Community Trust Bancorp, Inc. Reports Earnings For Second Quarter 2011

Community Trust Bancorp, Inc. (NASDAQ:CTBI):
         
Earnings Summary
(in thousands except per share data)   2Q

2011
  1Q

2011
  2Q

2010
  6 Months

2011
  6 Months

2010
Net income $ 8,970 $ 9,304 $ 8,553 $   18,274 $   15,344
Earnings per share $ 0.59 $ 0.61 $ 0.56 $ 1.19 $ 1.01
Earnings per share—diluted $ 0.58 $ 0.61 $ 0.56 $ 1.19 $ 1.01
 
Return on average assets 1.03% 1.11% 1.06% 1.07% 0.98%
Return on average equity 10.23% 10.96% 10.40% 10.59% 9.44%
Efficiency ratio 61.91% 60.78% 60.41% 61.34% 59.93%
Tangible common equity 8.35% 8.19% 8.43% 8.35% 8.43%
 
Dividends declared per share $ 0.305 $ 0.305 $ 0.30 $ 0.61 $ 0.60
Book value per share $ 22.87 $ 22.38 $ 21.60 $ 22.87 $ 21.60
 
Weighted average shares 15,308 15,294 15,228 15,301 15,215
Weighted average shares—diluted     15,332     15,324     15,305       15,328       15,252
 

Community Trust Bancorp, Inc. (NASDAQ:CTBI) reports earnings of $9.0 million, or $0.59 per basic share, compared to $8.6 million, or $0.56 per basic share, earned during the second quarter of 2010 and $9.3 million, or $0.61 per basic share, earned during the first quarter 2011. Earnings for the six months ended June 30, 2011 increased 19.1% to $18.3 million, or $1.19 per basic share, from the $15.3 million, or $1.01 per basic share, earned during the six months ended June 30, 2010.

CTBI continues to maintain a significantly higher level of capital than required by regulatory authorities to be designated as well-capitalized. On June 30, 2011, our Tangible Common Equity/Tangible Assets Ratio remains strong at 8.35%, our Tier 1 Leverage Ratio of 9.89% was 489 basis points higher than the 5.00% required, our Tier 1 Risk-Based Capital Ratio of 13.36% was 736 basis points higher than the required 6.00%, and our Total Risk-Based Capital Ratio of 14.62% was 462 basis points higher than the 10.00% regulatory requirement for this designation.

Second Quarter 2011 Highlights
  • CTBI's basic earnings per share for the quarter increased $0.03 per share from second quarter 2010 and decreased $0.02 per share from first quarter 2011. Year-to-date basic earnings per share increased $0.18 per share from prior year. Earnings for the first six months of 2011 were impacted by increased net interest income and noninterest income and decreased provision for loan loss partially offset by increased noninterest expense.
  • CTBI’s quarterly net interest margin of 4.17% was an increase from 4.00% for the quarter ended June 30, 2010 but a decrease from 4.27% for prior quarter. Year-to-date net interest margin of 4.22% was a 12 basis point increase from prior year.
  • Nonperforming loans at $59.6 million decreased from the $62.3 million at June 30, 2010 but increased from the $57.4 million at March 31, 2011. The increase from prior quarter was in the 90+ days past due classification and is primarily attributable to one $7.4 million credit which management believes is adequately collateralized. Nonperforming assets at $106.4 million increased $3.8 million from prior year second quarter and $1.3 million from prior quarter.
  • The loan loss provision for the quarter increased $0.2 million from prior year second quarter but decreased $1.1 million from prior quarter. Year-to-date loan loss provision decreased $1.1 million from the six months ended June 30, 2010.
  • Net loan charge-offs for the quarter ended June 30, 2011 of $3.3 million, or 0.52% of average loans annualized, was an increase from the $1.8 million, or 0.30%, experienced for the second quarter 2010 but a decrease from prior quarter’s $4.0 million, or 0.63%.
  • Our loan loss reserve as a percentage of total loans outstanding at June 30, 2011 was 1.36% compared to 1.48% at June 30, 2010 and 1.36% at March 31, 2011. The allowance-to-legacy loan ratio, which excludes acquired loans, was 1.42%, 1.48%, and 1.42%, respectively, at June 30, 2011, June 30, 2010, and March 31, 2011.
  • Noninterest income increased for the quarter ended June 30, 2011 compared to same period 2010 but decreased from prior quarter. Noninterest income for the six months ended June 30, 2011 increased $2.0 million from prior year. The increase from prior year was primarily attributable to increased deposit service charges and trust revenue, as well as the variance in the fair value adjustments of our mortgage servicing rights.
  • Our loan portfolio increased $139.3 million from prior year but decreased $5.6 million from prior quarter.
  • Our investment portfolio increased $104.2 million from prior year and $46.5 million during the quarter.
  • Deposits, including repurchase agreements, increased $239.0 million from prior year and $6.7 million from prior quarter.
  • The preceding balance sheet growth figures were impacted by the acquisition of First National Bank of LaFollette (“LaFollette”) in November 2010.
  • Our tangible common equity/tangible assets ratio remains strong at 8.35%.

Net Interest Income

CTBI saw a 12 basis point improvement in its net interest margin for the first six months of 2011 compared to prior year. Net interest income for the first six months of 2011 increased 11.6% from prior year. Our quarterly net interest margin increased 17 basis points from prior year but decreased 10 basis points from prior quarter. Net interest income for the second quarter 2011 increased 12.3% from prior year second quarter and 0.09% from prior quarter with average earning assets increasing 7.8% and 2.3%, respectively, for the same periods. The yield on average earning assets decreased 20 basis points from prior year second quarter and 17 basis points from prior quarter. The decline in yield on earning assets is the result of a change in our earning asset mix. Loans represented 80.7% of our average earning assets for the quarter ended June 30, 2011, compared to 82.1% and 82.9% for the quarters ended June 30, 2010 and March 31, 2011, respectively. As deposits, including repurchase agreements, have increased and loan growth has slowed, management has chosen to invest the excess liquidity in our investment portfolio resulting in increased net interest income while decreasing our net interest margin. The cost of interest bearing funds decreased 46 basis points and 9 basis points, respectively, for the same periods, primarily the result of the repricing of our CD products.

Noninterest Income

Noninterest income for the quarter ended June 30, 2011 increased 11.0% from prior year second quarter but decreased 1.3% from prior quarter. Noninterest income for the six months ended June 30, 2011 increased 10.6% from prior year. The increase from prior year was primarily attributable to increased deposit service charges and trust revenue, as well as the variance in the fair value adjustments of our mortgage servicing rights. Fair value adjustments to our mortgage servicing rights for the first six months of 2011 have totaled ($0.4 million) compared to ($1.0 million) for the first six months of 2010.

Noninterest Expense

Noninterest expense for the quarter increased 14.8% from prior year second quarter and 2.3% from prior quarter. Noninterest expense for the six months ended June 30, 2011 increased 14.0% from prior year primarily as a result of increased personnel expense, including health insurance; repossession expense; and other real estate owned expense, including adjustments to reflect declines in the values of foreclosed properties, as well as expected losses in investments in limited partnerships that were offset by tax credits.

Balance Sheet Review

CTBI’s total assets at $3.5 billion increased $275.4 million, or 8.6%, from the second quarter 2010 and $25.4 million, or an annualized 2.9%, during the quarter. Loans outstanding at June 30, 2011 were $2.6 billion, increasing $139.3 million, or 5.7%, year over year, but decreasing $5.6 million, or an annualized 0.9%, during the quarter. Loan growth during the quarter of $1.4 million and $1.5 million, respectively, in the residential and consumer loan portfolios was offset by an $8.5 million decline in the commercial loan portfolio. CTBI's investment portfolio increased $104.2 million, or 29.4%, from prior year second quarter and $46.5 million, or an annualized 45.2%, during the quarter. Deposits, including repurchase agreements, at $3.0 billion increased $239.0 million, or 8.7%, from June 30, 2010 and $6.7 million, or an annualized 0.9%, from prior quarter. The preceding growth figures were impacted by the acquisition of LaFollette in November 2010. At the time of acquisition, LaFollette had $183.6 million in assets, $118.6 million in loans, $29.8 million in investments, and $164.5 million in deposits.

Shareholders’ equity at June 30, 2011 was $352.3 million compared to $330.3 million at June 30, 2010 and $344.5 million at March 31, 2011. CTBI's annualized dividend yield to shareholders as of June 30, 2011 was 4.40%.

Asset Quality

CTBI's total nonperforming loans were $59.6 million at June 30, 2011, a $2.7 million decrease from the $62.3 million at June 30, 2010 but a $2.2 million increase from the $57.4 million at March 31, 2011. The increase for the quarter included an $8.4 million increase in the 90+ days past due category partially offset by a $6.2 million decline in nonaccrual loans. The increase in 90+ days past due loans is primarily attributable to one $7.4 million credit which management has evaluated for impairment and believes is adequately collateralized. Loans 30-89 days past due at $22.2 million is a decline of $1.5 million from prior year second quarter and $8.4 million from prior quarter. 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, at June 30, 2011 totaled $65.1 million, compared to $64.3 million at March 31, 2011. Included in certain loan categories of impaired loans are troubled debt restructurings that were classified as impaired. At June 30, 2011, CTBI had $12.1 million in commercial loans secured by real estate, $5.4 million in commercial real estate construction loans, $2.5 million in commercial other loans, and $0.3 million in consumer loans that were modified in troubled debt restructurings and impaired. Included in these amounts are troubled debt restructurings that were performing in accordance with their modified terms of $10.2 million in commercial loans secured by real estate, $1.0 million in commercial real estate construction loans, $1.6 million in commercial other loans, and $0.3 million in consumer loans. Management evaluates all impaired loans for impairment and provides specific reserves when necessary.

Our level of foreclosed properties at $46.7 million for the second quarter 2011 was an increase from the $40.1 million at June 30, 2010 but a decrease from the $47.7 million at prior quarter-end. Sales of foreclosed properties for the six months ended June 30, 2011 totaled $5.0 million while new foreclosed properties totaled $10.9 million. When foreclosed properties are acquired, appraisals are obtained and the properties are booked at the current market value less expected sales expense. Additionally, periodic updated appraisals are obtained on unsold foreclosed properties. When an updated appraisal reflects a market value below the current book value, a charge is booked to current earnings to reduce the property to its new market value less expected sales expense. During the second quarter of 2011, 59 properties totaling $18.5 million were reappraised. Charges to earnings to reflect the decrease in current market values of 29 of these foreclosed properties totaled $1.7 million, representing a 9.1% decline in the value of the properties reappraised. Charges during the quarters ended June 30, 2010 and March 31, 2011 were $0.1 million and $0.4 million, respectively. The year-to-date charges for the six months ended June 30, 2011 and 2010 were $2.1 million and $0.4 million, respectively. At June 30, 2011, 19 properties with a book value of $2.3 million were under contracts to sell; however, the closings had not occurred at quarter-end. The proceeds of these sales per the contracts is $2.5 million, representing 107% of the book value of those properties. Our policy for determining the frequency of periodic reviews is based upon consideration of the specific properties and the known or perceived market fluctuations in a particular market and is typically between 12 and 18 months. Seventy percent of our OREO properties have been reappraised within the past 12 months. Our nonperforming loans and foreclosed properties remain primarily concentrated in our Central Kentucky Region. Management anticipates that our foreclosed properties will remain elevated as we work through current market conditions.

Net loan charge-offs for the quarter were $3.3 million, or 0.52% of average loans annualized, an increase from prior year second quarter's $1.8 million, or 0.30%, but a decrease from prior quarter’s $4.0 million, or 0.63%. Of the total net charge-offs for the quarter, $2.2 million was in commercial loans, $0.5 million was in indirect auto loans, and $0.4 million was in residential real estate mortgage loans. Specific reserves had been previously established for 90.5% of the commercial loan charge-offs. Allocations to loan loss reserves were $3.3 million for the quarter ended June 30, 2011 compared to $3.1 million for the quarter ended June 30, 2010 and $4.4 million for the quarter ended March 31, 2011. Our loan loss reserve as a percentage of total loans outstanding at June 30, 2011 was 1.36% compared to 1.48% at June 30, 2010 and 1.36% at March 31, 2011. Generally accepted accounting principles require that expected credit losses associated with loans obtained in an acquisition be reflected in the estimation of loan fair value as of the acquisition date and prohibits any carryover of an allowance for credit losses. Excluding amounts related to loans obtained in the fourth quarter 2010 acquisition of LaFollette, the allowance-to-legacy loan ratio was 1.42%, 1.48%, and 1.42%, respectively, at June 30, 2011, June 30, 2010, and March 31, 2011.

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 $3.5 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 Tennessee, and four trust offices across Kentucky.

Additional information follows.
 
Community Trust Bancorp, Inc.
Financial Summary (Unaudited)
June 30, 2011
(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, 2011 March 31, 2011 June 30, 2010 June 30, 2011 June 30, 2010
Interest income $ 39,841 $ 39,860 $ 38,444 $ 79,701 $ 76,941
Interest expense   6,963     7,286     9,166     14,249     18,318  
Net interest income 32,878 32,574 29,278 65,452 58,623
Loan loss provision 3,320 4,387 3,106 7,707 8,828
 
Gains on sales of loans 347 381 337 728 779
Deposit service charges 6,438 5,880 5,949 12,318 11,246
Trust revenue 1,577 1,616 1,458 3,193 2,882
Loan related fees 476 883 46 1,359 886
Other noninterest income   1,755     1,978     1,752     3,733     3,490  
Total noninterest income 10,593 10,738 9,542 21,331 19,283
 
Personnel expense 12,717 12,084 11,632 24,801 23,077
Occupancy and equipment 2,838 2,965 2,701 5,803 5,425
FDIC insurance premiums 839 1,124 1,140 1,963 2,139
Amortization of core deposit intangible 54 53 159 107 318
Other noninterest expense   10,698     10,321     8,023     21,019     16,137  
Total noninterest expense   27,146     26,547     23,655     53,693     47,096  
 
Net income before taxes 13,005 12,378 12,059 25,383 21,982
Income taxes   4,035     3,074     3,506     7,109     6,638  
Net income $ 8,970   $ 9,304   $ 8,553   $ 18,274   $ 15,344  
 
Memo: TEQ interest income $ 40,221 $ 40,226 $ 38,780 $ 80,447 $ 77,618
 
Average shares outstanding 15,308 15,294 15,228 15,301 15,215
Diluted average shares outstanding 15,332 15,324 15,305 15,328 15,252
Basic earnings per share $ 0.59 $ 0.61 $ 0.56 $ 1.19 $ 1.01
Diluted earnings per share $ 0.58 $ 0.61 $ 0.56 $ 1.19 $ 1.01
Dividends per share $ 0.305 $ 0.305 $ 0.30 $ 0.61 $ 0.60
 
Average balances:
Loans $ 2,583,372 $ 2,594,746 $ 2,440,353 $ 2,589,028 $ 2,438,738
Earning assets 3,201,565 3,130,203 2,970,867 3,166,081 2,919,921
Total assets 3,486,728 3,406,604 3,222,645 3,446,887 3,172,502
Deposits 2,804,996 2,750,785 2,582,042 2,778,040 2,537,818
Interest bearing liabilities 2,533,223 2,491,141 2,349,394 2,512,298 2,311,937
Shareholders' equity 351,797 344,380 329,888 348,109 327,615
 
Performance ratios:
Return on average assets 1.03 % 1.11 % 1.06 % 1.07 % 0.98 %
Return on average equity 10.23 % 10.96 % 10.40 % 10.59 % 9.44 %
Yield on average earning assets (tax equivalent) 5.04 % 5.21 % 5.24 % 5.12 % 5.36 %
Cost of interest bearing funds (tax equivalent) 1.10 % 1.19 % 1.56 % 1.14 % 1.60 %
Net interest margin (tax equivalent) 4.17 % 4.27 % 4.00 % 4.22 % 4.10 %
Efficiency ratio (tax equivalent) 61.91 % 60.78 % 60.41 % 61.34 % 59.93 %
 
Loan charge-offs $ 4,066 $ 4,662 $ 2,617 $ 8,728 $ 6,933
Recoveries   (746 )   (622 )   (793 )   (1,368 )   (1,618 )
Net charge-offs $ 3,320 $ 4,040 $ 1,824 $ 7,360 $ 5,315
 
Market Price:
High $ 28.74 $ 30.35 $ 31.56 $ 30.35 $ 31.56
Low 26.00 27.03 24.89 26.00 22.15
Close 27.72 27.67 25.10 27.72 25.10
 
             

Community Trust Bancorp, Inc.

Financial Summary (Unaudited)

June 30, 2011
(in thousands except per share data and # of employees)
 
As of As of As of
June 30, 2011 March 31, 2011 June 30, 2010
Assets:
Loans $ 2,580,487 $ 2,586,048 $ 2,441,222
Loan loss reserve   (35,152 )   (35,152 )   (36,156 )
Net loans 2,545,335 2,550,896 2,405,066
Loans held for sale 621 952 1,466
Securities AFS 456,790 410,330 352,616
Securities HTM 1,662 1,662 1,662
Other equity investments 30,555 30,141 29,054
Other earning assets 121,402 146,042 122,728
Cash and due from banks 76,815 71,545 71,196
Premises and equipment 55,620 56,174 48,403
Goodwill and core deposit intangible 66,713 66,766 65,390
Other assets   129,161     124,763     111,711  
Total Assets $ 3,484,674   $ 3,459,271   $ 3,209,292  
 
Liabilities and Equity:
NOW accounts $ 23,408 $ 22,688 $ 18,553
Savings deposits 724,919 745,965 631,990
CD's >=$100,000 637,895 625,750 608,952
Other time deposits   827,261     834,288     816,731  
Total interest bearing deposits 2,213,483 2,228,691 2,076,226
Noninterest bearing deposits   567,638     563,544     494,901  
Total deposits 2,781,121 2,792,235 2,571,127
Repurchase agreements 212,266 194,472 183,287
Other interest bearing liabilities 96,435 97,685 89,865
Noninterest bearing liabilities   42,586     30,367     34,682  
Total liabilities 3,132,408 3,114,759 2,878,961
Shareholders' equity   352,266     344,512     330,331  
Total Liabilities and Equity $ 3,484,674   $ 3,459,271   $ 3,209,292  
 
Ending shares outstanding 15,405 15,395 15,290
Memo: Market value of HTM securities $ 1,662 $ 1,664 $ 1,662
 
30 - 89 days past due loans $ 22,167 $ 30,587 $ 23,677
90 days past due loans 26,758 18,387 16,857
Nonaccrual loans 32,845 39,002 45,435
Restructured loans (excluding 90 days past due and nonaccrual) 16,440 14,505 5,196
Foreclosed properties 46,791 47,667 40,105
Other repossessed assets 44 107 226
 
Tier 1 leverage ratio 9.89 % 9.97 % 10.12 %
Tier 1 risk based ratio 13.36 % 13.10 % 13.20 %
Total risk based ratio 14.62 % 14.35 % 14.46 %
Tangible equity to tangible assets ratio 8.35 % 8.19 % 8.43 %
FTE employees 1,034 1,019 992
 
 

Community Trust Bancorp, Inc.

Financial Summary (Unaudited)

June 30, 2011
(in thousands except per share data and # of employees)
 
 
Community Trust Bancorp, Inc. reported earnings for the three and six months ending June 30, 2011 and 2010 as follows:
 
    Three Months Ended   Six Months Ended
June 30 June 30
2011   2010 2011   2010
Net income $ 8,970 $ 8,553 $ 18,274 $ 15,344
 
Basic earnings per share $ 0.59 $ 0.56 $ 1.19 $ 1.01
 
Diluted earnings per share $ 0.58 $ 0.56 $ 1.19 $ 1.01
 
Average shares outstanding 15,308 15,228 15,301 15,215
 
Total assets (end of period) $ 3,484,674 $ 3,209,292
 
Return on average equity 10.23 % 10.40 % 10.59 % 9.44 %
 
Return on average assets 1.03 % 1.06 % 1.07 % 0.98 %
 
Provision for loan losses $ 3,320 $ 3,106 $ 7,707 $ 8,828
 
Gains on sales of loans $ 347 $ 337 $ 728 $ 779

Copyright Business Wire 2010

More from Press Releases

NFL Pushes for Regulation Following Supreme Court's Sports Gambling Ruling

NFL Pushes for Regulation Following Supreme Court's Sports Gambling Ruling

21st Century Fox Scoops Up Local News Stations

21st Century Fox Scoops Up Local News Stations

Walmart CEO: 'We Are Transforming Globally' With Flipkart

Walmart CEO: 'We Are Transforming Globally' With Flipkart

Three-Part FREE Webinar Series

Three-Part FREE Webinar Series

March 24 Full-Day Course Offering: Professional Approach to Trading SPX

March 24 Full-Day Course Offering: Professional Approach to Trading SPX