PIKEVILLE, Ky.–(July 16,2014)– Community Trust Bancorp Inc. (NASDAQ:CTBI), the parent of Community Trust Bank, reports earnings for the second quarter 2014 of $12.2 million, or $0.70 per basic share, compared to $11.9 million, or $0.70 per basic share, earned during the second quarter 2013 and $10.1 million, or $0.59 per basic share, earned during the first quarter 2014.
The increased net income for the quarter was primarily due to decreases in loan loss provision and noninterest expense with lower net other real estate owned expense and fewer operating losses. Year-to-date earnings for the six months ended June 30, 2014, were $22.3 million, or $1.29 per basic share, compared to $23.8 million, or $1.39 per basic share earned during the first six months of 2013. The variance from prior year is due to decreased net interest income and noninterest income, partially offset by decreases in our provision for loan losses and noninterest expense.
On June 2, 2014, CTBI distributed a 10 percent stock dividend to shareholders of record on May 15, 2014. All share data has been restated accordingly.
2nd Quarter 2014 Highlights
CTBI’s basic earnings per share for the quarter was flat to prior year second quarter but increased $0.11 from first quarter 2014. Year-to-date basic earnings per share decreased $0.10 from prior year.
Net interest income for the quarter decreased 1.5 percent from prior year second quarter but increased 0.2 percent from prior quarter as our net interest margin decreased 7 basis points and 5 basis points, respectively, for those time periods. Average earning assets increased 0.6 percent from second quarter 2013 and 0.7 percent from prior quarter while our yield on average earning assets decreased 14 basis points and 6 basis points, respectively. The yield on all earning asset portfolios declined quarter over quarter, while the cost of interest bearing funds remained stable. Net interest income for the six months ended June 30, 2014, decreased 1.4 percent from prior year.
Nonperforming loans at $44.5 million increased $3.0 million from June 30, 2013, and $2.1 million from March 31, 2014, primarily due to one credit relationship that management reviewed and considers to be well secured and in the process of collection. Nonperforming assets at $77.6 million decreased $7.1 million from June 30, 2013, and $1.1 million from March 31, 2014.
Net loan charge-offs for the quarter endedJune 30, 2014 were $0.7 million, or 0.11 percent of average loans annualized, compared to $3.5 million, or 0.54 percent, experienced for the second quarter 2013 and $1.7 million, or 0.27 percent, for the first quarter 2014. Year-to-date net charge-offs declined from 0.38 percent of average loans to 0.19 percent.
Community Trust’s loan loss provision for the quarter decreased $2.9 million from prior year second quarter and $0.6 million from prior quarter. Year-to-date provision decreased $3.1 million. The decline in the loan loss provision was primarily due to the trend of decreasing net losses to average loans resulting in a 2 basis point reduction in the allowance for loan and lease losses.
The reduction in the allowance for loan and lease losses impacted second quarter 2014 earnings per basic share by $0.02.
Noninterest income decreased 17.3 percent for the quarter ended June 30, 2014, compared to the same period in 2013 but increased 9.0 percent from prior quarter. Noninterest income for the first six months of 2014 decreased 16.5 percent from prior year. The decrease from prior year was primarily attributable to decreases in gains on sales of loans, deposit service charges, loan related fees resulting from the fluctuation in the fair value of our mortgage servicing rights, and other noninterest income due to the prior year death benefits received in bank owned life insurance.
The bank’s loan portfolio increased $47.8 million from June 30, 2013 and $47.1 million during the quarter.
Its investment portfolio decreased $39.8 million from June 30, 2013 and $2.6 million during the quarter.
Deposits, including repurchase agreements, declined $21.7 million from June 30, 2013 and $36.7 million during the quarter. During the second quarter 2014, substantially all decline was in interest-bearing deposits. Year over year interest bearing deposits, including repurchase agreements, declined $48.9 million while noninterest bearing deposits increased $27.1 million.
Our tangible common equity/tangible assets ratio increased to 10.26 percent.
Balance Sheet Review
CTBI’s total assets at $3.7 billion increased $14.4 million, or 0.4 percent, from June 30, 2013, but decreased $16.0 million, or an annualized 1.7 percent, during the quarter. Loans outstanding at June 30, 2014 were $2.6 billion, increasing $47.8 million, or 1.8 percent, from June 30, 2013 and $47.1 million, or an annualized 7.3 percent, during the quarter. Community Trust Bank experienced growth during the quarter of $36.8 million in the commercial loan portfolio, $6.9 million in the residential loan portfolio, and $3.4 million in the consumer loan portfolio. CTBI’s investment portfolio decreased $39.8 million, or 5.8 percent, from June 30, 2013 and $2.6 million, or an annualized 1.6 percent, during the quarter. Deposits in other banks decreased $62.9 million during the quarter to fund loan growth. Deposits, including repurchase agreements, at $3.1 billion decreased $21.7 million, or 0.7 percent, from June 30, 2013 and $36.7 million, or an annualized 4.7 percent, from prior quarter.
Shareholders’ equity at June 30, 2014 was $433.9 million compared to $400.3 million at June 30, 2013 and $422.0 million at March 31, 2014. CTBI’s annualized dividend yield to shareholders as of June 30, 2014 was 3.39 percent.
Asset Quality
CTBI’s total nonperforming loans were $44.5 million at June 30, 2014, a 7.1 percent increase from the $41.6 million at June 30, 2013 and a 5.0 percent increase from the $42.4 million at March 31, 2014. Loans 90+ days past due increased $3.3 million for the quarter, partially offset by a $1.2 million decrease in nonaccrual loans. The increase in loans 90+ days past due was primarily the result of one credit relationship totaling $2.6 million. Loans in the 90+ days past due category are reviewed by management and are considered to be well secured and in the process of collection; therefore, these loans require no specific reserves to the allowance for loan and lease losses.
Loans 30-89 days past due at $21.5 million was an increase of $5.0 million from June 30, 2013 but a decrease of $2.1 million from March 31, 2014. 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, 2014 totaled $66.2 million, compared to $63.4 million at June 30, 2013 and $65.3 million at March 31, 2014.
CTBI continues to experience improvement in other real estate owned. The level of foreclosed properties at $33.1 million at June 30, 2014, was a decrease from $43.1 million at June 30, 2013 and $36.3 million at March 31, 2014. Sales of foreclosed properties for the quarter ended June 30, 2014, totaled $5.1 million while new foreclosed properties totaled $2.2 million. At June 30, 2014, the book value of properties under contracts to sell was $2.6 million; however, the closings had not occurred at quarter-end.
Net loan charge-offs for the quarter ended June 30, 2014 were $0.7 million, or 0.11 percent of average loans annualized, compared to $3.5 million, or 0.54 percent, experienced for the second quarter 2013 and $1.7 million, or 0.27 percent, for the first quarter 2014. Of the total net charge-offs for the quarter, $0.1 million were in commercial loans, $0.2 million were in indirect auto loans, and $0.2 million were in residential real estate mortgage loans. Year-to-date net charge-offs declined from 0.38 percent of average loans to 0.19 percent. Allocations to loan loss reserves were $0.7 million for the quarter ended June 30, 2014 compared to $3.7 million for the quarter ended June 30, 2013 and $1.3 million for the quarter ended March 31, 2014.
Community Trust Bancorp, with assets of $3.7 billion, is headquartered in Pikeville, Ky., and has 71 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.
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