PIKEVILLE, Ky. (April 18, 2012) — Community Trust Bancorp, Inc. (NASDAQ-CTBI) reported record earnings of $11.9 million, or $0.77 per basic share, compared to $9.3 million, or $0.61 per basic share, earned during the first quarter 2011 and $9.9 million, or $0.64 per basic share, earned during the fourth quarter 2011.
First Quarter 2012 highlights
• CTBI’s basic earnings per share for the quarter increased $0.16 per share from first quarter 2011 and were $0.13 per share above fourth quarter 2011. The increase in earnings was supported by increased net interest income and decreased provision for loan loss and noninterest expense. Noninterest income increased from prior year first quarter, but decreased from prior quarter.
• Net interest income increased $0.4 million from prior year first quarter as average earning assets increased 6.1 percent. Because of increased liquidity and changes in earning asset mix, CTBI’s quarterly net interest margin of 4.05 percent was a decrease from 4.27 percent for the quarter ended March 31, 2011; however, the margin improved 7 basis points from prior quarter.
• Non-performing loans at $34.6 million decreased from $57.4 million at March 31, 2011, and $37.3 million at December 31, 2011. Nonperforming assets at $93.2 million decreased $11.9 million from prior year and $0.6 million from prior quarter.
• Net loan charge-offs for the quarter ended March 31, 2012, were $1.2 million, or 0.18 percent of average loans annualized, compared to $4.0 million, or 0.63 percent, experienced for the first quarter 2011 and prior quarter’s $4.9 million, or 0.75 percent.
• Loan loss provision for the quarter decreased $3.2 million from prior year first quarter and $1.9 million from prior quarter as net charge-offs declined $2.9 million and $3.7 million, respectively, for the same periods, while the loan portfolio decreased $43.9 million from prior year and $14.4 million from prior quarter.
• The loan loss reserve as a percentage of total loans outstanding remained at 1.30 percent from December 31, 2011, to March 31, 2012, a decrease from the 1.36% at March 31, 2011. The reserve coverage (allowance for loan loss reserve to non-performing loans) continued to improve to 95.9 percent at March 31, 2012, compared to 61.3 percent at March 31, 2011, and 89.0 percent at December 31, 2011. Several of the matrices and factors utilized in evaluating the adequacy of the loan loss reserve also continued to show significant improvement, including the level of past dues and nonperforming loans.
• Non-interest income increased 4.2 percent for the quarter ended March 31, 2012, compared to the same period in 2011 with increases in gains on sales of loans and loan related fees but decreased 3.2 percent compared to prior quarter as these increases were offset by a decline in deposit service charges.
• Non-interest expense for the quarter ended March 31, 2012, decreased 3.0 percent from prior year first quarter and 4.2 percent from prior quarter.
• The investment portfolio increased $203.6 million from prior year and $86.6 million during the quarter.
• Deposits, including repurchase agreements, increased $186.1 million from prior year and $77.3 million from prior quarter.
• Tangible common equity/tangible assets ratio remains strong at 8.55 percent.
Net interest income
Net interest income for the quarter increased 1.3 percent from prior year and 0.3 percent from prior quarter with average earning assets increasing 6.1 percent from prior year and remaining relatively flat to prior quarter. CTBI experienced a 22 basis point decline in its net interest margin for the first quarter 2012 compared to prior year but increased 7 basis points from prior quarter. The yield on average earning assets decreased 45 basis points from prior year first quarter but increased 4 basis points from prior quarter. The decline in yield on earning assets from prior year is the result of a change in earning asset mix with an increase in the investment portfolio as loan demand remains tepid. Loans represented 77.1 percent of the average earning assets for the quarter ended March 31, 2012, compared to 82.9 percent for the quarter ended March 31, 2011. The cost of interest bearing funds decreased 29 basis points from prior year first quarter and 4 basis points from prior quarter.
Non-interest income
Noninterest income for the quarter ended March 31, 2012, increased 4.2 percent from prior year first quarter, but decreased 3.2 percent from prior quarter. Gains on sales of loans increased $0.2 million from March 31, 2011, and loan related fees increased $0.4 million because of the variance in the fair value adjustments of the mortgage servicing rights. Increases in gains on sales of loans and loan related fees from December 31, 2011, were offset by a decline in deposit service charges of $0.7 million.
Non-interest expense
Non-interest expense decreased 3.0 percent for the first quarter 2012 compared to first quarter 2011 primarily because of the $0.5 million impact of expected losses in investments in limited partnerships that were offset by tax credits during 2011, as well as decreases in FDIC insurance premiums, legal and professional fees, and repossession expense. Non-interest expense decreased 4.2 percent from prior quarter as other real estate owned expense decreased $3.3 million compared to the quarter ended December 31, 2011, partially offset by increased personnel costs. During the fourth quarter of 2011, other real estate owned expense was impacted by the write down to fair value of two properties that had been vandalized. CTBI expects the insurance claims relative to these vandalisms to be resolved during the second quarter 2012 with no significant recoveries.
Balance sheet review
CTBI’s total assets at $3.7 billion increased $214.7 million, or 6.2 percent, from March 31, 2011, and $82.8 million, or an annualized 9.3 percent, during the quarter. Loans outstanding at March 31, 2012 were $2.5 billion, decreasing $43.9 million, or 1.7 percent, from March 31, 2011, and $14.4 million, or an annualized 2.3 percent, during the quarter. Loan growth during the quarter of $7.5 million in the commercial loan portfolio was offset by declines of $4.1 million in the residential loan portfolio and $17.8 million in the consumer loan portfolio. CTBI’s investment portfolio increased $203.6 million, or 49.4 percent, from March 31, 2011, and $86.6 million, or an annualized 65.8 percent, during the quarter. Deposits, including repurchase agreements, at $3.2 billion increased $186.1 million, or 6.2 percent, from March 31, 2011, and $77.3 million, or an annualized 10 percent, from prior quarter.
Shareholders’ equity at March 31, 2012, was $375 million compared to $344.5 million at March 31, 2011, and $366.9 million at December 31, 2011. CTBI’s annualized dividend yield to shareholders as of March 31, 2012, was 3.87 percent.
Asset quality
CTBI’s total nonperforming loans were $34.6 million at March 31, 2012, a 39.7 percent decrease from the $57.4 million at March 31, 2011, and a 7.2 percent decrease from the $37.3 million at December 31, 2011. The decrease for the quarter included a $4.0 million decrease in non-accrual loans partially offset by a $1.3 million increase in the 90+ days past due category. Loans 30-89 days past due at $19.4 million is a decline of $11.2 million from March 31, 2011, and a $2.3 million decline from prior quarter. The 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, 2012 totaled $51.9 million, compared to $64.3 million at March 31, 2011, and $47.4 million at December 31, 2011.
The level of foreclosed properties at $58.6 million at March 31, 2012, was an increase from $47.7 million at March 31, 2011, and $56.5 million at December 31, 2011. Sales of foreclosed properties for the quarter ended March 31, 2012, totaled $3.1 million while new foreclosed properties totaled $5.4 million. At March 31, 2012, the book value of properties under contracts to sell was $5 million; however, the closings had not occurred at quarter-end. The proceeds of these sales per the contracts is $5.4 million, representing 108 percent of the book value of those properties.
Net loan charge-offs for the quarter were $1.2 million, or 0.18 percent of average loans annualized, a decrease from prior year first quarter’s $4 million, or 0.63 percent, and prior quarter’s $4.9 million, or 0.75 percent. Of the total net charge-offs for the quarter, $0.4 million were in commercial loans, $0.4 million were in indirect auto loans, and $0.3 million were in residential real estate mortgage loans. Allocations to loan loss reserves were $1.2 million for the quarter ended March 31, 2012, compared to $4.4 million for the quarter ended March 31, 2011, and $3 million for the quarter ended December 31, 2011. Loan loss reserve as a percentage of total loans outstanding was 1.30 percent at March 31, 2012, compared to 1.36 percent at March 31, 2011, and 1.30 percent at December 31, 2011. Reserve coverage continued to improve to 95.9 percent at March 31, 2012. Several of the matrices and factors utilized in evaluating the adequacy of the loan loss reserve also continued to show significant improvement, including the level of past dues and non-performing loans. 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 1.35 percent, 1.42 percent, and 1.34 percent, respectively, at March 31, 2012, March 31, 2011, and December 31, 2011.
Community Trust Bancorp, Inc., with assets of $3.7 billion, is headquartered in Pikeville, Ky., 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.
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