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Section 1: 10-Q (10-Q)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2019
   
 
Or
   
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from _____________ to _____________

Commission file number 001-31220

COMMUNITY TRUST BANCORP, INC.
(Exact name of registrant as specified in its charter)

Kentucky
61-0979818
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.)

346 North Mayo Trail
Pikeville, Kentucky
41501
(Address of principal executive offices)
(Zip code)

(606) 432-1414
(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Common Stock
(Title of class)

ctbi
NASDAQ
(Trading symbol)
(Name of exchange on which registered)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes 
No

Indicate by check mark whether the registrant has submitted electronically every interactive data file required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.)

Yes 
No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer 
Accelerated Filer 
Non-accelerated Filer 
     
Smaller Reporting Company
Emerging Growth Company
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes
   No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.

Common stock – 17,777,251 shares outstanding at July 31, 2019



CAUTIONARY STATEMENT

REGARDING 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, regulations, and enforcement actions 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.

PART I - FINANCIAL INFORMATION

Item 1.          Condensed Consolidated Financial Statements

The accompanying information has not been audited by our independent registered public accountants; however, in the opinion of management such information reflects all adjustments necessary for a fair presentation of the results for the interim period.  All such adjustments are of a normal and recurring nature.

The accompanying condensed consolidated financial statements are presented in accordance with the requirements of Form 10-Q and consequently do not include all of the disclosures normally required by accounting principles generally accepted in the United States of America or those normally made in the Registrant’s annual report on Form 10-K.  Accordingly, the reader of the Form 10-Q should refer to the Registrant’s Form 10-K for the year ended December 31, 2018 for further information in this regard.


Community Trust Bancorp, Inc.
Condensed Consolidated Balance Sheets

(dollars in thousands)
 
(unaudited)
June 30
2019
   
December 31
2018
 
Assets:
           
Cash and due from banks
 
$
52,545
   
$
64,632
 
Interest bearing deposits
   
269,094
     
75,718
 
Federal funds sold
   
0
     
1,100
 
Cash and cash equivalents
   
321,639
     
141,450
 
                 
Certificates of deposit in other banks
   
245
     
3,920
 
Securities available-for-sale at fair value (amortized cost of $587,314 and $602,114, respectively)
   
591,586
     
593,746
 
Securities held-to-maturity at amortized cost (fair value of $619 and $649, respectively)
   
619
     
649
 
Equity securities at fair value
   
1,727
     
1,173
 
Loans held for sale
   
1,067
     
2,461
 
                 
Loans
   
3,192,207
     
3,208,638
 
Allowance for loan and lease losses
   
(34,998
)
   
(35,908
)
Net loans
   
3,157,209
     
3,172,730
 
                 
Premises and equipment, net
   
44,404
     
45,291
 
Right-of-use asset
   
15,028
     
0
 
Federal Home Loan Bank stock
   
11,360
     
14,713
 
Federal Reserve Bank stock
   
4,887
     
4,887
 
Goodwill
   
65,490
     
65,490
 
Bank owned life insurance
   
67,304
     
67,076
 
Mortgage servicing rights
   
3,119
     
3,607
 
Other real estate owned
   
22,536
     
27,273
 
Other assets
   
69,037
     
57,150
 
Total assets
 
$
4,377,257
   
$
4,201,616
 
                 
Liabilities and shareholders’ equity:
               
Deposits:
               
Noninterest bearing
 
$
833,044
   
$
803,316
 
Interest bearing
   
2,604,137
     
2,502,634
 
Total deposits
   
3,437,181
     
3,305,950
 
                 
Repurchase agreements
   
233,238
     
232,712
 
Federal funds purchased
   
3,900
     
1,180
 
Advances from Federal Home Loan Bank
   
426
     
436
 
Long-term debt
   
59,341
     
59,341
 
Deferred taxes
   
3,621
     
3,363
 
Lease liability
   
15,544
     
0
 
Other liabilities
   
29,298
     
34,484
 
Total liabilities
   
3,782,549
     
3,637,466
 
                 
Shareholders’ equity:
               
Preferred stock, 300,000 shares authorized and unissued
   
-
     
-
 
Common stock, $5 par value, shares authorized 25,000,000; shares outstanding 201917,772,309; 201817,732,853
   
88,862
     
88,665
 
Capital surplus
   
223,833
     
223,161
 
Retained earnings
   
278,960
     
258,935
 
Accumulated other comprehensive income (loss), net of tax
   
3,053
     
(6,611
)
Total shareholders’ equity
   
594,708
     
564,150
 
                 
Total liabilities and shareholders’ equity
 
$
4,377,257
   
$
4,201,616
 

See notes to condensed consolidated financial statements.


Community Trust Bancorp, Inc.
Condensed Consolidated Statements of Income and Comprehensive Income
(unaudited)

 
Three Months Ended
June 30
   
Six Months Ended
June 30
 
(in thousands except per share data)
 
2019
   
2018
   
2019
   
2018
 
Interest income:
                       
Interest and fees on loans, including loans held for sale
 
$
41,318
   
$
37,791
   
$
82,228
   
$
74,368
 
Interest and dividends on securities
                               
Taxable
   
3,089
     
2,422
     
6,252
     
4,892
 
Tax exempt
   
580
     
706
     
1,258
     
1,403
 
Interest and dividends on Federal Reserve Bank and Federal Home Loan Bank stock
   
261
     
328
     
557
     
661
 
Interest on Federal Reserve Bank deposits
   
1,525
     
713
     
2,311
     
1,152
 
Other, including interest on federal funds sold
   
44
     
65
     
100
     
129
 
Total interest income
   
46,817
     
42,025
     
92,706
     
82,605
 
                                 
Interest expense:
                               
Interest on deposits
   
8,956
     
5,585
     
17,031
     
10,457
 
Interest on repurchase agreements and federal funds purchased
   
1,191
     
723
     
2,347
     
1,358
 
Interest on advances from Federal Home Loan Bank
   
0
     
2
     
39
     
4
 
Interest on long-term debt
   
643
     
567
     
1,279
     
1,047
 
Total interest expense
   
10,790
     
6,877
     
20,696
     
12,866
 
                                 
Net interest income
   
36,027
     
35,148
     
72,010
     
69,739
 
Provision for loan losses
   
1,563
     
1,929
     
1,753
     
2,875
 
Net interest income after provision for loan losses
   
34,464
     
33,219
     
70,257
     
66,864
 
                                 
Noninterest income:
                               
Service charges on deposit accounts
   
6,525
     
6,480
     
12,645
     
12,701
 
Gains on sales of loans, net
   
518
     
304
     
848
     
583
 
Trust and wealth management income
   
2,765
     
2,856
     
5,340
     
5,814
 
Loan related fees
   
440
     
919
     
1,013
     
2,063
 
Bank owned life insurance
   
689
     
793
     
1,247
     
2,557
 
Brokerage revenue
   
299
     
440
     
560
     
723
 
Securities gains (losses)
   
204
     
2
     
560
     
(286
)
Other noninterest income
   
812
     
1,946
     
2,209
     
2,895
 
Total noninterest income
   
12,252
     
13,740
     
24,422
     
27,050
 
                                 
Noninterest expense:
                               
Officer salaries and employee benefits
   
3,297
     
3,220
     
6,671
     
6,434
 
Other salaries and employee benefits
   
12,790
     
12,202
     
25,375
     
24,607
 
Occupancy, net
   
1,812
     
2,043
     
3,863
     
4,159
 
Equipment
   
749
     
727
     
1,488
     
1,444
 
Data processing
   
1,789
     
1,634
     
3,552
     
3,270
 
Bank franchise tax
   
1,683
     
1,577
     
3,398
     
3,278
 
Legal fees
   
424
     
428
     
854
     
902
 
Professional fees
   
546
     
495
     
1,077
     
997
 
Advertising and marketing
   
874
     
876
     
1,666
     
1,608
 
FDIC insurance
   
369
     
279
     
546
     
593
 
Other real estate owned provision and expense
   
1,024
     
1,315
     
1,795
     
2,254
 
Repossession expense
   
112
     
304
     
489
     
713
 
Amortization of limited partnership investments
   
1,166
     
716
     
1,943
     
1,216
 
Other noninterest expense
   
3,395
     
6,623
     
6,396
     
9,645
 
Total noninterest expense
   
30,030
     
32,439
     
59,113
     
61,120
 
                                 
Income before income taxes
   
16,686
     
14,520
     
35,566
     
32,794
 
Income taxes
   
(1,638
)
   
2,921
     
2,303
     
5,381
 
Net income
   
18,324
     
11,599
     
33,263
     
27,413
 
                                 
Other comprehensive income (loss):
                               
Unrealized holding gains (losses) on securities available-for-sale:
                               
Unrealized holding gains (losses) arising during the period
   
6,522
     
(1,811
)
   
12,646
     
(7,309
)
Less: Reclassification adjustments for realized gains included in net income
   
5
     
2
     
6
     
151
 
Tax expense (benefit)
   
1,690
     
(381
)
   
2,976
     
(1,567
)
Other comprehensive income (loss), net of tax
   
4,827
     
(1,432
)
   
9,664
     
(5,893
)
Comprehensive income
 
$
23,151
   
$
10,167
   
$
42,927
   
$
21,520
 
                                 
Basic earnings per share
 
$
1.03
   
$
0.66
   
$
1.88
   
$
1.55
 
Diluted earnings per share
 
$
1.03
   
$
0.66
   
$
1.88
   
$
1.55
 
                                 
Weighted average shares outstanding-basic
   
17,721
     
17,687
     
17,717
     
17,679
 
Weighted average shares outstanding-diluted
   
17,733
     
17,703
     
17,728
     
17,695
 

See notes to condensed consolidated financial statements.


Consolidated Statements of Changes in Shareholders’ Equity
Quarterly

(in thousands except per share and share amounts)
 
Common
Shares
   
Common
Stock
   
Capital
Surplus
   
Retained
Earnings
   
Accumulated
Other
Comprehensive
Income (Loss),
Net of Tax
   
Total
 
Balance, December 31, 2017
   
17,692,912
   
$
88,465
   
$
221,472
   
$
224,268
   
$
(3,506
)
 
$
530,699
 
Net income
                           
15,814
             
15,814
 
Other comprehensive loss, net of tax of $(1,186)
                                   
(4,461
)
   
(4,461
)
Cash dividends declared ($0.33 per share)
                           
(5,836
)
           
(5,836
)
Issuance of common stock
   
29,087
     
145
     
451
                     
596
 
Vesting of restricted stock
   
(12,582
)
   
(63
)
   
63
                     
0
 
Issuance of restricted stock
   
11,435
     
57
     
(57
)
                   
0
 
Forfeiture of restricted stock
   
(115
)
   
(1
)
   
1
                     
0
 
Stock-based compensation
                   
224
                     
224
 
Implementation of ASU 2014-09
                           
453
             
453
 
Implementation of ASU 2016-01
                           
(507
)
   
507
     
0
 
Balance, March 31, 2018
   
17,720,737
   
$
88,603
   
$
222,154
   
$
234,192
   
$
(7,460
)
 
$
537,489
 
Net income
                           
11,599
             
11,599
 
Other comprehensive loss, net of tax of
 $(381)
                                   
(1,432
)
   
(1,432
)
Cash dividends declared ($0.33 per share)
                           
(5,836
)
           
(5,836
)
Issuance of common stock
   
3,991
     
20
     
184
                     
204
 
Vesting of restricted stock
   
585
     
3
     
(3
)
                   
0
 
Stock-based compensation
                   
151
                     
151
 
Balance, June 30, 2018
   
17,725,313
   
$
88,626
   
$
222,486
   
$
239,955
   
$
(8,892
)
 
$
542,175
 

(in thousands except per share and share amounts)
 
Common
Shares
   
Common
Stock
   
Capital
Surplus
   
Retained
Earnings
   
Accumulated
Other
Comprehensive
Income (Loss),
Net of Tax
   
Total
 
Balance, December 31, 2018
   
17,732,853
   
$
88,665
   
$
223,161
   
$
258,935
   
$
(6,611
)
 
$
564,150
 
Net income
                           
14,939
             
14,939
 
Other comprehensive income, net of tax of $1,286
                                   
4,837
     
4,837
 
Cash dividends declared ($0.36 per share)
                           
(6,378
)
           
(6,378
)
Issuance of common stock
   
19,065
     
95
     
163
                     
258
 
Vesting of restricted stock
   
(12,186
)
   
(61
)
   
61
                     
0
 
Issuance of restricted stock
   
27,921
     
140
     
(140
)
                   
0
 
Forfeiture of restricted stock
   
(59
)
   
0
     
0
                     
0
 
Stock-based compensation
                   
181
                     
181
 
Implementation of ASU 2016-02
                           
(480
)
   
0
     
(480
)
Balance, March 31, 2019
   
17,767,594
   
$
88,839
   
$
223,426
   
$
267,016
   
$
(1,774
)
 
$
577,507
 
Net income
                           
18,324
             
18,324
 
Other comprehensive income, net of tax of
 $1,690
                                   
4,827
     
4,827
 
Cash dividends declared ($0.36 per share)
                           
(6,380
)
           
(6,380
)
Issuance of common stock
   
5,718
     
28
     
188
                     
216
 
Vesting of restricted stock
   
(474
)
   
(2
)
   
2
                     
0
 
Forfeiture of restricted stock
   
(529
)
   
(3
)
   
3