months2013

   

9 Months2012

  Net income $12,653 $11,942 $10,209 $36,415 $34,310 Earnings per share $0.81 $0.77 $0.66 $2.34 $2.22 Earnings per share - diluted $0.81 $0.76 $0.66 $2.33 $2.21   Return on average assets 1.38% 1.31% 1.11% 1.33% 1.26% Return on average equity 12.39% 11.76% 10.26% 11.99% 11.89% Efficiency ratio 54.80% 55.21% 58.19% 55.89% 56.95% Tangible common equity 9.57% 9.35% 9.22%   Dividends declared per share $0.320 $0.315 $0.315 $0.950 $0.935 Book value per share $26.03 $25.56 $25.38   Weighted average shares 15,594 15,565 15,491 15,566 15,450   Weighted average shares - diluted     15,688     15,641     15,555     15,647     15,501    

Community Trust Bancorp, Inc. (NASDAQ: CTBI) reports earnings for the third quarter 2013 of $12.7 million, or $0.81 per basic share, compared to $10.2 million, or $0.66 per basic share, earned during the third quarter 2012 and $11.9 million, or $0.77 per basic share, earned during the second quarter 2013. Earnings for the nine months ended September 30, 2013 were $36.4 million, or $2.34 per basic share, compared to $34.3 million, or $2.22 per basic share for the nine months ended September 30, 2012.

3rd Quarter 2013 Highlights

• CTBI’s basic earnings per share for the quarter increased $0.15 per share from the third quarter 2012 and $0.04 per share from the second quarter 2013. Year-to-date basic earnings per share increased $0.12 per share from prior year.
• Net interest income for the quarter increased 3.3% from prior year third quarter and 2.4% from prior quarter as our net interest margin increased 11 basis points and 8 basis points, respectively, for those time periods. Average earning assets remained relatively stable from third quarter 2012 but decreased 0.6% from prior quarter. Net interest income for the nine months ended September 30, 2013 increased 2.4% from prior year.
• Nonperforming loans at $42.3 million increased $8.2 million from September 30, 2012 and $0.7 million from June 30, 2013. Nonperforming assets at $84.7 million decreased $4.9 million from September 30, 2012 but increased $0.1 million from June 30, 2013.
• Net loan charge-offs for the quarter ended September 30, 2013 were $1.7 million, or 0.26% of average loans annualized, compared to $2.9 million, or 0.45%, experienced for the third quarter 2012 and $3.5 million, or 0.54%, for the second quarter 2013. Year-to-date net charge-offs were $6.6 million, or 0.34%, compared to $6.5 million, or 0.34%, for the nine months ended September 30, 2012.
• Our loan loss provision for the quarter decreased $0.8 million from prior year third quarter and $1.5 million from prior quarter. Year-to-date provision expense of $7.3 million is $0.8 million higher than 2012.

• Our loan loss reserve as a percentage of total loans outstanding remained at 1.30% from September 30, 2012 to September 30, 2013. Our reserve coverage (allowance for loan loss reserve to nonperforming loans) at September 30, 2013 was 80.5% compared to 97.5% at September 30, 2012 and 80.8% at June 30, 2013.

• Noninterest income increased 11.4% for the quarter ended September 30, 2013 compared to the same period in 2012 but decreased 9.1% from prior quarter. Noninterest income for the nine months ended September 30, 2013 increased 9.6%. The increase year over year in noninterest income included increases in gains on sales of loans, deposit service charges, trust revenue, loan related fees, and bank owned life insurance income, offset slightly by a decrease in securities gains; although, each of these areas saw declines quarter over quarter except deposit service charges.
• Noninterest expense for the quarter ended September 30, 2013 decreased 0.9% from prior year third quarter and 1.5% from prior quarter. Noninterest expense for the nine months ended September 30, 2013 increased 2.9% from prior year. The year over year increase from prior year resulted primarily from increases in personnel expense, data processing expense, and other real estate owned expense. The quarter over quarter decrease is primarily due to decreased other real estate owned expense.
• Our loan portfolio increased $64.8 million from September 30, 2012 and $31.6 million during the quarter.
• Our investment portfolio increased $42.7 million from September 30, 2012 but declined $23.4 million during the quarter.
• Deposits, including repurchase agreements, declined $41.3 million from September 30, 2012 and $37.9 million during the quarter.
• Other interest bearing liabilities increased $30 million at the end of the quarter due to an FHLB advance which matured and was paid on October 2, 2013.
• Our tangible common equity/tangible assets ratio remains strong at 9.57%.

Net Interest Income

Net interest income for the quarter increased $1.1 million from prior year third quarter and $0.8 million from prior quarter as our net interest margin increased 11 basis points and 8 basis points, respectively. Average earning assets remained relatively stable from third quarter 2012 but decreased 0.6% from prior quarter. The yield on average earning assets decreased 13 basis points but increased 6 basis points for these respective time periods. Loans represented 77.0% of our average earning assets for the quarter ended September 30, 2013 compared to 75.4% for the quarter ended September 30, 2012 and 75.6% for the quarter ended June 30, 2013. The cost of interest bearing funds decreased 31 basis points from prior year third quarter and 2 basis points from prior quarter. Net interest income for the nine months ended September 30, 2013 increased $2.3 million from prior year with average earning assets increasing 1.1% and our net interest margin increasing 5 basis points.

Noninterest Income

Noninterest income increased 11.4% for the quarter ended September 30, 2013 compared to the same period in 2012 but decreased 9.1% from prior quarter. Noninterest income for the nine months ended September 30, 2013 increased 9.6%. The increase year over year in noninterest income included increases in gains on sales of loans, deposit service charges, trust revenue, loan related fees, and bank owned life insurance income, offset slightly by a decrease in securities gains; although, each of these areas saw declines quarter over quarter except deposit service charges. Loan related fees were impacted by a $0.3 million positive variance year over year in fair value adjustments to our mortgage servicing rights.

Noninterest Expense

Noninterest expense for the third quarter 2013 decreased 0.9% from prior year third quarter and 1.5% from prior quarter. Noninterest expense for the nine months ended September 30, 2013 increased 2.9% from prior year. The year over year increase from prior year resulted primarily from a $0.9 million increase in personnel expense, a $0.7 million increase in data processing expense, and a $1.2 million increase in other real estate owned expense. The quarter over quarter decrease is primarily due to a $0.3 million decrease in other real estate owned expense.

Balance Sheet Review

CTBI’s total assets at $3.6 billion increased $2.3 million, or 0.1%, from September 30, 2012 and $5.6 million, or an annualized 0.6%, during the quarter. Loans outstanding at September 30, 2013 were $2.6 billion, increasing $64.8 million, or 2.5%, from September 30, 2012 and $31.6 million, or an annualized 4.8%, during the quarter. We experienced loan growth during the quarter of $22.7 million in the commercial loan portfolio, $4.8 million in the residential loan portfolio, and $4.1 million in the consumer loan portfolio. CTBI’s investment portfolio increased $42.7 million, or 6.9%, from September 30, 2012 but decreased $23.4 million, or an annualized 13.5%, during the quarter. Deposits, including repurchase agreements, at $3.1 billion decreased $41.3 million, or 1.3%, from September 30, 2012 and $37.9 million, or an annualized 4.8%, from prior quarter. Deposits in other banks declined $22.8 million during the quarter and $107.1 million from September 30, 2012 as a result of loan growth and a decline in deposits. Other interest bearing liabilities increased $30 million at the end of the quarter due to an FHLB advance which matured and was paid on October 2, 2013.

Shareholders’ equity at September 30, 2013 was $408.7 million compared to $396.1 million at September 30, 2012 and $400.3 million at June 30, 2013. CTBI’s annualized dividend yield to shareholders as of September 30, 2013 was 3.15%.

Asset Quality

CTBI’s total nonperforming loans were $42.3 million at September 30, 2013, a 24.2% increase from the $34.0 million at September 30, 2012 and a 1.7% increase from the $41.6 million at June 30, 2013. The increase for the quarter included a $2.6 million increase in the 90+ days past due category partially offset by a $1.9 million decrease in nonaccrual loans. Loans 30-89 days past due at $23.3 million is an increase of $1.7 million from September 30, 2012 and $6.8 million from June 30, 2013. Our loan portfolio management processes focus on the immediate identification, management, and resolution of problem loans to maximize recovery and minimize loss. Impaired loans, loans not expected to meet contractual principal and interest payments other than insignificant delays, at September 30, 2013 totaled $63.3 million, compared to $60.9 million at September 30, 2012 and $63.4 million at June 30, 2013.

Our level of foreclosed properties at $42.5 million at September 30, 2013 was a decrease from $55.6 million at September 30, 2012 and $43.1 million at June 30, 2013. Sales of foreclosed properties for the nine months ended September 30, 2013 totaled $8.7 million while new foreclosed properties totaled $6.2 million. At September 30, 2013, the book value of properties under contracts to sell was $4.3 million; however, the closings had not occurred at quarter-end.

Net loan charge-offs for the quarter ended September 30, 2013 were $1.7 million, or 0.26% of average loans annualized, compared to $2.9 million, or 0.45%, experienced for the third quarter 2012 and $3.5 million, or 0.54%, for the second quarter 2013. Of the total net charge-offs for the quarter, $0.7 million were in commercial loans, $0.5 million were in indirect auto loans, and $0.3 million were in residential real estate mortgage loans. Year-to-date net charge-offs were $6.6 million, or 0.34%, compared to $6.5 million, or 0.34%, for the nine months ended September 30, 2012. Allocations to loan loss reserves were $2.1 million for the quarter ended September 30, 2013 compared to $2.9 million for the quarter ended September 30, 2012 and $3.7 million for the quarter ended June 30, 2013. Our loan loss reserve as a percentage of total loans outstanding has remained at 1.30% from September 30, 2012 to September 30, 2013.

Recent Form 8-K Filing

On October 11, 2013, CTBI filed an 8-K to disclose that the Federal Reserve has made requests for information and is currently investigating Community Trust Bank’s (“CTB”) overdraft fee assessment methodology. On October 7, 2013, representatives of the Federal Reserve informed CTB that Federal Reserve staff is recommending that the Federal Reserve Division of Consumer and Community Affairs cite CTB for a violation based on an unfair and deceptive practice. CTBI continues to believe that CTB’s practices are neither unfair nor deceptive and are consistent with methodologies prevalent in the banking industry. If the Federal Reserve takes such action, it would likely result in material adverse consequences to CTBI and its affiliates. Such adverse consequences may be material to the financial position of CTBI or its results of operations. CTBI expects to recognize an accrual against earnings with respect to this matter, but cannot reasonably estimate the amount of such accrual until additional information is received from the Federal Reserve.

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 $3.6 billion, is headquartered in Pikeville, Kentucky and has 71 banking locations across eastern, northeastern, central, and south central Kentucky, six banking locations in southern West Virginia, four banking locations in northeastern Tennessee, four trust offices across Kentucky, and one trust office in Tennessee.

Additional information follows.

 

Community Trust Bancorp, Inc.Financial Summary (Unaudited)September 30, 2013(in thousands except per share data and # of employees)

 

      Three         Three         Three         Nine         Nine Months Months Months Months Months Ended Ended Ended Ended Ended   September 30, 2013     June 30, 2013     September 30, 2012     September 30, 2013     September 30, 2012   Interest income $ 37,455 $ 36,783 $ 38,450 $ 111,014 $ 115,631 Interest expense     3,305         3,441         5,404         10,325         17,260     Net interest income 34,150 33,342 33,046 100,689 98,371 Loan loss provision 2,129 3,661 2,919 7,349 6,504   Gains on sales of loans 653 755 660 2,805 1,982 Deposit service charges 6,349 6,182 6,038 18,298 17,865 Trust revenue 2,005 2,023 1,734 6,028 5,169 Loan related fees 1,088 1,496 631 3,532 2,528 Securities gains (23 ) (8 ) - (31 ) 819 Other noninterest income     1,999         2,826         1,775         6,633         5,651     Total noninterest income 12,071 13,274 10,838 37,265 34,014   Personnel expense 13,248 13,214 13,285 39,444 38,500 Occupancy and equipment 2,865 2,960 2,926 8,730 8,551 FDIC insurance premiums 624 637 643 1,863 1,913 Amortization of core deposit intangible 53 53 53 160 160 Other noninterest expense     8,801         9,123         8,906         27,680         26,587     Total noninterest expense 25,591 25,987 25,813 77,877 75,711   Net income before taxes 18,501 16,968 15,152 52,728 50,170 Income taxes     5,848         5,026         4,943         16,313         15,860     Net income   $ 12,653       $ 11,942       $ 10,209       $ 36,415       $ 34,310       Memo: TEQ interest income $ 37,905 $ 37,230 $ 38,922 $ 112,356 $ 117,007   Average shares outstanding 15,594 15,565 15,491 15,566 15,450 Diluted average shares outstanding 15,688 15,641 15,555 15,647 15,501 Basic earnings per share $ 0.81 $ 0.77 $ 0.66 $ 2.34 $ 2.22 Diluted earnings per share $ 0.81 $ 0.76 $ 0.66 $ 2.33 $ 2.21 Dividends per share $ 0.320 $ 0.315 $ 0.315 $ 0.950 $ 0.935   Average balances: Loans $ 2,596,805 $ 2,566,536 $ 2,542,832 $ 2,572,096 $ 2,547,890 Earning assets 3,372,755 3,393,342 3,371,420 3,386,571 3,348,807 Total assets 3,638,742 3,665,249 3,650,422 3,654,547 3,635,890 Deposits, including repurchase agreements 3,121,466 3,139,180 3,145,049 3,132,032 3,138,332 Interest bearing liabilities 2,578,567 2,597,011 2,611,981 2,591,766 2,614,379

Shareholders’ equity

405,043 407,203 395,902 405,930 385,526   Performance ratios: Return on average assets 1.38 % 1.31 % 1.11 % 1.33 % 1.26 % Return on average equity 12.39 % 11.76 % 10.26 % 11.99 % 11.89 % Yield on average earning assets (tax equivalent) 4.46 % 4.40 % 4.59 % 4.44 % 4.67 % Cost of interest bearing funds (tax equivalent) 0.51 % 0.53 % 0.82 % 0.53 % 0.88 % Net interest margin (tax equivalent) 4.07 % 3.99 % 3.96 % 4.03 % 3.98 % Efficiency ratio (tax equivalent) 54.80 % 55.21 % 58.19 % 55.89 % 56.95 %   Loan charge-offs $ 2,519 $ 4,115 $ 3,664 $ 8,822 $ 8,997 Recoveries     (802 )       (662 )       (800 )       (2,241 )       (2,511 )   Net charge-offs $ 1,717 $ 3,453 $ 2,864 $ 6,581 $ 6,486   Market Price: High $ 41.54 $ 36.60 $ 36.92 $ 41.54 $ 36.92 Low $ 35.80 $ 32.15 $ 33.15 $ 32.15 $ 29.13 Close $ 40.59 $ 35.62 $ 35.53 $ 40.59 $ 35.53    

Community Trust Bancorp, Inc.Financial Summary (Unaudited)September 30, 2013(in thousands except per share data and # of employees)

        As of         As of         As of   September 30, 2013     June 30, 2013     September 30, 2012   Assets: Loans $ 2,616,365 $ 2,584,801 $ 2,551,537 Loan loss reserve     (34,013 )       (33,601 )       (33,189 )   Net loans 2,582,352 2,551,200 2,518,348 Loans held for sale 768 2,991 771 Securities AFS 663,916 687,362 621,230 Securities HTM 1,662 1,662 1,662 Other equity investments 30,559 30,559 30,558 Other earning assets 46,156 63,071 153,663 Cash and due from banks 74,252 56,100 59,480 Premises and equipment 51,898 52,703 55,068 Goodwill and core deposit intangible 66,234 66,287 66,447 Other assets     126,057         126,316         134,304     Total Assets   $ 3,643,854       $ 3,638,251       $ 3,641,531       Liabilities and Equity: NOW accounts $ 26,889 $ 28,191 $ 22,200 Savings deposits 864,073 874,800 848,068

CD’s >=$100,000

627,347 641,979 647,433 Other time deposits     739,179         752,752         794,159     Total interest bearing deposits 2,257,488 2,297,722 2,311,860 Noninterest bearing deposits     616,796         624,451         599,984     Total deposits 2,874,284 2,922,173 2,911,844 Repurchase agreements 214,755 204,735 218,511 Other interest bearing liabilities 106,590 76,763 71,634 Noninterest bearing liabilities     39,548         34,236         43,445     Total liabilities 3,235,177 3,237,907 3,245,434

Shareholders’ equity

    408,677         400,344         396,097     Total Liabilities and Equity   $ 3,643,854       $ 3,638,251       $ 3,641,531       Ending shares outstanding 15,698 15,665 15,604 Memo: Market value of HTM securities $ 1,614 $ 1,621 $ 1,664   30 - 89 days past due loans $ 23,274 $ 16,507 $ 21,539 90 days past due loans 25,133 22,562 15,928 Nonaccrual loans 17,131 19,012 18,098 Restructured loans (excluding 90 days past due and nonaccrual) 42,630 42,181 28,493 Foreclosed properties 42,481 43,080 55,551 Other repossessed assets - - 25   Tier 1 leverage ratio 11.29 % 11.01 % 10.51 % Tier 1 risk based ratio 15.71 % 15.52 % 14.86 % Total risk based ratio 16.96 % 16.77 % 16.12 % Tangible equity to tangible assets ratio 9.57 % 9.35 % 9.22 % FTE employees 1,026 1,045 1,032    

Community Trust Bancorp, Inc.Financial Summary (Unaudited)September 30, 2013(in thousands except per share data and # of employees)

  Community Trust Bancorp, Inc. reported earnings for the three and nine months ending September 30, 2013 and 2012 as follows:         Three Months Ended         Nine Months Ended   September 30     September 30     2013         2012     2013         2012   Net income $ 12,653     $ 10,209 $ 36,415     $ 34,310   Basic earnings per share $ 0.81 $ 0.66 $ 2.34 $ 2.22   Diluted earnings per share $ 0.81 $ 0.66 $ 2.33 $ 2.21   Average shares outstanding 15,594 15,491 15,566 15,450   Total assets (end of period) $ 3,643,854 $ 3,641,531   Return on average equity 12.39 % 10.26 % 11.99 % 11.89 %   Return on average assets 1.38 % 1.11 % 1.33 % 1.26 %   Provision for loan losses $ 2,129 $ 2,919 $ 7,349 $ 6,504   Gains on sales of loans $ 653 $ 660 $ 2,805 $ 1,982  

Community Trust Bancorp, Inc.Jean R. Hale, 606-437-3294Chairman, President, and C.E.O.