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

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

     
Earnings Summary
(in thousands except per share data)   1Q

2018

  4Q

2017

  1Q

2017

Net income $15,814 $14,912 $11,277
Earnings per share $0.89 $0.84 $0.64
Earnings per share - diluted $0.89 $0.84 $0.64
 
Return on average assets 1.55% 1.43% 1.15%
Return on average equity 12.00% 11.18% 9.02%
Efficiency ratio 59.24% 57.76% 61.18%
Tangible common equity 11.43% 11.43% 11.14%
 
Dividends declared per share $0.33 $0.33 $0.32
Book value per share $30.33 $30.00 $28.73
 
Weighted average shares 17,671 17,650 17,615
Weighted average shares - diluted   17,687   17,674   17,638
 

Community Trust Bancorp, Inc. (NASDAQ:CTBI) reports record earnings for the first quarter 2018 of $15.8 million, or $0.89 per basic share, compared to $14.9 million, or $0.84 per basic share, earned during the fourth quarter 2017 and $11.3 million, or $0.64 per basic share, earned during the first quarter 2017.

1st Quarter 2018 Highlights

  • Net interest income for the quarter of $34.6 million was a decrease of $0.5 million, or 1.5%, from fourth quarter 2017 but an increase of $1.5 million, or 4.5%, from prior year first quarter.
  • Provision for loan losses for the quarter ended March 31, 2018 decreased $1.9 million from prior quarter and $0.3 million from prior year same quarter.
  • Our loan portfolio decreased $4.7 million, an annualized 0.6%, during the quarter but increased $148.4 million, or 5.0%, from March 31, 2017.
  • Net loan charge-offs for the quarter ended March 31, 2018 were $1.9 million, or 0.25% of average loans annualized, compared to $3.1 million, or 0.39%, experienced for the fourth quarter 2017 and $1.4 million, or 0.20%, for the first quarter 2017.
  • Nonperforming loans at $25.9 million decreased $2.3 million from December 31, 2017 but increased $0.9 million from March 31, 2017. Nonperforming assets at $58.1 million decreased $2.3 million from December 31, 2017 and $2.8 million from March 31, 2017.
  • Deposits, including repurchase agreements, increased $56.8 million during the quarter and $147.2 million from March 31, 2017.
  • Noninterest income for the quarter ended March 31, 2018 of $13.3 million was an increase of $0.9 million, or 7.2%, from prior quarter and $1.7 million, or 15.0%, from prior year same quarter. The increase in noninterest income included a $1.2 million increase in bank owned life insurance revenue as a result of death benefits.
  • Noninterest expense for the quarter ended March 31, 2018 of $28.7 million increased $0.9 million, or 3.4%, from prior quarter, and $1.0 million, or 3.8%, from prior year same quarter. The variance in noninterest expense from prior quarter included increases in bank franchise taxes, net other real estate owned expense, and repossession expense. The variance from prior year included increases in personnel expense, taxes other than property/payroll, operating losses, and repossession expense.
  • Income tax expense was positively impacted this quarter by the change in the corporate income tax rate from 35% to 21%. We utilize various tax exempt investments, including municipal bonds, bank owned life insurance, and low income housing projects, to lower our effective income tax rate. With the current tax laws, we expect our effective income tax rate for the year to be within the 13% to 17% range.

Net Interest Income

Net interest income for the quarter of $34.6 million was a decrease of $0.5 million, or 1.5%, from fourth quarter 2017 but an increase of $1.5 million, or 4.5%, from prior year first quarter. Our net interest margin at 3.65% remained flat from prior quarter but was down three basis points from prior year same quarter, while our average earning assets increased $1.2 million and $165.5 million, respectively, during those same periods. Our yield on average earning assets increased 6 basis points from prior quarter and 20 basis points from prior year same quarter, and our cost of funds increased 7 basis points from prior quarter and 31 basis points from prior year same quarter. Our ratio of average loans to deposits, including repurchase agreements, was 88.6% for the quarter ended March 31, 2018 compared to 89.1% for the quarter ended December 31, 2017 and 87.9% for the quarter ended March 31, 2017.

Noninterest Income

Noninterest income for the quarter ended March 31, 2018 of $13.3 million was an increase of $0.9 million, or 7.2%, from prior quarter and $1.7 million, or 15.0%, from prior year same quarter. The increase in noninterest income included an increase of $1.2 million in bank owned life insurance revenue as a result of death benefits. This increase was partially offset by $0.3 million in losses on the sale of securities.

Noninterest Expense

Noninterest expense for the quarter ended March 31, 2018 of $28.7 million increased $0.9 million, or 3.4%, from prior quarter, and $1.0 million, or 3.8%, from prior year same quarter. The variance in noninterest expense from prior quarter included increases in bank franchise taxes ($0.5 million), net other real estate owned expense ($0.5 million), and repossession expense ($0.2 million). The quarter over quarter increase in noninterest expense was partially offset by a $0.2 million decrease in personnel expense. Bonuses and incentives declined by $0.6 million due to the one-time bonus declared in December 2017, while cost increases included group medical and life insurance ($0.3 million), salaries ($0.1 million), and payroll taxes ($0.1 million). The variance in noninterest expense from prior year included an increase in personnel expense of $0.7 million, primarily due to an increase in the cost of group medical and life insurance ($0.5 million) and salaries ($0.2 million), in addition to increases in bank franchise taxes ($0.2 million), operating losses ($0.2 million), and repossession expense ($0.2 million). The year over year increase in noninterest expense was partially offset by a $0.2 million decrease in data processing expense.

Balance Sheet Review

CTBI’s total assets at $4.2 billion increased $59.5 million, or 5.8% annualized, from December 31, 2017 and $161.6 million, or 4.0%, from March 31, 2017. Loans outstanding at March 31, 2018 were $3.1 billion, a decrease of $4.7 million, or an annualized 0.6%, from December 31, 2017 but an increase of $148.4 million, or 5.0%, from March 31, 2017. We experienced a decrease during the quarter of $7.6 million in the commercial loan portfolio, $1.8 million in the indirect loan portfolio, and $1.2 million in the consumer direct loan portfolio, partially offset by an increase of $5.9 million in the residential loan portfolio. The decline in the commercial loan portfolio was the result of the payout of a $13 million dealer floor plan. CTBI’s investment portfolio increased $19.1 million, or an annualized 13.2%, from December 31, 2017 but decreased $1.0 million, or 0.2%, from March 31, 2017. Deposits in other banks increased $20.2 million from prior quarter and $2.6 million from March 31, 2017. Deposits, including repurchase agreements, at $3.6 billion increased $56.8 million, or an annualized 6.6%, from December 31, 2017 and $147.2 million, or 4.3%, from March 31, 2017.

Shareholders’ equity at March 31, 2018 was $537.5 million, a 5.2% annualized increase from the $530.7 million at December 31, 2017 and a 5.9% increase from the $507.5 million at March 31, 2017. CTBI’s annualized dividend yield to shareholders as of March 31, 2018 was 2.92%.

Asset Quality

CTBI’s total nonperforming loans, not including troubled debt restructurings, were $25.9 million, or 0.83% of total loans, at March 31, 2018 compared to $28.3 million, or 0.91% of total loans, at December 31, 2017 and $25.1 million, or 0.84% of total loans, at March 31, 2017. Accruing loans 90+ days past due decreased $1.1 million from prior quarter but increased $0.4 million from March 31, 2017. Nonaccrual loans decreased $1.2 million during the quarter, but increased $0.4 million from March 31, 2017. Accruing loans 30-89 days past due at $16.9 million was a decrease of $2.5 million from December 31, 2017 but an increase of $1.6 million from March 31, 2017. 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 March 31, 2018 totaled $48.2 million, a $0.8 million increase from the $47.4 million at December 31, 2017 but a $2.1 million decrease from the $50.3 million at March 31, 2017.

Our level of foreclosed properties at $32.0 million at March 31, 2018 was relatively flat to December 31, 2017, but a $3.7 million decrease from the $35.7 million at March 31, 2017. Sales of foreclosed properties for the quarter ended March 31, 2018 totaled $0.8 million while new foreclosed properties totaled $1.3 million. At March 31, 2018, the book value of properties under contracts to sell was $2.5 million; however, the closings had not occurred at quarter-end. Write-downs on foreclosed properties for the first quarter 2018 totaled $0.5 million compared to $0.2 million in the fourth quarter 2017 and $0.5 million in the first quarter 2017.

Net loan charge-offs for the quarter ended March 31, 2018 were $1.9 million, or 0.25% of average loans annualized, compared to $3.1 million, or 0.39%, experienced for the fourth quarter 2017 and $1.4 million, or 0.20%, for the first quarter 2017. Of the net charge-offs for the quarter, $0.3 million were in commercial loans, $1.2 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 $0.9 million for the quarter ended March 31, 2018 compared to $2.9 million for the quarter ended December 31, 2017 and $1.2 million for the quarter ended March 31, 2017. Our reserve coverage (allowance for loan and lease loss reserve to nonperforming loans) at March 31, 2018 was 135.6% compared to 127.8% at December 31, 2017 and 142.4% at March 31, 2017. Our loan loss reserve as a percentage of total loans outstanding was reduced to 1.13% at March 31, 2018 from the 1.16% at December 31, 2017 and the 1.20% at March 31, 2017. The decline in the loan loss reserve is primarily attributable to a reduction in our soft factor allocation for trends in delinquencies.

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)
March 31, 2018
(in thousands except per share data and # of employees)
               
Three Three Three
Months Months Months
Ended Ended Ended
March 31, 2018 December 31, 2017 March 31, 2017
Interest income $ 40,580 $ 40,673 $ 36,768
Interest expense   5,989     5,571     3,678  
Net interest income 34,591 35,102 33,090
Loan loss provision 946 2,862 1,229
 
Gains on sales of loans 279 423 256
Deposit service charges 6,221 6,463 5,960
Trust revenue 2,958 2,684 2,586
Loan related fees 1,144 1,108 1,005
Securities gains (losses) (288 ) 15 (8 )
Other noninterest income   2,996     1,723     1,780  
Total noninterest income 13,310 12,416 11,579
 
Personnel expense 15,619 15,782 14,924
Occupancy and equipment 2,833 2,804 2,813
Data processing expense 1,636 1,782 1,789
FDIC insurance premiums 314 316 292
Other noninterest expense   8,279     7,052     7,826  
Total noninterest expense 28,681 27,736 27,644
 
Net income before taxes 18,274 16,920 15,796
Income taxes   2,460     2,008     4,519  
Net income $ 15,814   $ 14,912   $ 11,277  
 
Memo: TEQ interest income $ 40,804 $ 41,186 $ 37,277
 
Average shares outstanding 17,671 17,650 17,615
Diluted average shares outstanding 17,687 17,674 17,638
Basic earnings per share $ 0.89 $ 0.84 $ 0.64
Diluted earnings per share $ 0.89 $ 0.84 $ 0.64
Dividends per share $ 0.33 $ 0.33 $ 0.32
 
Average balances:
Loans $ 3,111,116 $ 3,116,070 $ 2,954,283
Earning assets 3,870,216 3,869,028 3,704,690
Total assets 4,144,105 4,141,555 3,975,089
Deposits, including repurchase agreements 3,511,260 3,498,571 3,362,792
Interest bearing liabilities 2,782,467 2,778,996 2,660,794
Shareholders' equity 534,278 529,334 507,237
 
Performance ratios:
Return on average assets 1.55 % 1.43 % 1.15 %
Return on average equity 12.00 % 11.18 % 9.02 %
Yield on average earning assets (tax equivalent) 4.28 % 4.22 % 4.08 %
Cost of interest bearing funds (tax equivalent) 0.87 % 0.80 % 0.56 %
Net interest margin (tax equivalent) 3.65 % 3.65 % 3.68 %
Efficiency ratio (tax equivalent) 59.24 % 57.76 % 61.18 %
 
Loan charge-offs $ 2,977 $ 3,962 $ 2,491
Recoveries   (1,069 )   (860 )   (1,042 )
Net charge-offs $ 1,908 $ 3,102 $ 1,449
 
Market Price:
High $ 50.70 $ 51.90 $ 50.40
Low $ 43.00 $ 45.00 $ 43.25
Close $ 45.20 $ 47.10 $ 45.75
       

Community Trust Bancorp, Inc.

Financial Summary (Unaudited)

March 31, 2018

(in thousands except per share data and # of employees)
 
 
As of As of As of
March 31, 2018 December 31, 2017 March 31, 2017
Assets:
Loans $ 3,118,241 $ 3,122,940 $ 2,969,865
Loan loss reserve   (35,189 )   (36,151 )   (35,713 )
Net loans 3,083,052 3,086,789 2,934,152
Loans held for sale 1,145 1,033 2,599
Securities AFS 604,890 585,761 605,701
Securities HTM 659 659 858
Other equity investments 22,814 22,814 22,814
Other earning assets 159,608 139,392 163,362
Cash and due from banks 44,792 47,528 51,089
Premises and equipment 45,860 46,318 47,298
Goodwill and core deposit intangible 65,490 65,490 65,583
Other assets   167,427     140,447     140,705  
Total Assets $ 4,195,737   $ 4,136,231   $ 4,034,161  
 
Liabilities and Equity:
NOW accounts $ 55,034 $ 51,218 $ 50,762
Savings deposits 1,131,371 1,108,572 1,093,019
CD's >=$100,000 705,978 702,218 601,063
Other time deposits   601,942     610,925     609,990  
Total interest bearing deposits 2,494,325 2,472,933 2,354,834
Noninterest bearing deposits   825,345     790,930     804,944  
Total deposits 3,319,670 3,263,863 3,159,778
Repurchase agreements 244,822 243,814 257,497
Other interest bearing liabilities 67,241 67,498 73,614
Noninterest bearing liabilities   26,515     30,357     35,788  
Total liabilities 3,658,248 3,605,532 3,526,677
Shareholders' equity   537,489     530,699     507,484  
Total Liabilities and Equity $ 4,195,737   $ 4,136,231   $ 4,034,161  
 
Ending shares outstanding 17,721 17,693 17,661
Memo: Market value of HTM securities $ 660 $ 660 $ 858
 
30 - 89 days past due loans $ 16,914 $ 19,388 $ 15,316
90 days past due loans 9,027 10,176 8,583
Nonaccrual loans 16,923 18,119 16,498
Restructured loans (excluding 90 days past due and nonaccrual) 56,119 53,010 55,822
Foreclosed properties 32,004 31,996 35,665
Other repossessed assets 118 155 103
 
Common equity Tier 1 capital 15.73 % 15.33 % 15.21 %
Tier 1 leverage ratio 13.14 % 12.89 % 12.85 %
Tier 1 risk-based capital ratio 17.62 % 17.22 % 17.25 %
Total risk based capital ratio 18.78 % 18.41 % 18.49 %
Tangible equity to tangible assets ratio 11.43 % 11.43 % 11.14 %
FTE employees 986 990 996

Contacts

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

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