FOR ADDITIONAL INFORMATION, PLEASE CONTACT JEAN R. HALE, CHAIRMAN, PRESIDENT, AND C.E.O., COMMUNITY TRUST BANCORP, INC. AT (606) 437-3294
COMMUNITY TRUST BANCORP, INC. REPORTS RECORD EARNINGS FOR THE FOURTH QUARTER AND YEAR 2017
Net Interest Income
Net interest income for the quarter of $35.1 million was an increase of $0.1 million, or 0.4%, from third quarter 2017 and $1.7 million, or 5.1%, from prior year fourth quarter. Our net interest margin at 3.65% was down two basis points from prior quarter and one basis point from prior year same quarter, while our average earning assets increased $31.0 million and $178.6 million, respectively, during those same periods. Our yield on average earning assets increased 5 basis points from prior quarter and 18 basis points from prior year same quarter, and our cost of funds increased 10 basis points from prior quarter and 26 basis points from prior year same quarter. Our ratio of average loans to deposits, including repurchase agreements, was 89.1% for the quarter ended December 31, 2017 compared to 91.1% for the quarter ended September 30, 2017 and 87.9% for the quarter ended December 31, 2016. Net interest income for the year ended December 31, 2017 increased $4.4 million, or 3.3%, from December 31, 2016.
Noninterest Income
Noninterest income for the quarter ended December 31, 2017 of $12.4 million was an increase of $0.2 million, or 1.8%, from prior quarter but a decrease of $0.1 million, or 0.8%, from prior year same quarter. The increase from prior quarter consisted of a $0.3 million increase in loan related fees, as a result of fluctuations in the valuation of our mortgage servicing rights, and a $0.1 million increase in trust revenue. These increases were partially offset by a $0.1 million decrease in net gains on other real estate owned. The decrease from prior year same quarter consisted of a $0.4 million decrease in loan related fees, partially offset by a $0.2 million increase in trust revenue. Noninterest income for the year ended December 31, 2017 of $48.5 million was a $0.1 million, or 0.1% increase, from the year ended December 31, 2016.
Noninterest Expense
Noninterest expense for the quarter ended December 31, 2017 of $27.7 million increased $0.8 million, or 3.0%, from prior quarter, and $0.7 million, or 2.7%, from prior year same quarter. The increase in noninterest expense was due to increased personnel expense of $1.7 million from prior quarter and $1.4 million from prior year same quarter. Personnel expense increased $0.9 million due to a one-time bonus for all non-executive employees of $1,000 per full-time employee and $500 per part-time employee so that they may share in the benefit CTBI received from the recently enacted tax legislation. Personnel expense was also impacted by a $0.6 million increase in the cost of group medical and life insurance from prior quarter and a $0.3 million increase in salaries from prior year same quarter. The increase in personnel expense was partially offset by a decrease in net other real estate owned expense of $0.9 million from prior quarter and $0.5 million from prior year same quarter. Noninterest expense for the year ended December 31, 2017 increased $2.8 million, or 2.6%, compared to the year ended December 31, 2016, as a result of a $1.8 million increase in personnel expense and a $1.6 million increase in net other real estate owned expense, partially offset by a $0.6 million decrease in FDIC insurance. The increase year over year in personnel expense included a $1.1 million increase in salaries, a $0.5 million increase in bonuses and incentives, and a $0.4 million increase in the cost of group medical and life insurance.
Balance Sheet Review
CTBI’s total assets at $4.1 billion were relatively flat to prior quarter with a $0.3 million increase from September 30, 2017 and a $204.1 million, or 5.2%, increase from December 31, 2016. Loans outstanding at December 31, 2017 were $3.1 billion, increasing $9.5 million, or an annualized 1.2%, from September 30, 2017 and $184.6 million, or 6.3%, from December 31, 2016. We experienced an increase during the quarter of $4.7 million in the commercial loan portfolio, $2.9 million in the residential loan portfolio, $1.8 million in the indirect loan portfolio, and $0.1 million in the consumer direct loan portfolio. CTBI’s investment portfolio decreased $17.5 million, or an annualized 11.5%, from September 30, 2017 and $19.8 million, or 3.3%, from December 31, 2016. Deposits in other banks increased $19.1 million from prior quarter and $41.0 million from December 31, 2016. Deposits, including repurchase agreements, at $3.5 billion increased $47.3 million, or an annualized 5.4%, from September 30, 2017 and $175.3 million, or 5.3%, from December 31, 2016. Wholesale brokered deposits acquired in the third quarter 2017 accounted for $82.3 million of the year over year deposit growth.
Shareholders’ equity at December 31, 2017 was $530.7 million, a 5.9% annualized increase from the $522.9 million at September 30, 2017 and a 6.0% increase from the $500.6 million at December 31, 2016. CTBI’s annualized dividend yield to shareholders as of December 31, 2017 was 2.80%.
Asset Quality
CTBI’s total nonperforming loans, not including troubled debt restructurings, were $28.3 million, or 0.91% of total loans, at December 31, 2017 compared to $30.0 million, or 0.96% of total loans, at September 30, 2017 and $27.5 million, or 0.93% of total loans, at December 31, 2016. Accruing loans 90+ days past due decreased $46 thousand from prior quarter and $0.7 million from December 31, 2016. Nonaccrual loans decreased $1.7 million during the quarter, but increased $1.5 million from December 31, 2016. Accruing loans 30-89 days past due at $19.4 million was an increase of $2.0 million from September 30, 2017 and $3.0 million from December 31, 2016. 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, 2017 totaled $47.4 million, a $1.2 million increase from the $46.2 million at September 30, 2017 but a $4.8 million decrease from the $52.2 million at December 31, 2016.
Our level of foreclosed properties at $32.0 million at December 31, 2017 was relatively flat to September 30, 2017, but a $3.9 million decrease from the $35.9 million at December 31, 2016. Sales of foreclosed properties for the quarter ended December 31, 2017 totaled $1.0 million while new foreclosed properties totaled $1.1 million. At December 31, 2017, the book value of properties under contracts to sell was $2.2 million; however, the closings had not occurred at quarter-end. Write-downs on foreclosed properties for the fourth quarter 2017 totaled $0.2 million compared to $0.9 million in the third quarter 2017 and $0.6 million in the fourth quarter 2016. Write-downs for the year ended December 31, 2017 totaled $3.0 million compared to $1.2 million for the year 2016.
Net loan charge-offs for the quarter ended December 31, 2017 were $3.1 million, or 0.39% of average loans annualized, compared to $1.4 million, or 0.18%, experienced for the third quarter 2017 and $1.9 million, or 0.26%, for the fourth quarter 2016. Of the net charge-offs for the quarter, $1.7 million were in commercial loans, $0.8 million were in indirect auto loans, $0.4 million were in residential loans, and $0.2 million were in consumer direct loans. Commercial loan charge-offs increased $1.0 million for the quarter, $0.8 million of which was one commercial real estate loan with a previous specific reserve of $0.5 million. Allocations to loan loss reserves were $2.9 million for the quarter ended December 31, 2017 compared to $0.7 million for the quarter ended September 30, 2017 and $2.0 million for the quarter ended December 31, 2016. Our reserve coverage (allowance for loan and lease loss reserve to nonperforming loans) at December 31, 2017 was 127.8% compared to 121.2% at September 30, 2017 and 130.8% at December 31, 2016. Our loan loss reserve as a percentage of total loans outstanding was reduced to 1.16% at December 31, 2017 from the 1.17% at September 30, 2017 and the 1.22% at December 31, 2016. The reduction in the loan loss reserve from prior quarter was driven primarily by a reduction in required specific reserves as loans with specific reserves were charged off during the quarter.
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 $4.1 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 northeastern Tennessee, four trust offices across Kentucky, and one trust office in Tennessee.
Additional information follows.
