10-Q 1 brhc20052495_10q.htm 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 March 31, 2023
 
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
P.O. Box 2947
Pikeville, Kentucky
41502
(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 Global Select Market
(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 definitions 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 – 17,983,700 shares outstanding at April 30, 2023



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; the effects of epidemics, pandemics, or other infectious disease outbreaks, including the continuation of the COVID-19 pandemic; 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, 2022 for further information in this regard.

1


Community Trust Bancorp, Inc.
Condensed Consolidated Balance Sheets

(dollars in thousands)
 
(unaudited)
March 31
2023
   
December 31
2022
 
Assets:
           
Cash and due from banks
 
$
60,762
   
$
51,306
 
Interest bearing deposits
    175,112       77,380  
Cash and cash equivalents
   
235,874
     
128,686
 
                 
Certificates of deposit in other banks
   
245
     
245
 
Debt securities available-for-sale at fair value (amortized cost of $1,390,747 and $1,430,605, respectively)
   
1,241,080
     
1,256,226
 
Equity securities at fair value
   
2,380
     
2,166
 
Loans held for sale
   
182
     
109
 
                 
Loans
   
3,777,359
     
3,709,290
 
Allowance for credit losses
   
(46,683
)
   
(45,981
)
Net loans
   
3,730,676
     
3,663,309
 
                 
Premises and equipment, net
   
42,636
     
42,633
 
Operating right-of-use assets
   
13,805
     
13,809
 
Finance right-of-use assets     3,232       3,262  
Federal Home Loan Bank stock
   
4,826
     
6,676
 
Federal Reserve Bank stock
   
4,887
     
4,887
 
Goodwill
   
65,490
     
65,490
 
Bank owned life insurance
   
93,324
     
92,746
 
Mortgage servicing rights
   
8,121
     
8,468
 
Other real estate owned
   
2,776
     
3,671
 
Deferred tax asset
    31,653       39,878  
Accrued interest receivable
   
19,012
     
19,592
 
Other assets
   
29,121
     
28,463
 
Total assets
 
$
5,529,320
   
$
5,380,316
 
                 
Liabilities and shareholders’ equity:
               
Deposits:
               
Noninterest bearing
 
$
1,409,839
   
$
1,394,915
 
Interest bearing
   
3,133,585
     
3,031,228
 
Total deposits
   
4,543,424
     
4,426,143
 
                 
Repurchase agreements
   
208,777
     
215,431
 
Federal funds purchased
   
500
     
500
 
Advances from Federal Home Loan Bank
   
350
     
355
 
Long-term debt
   
64,404
     
57,841
 
Operating lease liability
   
14,148
     
14,160
 
Finance lease liability
   
3,471
     
3,468
 
Accrued interest payable
   
4,138
     
2,237
 
Other liabilities
   
33,287
     
32,134
 
Total liabilities
   
4,872,499
     
4,752,269
 
                 
Shareholders’ equity:
               
Preferred stock, 300,000 shares authorized and unissued
   
-
     
-
 
Common stock, $5.00 par value, shares authorized 25,000,000; shares issued and outstanding 202317,976,345; 202217,918,280
   
89,881
     
89,591
 
Capital surplus
   
229,333
     
229,012
 
Retained earnings
   
450,044
     
438,596
 
Accumulated other comprehensive loss, net of tax
   
(112,437
)
   
(129,152
)
Total shareholders’ equity
   
656,821
     
628,047
 
                 
Total liabilities and shareholders’ equity
 
$
5,529,320
   
$
5,380,316
 

See notes to condensed consolidated financial statements.

2

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

 
Three Months Ended
 
   
March 31
 
(in thousands except per share data)
 
2023
   
2022
 
Interest income:
           
Interest and fees on loans, including loans held for sale
 
$
51,947
   
$
38,167
 
Interest and dividends on securities
               
Taxable
   
6,758
     
4,384
 
Tax exempt
   
682
     
772
 
Interest and dividends on Federal Reserve Bank and Federal Home Loan Bank stock
   
174
     
114
 
Interest on Federal Reserve Bank deposits
   
1,350
     
82
 
Other, including interest on federal funds sold
   
84
     
8
 
Total interest income
   
60,995
     
43,527
 
                 
Interest expense:
               
Interest on deposits
   
14,391
     
2,954
 
Interest on repurchase agreements and federal funds purchased
   
1,616
     
254
 
Interest on advances from Federal Home Loan Bank     43       0  
Interest on long-term debt
   
1,029
     
287
 
Total interest expense
   
17,079
     
3,495
 
                 
Net interest income
   
43,916
     
40,032
 
Provision for credit losses
   
1,116
     
875
 
Net interest income after provision for credit losses
   
42,800
     
39,157
 
                 
Noninterest income:
               
Deposit related fees
   
7,287
      6,746  
Gains on sales of loans, net
   
121
     
597
 
Trust and wealth management income
   
3,079
     
3,248
 
Loan related fees
   
845
     
2,062
 
Bank owned life insurance
   
858
     
691
 
Brokerage revenue
   
348
     
590
 
Securities gains
   
218
     
99
 
Other noninterest income
   
926
     
932
 
Total noninterest income
   
13,682
     
14,965
 
                 
Noninterest expense:
               
Officer salaries and employee benefits
   
4,152
     
3,882
 
Other salaries and employee benefits
   
14,756
     
13,656
 
Occupancy, net
   
2,302
     
2,245
 
Equipment
   
726
     
609
 
Data processing
   
2,303
     
2,201
 
Bank franchise tax
   
419
     
415
 
Legal fees
   
268
     
301
 
Professional fees
   
548
     
566
 
Advertising and marketing
   
820
     
752
 
FDIC insurance
   
606
     
355
 
Other real estate owned provision and expense
   
119
     
353
 
Repossession expense
   
231
     
100
 
Amortization of limited partnership investments
   
597
     
733
 
Other noninterest expense
   
4,043
     
3,191
 
Total noninterest expense
   
31,890
     
29,359
 
                 
Income before income taxes
   
24,592
     
24,763
 
Income taxes
   
5,279
     
5,035
 
Net income
   
19,313
     
19,728
 
                 
Other comprehensive income (loss):
               
Unrealized holding gains (losses) on debt securities available-for-sale:
               
Unrealized holding gains (losses) arising during the period
   
24,716
     
(78,564
)
Less: Reclassification adjustments for realized gains included in net income
   
4
     
0
 
Tax expense (benefit)
   
7,997
     
(20,427
)
Other comprehensive income (loss), net of tax
   
16,715
     
(58,137
)
Comprehensive income (loss)
 
$
36,028
   
$
(38,409
)
                 
Basic earnings per share
 
$
1.08
   
$
1.11
 
Diluted earnings per share
 
$
1.08
   
$
1.11
 
                 
Weighted average shares outstanding-basic
   
17,872
     
17,820
 
Weighted average shares outstanding-diluted
   
17,884
     
17,832
 

See notes to condensed consolidated financial statements.

3

Consolidated Statements of Changes in Shareholders’ Equity
(unaudited)

(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, January 1, 2023
   
17,918,280
   
$
89,591
   
$
229,012
   
$
438,596
   
$
(129,152
)
 
$
628,047
 
Net income
                           
19,313
             
19,313
 
Other comprehensive income
                                   
16,715
     
16,715
 
Cash dividends declared ($0.44 per share)
                           
(7,865
)
           
(7,865
)
Issuance of common stock
   
26,118
     
131
     
147
                     
278
 
Issuance of restricted stock
   
52,865
     
264
     
(264
)
                   
0
 
Vesting of restricted stock
   
(20,128
)
   
(101
)
   
101
                     
0
 
Forfeiture of restricted stock
    (790 )     (4 )     4                       0  
Stock-based compensation
                   
333
                     
333
 
Balance, March 31, 2023
   
17,976,345
   
$
89,881
   
$
229,333
   
$
450,044
   
$
(112,437
)
 
$
656,821
 

(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, January 1, 2022
   
17,843,081
   
$
89,215
   
$
227,085
   
$
386,750
   
$
(4,848
)
 
$
698,202
 
Net income
                           
19,728
             
19,728
 
Other comprehensive loss
                                   
(58,137
)
   
(58,137
)
Cash dividends declared ($0.40 per share)
                           
(7,131
)
           
(7,131
)
Issuance of common stock
   
32,491
     
163
     
85
                     
248
 
Issuance of restricted stock
   
35,438
     
177
     
(177
)
                   
0
 
Vesting of restricted stock
   
(26,904
)
   
(135
)
   
135
                     
0
 
Stock-based compensation
                   
461
                     
461
 
Balance, March 31, 2022
   
17,884,106
   
$
89,420
   
$
227,589
   
$
399,347
   
$
(62,985
)
 
$
653,371
 

See notes to condensed consolidated financial statements.

4

Community Trust Bancorp, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)

  Three Months Ended
 
   
March 31
 
(in thousands)
 
2023
   
2022
 
Cash flows from operating activities:
           
Net income
 
$
19,313
   
$
19,728
 
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
   
907
     
813
 
Non-cash operating lease expense     398       207  
Deferred taxes
   
228
     
307
 
Stock-based compensation
   
377
     
484
 
Provision for credit losses
   
1,116
     
875
 
Write-downs of other real estate owned and other repossessed assets
   
81
     
246
 
Gains on sale of mortgage loans held for sale
   
(121
)
   
(597
)
Securities gains
   
(4
)
   
0
 
Fair value adjustments in equity securities
   
(214
)
   
(99
)
Gains on sale of assets, net
   
(37
)
   
(5
)
Proceeds from sale of mortgage loans held for sale
   
4,658
     
26,257
 
Funding of mortgage loans held for sale
   
(4,610
)
   
(24,969
)
Amortization of securities premiums and discounts, net
   
752
     
1,801
 
Change in cash surrender value of bank owned life insurance
   
(578
)
   
(434
)
Changes in lease liabilities
   
(376
)
   
(203
)
Mortgage servicing rights:
               
Fair value adjustments
   
397
     
(745
)
New servicing assets created
   
(50
)
   
(229
)
Changes in:
               
Accrued interest receivable
   
580
     
391
 
Other assets
   
(658
)
   
627
 
Accrued interest payable
   
1,901
     
290
 
Other liabilities
   
1,113
     
2,605
 
Net cash provided by operating activities
   
25,173
     
27,350
 
                 
Cash flows from investing activities:
               
Securities available-for-sale (AFS):
               
Purchase of AFS securities
   
(161
)
   
(176,730
)
Proceeds from sales of AFS securities
   
18,561
     
0
 
Proceeds from prepayments, calls, and maturities of AFS securities
   
20,710
     
48,630
 
Change in loans, net
   
(67,837
)
   
(106,591
)
Purchase of premises and equipment
   
(910
)
   
(1,072
)
Proceeds from sale of stock by Federal Home Loan Bank
   
1,850
     
0
 
Proceeds from sale of other real estate owned and repossessed assets
   
204
     
486
 
Proceeds from settlement of bank owned life insurance
    0       1  
Net cash used in investing activities
   
(27,583
)
   
(235,276
)
                 
Cash flows from financing activities:
               
Change in deposits, net