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

Community Trust Bancorp, Inc. (NASDAQ-CTBI) achieved earnings for the fourth quarter 2022 of $22.4 million, or $1.26 per basic share, compared to $19.4 million, or $1.09 per basic share, earned during the third quarter 2022 and $19.2 million, or $1.08 per basic share, earned during the fourth quarter 2021. Total revenue was $0.3 million above prior quarter and $2.7 million above prior year same quarter. Net interest revenue increased $1.2 million compared to prior quarter and $3.9 million compared to prior year same quarter, and noninterest income decreased $0.9 million compared to prior quarter and $1.2 million compared to prior year same quarter. Our provision for credit losses for the quarter was $1.5 million compared to $2.4 million for the quarter ended September 30, 2022 and $0.5 million for the fourth quarter 2021. Noninterest expense decreased $1.2 million compared to prior quarter and $0.9 million compared to prior year same quarter. Net income for the year ended December 31, 2022 was below prior year by $6.1 million, primarily due to the $6.4 million recovery of provision for credit losses taken in 2021 compared to provision expense of $4.9 million for the year 2022 and a $5.3 million decline in gains on sales of loans year over year.

4^th Quarter 2022 Highlights

• Net interest income for the quarter of $44.7 million was $1.2 million above prior quarter and $3.9 million above prior year same quarter.
• Provision for credit losses for the quarter were $1.5 million compared to $2.4 million for the quarter ended September 30, 2022 and $0.5 million for the fourth quarter 2021.
• Our loan portfolio increased $78.7 million, an annualized 8.6%, from September 30, 2022 and $300.5 million, or 8.8%, from December 31, 2021.
• We had a net recovery of loan charge-offs for the fourth quarter 2022 of $9 thousand compared to net loan charge-offs of $325 thousand, or 0.04% of average loans annualized, for the quarter ended September 30, 2022 and an $8 thousand net recovery of loan charge-offs for the quarter ended December 31, 2021.
• Our total nonperforming loans, excluding troubled debt restructurings, increased to $15.3 million at December 31, 2022 from $13.7 million at September 30, 2022 but were below the $16.6 million at December 31, 2021. Nonperforming assets at $19.0 million increased $3.4 million from September 30, 2022 but decreased $1.1 million from December 31, 2021.
• Deposits, including repurchase agreements, at $4.6 billion decreased $123.6 million, or an annualized 10.3%, from September 30, 2022 but increased $26.2 million, or 0.6%, from December 31, 2021.
• Shareholders’ equity at $628.0 million increased $25.5 million, or an annualized 16.8%, during the quarter but declined $70.2 million, or 10.0%, from December 31, 2021, as a result of an increase year over year in unrealized losses on our securities portfolio due to an increased interest rate environment.
• Noninterest income for the quarter ended December 31, 2022 of $13.8 million was $0.9 million, or 6.2%, below prior quarter and $1.2 million, or 8.1%, below prior year same quarter.
• Noninterest expense for the quarter ended December 31, 2022 of $30.3 million was $1.2 million, or 3.9%, lower than prior quarter and $0.9 million, or 2.9%, below prior year same quarter.

Net Interest Income

Net interest income for the quarter of $44.7 million was $1.2 million above prior quarter and $3.9 million above prior year same quarter. Our net interest margin, on a fully tax equivalent basis, at 3.51% increased 15 basis points from prior quarter and 34 basis points from prior year same quarter. Our average earning assets decreased $84.4 million from prior quarter and $54.7 million from prior year same quarter. Our yield on average earning assets increased 54 basis points from prior quarter and 106 basis points from prior year same quarter, and our cost of funds increased 59 basis points from prior quarter and 110 basis points from prior year same quarter. While the cost of funds increased more than our yield on earning assets improved, the net interest margin increased because of the benefit of our noninterest bearing deposits. The benefit of these deposits increased 23 basis points during the quarter. Noninterest bearing deposits decreased $86.2 million over prior quarter but increased $63.8 million over prior year. Net interest income for the year ended December 31, 2022 increased $6.0 million or 3.7% from the year ended December 31, 2021.

Our ratio of average loans to deposits, including repurchase agreements, was 78.2% for the quarter ended December 31, 2022 compared to 75.4% for the quarter ended September 30, 2022 and 73.3% for the quarter ended December 31, 2021.

Noninterest Income

Noninterest income for the quarter ended December 31, 2022 of $13.8 million was $0.9 million, or 6.2%, below prior quarter and $1.2 million, or 8.1%, below prior year same quarter. The quarter over quarter decrease included a $0.2 million decrease in deposit related fees, a $0.5 million decrease in loan related fees, and a $0.2 million decrease in bank owned life insurance income. Noninterest income for the year 2022 decreased $2.5 million from the year ended December 31, 2021 due to a $5.3 million decline in gains on sales of loans, partially offset by a $2.5 million increase in deposit related fees. Gains on sales of loans continue to be impacted by the slowdown in the industry-wide mortgage refinancing boom. Deposit related fees were primarily impacted by debit card income and overdraft charges.

Noninterest Expense

Noninterest expense for the quarter ended December 31, 2022 of $30.3 million was $1.2 million, or 3.9%, lower than prior quarter and $0.9 million, or 2.9%, below prior year same quarter. The decrease in noninterest expense was primarily the result of a decline in post retirement benefits, included in employee benefits. Noninterest expense for the year ended December 31, 2022 was $1.8 million, or 1.5%, higher than the year 2021. Noninterest expense for the year 2022 was impacted by a $1.4 million accrual for customer refunds of re-presented returned item fees during the third quarter and year over year increases of $0.9 million in data processing expense, $0.6 million in loan related expenses, and $0.4 million in contributions, partially offset by a $1.6 million year over year decrease in personnel expense.

Balance Sheet Review

CTBI’s total assets at $5.4 billion decreased $94.0 million, or 6.8% annualized, from September 30, 2022 and $37.9 million, or 0.7%, from December 31, 2021. Loans outstanding at December 31, 2022 were $3.7 billion, an increase of $78.7 million, an annualized 8.6%, from September 30, 2022 and $300.5 million, or 8.8%, from December 31, 2021. The increase in loans from prior quarter included a $32.5 million increase in the commercial loan portfolio, a $15.2 million increase in the residential loan portfolio, and a $34.4 million increase in the indirect consumer loan portfolio, offset partially by a $3.4 million decrease in the consumer direct loan portfolio. CTBI’s investment portfolio decreased $42.2 million, or an annualized 12.9%, from September 30, 2022 and $199.3 million, or 13.7%, from December 31, 2021. Deposits in other banks decreased $121.7 million from prior quarter and $187.8 million from year end 2021. Deposits, including repurchase agreements, at $4.6 billion decreased $123.6 million, or an annualized 10.3%, from September 30, 2022 but increased $26.2 million, or 0.6%, from December 31, 2021. Though deposits decreased during the quarter, $48.3 million was referred to our trust subsidiary, Community Trust and Investment Company (CTIC), allowing us to maintain the overall customer relationship for those depositors who moved funds for additional investment opportunities. During the year 2022, $100.2 million in deposits was referred to CTIC.

Shareholders’ equity at $628.0 million increased $25.5 million, or an annualized 16.8%, during the quarter but declined $70.2 million, or 10.0%, from December 31, 2021, as a result of an increase year over year in unrealized losses on our securities portfolio due to an increased interest rate environment. Net unrealized losses on securities were $129.2 million at December 31, 2022, compared to $139.4 million at September 30, 2022 and $4.8 million at December 31, 2021. Management has the ability and intent to hold these securities to recovery or maturity. CTBI’s annualized dividend yield to shareholders as of December 31, 2022 was 3.83%.

Asset Quality

Our total nonperforming loans, excluding troubled debt restructurings, increased to $15.3 million at December 31, 2022 from $13.7 million at September 30, 2022 but were below the $16.6 million at December 31, 2021. Accruing loans 90+ days past due at $8.5 million increased $2.9 million from prior quarter and $2.5 million from December 31, 2021. Nonaccrual loans at $6.8 million decreased $1.3 million from prior quarter and $3.9 million from December, 2021. Accruing loans 30-89 days past due at $15.3 million increased $3.2 million from prior quarter and $4.4 million from December 31, 2021. Our loan portfolio management processes focus on the immediate identification, management, and resolution of problem loans to maximize recovery and minimize loss.

Our level of foreclosed properties was $3.7 million at December 31, 2022 compared to $1.9 million at September 30, 2022 and $3.5 million at December 31, 2021. Sales of foreclosed properties for the quarter ended December 31, 2022 totaled $0.1 million while new foreclosed properties totaled $2.0 million. For the year 2022, we had sales of $2.0 million and new foreclosed properties of $2.4 million. At December 31, 2022, the book value of properties under contracts to sell was $1.2 million; however, the closings had not occurred at quarter-end.

We had a net recovery of loan charge-offs for the fourth quarter 2022 of $9 thousand, resulting from a $1.1 million recovery of a previous year’s charge-off. Net loan charge-offs were $325 thousand, or 0.04% of average loans annualized, for the quarter ended September 30, 2022. We had an $8 thousand net recovery of loan charge-offs for the quarter ended December 31, 2021. Net loan charge-offs for the year 2022 were $0.7 million, or 0.02% of average loans annualized, compared to a net recovery of loan charge-offs of $0.1 million for the year 2021.

Allowance for Credit Losses

Provision for credit losses for the fourth quarter 2022 was $1.5 million, compared to $2.4 million for the quarter ended September 30, 2022 and $0.5 million for the fourth quarter 2021. Provision for the year 2022 was $4.9 million compared to a recovery of $6.4 million during the year 2021. Our reserve coverage (allowance for credit losses to nonperforming loans) at December 31, 2022 was 300.4% compared to 324.5% at September 30, 2022 and 251.2% at December 31, 2021. Our credit loss reserve as a percentage of total loans outstanding at December 31, 2022 was 1.24% compared to 1.22% at September 30, 2022 and December 31, 2021.

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 the COVID-19 pandemic on our business operations and credit quality and on general economic and financial market conditions, as well as our ability to respond to the related challenges; 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 $5.4 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, three banking locations in northeastern Tennessee, four trust offices across Kentucky, and one trust office in Tennessee.

Additional information follows.

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