Community Trust Bancorp, Inc. Reports Earnings for the 2nd Quarter 2024

Community Trust Bancorp, Inc. (NASDAQ:CTBI):

Earnings Summary

Community Trust Bancorp, Inc. (NASDAQ-CTBI) achieved earnings for the second quarter 2024 of $19.5 million, or $1.09 per basic share, compared to $18.7 million, or $1.04 per basic share, earned during the first quarter 2024 and $19.4 million, or $1.09 per basic share, earned during the second quarter 2023. Total revenue for the quarter was $2.7 million above prior quarter and $3.6 million above prior year same quarter. Net interest revenue for the quarter increased $2.1 million compared to prior quarter and $2.6 million compared to prior year same quarter, and noninterest income increased $0.6 million compared to prior quarter and $1.0 million compared to prior year same quarter. Our provision for credit losses for the quarter increased $0.3 million from prior quarter and $1.0 million from prior year same quarter. Noninterest expense increased $0.2 million compared to prior quarter and $1.4 million compared to prior year same quarter. Net income for the six months ended June 30, 2024 was $38.2 million, or $2.13 per basic share, compared to $38.7 million, or $2.17 per basic share, for the six months ended June 30, 2023.

2^nd Quarter 2024 Highlights

• Net interest income for the quarter of $45.7 million was $2.1 million, or 4.8%, above prior quarter and $2.6 million, or 6.0%, above prior year same quarter, as our net interest margin increased 15 basis points from prior quarter and 3 basis points from prior year same quarter.

• Provision for credit losses at $3.0 million for the quarter increased $0.3 million from prior quarter and $1.0 million from prior year same quarter.

• Noninterest income for the quarter ended June 30, 2024 of $15.7 million was $0.6 million, or 3.8%, above prior quarter and $1.0 million, or 6.5%, above prior year same quarter.

• Noninterest expense for the quarter ended June 30, 2024 of $32.4 million was $0.2 million, or 0.6%, above prior quarter and $1.4 million, or 4.5%, above prior year same quarter.

• Our loan portfolio at $4.3 billion increased $100.1 million, an annualized 9.7%, from March 31, 2024 and $331.6 million, or 8.4%, from June 30, 2023.

• We had net loan charge-offs of $1.4 million, or an annualized 0.13% of average loans, for the second quarter 2024 compared to $1.6 million, or an annualized 0.16% of average loans, for the first quarter 2024 and $0.7 million, or an annualized 0.07% of average loans, for the second quarter 2023.

• Our total nonperforming loans increased to $19.8 million at June 30, 2024 from $15.9 million at March 31, 2024 and $11.7 million at June 30, 2023. Nonperforming assets at $21.5 million increased $4.3 million from March 31, 2024 and $7.7 million from June 30, 2023.

• Deposits, including repurchase agreements, at $5.0 billion decreased $57.6 million, or an annualized 4.6%, from March 31, 2024 but increased $215.7 million, or 4.5%, from June 30, 2023.

• Shareholders' equity at $719.3 million increased $11.6 million, or an annualized 6.6%, during the quarter and $59.2 million, or 9.0%, from June 30, 2023.

Net Interest Income

Net interest income for the quarter of $45.7 million was $2.1 million, or 4.8%, above prior quarter and $2.6 million, or 6.0%, above prior year same quarter. Our net interest margin, on a fully tax equivalent basis, at 3.38% increased 15 basis points from prior quarter and 3 basis points from prior year same quarter. Our quarterly average earning assets increased $11.7 million from prior quarter and $280.1 million from prior year same quarter. Our yield on average earning assets increased 11 basis points from prior quarter and 63 basis points from prior year same quarter, and our cost of funds decreased 5 basis points from prior quarter but increased 76 basis points from prior year same quarter. Net interest income for the six months ended June 30, 2024 was $89.3 million compared to $87.0 million for the six months ended June 30, 2023.

Our ratio of average loans to deposits, including repurchase agreements, was 84.5% for the quarter ended June 30, 2024 compared to 82.7% for the quarter ended March 31, 2024 and 81.2% for the quarter ended June 30, 2023.

Noninterest Income

Noninterest income for the quarter ended June 30, 2024 of $15.7 million was $0.6 million, or 3.8%, above prior quarter and $1.0 million, or 6.5%, above prior year same quarter. The quarter over quarter increase included a $0.5 million increase in bank owned life insurance revenue, a $0.3 million increase in deposit related fees, a $0.2 million increase in trust revenue, and a $0.2 million increase in brokerage revenue, partially offset by $0.8 million decrease in securities gains. The year over year increase included a $1.1 million increase in bank owned life insurance, a $0.4 million increase in trust revenue, a $0.3 million increase in brokerage revenue, partially offset by a $0.6 million decrease in securities gains and a $0.2 million decrease in deposit related fees. Noninterest income for the six months ended June 30, 2024 was $30.8 million compared to $28.4 million for the six months ended June 30, 2023.

Noninterest Expense

Noninterest expense for the quarter ended June 30, 2024 of $32.4 million was $0.2 million, or 0.6%, above prior quarter and $1.4 million, or 4.5%, above prior year same quarter. The increase year over year primarily resulted from a $1.3 million increase in personnel expense, which included a $0.3 million increase in salaries, a $0.9 million increase in bonuses and incentives, and a $0.5 million increase in the cost of group medical and life insurance benefits, partially offset by a $0.4 million decrease in payroll taxes. Noninterest expense for the six months ended June 30, 2024 was $64.6 million compared to $62.9 million for the six months ended June 30, 2023.

Balance Sheet Review

Total Loans

Total Deposits and Repurchase Agreements

CTBI's total assets at $5.8 billion as of June 30, 2024 decreased $45.9 million, or 3.2% annualized, from March 31, 2024 but increased $283.5 million, or 5.1%, from June 30, 2023. Loans outstanding at $4.3 billion increased $100.1 million, an annualized 9.7%, from March 31, 2024 and $331.6 million, or 8.4%, from June 30, 2023. The increase in loans from prior quarter included a $66.6 million increase in the commercial loan portfolio, a $25.3 million increase in the residential loan portfolio, a $6.7 million increase in the indirect consumer loan portfolio, and a $1.5 million increase in the consumer direct loan portfolio. CTBI's investment portfolio decreased $21.7 million, or an annualized 7.8%, from March 31, 2024 and $110.4 million, or 9.2%, from June 30, 2023. Deposits in other banks decreased $130.7 million from prior quarter but increased $49.1 million from June 30, 2023. Deposits, including repurchase agreements, at $5.0 billion decreased $57.6 million, or an annualized 4.6%, from March 31, 2024 but increased $215.7 million, or 4.5%, from June 30, 2023. CTBI is not dependent on any one customer or group of customers for their source of deposits. As of June 30, 2024, no one customer accounted for more than 2.25% of our $5.0 billion in deposits. Only two customer relationships accounted for more than 1% each.

Shareholders' equity at $719.3 million increased $11.6 million, or an annualized 6.6%, during the quarter and $59.2 million, or 9.0%, from June 30, 2023. Net unrealized losses on securities, net of deferred taxes, were $107.1 million at June 30, 2024, compared to $106.9 million at March 31, 2024 and $121.3 million at June 30, 2023. CTBI's annualized dividend yield to shareholders as of June 30, 2024 was 4.21%.

Asset Quality

Our total nonperforming loans increased to $19.8 million at June 30, 2024 from $15.9 million at March 31, 2024 and $11.7 million at June 30, 2023. Accruing loans 90+ days past due at $14.7 million increased $3.2 million from prior quarter and $8.3 million from June 30, 2023. Nonaccrual loans at $5.1 million increased $0.8 million from prior quarter but decreased $0.2 million from June 30, 2023. Accruing loans 30-89 days past due at $24.1 million increased $11.9 million from prior quarter and from June 30, 2023. Our loan portfolio management processes focus on the immediate identification, management, and resolution of problem loans to maximize recovery and minimize loss.

We had net loan charge-offs of $1.4 million, or an annualized 0.13% of average loans, for the second quarter 2024 compared to $1.6 million, or an annualized 0.16% of average loans, for the first quarter 2024 and $0.7 million, or an annualized 0.07% of average loans, for the second quarter 2023. Of the net charge-offs for the quarter, $0.8 million were in indirect consumer loans, $0.5 million were in commercial loans, and $0.1 million were in direct consumer loans. Year-to-date net loan charge-offs of an annualized 0.15% of average loans are in line with management's expectations.

Allowance for Credit Losses

Our provision for credit losses at $3.0 million for the quarter increased $0.3 million from prior quarter and $1.0 million from prior year same quarter. Of the provision for the quarter, $1.2 million was allotted to fund loan growth. Year-to-date provision for credit losses increased $2.5 million from the six months ended June 30, 2023. Our reserve coverage (allowance for credit losses to nonperforming loans) at June 30, 2024 was 263.0% compared to 319.0% at March 31, 2024 and 408.9% at June 30, 2023. Our credit loss reserve as a percentage of total loans outstanding at June 30, 2024 remained at 1.22% from March 31, 2024 and June 30, 2023.

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. CTBI's 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; 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.

Community Trust Bancorp, Inc., with assets of $5.8 billion, is headquartered in Pikeville, Kentucky and has 71 banking locations across eastern, northeastern, central, and south central Kentucky, six banking locations in southern West Virginia, three banking locations in northeastern Tennessee, four trust offices across Kentucky, and one trust office in Tennessee.

Additional information follows.

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