Press Release

Community Trust Bancorp, Inc. Reports Earnings for the Second Quarter 2018

Company Release - 7/18/2018 8:52 AM ET

PIKEVILLE, Ky.--(BUSINESS WIRE)-- Community Trust Bancorp, Inc. (NASDAQ: CTBI):

                   
Earnings Summary
(in thousands except per share data)     2Q

2018

    1Q

2018

    2Q

2017

    6 Months

2018

    6 Months

2017

Net income $11,599 $15,814 $11,541 $27,413 $22,818
Earnings per share $0.66 $0.89 $0.65 $1.55 $1.29
Earnings per share - diluted $0.66 $0.89 $0.65 $1.55 $1.29
 
Return on average assets 1.11% 1.55% 1.14% 1.33% 1.15%
Return on average equity 8.56% 12.00% 8.97% 10.26% 9.00%
Efficiency ratio 66.05% 59.24% 59.32% 62.67% 60.23%
Tangible common equity 11.51% 11.43% 11.19%
 
Dividends declared per share $0.33 $0.33 $0.32 $0.66 $0.64
Book value per share $30.59 $30.33 $29.14
 
Weighted average shares 17,687 17,671 17,626 17,679 17,621
Weighted average shares - diluted 17,703 17,687 17,645 17,695 17,641
 

Community Trust Bancorp, Inc. (NASDAQ: CTBI) reports earnings for the second quarter 2018 of $11.6 million, or $0.66 per basic share, compared to $15.8 million, or $0.89 per basic share, earned during the first quarter 2018 and $11.5 million, or $0.65 per basic share, earned during the second quarter 2017. Earnings for the six months ended June 30, 2018 were $27.4 million, or $1.55 per basic share, compared to $22.8 million or $1.29 per basic share earned during the six months ended June 30, 2017.

As disclosed by CTBI in Annual Reports on Form 10-K for the years ended December 31, 2017 and 2016, and previous Quarterly Reports on Form 10-Q, CTB will be required to make certain customer reimbursements related to two deposit add-on products. CTBI further disclosed in such filings that management had established a related accrual, and that the actual reimbursement amount could materially vary from the amount management had evaluated as most likely. On June 14, 2018, CTBI filed a Form 8-K disclosing an increase in the accrual from $1.2 million to $4.75 million to reflect a change in the amount management determined to be the most likely amount as a result of communications with regulatory agency representatives. As a result of the increased accrual, a charge to earnings was reflected in the second quarter 2018 financial results of $2.8 million after-tax, or $0.16 per share.

2nd Quarter 2018 Highlights

  • Net interest income for the quarter of $35.1 million was an increase of $0.6 million, or 1.6%, from first quarter 2018 and $0.9 million, or 2.7%, from prior year second quarter.
  • Provision for loan losses for the quarter ended June 30, 2018 increased $1.0 million from prior quarter but decreased $0.8 million from prior year same quarter.
  • Our loan portfolio increased $50.8 million, an annualized 6.5%, during the quarter and $81.7 million, or 2.6%, from June 30, 2017.
  • Net loan charge-offs for the quarter ended June 30, 2018 were $1.3 million, or 0.17% of average loans annualized, compared to $1.9 million, or 0.25%, experienced for the first quarter 2018 and $1.3 million, or 0.18%, for the second quarter 2017.
  • Nonperforming loans at $22.0 million decreased $3.9 million from March 31, 2018 and $6.0 million from June 30, 2017. Nonperforming assets at $52.3 million decreased $5.7 million from March 31, 2018 and $8.3 million from June 30, 2017.
  • Deposits, including repurchase agreements, decreased $6.3 million during the quarter but increased $195.4 million from June 30, 2017.
  • Noninterest income for the quarter ended June 30, 2018 of $13.7 million was an increase of $0.4 million, or 3.2%, from prior quarter and $1.4 million, or 11.6%, from prior year same quarter. The increase in noninterest income was primarily due to a gain on the sale of a partnership interest resulting from a low income housing tax credit recapture and an increase in deposit service charges.
  • Noninterest expense for the quarter ended June 30, 2018 of $32.4 million increased $3.8 million, or 13.1%, from prior quarter, and $4.9 million, or 17.7%, from prior year same quarter. The variance in noninterest expense from prior quarter was primarily due to the above mentioned increase in the customer reimbursement accrual. Additionally, personnel expense increased from prior year same quarter with increases in bonuses and the cost of group medical and life insurance.
  • Income tax expense continues to be positively impacted by the change in the corporate income tax rate from 35% to 21%. We utilize various tax exempt investments and loans, including municipal bonds, bank owned life insurance, and low income housing projects, to lower our effective income tax rate. With the current tax laws, our effective tax rate for the six months ended June 30, 2018 was 16% compared to 28% for the six months ended June 30, 2017.

Net Interest Income

Net interest income for the quarter of $35.1 million was an increase of $0.6 million, or 1.6%, from first quarter 2018 and $0.9 million, or 2.7%, from prior year second quarter. Our net interest margin at 3.61% decreased 4 basis points from prior quarter and 7 basis points from prior year same quarter, while our average earning assets increased $57.8 million and $145.5 million, respectively, during those same periods. Our yield on average earning assets increased 3 basis points from prior quarter and 18 basis points from prior year same quarter, and our cost of funds increased 11 basis points from prior quarter and 37 basis points from prior year same quarter. Our ratio of average loans to deposits, including repurchase agreements, was 88.1% for the quarter ended June 30, 2018 compared to 88.6% for the quarter ended March 31, 2018 and 89.9% for the quarter ended June 30, 2017.

Noninterest Income

Noninterest income for the quarter ended June 30, 2018 of $13.7 million was an increase of $0.4 million, or 3.2%, from prior quarter and $1.4 million, or 11.6%, from prior year same quarter. The increase in noninterest income was primarily due to a gain on the sale of a partnership interest totaling $1.0 million related to one of our tax credit investments. As a result of the sale of this interest, a portion of the tax credits previously claimed was recaptured during the current quarter totaling $0.8 million, which was recorded in income tax expense. The variance in noninterest income from prior quarter was also impacted by a $0.3 million increase in deposit service charges and a $0.3 million decrease in losses on the sale of securities, offset by a $1.0 million decrease in bank owned life insurance income and a $0.2 million decrease in loan related fees as a result of fluctuations in the fair value adjustments of our mortgage servicing rights. The increase from prior year same quarter was also positively impacted by a $0.2 million increase in trust revenue. Additionally, noninterest income for the second quarter 2017 included a $0.6 million gain on the repurchase of trust preferred securities. Noninterest income for the six months ended June 30, 2018 was a $3.2 million, or 13.2%, increase from prior year.

Noninterest Expense

Noninterest expense for the quarter ended June 30, 2018 of $32.4 million increased $3.8 million, or 13.1%, from prior quarter, and $4.9 million, or 17.7%, from prior year same quarter. The variance in noninterest expense from prior quarter was primarily due to the above mentioned $3.6 million increase in the customer reimbursement accrual. Personnel expense increased from prior year same quarter with increases in bonuses ($0.7 million) and the cost of group medical and life insurance ($0.4 million). Noninterest expense for the six months ended June 30, 2018 was $61.1 million, a $5.9 million or 10.7% increase over the first six months of 2017, primarily due to the same items detailed above.

Balance Sheet Review

CTBI’s total assets at $4.2 billion increased $9.4 million, or 0.9% annualized, from March 31, 2018 and $124.1 million, or 3.0%, from June 30, 2017. Loans outstanding at June 30, 2018 were $3.2 billion, an increase of $50.8 million, or an annualized 6.5%, from March 31, 2018 and $81.7 million, or 2.6%, from June 30, 2017. We experienced an increase during the quarter of $16.1 million in the commercial loan portfolio, $5.7 million in the residential loan portfolio, $20.2 million in the indirect loan portfolio, and $8.8 million in the consumer direct loan portfolio. CTBI’s investment portfolio decreased $19.1 million, or an annualized 12.7%, from March 31, 2018 and $24.8 million, or 4.1%, from June 30, 2017. Deposits, including repurchase agreements, at $3.6 billion decreased $6.3 million, or an annualized 0.7%, from March 31, 2018 but increased $195.4 million, or 5.8%, from June 30, 2017.

Shareholders’ equity at June 30, 2018 was $542.2 million, a 3.5% annualized increase from the $537.5 million at March 31, 2018 and a 5.3% increase from the $514.9 million at June 30, 2017. CTBI’s annualized dividend yield to shareholders as of June 30, 2018 was 2.64%.

Asset Quality

CTBI’s total nonperforming loans, not including troubled debt restructurings, were $22.0 million, or 0.69% of total loans, at June 30, 2018 compared to $25.9 million, or 0.83% of total loans, at March 31, 2018 and $28.0 million, or 0.91% of total loans, at June 30, 2017. Accruing loans 90+ days past due decreased $1.8 million from prior quarter and $1.2 million from June 30, 2017. Nonaccrual loans decreased $2.1 million during the quarter and $4.8 million from June 30, 2017. Accruing loans 30-89 days past due at $23.5 million was an increase of $6.6 million from March 31, 2018 and $8.3 million from June 30, 2017. The increase in past due loans 30-89 days is due to one relationship which is well-collateralized, and no loss is expected. 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 June 30, 2018 totaled $46.7 million, a $1.5 million decrease from the $48.2 million at March 31, 2018 and a $4.0 million decrease from the $50.7 million at June 30, 2017.

Our level of foreclosed properties at $30.3 million at June 30, 2018 was a $1.7 million decrease from the $32.0 million at March 31, 2018 and a $2.4 million decrease from the $32.6 million at June 30, 2017. Sales of foreclosed properties for the quarter ended June 30, 2018 totaled $2.4 million while new foreclosed properties totaled $1.6 million. At June 30, 2018, the book value of properties under contracts to sell was $1.9 million; however, the closings had not occurred at quarter-end. Write-downs on foreclosed properties for the second quarter 2018 totaled $0.9 million compared to $0.5 million in the first quarter 2018 and $1.4 million in the second quarter 2017.

Net loan charge-offs for the quarter ended June 30, 2018 were $1.3 million, or 0.17% of average loans annualized, compared to $1.9 million, or 0.25%, experienced for the first quarter 2018 and $1.3 million, or 0.18%, for the second quarter 2017. Of the net charge-offs for the quarter, $0.5 million were in commercial loans, $0.4 million were in indirect auto loans, $0.2 million were in residential loans, and $0.2 million were in consumer direct loans. Allocations to loan loss reserves were $1.9 million for the quarter ended June 30, 2018 compared to $0.9 million for the quarter ended March 31, 2018 and $2.8 million for the quarter ended June 30, 2017. Our reserve coverage (allowance for loan and lease loss reserve to nonperforming loans) at June 30, 2018 was 162.6% compared to 135.6% at March 31, 2018 and 132.6% at June 30, 2017. Our loan loss reserve as a percentage of total loans outstanding remained at 1.13% from March 31, 2018 to June 30, 2018, down from the 1.20% at June 30, 2017.

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, operational, and fiscal policies and regulations, which include, but are not limited to, those determined by the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Consumer Financial Protection Bureau, 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 $4.2 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)
June 30, 2018
(in thousands except per share data and # of employees)
               
Three Three Three Six Six
Months Months Months Months Months
Ended Ended Ended Ended Ended
June 30, 2018 March 31, 2018 June 30, 2017 June 30, 2018 June 30, 2017
Interest income $ 42,025 $ 40,580 $ 38,411 $ 82,605 $ 75,179
Interest expense   6,877     5,989     4,171     12,866     7,849  
Net interest income 35,148 34,591 34,240 69,739 67,330
Loan loss provision 1,929 946 2,764 2,875 3,993
 
Gains on sales of loans 304 279 251 583 507
Deposit service charges 6,480 6,221 6,199 12,701 12,159
Trust revenue 2,856 2,958 2,649 5,814 5,235
Loan related fees 919 1,144 773 2,063 1,778
Securities gains (losses) 2 (288 ) 18 (286 ) 10
Other noninterest income   3,179     2,996     2,421     6,175     4,201  
Total noninterest income 13,740 13,310 12,311 27,050 23,890
 
Personnel expense 15,422 15,619 14,044 31,041 28,968
Occupancy and equipment 2,770 2,833 2,720 5,603 5,533
Data processing expense 1,634 1,636 1,757 3,270 3,546
FDIC insurance premiums 279 314 315 593 607
Other noninterest expense   12,334     8,279     8,730     20,613     16,556  
Total noninterest expense 32,439 28,681 27,566 61,120 55,210
 
Net income before taxes 14,520 18,274 16,221 32,794 32,017
Income taxes   2,921     2,460     4,680     5,381     9,199  
Net income $ 11,599   $ 15,814   $ 11,541   $ 27,413   $ 22,818  
 
Memo: TEQ interest income $ 42,253 $ 40,804 $ 38,910 $ 83,057 $ 76,187
 
Average shares outstanding 17,687 17,671 17,626 17,679 17,621
Diluted average shares outstanding 17,703 17,687 17,645 17,695 17,641
Basic earnings per share $ 0.66 $ 0.89 $ 0.65 $ 1.55 $ 1.29
Diluted earnings per share $ 0.66 $ 0.89 $ 0.65 $ 1.55 $ 1.29
Dividends per share $ 0.33 $ 0.33 $ 0.32 $ 0.66 $ 0.64
 
Average balances:
Loans $ 3,131,964 $ 3,111,116 $ 3,027,044 $ 3,121,597 $ 2,990,865
Earning assets 3,928,066 3,870,216 3,782,548 3,899,301 3,743,834
Total assets 4,196,693 4,144,105 4,052,791 4,170,544 4,014,155
Deposits, including repurchase agreements 3,556,340 3,511,260 3,366,489 3,533,925 3,364,651
Interest bearing liabilities 2,818,168 2,782,467 2,731,147 2,800,416 2,696,164
Shareholders' equity 543,513 534,278 515,834 538,921 511,560
 
Performance ratios:
Return on average assets 1.11 % 1.55 % 1.14 % 1.33 % 1.15 %
Return on average equity 8.56 % 12.00 % 8.97 % 10.26 % 9.00 %
Yield on average earning assets (tax equivalent) 4.31 % 4.28 % 4.13 % 4.30 % 4.10 %
Cost of interest bearing funds (tax equivalent) 0.98 % 0.87 % 0.61 % 0.93 % 0.59 %
Net interest margin (tax equivalent) 3.61 % 3.65 % 3.68 % 3.63 % 3.68 %
Efficiency ratio (tax equivalent) 66.05 % 59.24 % 59.32 % 62.67 % 60.23 %
 
Loan charge-offs $ 2,526 $ 2,977 $ 2,189 $ 5,503 $ 4,680
Recoveries   (1,179 )   (1,069 )   (845 )   (2,248 )   (1,887 )
Net charge-offs $ 1,347 $ 1,908 $ 1,344 $ 3,255 $ 2,793
 
Market Price:
High $ 53.00 $ 50.70 $ 46.90 $ 53.00 $ 50.40
Low $ 43.95 $ 43.00 $ 41.07 $ 43.00 $ 41.07
Close $ 49.95 $ 45.20 $ 43.75 $ 49.95 $ 43.75
 
As of As of As of
June 30, 2018 March 31, 2018 June 30, 2017
Assets:
Loans $ 3,169,042 $ 3,118,241 $ 3,087,342
Loan loss reserve   (35,771 )   (35,189 )   (37,133 )
Net loans 3,133,271 3,083,052 3,050,209
Loans held for sale 1,093 1,145 4,624
Securities AFS 585,764 604,890 610,368
Securities HTM 659 659 858
Other equity investments 22,814 22,814 22,814
Other earning assets 150,880 159,608 90,711
Cash and due from banks 54,987 44,792 51,224
Premises and equipment 46,483 45,860 47,036
Goodwill and core deposit intangible 65,490 65,490 65,543
Other assets   143,745     167,427     137,726  
Total Assets $ 4,205,186   $ 4,195,737   $ 4,081,113  
 
Liabilities and Equity:
NOW accounts $ 51,563 $ 55,034 $ 48,476
Savings deposits 1,156,601 1,131,371 1,070,706
CD's >=$100,000 694,641 705,978 592,794
Other time deposits   587,078     601,942     610,770  
Total interest bearing deposits 2,489,883 2,494,325 2,322,746
Noninterest bearing deposits   819,525     825,345     782,864  
Total deposits 3,309,408 3,319,670 3,105,610
Repurchase agreements 248,781 244,822 257,208
Other interest bearing liabilities 68,121 67,241 167,455
Noninterest bearing liabilities   36,701     26,515     35,925  
Total liabilities 3,663,011 3,658,248 3,566,198
Shareholders' equity   542,175     537,489     514,915  
Total Liabilities and Equity $ 4,205,186   $ 4,195,737   $ 4,081,113  
 
Ending shares outstanding 17,725 17,721 17,671
Memo: Market value of HTM securities $ 660 $ 660 $ 858
 
30 - 89 days past due loans $ 23,488 $ 16,914 $ 15,234
90 days past due loans 7,189 9,027 8,362
Nonaccrual loans 14,812 16,923 19,651
Restructured loans (excluding 90 days past due and nonaccrual) 56,814 56,119 53,786
Foreclosed properties 30,262 32,004 32,638
Other repossessed assets 83 118 45
 
Common equity Tier 1 capital 15.80 % 15.73 % 14.91 %
Tier 1 leverage ratio 13.11 % 13.14 % 12.72 %
Tier 1 risk-based capital ratio 17.67 % 17.62 % 16.81 %
Total risk based capital ratio 18.84 % 18.78 % 18.05 %
Tangible equity to tangible assets ratio 11.51 % 11.43 % 11.19 %
FTE employees 988 986 1,000

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

Source: Community Trust Bancorp, Inc.