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Community Trust Bancorp, Inc. Reports Record Earnings for the Year 2019

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

Earnings Summary

 

 

 

 

 

(in thousands except per share data)

 

4Q

2019

 

3Q

2019

 

4Q

2018

 

Year

2019

 

Year

2018

Net income

 

$16,008

 

$15,269

 

$15,709

 

$64,540

 

$59,228

Earnings per share

 

$0.90

 

$0.86

 

$0.89

 

$3.64

 

$3.35

Earnings per share - diluted

 

$0.90

 

$0.86

 

$0.89

 

$3.64

 

$3.35

 

 

 

 

 

Return on average assets

 

1.46%

 

1.40%

 

1.48%

 

1.49%

 

1.41%

Return on average equity

 

10.35%

 

10.02%

 

11.16%

 

10.84%

 

10.83%

Efficiency ratio

 

58.88%

 

61.16%

 

58.04%

 

60.70%

 

60.17%

Tangible common equity

 

12.78%

 

12.64%

 

12.06%

 

 

 

 

 

 

 

Dividends declared per share

 

$0.38

 

$0.38

 

$0.36

 

$1.48

 

$1.38

Book value per share

 

$34.56

 

$34.06

 

$31.81

 

 

 

 

 

 

 

Weighted average shares

 

17,737

 

17,726

 

17,696

 

17,724

 

17,687

Weighted average shares - diluted

 

17,760

 

17,743

 

17,714

 

17,740

 

17,703

Community Trust Bancorp, Inc. (NASDAQ:CTBI) reports earnings for the fourth quarter 2019 of $16.0 million, or $0.90 per basic share, compared to $15.3 million, or $0.86 per basic share, earned during the third quarter 2019 and $15.7 million, or $0.89 per basic share, earned during the fourth quarter 2018. Earnings for the year ended December 31, 2019 were a record $64.5 million, or $3.64 per basic share, compared to $59.2 million, or $3.35 per basic share, earned during the year ended December 31, 2018. The increase in earnings year over year was impacted by a decrease in income tax expense, resulting from the 2019 changes in Kentucky tax law. In March and April of 2019, Kentucky enacted legislation requiring financial institutions to transition from a bank franchise tax to the Kentucky corporate income tax beginning in 2021 and provided guidance on combining returns with entities that have net operating loss carryforwards. As a result, in 2019, we recognized a state income tax benefit of $2.7 million, or $0.15 per basic share, to income tax expense to record our Kentucky deferred tax asset at December 31, 2019. While this deferred tax asset may be adjusted in 2020, we do not anticipate any further adjustments to have a significant impact to income.

4th Quarter 2019 Highlights

  • Net interest income for the quarter of $36.4 million was $0.2 million, or 0.4%, below prior quarter but $0.1 million, or 0.2%, above fourth quarter 2018.
  • Provision for loan losses for the quarter ended December 31, 2019 increased $0.6 million from prior quarter and $0.1 million from prior year same quarter.
  • Our loan portfolio increased $33.9 million, an annualized 4.2%, during the quarter and $40.0 million, or 1.2%, from December 31, 2018.
  • Net loan charge-offs for the quarter ended December 31, 2019 were $1.5 million, or 0.19% of average loans annualized, compared to $1.4 million, or 0.18%, experienced for the third quarter 2019 and $1.6 million, or 0.20%, for the fourth quarter 2018.
  • Nonperforming loans at $33.6 million increased $2.2 million from September 30, 2019 and $11.6 million from December 31, 2018. While the loans 90+ days past due category decreased $0.7 million, the nonaccrual loan category increased $2.9 million during the quarter. All categories increased from December 31, 2018. Nonperforming assets at $53.1 million increased $1.8 million from September 30, 2019 and $3.7 million from December 31, 2018.
  • Deposits, including repurchase agreements, increased $14.2 million, an annualized 1.6%, during the quarter and $93.8 million, or 2.7%, from December 31, 2018.
  • Noninterest income for the quarter ended December 31, 2019 of $13.4 million was a $1.0 million, or 7.9%, increase over prior quarter and an increase of $1.1 million, or 9.3%, from prior year same quarter.
  • Noninterest expense for the quarter ended December 31, 2019 of $29.3 million decreased $0.6 million, or 2.1%, from prior quarter, but increased $1.1 million, or 3.9%, from prior year same quarter.

Net Interest Income

Net interest income for the quarter of $36.4 million was a decrease of $0.2 million, or 0.4%, from third quarter 2019 but an increase of $0.1 million, or 0.2%, from fourth quarter 2018. Our net interest margin at 3.55% decreased 4 basis points from prior quarter and 13 basis points from prior year same quarter, while our average earning assets increased $15.9 million and $140.2 million, respectively, during those same periods. Our yield on average earning assets decreased 15 basis points from prior quarter and 12 basis points from prior year same quarter, and our cost of funds decreased 14 basis points from prior quarter but increased 4 basis points from prior year same quarter. Our ratio of average loans to deposits, including repurchase agreements, was 88.8% for the quarter ended December 31, 2019 compared to 88.1% for the quarter ended September 30, 2019 and 89.8% for the quarter ended December 31, 2018. Net interest income for the year ended December 31, 2019 increased $2.7 million, or 1.9%, from December 31, 2018, as our net interest margin declined 6 basis points and average earnings assets for the year increased $130.4 million.

Noninterest Income

Noninterest income for the quarter ended December 31, 2019 of $13.4 million was a $1.0 million, or 7.9%, increase over prior quarter and a $1.1 million, or 9.3%, increase from prior year same quarter. The increase from prior quarter consisted of increases in gains on sales of loans ($0.1 million), loan related fees ($0.5 million), securities gains ($0.2 million), and net gains on other real estate owned ($0.4 million), offset partially by the $0.2 million variance from the debt redemption gains received in prior quarter. The increase from prior year same quarter was also impacted by increases in gains on sales of loans ($0.2 million) and loan related fees ($0.5 million), as well as an increase in deposit service charges ($0.3 million). Noninterest income for the year ended December 31, 2019 was a $1.8 million, or 3.4%, decrease from prior year. The decrease in noninterest income from prior year resulted from decreases in trust revenue ($0.5 million), insurance commissions ($0.2 million), loan related fees ($1.0 million), net gains on other real estate owned ($0.6 million), and bank owned life insurance proceeds ($1.3 million). These declines were partially offset by increases in gains on sales of loans ($0.6 million), deposit service charges ($0.4 million), and securities gains ($0.9 million). The decrease in loan related fees is due to a decline in the fair market value of our mortgage servicing rights.

Noninterest Expense

Noninterest expense for the quarter ended December 31, 2019 of $29.3 million decreased $0.6 million, or 2.1%, from prior quarter, but increased $1.1 million, or 3.9%, from prior year same quarter. The decrease in noninterest expense from prior quarter was primarily impacted by a $1.3 million decline in net other real estate owned expense, partially offset by a $0.9 million increase in personnel expense. The increase in personnel expense was the result of increases in the cost of group medical and life insurance ($0.3 million) and bonuses and incentives ($0.6 million). The quarterly variance in bonuses and incentives was due to the third quarter 2019 tier adjustment to our performance-based bonus accrual. The increase in noninterest expense from prior year same quarter was the result of a $0.7 million increase in personnel expense, a $0.2 million increase in data processing expense, and a $0.2 million increase in net other real estate owned expense. Noninterest expense for the year ended December 31, 2019 was $118.3 million, a $0.9 million, or 0.7%, increase from prior year. The year over year increase included a $1.5 million increase in personnel expense, a $0.7 million increase in data processing expense, and a $1.2 million increase in net other real estate owned expense, offset partially by a $0.9 million decrease in FDIC insurance premiums, a $0.3 million decrease in occupancy expense, and a $0.2 million decrease in repossession expense.

Balance Sheet Review

CTBI’s total assets at $4.4 billion increased $28.3 million, or 2.6% annualized, from September 30, 2019 and $164.4 million, or 3.9%, from December 31, 2018. Loans outstanding at December 31, 2019 were $3.2 billion, an increase of $33.9 million, an annualized 4.2%, from September 30, 2019 and $40.0 million, or 1.2%, from December 31, 2018. We experienced increases during the quarter of $7.5 million in the commercial loan portfolio, $12.1 million in the residential loan portfolio, and $15.8 million in the indirect consumer loan portfolio, offset partially by a $1.5 million decrease in the direct consumer loan portfolio. CTBI’s investment portfolio decreased $49.9 million, or an annualized 30.4%, from September 30, 2019 but increased $6.7 million, or 1.3%, from December 31, 2018. The decrease during the quarter was the result of late quarter maturities that will be reinvested in the first quarter 2020. Deposits in other banks increased $52.7 million from prior quarter and $126.6 million from prior year same quarter. Deposits, including repurchase agreements, at $3.6 billion increased $14.2 million, or an annualized 1.6%, from September 30, 2019 and $93.8 million, or 2.7%, from December 31, 2018.

Shareholders’ equity at December 31, 2019 was $614.9 million, a 6.1% annualized increase from the $605.5 million at September 30, 2019 and a 9.0% increase from the $564.1 million at December 31, 2018. CTBI’s annualized dividend yield to shareholders as of December 31, 2019 was 3.26%.

Asset Quality

CTBI’s total nonperforming loans, not including performing troubled debt restructurings, were $33.6 million, or 1.03% of total loans, at December 31, 2019 compared to $31.4 million, or 0.98% of total loans, at September 30, 2019 and $22.1 million, or 0.69% of total loans, at December 31, 2018. Accruing loans 90+ days past due decreased $0.7 million from prior quarter but increased $9.4 million from December 31, 2018. Nonaccrual loans increased $2.9 million during the quarter and $2.1 million from December 31, 2018. Accruing loans 30-89 days past due at $22.9 million remained flat to prior quarter, but was an increase of $0.3 million from December 31, 2018. CTBI is currently working with three of our customers with total loans outstanding of approximately $11.2 million as they work their way through financial difficulties. While we do not expect significant losses in these credits, we expect it may take some time before these issues are resolved and as a result our total level of past dues may remain elevated for several quarters. 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, 2019 totaled $57.8 million, compared to $56.3 million at September 30, 2019 and $46.4 million at December 31, 2018.

Our level of foreclosed properties at $19.5 million at December 31, 2019 was a $0.3 million decrease from the $19.8 million at September 30, 2019 and a $7.8 million decrease from the $27.3 million at December 31, 2018. Sales of foreclosed properties for the quarter ended December 31, 2019 totaled $0.9 million while new foreclosed properties totaled $1.5 million. At December 31, 2019, the book value of properties under contracts to sell was $3.1 million; however, the closings had not occurred at quarter-end. Write-downs on foreclosed properties for the fourth quarter 2019 totaled $0.9 million compared to $2.2 million in the third quarter 2019 and $0.5 million in the fourth quarter 2018. As disclosed in our Form 10-K for the year ended December 31, 2018, CTBI is required to dispose of any foreclosed property that has not been sold within 10 years. As of December 31, 2018, foreclosed property with a total book value of $2.4 million had been held by us for at least nine years. During the first nine months of 2019, we disposed of all of these properties at a loss of $0.9 million. At December 31, 2019, we held no foreclosed property for nine years or more.

Net loan charge-offs for the quarter ended December 31, 2019 were $1.5 million, or 0.19% of average loans annualized, compared to $1.4 million, or 0.18%, experienced for the third quarter 2019 and $1.6 million, or 0.20%, for the fourth quarter 2018. Of the net charge-offs for the quarter, $0.5 million were in commercial loans, $0.7 million were in indirect consumer loans, $0.1 million were in residential loans, and $0.2 million were in direct consumer loans. Allocations to loan loss reserves were $1.8 million for the quarter ended December 31, 2019 compared to $1.3 million for the quarter ended September 30, 2019 and $1.7 million for the quarter ended December 31, 2018. Our reserve coverage (allowance for loan and lease loss reserve to nonperforming loans) at December 31, 2019 was 104.4% compared to 110.8% at September 30, 2019 and 162.7% at December 31, 2018. Our loan loss reserve as a percentage of total loans outstanding at December 31, 2019 remained at 1.08% from September 30, 2019, down from 1.12% at December 31, 2018.

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 $4.4 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, three 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, 2019

(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, 2019

September 30, 2019

December 31, 2018

December 31, 2019

December 31, 2018

Interest income

$

45,705

$

46,987

$

45,238

$

185,398

$

171,450

Interest expense

9,349

10,468

8,958

40,513

29,295

Net interest income

36,356

36,519

36,280

144,885

142,155

Loan loss provision

1,813

1,253

1,749

4,819

6,167

 
Gains on sales of loans

582

450

386

1,880

1,288

Deposit service charges

6,855

6,859

6,602

26,359

25,974

Trust revenue

2,739

2,725

2,663

10,804

11,313

Loan related fees

1,107

622

644

2,742

3,729

Securities gains (losses)

209

14

203

783

(85)

Other noninterest income

1,881

1,719

1,741

7,616

9,733

Total noninterest income

13,373

12,389

12,239

50,184

51,952

 
Personnel expense

15,961

15,020

15,257

63,027

61,562

Occupancy and equipment

2,687

2,807

2,698

10,845

11,045

Data processing expense

1,878

1,987

1,715

7,417

6,680

FDIC insurance premiums

0

(280)

264

266

1,171

Other noninterest expense

8,737

10,348

8,238

36,703

36,940

Total noninterest expense

29,263

29,882

28,172

118,258

117,398

 
Net income before taxes

18,653

17,773

18,598

71,992

70,542

Income taxes

2,645

2,504

2,889

7,452

11,314

Net income

$

16,008

$

15,269

$

15,709

$

64,540

$

59,228

 
Memo: TEQ interest income

$

45,881

$

47,170

$

45,462

$

186,169

$

172,352

 
Average shares outstanding

17,737

17,726

17,696

17,724

17,687

Diluted average shares outstanding

17,760

17,743

17,714

17,740

17,703

Basic earnings per share

$

0.90

$

0.86

$

0.89

$

3.64

$

3.35

Diluted earnings per share

$

0.90

$

0.86

$

0.89

$

3.64

$

3.35

Dividends per share

$

0.38

$

0.38

$

0.36

$

1.48

$

1.38

 
Average balances:
Loans

$

3,219,762

$

3,188,446

$

3,191,980

$

3,195,662

$

3,150,878

Earning assets

4,077,277

4,061,410

3,937,106

4,043,975

3,913,596

Total assets

4,362,271

4,341,985

4,217,158

4,328,024

4,187,397

Deposits, including repurchase agreements

3,627,825

3,617,671

3,555,292

3,610,589

3,540,717

Interest bearing liabilities

2,839,295

2,857,468

2,794,216

2,848,670

2,796,092

Shareholders' equity

613,728

604,271

558,632

595,337

546,641

 
Performance ratios:
Return on average assets

1.46%

1.40%

1.48%

1.49%

1.41%

Return on average equity

10.35%

10.02%

11.16%

10.84%

10.83%

Yield on average earning assets (tax equivalent)

4.46%

4.61%

4.58%

4.60%

4.40%

Cost of interest bearing funds (tax equivalent)

1.31%

1.45%

1.27%

1.42%

1.05%

Net interest margin (tax equivalent)

3.55%

3.59%

3.68%

3.60%

3.66%

Efficiency ratio (tax equivalent)

58.88%

61.16%

58.04%

60.70%

60.17%

 
Loan charge-offs

$

2,568

$

2,316

$

2,667

$

9,736

$

10,998

Recoveries

(1,040)

(876)

(1,035)

(4,105)

(4,588)

Net charge-offs

$

1,528

$

1,440

$

1,632

$

5,631

$

6,410

 
Market Price:
High

$

47.54

$

44.22

$

46.86

$

47.54

$

53.00

Low

$

40.88

$

38.05

$

35.70

$

38.03

$

35.70

Close

$

46.64

$

42.58

$

39.61

$

46.64

$

39.61

 

As of

As of

As of

December 31, 2019

September 30, 2019

December 31, 2018

Assets:
Loans

$

3,248,664

$

3,214,785

$

3,208,638

Loan loss reserve

(35,096)

(34,811)

(35,908)

Net loans

3,213,568

3,179,974

3,172,730

Loans held for sale

1,167

1,943

2,461

Securities AFS

599,844

649,976

593,746

Securities HTM

517

517

649

Equity securities at fair value

1,953

1,743

1,173

Other equity investments

15,361

15,681

19,600

Other earning assets

208,094

155,441

82,585

Cash and due from banks

58,680

68,472

64,632

Premises and equipment

44,046

44,223

45,291

Right of use asset

14,550

14,702

-

Goodwill and core deposit intangible

65,490

65,490

65,490

Other assets

142,733

139,501

153,259

Total Assets

$

4,366,003

$

4,337,663

$

4,201,616

 
Liabilities and Equity:
NOW accounts

$

51,179

$

54,365

$

56,964

Savings deposits

1,389,473

1,385,188

1,294,037

CD's >=$100,000

541,638

533,019

555,822

Other time deposits

557,523

567,401

595,811

Total interest bearing deposits

2,539,812

2,539,973

2,502,634

Noninterest bearing deposits

865,760

849,582

803,316

Total deposits

3,405,572

3,389,555

3,305,950

Repurchase agreements

226,917

228,755

232,712

Other interest bearing liabilities

66,162

64,162

60,957

Lease liability

15,185

15,286

-

Other noninterest bearing liabilities

37,281

34,387

37,847

Total liabilities

3,751,117

3,732,145

3,637,466

Shareholders' equity

614,886

605,518

564,150

Total Liabilities and Equity

$

4,366,003

$

4,337,663

$

4,201,616

 
Ending shares outstanding

17,793

17,777

17,733

Memo: Market value of HTM securities

$

517

$

517

$

649

 
30 - 89 days past due loans

$

22,945

$

22,927

$

22,682

90 days past due loans

19,620

20,330

10,198

Nonaccrual loans

13,999

11,090

11,867

Restructured loans (excluding 90 days past due and nonaccrual)

60,462

60,413

56,328

Foreclosed properties

19,480

19,833

27,273

Other repossessed assets

0

0

42

 
Common equity Tier 1 capital

17.18%

17.03%

16.27%

Tier 1 leverage ratio

14.01%

13.84%

13.51%

Tier 1 risk-based capital ratio

18.94%

18.82%

18.12%

Total risk based capital ratio

20.05%

19.93%

19.29%

Tangible equity to tangible assets ratio

12.78%

12.64%

12.06%

FTE employees

1,000

1,001

978

Contacts:

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

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