CTBI Community Trust Bancorp Inc

Community Trust Bancorp, Inc. (NASDAQ:CTBI):

                                Earnings Summary                     (in thousands except per share data)     4Q

2015

    3Q

2015

    4Q

2014

    Year

2015

    Year

2014

Net income $11,870 $11,222 $9,992 $46,432 $43,251 Earnings per share $0.68 $0.64 $0.58 $2.66 $2.50 Earnings per share – diluted $0.68 $0.64 $0.57 $2.66 $2.49   Return on average assets 1.22% 1.18% 1.07% 1.23% 1.18% Return on average equity 9.91% 9.50% 8.87% 9.97% 9.94% Efficiency ratio 56.35% 60.53% 60.76% 58.20% 59.12% Tangible common equity 10.68% 10.82% 10.44%   Dividends declared per share $0.310 $0.310 $0.300 $1.220 $1.181 Book value per share $27.12 $26.87 $25.64   Weighted average shares 17,464 17,440 17,351 17,431 17,326 Weighted average shares - diluted     17,516     17,491     17,422     17,483     17,397  

Community Trust Bancorp, Inc. (NASDAQ:CTBI) reports earnings for the fourth quarter 2015 of $11.9 million, or $0.68 per basic share, compared to $10.0 million, or $0.58 per basic share, earned during the fourth quarter 2014 and $11.2 million, or $0.64 per basic share, earned during the third quarter 2015. Earnings for the year ended December 31, 2015 were a record $46.4 million, or $2.66 per basic share compared to $43.3 million, or $2.50 per basic share, for the year ended December 31, 2014.

4th Quarter 2015 Highlights

• Our loan portfolio increased $140.1 million from December 31, 2014 and $53.5 million during the quarter.
• Our investment portfolio decreased $45.2 million from December 31, 2014 but increased $18.2 million during the quarter.
• Deposits, including repurchase agreements, increased $122.6 million from December 31, 2014 and $0.6 million during the quarter.
• Nonperforming loans at $28.6 million decreased $10.3 million from December 31, 2014 and $4.1 million from September 30, 2015. Nonperforming assets at $69.5 million decreased $6.4 million from December 31, 2014 but increased $2.0 million from September 30, 2015.
• Net loan charge-offs for the quarter ended December 31, 2015 were $1.4 million, or 0.19% of average loans annualized, compared to $3.0 million, or 0.44%, experienced for the fourth quarter 2014 and $2.2 million, or 0.31%, for the third quarter 2015.
• CTBI’s investments in low income housing and other community related investments provided tax credits to offset current income tax expense for the fourth quarter 2015 in the amount of $0.3 million compared to $0.3 million in the fourth quarter 2014 and $1.2 million in the third quarter 2015. Credits used to offset current income tax expense totaled $2.7 million for the year 2015 compared to $1.1 million for the year 2014. The amortization of our investment in these partnerships for the fourth quarter 2015 totaled $0.6 million compared to $0.2 million for the fourth quarter 2014 and $1.0 million for the third quarter 2015. Amortization for the year 2015 was $2.6 million compared to $0.9 million for the year 2014.
• In addition to the amortization expense mentioned above, noninterest expense for the quarter was impacted by decreases in personnel expense, data processing expense, repossession expense, and other direct expenses, resulting in a decrease in total noninterest expense. Noninterest expense for the year also decreased in total from prior year as a result of decreases in occupancy and equipment expense, data processing expense, and repossession expense.

Net Interest Income

Net interest income for the quarter decreased $0.3 million, or 0.9%, from prior year fourth quarter but increased $0.2 million, or 0.7%, from prior quarter, while our net interest margin decreased 16 basis points and 3 basis points during the respective time periods. Average earning assets increased $118.8 million, or 3.4%, from fourth quarter 2014 and $54.5 million, or 1.5%, from prior quarter, while our yield on average earning assets decreased 15 basis points and 2 basis points, respectively, during these time periods. The cost of interest bearing funds increased 3 basis points from prior year fourth quarter and 2 basis points from prior quarter. Our ratio of average loans to deposits, including repurchase agreements, for the quarter ended December 31, 2015 was 87.5% compared to 86.1% for the quarter ended December 31, 2014 and 87.5% for the quarter ended September 30, 2015. Net interest income for the year increased $0.2 million, or 0.1%, from prior year.

Noninterest Income

Noninterest income for the quarter ended December 31, 2015 decreased $0.2 million, or 1.9%, from prior year same quarter and $0.2 million, or 1.9%, from prior quarter. The decrease was primarily due to decreases in gains on sales of loans and other noninterest income items and increased securities losses, partially offset by an increase in loan related fees. Loan related fees increased from prior year and prior quarter as a result of a $0.4 million fluctuation in the fair value adjustments of our mortgage servicing rights.

Noninterest income for the year ended December 31, 2015 increased $1.7 million, or 3.8%, from prior year as a result of increases in gains on sales of loans ($0.5 million), deposit service charges ($0.4 million), trust revenue ($0.3 million), and loan related fees ($0.3 million) and decreased securities losses ($0.1 million). Year over year, we had a $0.5 million fluctuation in the fair value adjustments of our mortgage servicing rights.

Noninterest Expense

Noninterest expense for the quarter ended December 31, 2015 decreased $2.2 million, or 8.0%, from prior year fourth quarter and $1.8 million, or 6.4%, from prior quarter. The decrease in noninterest expense was primarily due to decreases in personnel expense, data processing expense, repossession expense, and other direct expenses. The decrease in other direct expenses from prior year same quarter was the result of a $0.5 million accrual for anticipated customer refunds and a $0.2 million accrual for costs associated with the defense of our trademark which were booked in the fourth quarter 2014 that offset a $0.4 million increase in the amortization of tax credits in the fourth quarter 2015. Repossession expense decreased $0.3 million from prior year same quarter.

Noninterest expense for the year decreased $0.6 million, or 0.5%, from prior year, as a result of decreases in occupancy and equipment expense ($0.6 million), data processing expense ($1.1 million), and repossession expense ($0.2 million), partially offset by the $1.7 million increase in the amortization expense related to tax credits.

As disclosed in our September 30, 2015 Form 10-Q, CTBI was under IRS examination of our 2013 corporate income tax return. In November 2015, we were notified by the IRS that the review has been completed and no changes were proposed to our return.

Balance Sheet Review

CTBI’s total assets at $3.9 billion increased $180.2 million, or 4.8%, from December 31, 2014 and $95.8 million, or an annualized 10.0%, during the quarter. Loans outstanding at December 31, 2015 were $2.9 billion, increasing $140.1 million, or 5.1%, from December 31, 2014 and $53.5 million, or an annualized 7.5%, during the quarter. We experienced growth during the quarter of $38.4 million in the commercial loan portfolio, $12.5 million in the indirect loan portfolio, $2.0 million in the residential loan portfolio, and $0.6 million in the consumer direct loan portfolio. CTBI’s investment portfolio decreased $45.2 million, or 7.0%, from December 31, 2014 but increased $18.2 million, or an annualized 12.5%, during the quarter. The decline in the investment portfolio year over year was utilized to support loan growth. Deposits, including repurchase agreements, at $3.2 billion increased $122.6 million, or 3.9%, from December 31, 2014 and $0.6 million, or an annualized 0.1%, from prior quarter.

Shareholders’ equity at December 31, 2015 was $475.6 million compared to $447.9 million at December 31, 2014 and $470.6 million at September 30, 2015. CTBI’s annualized dividend yield to shareholders as of December 31, 2015 was 3.55%.

Asset Quality

CTBI’s total nonperforming loans were $28.6 million at December 31, 2015, a 26.6% decrease from the $39.0 million at December 31, 2014 and a 12.6% decrease from the $32.7 million at September 30, 2015. Loans 90+ days past due decreased $6.0 million during the quarter while nonaccrual loans increased $1.8 million. Loans 30-89 days past due at $14.4 million was a decrease of $4.4 million from September 30, 2015. 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 December 31, 2015 totaled $49.9 million, a $9.2 million decline from the $59.1 million at December 31, 2014 and a $1.6 million increase from the $48.3 million at September 30, 2015.

Our level of foreclosed properties at $40.7 million at December 31, 2015 was an increase from $36.8 million at December 31, 2014 and the $34.7 million at September 30, 2015. Sales of foreclosed properties for the quarter ended December 31, 2015 totaled $2.3 million while new foreclosed properties totaled $8.9 million. The increase in other real estate owned was primarily the result of two commercial credits totaling $7.0 million. At December 31, 2015, the book value of properties under contracts to sell was $3.0 million; however, the closings had not occurred at quarter-end.

Net loan charge-offs for the quarter ended December 31, 2015 were $1.4 million, or 0.19% of average loans annualized, compared to $3.0 million, or 0.44%, experienced for the fourth quarter 2014 and $2.2 million, or 0.31%, for the third quarter 2015. Of the net charge-offs for the quarter, $0.4 million were in commercial loans, $0.7 million were in indirect auto loans, $0.2 million were in residential real estate mortgage loans, and $0.1 million were in consumer direct loans. Allocations to loan loss reserves were $1.9 million for the quarter ended December 31, 2015 compared to $3.4 million for the quarter ended December 31, 2014 and $2.5 million for the quarter ended September 30, 2015. Our reserve coverage (allowance for loan and lease loss reserve to nonperforming loans) at December 31, 2015 was 126.2% compared to 88.4% at December 31, 2014 and 108.6% at September 30, 2015. Our loan loss reserve as a percentage of total loans outstanding remained at 1.26% at December 31, 2015 from December 31, 2014 and September 30, 2015.

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. Community Trust Bancorp, Inc.’s (“CTBI”) 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, 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, changes in laws and regulations, competition, and 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; 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, but are not limited to, 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 $3.9 billion, is headquartered in Pikeville, Kentucky and has 70 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) December 31, 2015 (in thousands except per share data and # of employees)                     Three Three Three Twelve Twelve Months Months Months Months Months Ended Ended Ended Ended Ended December 31, 2015 September 30, 2015 December 31, 2014 December 31, 2015 December 31, 2014 Interest income $ 36,300 $ 35,912 $ 36,406 $ 144,020 $ 143,867 Interest expense   3,105     2,947     2,907     11,773     11,797   Net interest income 33,195 32,965 33,499 132,247 132,070 Loan loss provision 1,910 2,520 3,375 8,650 8,755   Gains on sales of loans 403 462 687 1,978 1,468 Deposit service charges 6,306 6,348 6,153 24,282 23,892 Trust revenue 2,384 2,297 2,308 9,286 9,011 Loan related fees 1,074 641 958 3,821 3,531 Securities gains (losses) (248 ) 12 (66 ) (106 ) (211 ) Other noninterest income   1,891     2,275     1,998     7,548     7,390   Total noninterest income 11,810 12,035 12,038 46,809 45,081   Personnel expense 13,321 13,975 14,337 54,563 54,493 Occupancy and equipment 2,643 2,688 2,654 10,875 11,431 Data processing expense 1,539 1,577 2,002 6,743 7,877 FDIC insurance premiums 584 606 618 2,382 2,400 Other noninterest expense   7,691     8,688     8,408     30,880     29,798   Total noninterest expense 25,778 27,534 28,019 105,443 105,999   Net income before taxes 17,317 14,946 14,143 64,963 62,397 Income taxes   5,447     3,724     4,151     18,531     19,146   Net income $ 11,870   $ 11,222   $ 9,992   $ 46,432   $ 43,251     Memo: TEQ interest income $ 36,797 $ 36,414 $ 36,917 $ 146,047 $ 145,800   Average shares outstanding 17,464 17,440 17,351 17,431 17,326 Diluted average shares outstanding 17,516 17,491 17,422 17,483 17,397 Basic earnings per share $ 0.68 $ 0.64 $ 0.58 $ 2.66 $ 2.50 Diluted earnings per share $ 0.68 $ 0.64 $ 0.57 $ 2.66 $ 2.49 Dividends per share $ 0.310 $ 0.310 $ 0.300 $ 1.220 $ 1.181   Average balances: Loans $ 2,847,128 $ 2,803,332 $ 2,711,183 $ 2,791,871 $ 2,642,231 Earning assets 3,578,521 3,524,058 3,459,675 3,524,506 3,422,450 Total assets 3,844,441 3,788,917 3,720,851 3,790,282 3,679,531 Deposits, including repurchase agreements 3,253,160 3,203,122 3,150,160 3,201,545 3,130,338 Interest bearing liabilities 2,586,609 2,562,274 2,543,308 2,569,344 2,547,267 Shareholders' equity 475,261 468,442 447,080 465,682 435,290   Performance ratios: Return on average assets 1.22 % 1.18 % 1.07 % 1.23 % 1.18 % Return on average equity 9.91 % 9.50 % 8.87 % 9.97 % 9.94 % Yield on average earning assets (tax equivalent) 4.08 % 4.10 % 4.23 % 4.14 % 4.26 % Cost of interest bearing funds (tax equivalent) 0.48 % 0.46 % 0.45 % 0.46 % 0.46 % Net interest margin (tax equivalent) 3.74 % 3.77 % 3.90 % 3.81 % 3.92 % Efficiency ratio (tax equivalent) 56.35 % 60.53 % 60.76 % 58.20 % 59.12 %   Loan charge-offs $ 2,051 $ 2,899 $ 3,792 $ 9,870 $ 11,436 Recoveries   (695 )   (729 )   (774 )   (2,867 )   (3,120 ) Net charge-offs $ 1,356 $ 2,170 $ 3,018 $ 7,003 $ 8,316   Market Price: High $ 37.15 $ 37.63 $ 37.54 $ 37.63 $ 41.13 Low $ 33.68 $ 33.62 $ 33.19 $ 31.53 $ 32.33 Close $ 34.96 $ 35.51 $ 36.61 $ 34.96 $ 36.61     Community Trust Bancorp, Inc. Financial Summary (Unaudited) December 31, 2015 (in thousands except per share data and # of employees)             As of As of As of December 31, 2015 September 30, 2015 December 31, 2014 Assets: Loans $ 2,873,961 $ 2,820,460 $ 2,733,824 Loan loss reserve   (36,094 )   (35,540 )   (34,447 ) Net loans 2,837,867 2,784,920 2,699,377 Loans held for sale 1,172 1,983 2,264 Securities AFS 594,936 576,713 640,186 Securities HTM 1,661 1,661 1,662 Other equity investments 22,814 22,814 22,796 Other earning assets 141,313 116,754 59,259 Cash and due from banks 51,974 54,041 56,299 Premises and equipment 48,188 48,541 49,980 Goodwill and core deposit intangible 65,781 65,821 65,967 Other assets   138,228     134,900     125,975   Total Assets $ 3,903,934   $ 3,808,148   $ 3,723,765     Liabilities and Equity: NOW accounts $ 44,567 $ 32,249 $ 31,998 Savings deposits 997,042 1,004,635 925,715 CD's >=$100,000 559,497 561,856 575,394 Other time deposits   629,701     638,832     663,524   Total interest bearing deposits 2,230,807 2,237,572 2,196,631 Noninterest bearing deposits   749,975     737,657     677,626   Total deposits 2,980,782 2,975,229 2,874,257 Repurchase agreements 251,225 256,153 235,186 Other interest bearing liabilities 165,993 71,640 133,552 Noninterest bearing liabilities   30,351     34,541     32,893   Total liabilities 3,428,351 3,337,563 3,275,888 Shareholders' equity   475,583     470,585     447,877   Total Liabilities and Equity $ 3,903,934   $ 3,808,148   $ 3,723,765     Ending shares outstanding 17,537 17,513 17,466 Memo: Market value of HTM securities $ 1,651 $ 1,651 $ 1,644   30 - 89 days past due loans $ 14,401 $ 18,812 $ 15,150 90 days past due loans 12,046 18,001 17,985 Nonaccrual loans 16,563 14,722 20,971 Restructured loans (excluding 90 days past due and nonaccrual) 49,283 43,081 47,860 Foreclosed properties 40,674 34,654 36,776 Other repossessed assets 183 136 90   Common equity Tier 1 capital 14.58 % 14.49 % - Tier 1 leverage ratio 12.40 % 12.40 % 12.04 % Tier 1 risk-based capital ratio 16.70 % 16.63 % 16.51 % Total risk based capital ratio 17.95 % 17.88 % 17.76 % Tangible equity to tangible assets ratio 10.68 % 10.82 % 10.44 % FTE employees 984 980 1,012

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