PIKEVILLE, Ky. (Jan. 18, 2012) BUSINESS WIRE — Community Trust Bancorp, Inc. (NASDAQ:CTBI) reports earnings of $9.9 million, or $0.64 per basic share, compared to $9.2 million, or $0.61 per basic share, earned during the fourth quarter of 2010 and $10.7 million, or $0.70 per basic share, earned during the third quarter 2011. Earnings for the year ended December 31, 2011 increased 17.5% to $38.8 million, or $2.54 per basic share, from the $33.0 million, or $2.17 per basic share, earned during the year ended December 31, 2010.
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Fourth Quarter and Year 2011 Highlights
CTBI’s basic earnings per share for the quarter increased $0.03 per share from fourth quarter 2010 but were $0.06 per share below third quarter 2011. Earnings per share for the year 2011 increased $0.37 per share from prior year with increased net interest income and noninterest income and decreased provision for loan loss partially offset by increased noninterest expense.
Noninterest expense was significantly impacted by a $3.2 million decrease in the carrying value of two groups of foreclosed properties that were vandalized. Claims have been filed with the insurance carriers and discussions are ongoing. Since no agreement has been reached, the amount of recovery is uncertain. Accordingly, the entire decrease in the carrying value of the properties has been charged against earnings and no estimate of insurance recovery is reflected at December 31, 2011.
Due to increased liquidity and changes in earning asset mix, CTBI’s quarterly net interest margin of 3.98% was a decrease from 4.15% for the quarter ended December 31, 2010 and 4.11% for prior quarter. Net interest margin for the year 2011 of 4.13% was a 6 basis point increase from prior year.
Nonperforming loans at $37.3 million decreased from the $62.0 million at December 31, 2010 and the $37.5 million at September 30, 2011. Nonperforming assets at $93.9 million decreased $11.2 million from prior year and $1.7 million from prior quarter.
Our loan loss provision for the quarter decreased $0.9 million from prior year fourth quarter but increased $0.5 million from prior quarter. Loan loss provision for the year 2011 was $3.2 million below 2010.
Net loan charge-offs for the quarter ended December 31, 2011 of $4.9 million, or 0.75% of average loans annualized, was an increase from the $3.4 million, or 0.54%, experienced for the fourth quarter 2010 and from prior quarter’s $2.7 million, or 0.41%.
Our loan loss reserve as a percentage of total loans outstanding at December 31, 2011 decreased to 1.30% compared to 1.34% at December 31, 2010 and 1.36% at September 30, 2011. Our reserve coverage (allowance for loan loss reserve to nonperforming loans) of 93.3% at September 30, 2011 began to show improvement from the 59.0% and 56.1% at June 30, 2011 and December 31, 2010, respectively. Our December 31, 2011 reserve coverage of 89.0% evidenced two consecutive quarters of continued improvement. Several of the matrices and factors utilized in evaluating the adequacy of our loan loss reserve also show significant improvement, including level of past dues, nonperforming loans, and nonaccrual loans, and after two consecutive quarters of continued improvement, we determined that our loan loss reserve of 1.30% was adequate.
The allowance-to-legacy loan ratio, which excludes acquired loans, was 1.34%, 1.40%, and 1.41%, respectively, at December 31, 2011, December 31, 2010, and September 30, 2011.
Noninterest income increased 4.6% for the quarter ended December 31, 2011 compared to same period 2010 and 5.6% compared to prior quarter. Noninterest income for the year ended December 31, 2011 increased 7.1% from prior year, primarily due to increased gains on sales of loans, deposit service charges, and trust revenue.
Our loan portfolio decreased $48.6 million from prior year and $17.0 million from prior quarter.
Our investment portfolio increased $188.7 million from prior year and $63.8 million during the quarter.
Deposits, including repurchase agreements, increased $201.1 million from prior year and $57.7 million from prior quarter.
Our tangible common equity/tangible assets ratio remains strong at 8.52%.
Net Interest Income
CTBI experienced a 6 basis point improvement in its net interest margin for the year 2011 compared to prior year. Net interest income for the year increased 10.2% from prior year. Our quarterly net interest margin, however, decreased 17 basis points from prior year and 13 basis points from prior quarter. Net interest income for the fourth quarter 2011 increased 5.3% from prior year fourth quarter but decreased 0.6% from prior quarter with average earning assets increasing 9.8% and 2.7%, respectively, for the same periods. The yield on average earning assets decreased 47 basis points from prior year fourth quarter and 20 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 77.3% of our average earning assets for the quarter ended December 31, 2011, compared to 83.5% and 79.7% for the quarters ended December 31, 2010 and September 30, 2011, respectively. As deposits, including repurchase agreements, have increased and loan demand 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 39 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 December 31, 2011 increased 4.6% from prior year fourth quarter and 5.6% from prior quarter. Noninterest income for the year ended December 31, 2011 increased 7.1% from prior year. The year over year increase was primarily attributable to increased gains on sales of loans, deposit service charges, and trust revenue partially offset by decreased loan related fees.
Noninterest Expense
Noninterest expense for the quarter increased 7.7% from prior year fourth quarter and 4.0% from prior quarter. The quarter over quarter increase from December 31, 2010 is primarily a result of increased other real estate owned expense partially offset by declines in personnel expense, due to the reversal of a performance based incentive, and FDIC insurance premiums, due to a change in the assessment base. Noninterest expense for the year ended December 31, 2011 increased 10.8% 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. Other real estate owned expense during the quarter of $3.6 million was significantly impacted by a $3.2 million decrease in the carrying value of two groups of foreclosed properties that were vandalized. Claims have been filed with the insurance carriers, and discussions are ongoing. Since no agreement has been reached, the amount of recovery is uncertain. Accordingly, the entire decrease in the carrying value of the properties has been charged against earnings and no estimate of insurance recovery is reflected at December 31, 2011.
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