[X]
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended September 30, 2008
|
|
Or
|
|
[ ]
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the transition period from _____________ to
_____________
|
|
Kentucky
|
61-0979818
|
(State
or other jurisdiction of incorporation or organization)
|
IRS
Employer Identification No.
|
346
North Mayo Trail
Pikeville,
Kentucky
(address
of principal executive offices)
|
41501
(Zip
Code)
|
Yes ü
|
No
|
Large
accelerated filer
|
Accelerated
filer ü
|
Non-accelerated
filer
|
Smaller
reporting company
|
(Do
not check if a smaller reporting company)
|
Yes
|
No
ü
|
(dollars
in thousands)
|
(unaudited)
September
30
2008
|
December
31
2007
|
||||||
Assets:
|
||||||||
Cash
and due from banks
|
$ | 83,169 | $ | 105,209 | ||||
Federal
funds sold
|
21,766 | 32,041 | ||||||
Cash
and cash equivalents
|
104,935 | 137,250 | ||||||
Securities
available-for-sale at fair value
|
||||||||
(amortized
cost of $284,716 and $325,879, respectively)
|
284,913 | 324,153 | ||||||
Securities
held-to-maturity at amortized cost
|
||||||||
(fair
value of $27,065 and $32,350, respectively)
|
27,219 | 32,959 | ||||||
Loans
held for sale
|
2,175 | 2,334 | ||||||
Loans
|
2,316,020 | 2,227,897 | ||||||
Allowance
for loan losses
|
(29,908 | ) | (28,054 | ) | ||||
Net
loans
|
2,286,112 | 2,199,843 | ||||||
Premises
and equipment, net
|
51,890 | 53,391 | ||||||
Federal
Reserve Bank and Federal Home Loan Bank stock
|
29,036 | 28,060 | ||||||
Goodwill
|
65,059 | 65,059 | ||||||
Core
deposit intangible (net of accumulated amortization of $6,063
and
|
||||||||
$5,588,
respectively)
|
1,441 | 1,917 | ||||||
Bank
owned life insurance
|
23,894 | 23,285 | ||||||
Mortgage
servicing rights
|
3,154 | 3,258 | ||||||
Other
assets
|
29,100 | 31,175 | ||||||
Total
assets
|
$ | 2,908,928 | $ | 2,902,684 | ||||
Liabilities
and shareholders’ equity:
|
||||||||
Deposits
|
||||||||
Noninterest
bearing
|
$ | 452,678 | $ | 449,861 | ||||
Interest
bearing
|
1,837,089 | 1,843,303 | ||||||
Total
deposits
|
2,289,767 | 2,293,164 | ||||||
Repurchase
agreements
|
142,238 | 158,980 | ||||||
Federal
funds purchased and other short-term borrowings
|
20,180 | 18,364 | ||||||
Advances
from Federal Home Loan Bank
|
60,764 | 40,906 | ||||||
Long-term
debt
|
61,341 | 61,341 | ||||||
Other
liabilities
|
29,650 | 28,574 | ||||||
Total
liabilities
|
2,603,940 | 2,601,329 | ||||||
Shareholders’
equity:
|
||||||||
Preferred
stock, 300,000 shares authorized and unissued
|
- | - | ||||||
Common
stock, $5 par value, shares authorized 25,000,000;
|
||||||||
shares
outstanding 2008 – 15,055,405; 2007 – 15,044,124
|
75,277 | 75,221 | ||||||
Capital
surplus
|
149,605 | 149,005 | ||||||
Retained
earnings
|
79,978 | 78,251 | ||||||
Accumulated
other comprehensive income (loss), net of tax
|
128 | (1,122 | ) | |||||
Total
shareholders’ equity
|
304,988 | 301,355 | ||||||
Total
liabilities and shareholders’ equity
|
$ | 2,908,928 | $ | 2,902,684 |
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30
|
September
30
|
|||||||||||||||
(in
thousands except per share data)
|
2008
|
2007
|
2008
|
2007
|
||||||||||||
Interest
income:
|
||||||||||||||||
Interest
and fees on loans, including loans held for sale
|
$ | 37,501 | $ | 43,454 | $ | 114,564 | $ | 128,835 | ||||||||
Interest
and dividends on securities
|
||||||||||||||||
Taxable
|
3,139 | 4,316 | 9,777 | 13,593 | ||||||||||||
Tax
exempt
|
472 | 471 | 1,417 | 1,460 | ||||||||||||
Interest
and dividends on Federal Reserve and Federal
|
||||||||||||||||
Home
Loan Bank stock
|
394 | 453 | 1,188 | 1,340 | ||||||||||||
Other,
including interest on federal funds sold
|
198 | 1,025 | 1,108 | 3,755 | ||||||||||||
Total
interest income
|
41,704 | 49,719 | 128,054 | 148,983 | ||||||||||||
Interest
expense:
|
||||||||||||||||
Interest
on deposits
|
12,713 | 19,345 | 41,762 | 57,996 | ||||||||||||
Interest
on repurchase agreements and other short-term
|
||||||||||||||||
borrowings
|
1,030 | 2,177 | 3,588 | 6,510 | ||||||||||||
Interest
on advances from Federal Home Loan Bank
|
462 | 605 | 1,215 | 2,020 | ||||||||||||
Interest
on long-term debt
|
1,000 | 1,000 | 3,000 | 3,364 | ||||||||||||
Total
interest expense
|
15,205 | 23,127 | 49,565 | 69,890 | ||||||||||||
Net
interest income
|
26,499 | 26,592 | 78,489 | 79,093 | ||||||||||||
Provision
for loan losses
|
2,875 | 1,915 | 7,892 | 4,231 | ||||||||||||
Net
interest income after provision for loan losses
|
23,624 | 24,677 | 70,597 | 74,862 | ||||||||||||
Noninterest
income:
|
||||||||||||||||
Service
charges on deposit accounts
|
5,739 | 5,302 | 16,341 | 15,436 | ||||||||||||
Gains
on sales of loans, net
|
292 | 384 | 1,332 | 996 | ||||||||||||
Trust
income
|
1,260 | 1,240 | 3,749 | 3,619 | ||||||||||||
Loan
related fees
|
686 | 606 | 2,064 | 2,494 | ||||||||||||
Bank
owned life insurance
|
190 | 280 | 722 | 752 | ||||||||||||
Securities
losses/other than temporary impairment charges
|
(13,461 | ) | 0 | (13,511 | ) | 0 | ||||||||||
Other
|
1,325 | 2,122 | 3,758 | 4,109 | ||||||||||||
Total
noninterest income
|
(3,969 | ) | 9,934 | 14,455 | 27,406 | |||||||||||
Noninterest
expense:
|
||||||||||||||||
Salaries
and employee benefits
|
10,287 | 9,604 | 31,598 | 31,818 | ||||||||||||
Occupancy,
net
|
1,715 | 1,641 | 5,049 | 5,043 | ||||||||||||
Equipment
|
1,088 | 1,202 | 3,255 | 3,664 | ||||||||||||
Data
processing
|
1,413 | 1,301 | 4,220 | 3,617 | ||||||||||||
Bank
franchise tax
|
891 | 866 | 2,695 | 2,598 | ||||||||||||
Legal
and professional fees
|
823 | 922 | 2,260 | 2,489 | ||||||||||||
Other
|
5,083 | 3,788 | 12,667 | 13,529 | ||||||||||||
Total
noninterest expense
|
21,300 | 19,324 | 61,744 | 62,758 | ||||||||||||
Income
(loss) before income taxes
|
(1,645 | ) | 15,287 | 23,308 | 39,510 | |||||||||||
Income
tax expense (benefit)
|
(1,068 | ) | 4,811 | 6,720 | 12,154 | |||||||||||
Net
income (loss)
|
(577 | ) | 10,476 | 16,588 | 27,356 | |||||||||||
Other
comprehensive income, net of tax:
|
||||||||||||||||
Unrealized
holding gains on securities available-for-sale
|
1,837 | 1,969 | 1,250 | 1,132 | ||||||||||||
Comprehensive
income
|
$ | 1,260 | $ | 12,445 | $ | 17,838 | $ | 28,488 | ||||||||
Basic
earnings (loss) per share
|
$ | (0.04 | ) | $ | 0.69 | $ | 1.11 | $ | 1.80 | |||||||
Diluted
earnings (loss) per share
|
$ | (0.04 | ) | $ | 0.68 | $ | 1.09 | $ | 1.77 | |||||||
Weighted
average shares outstanding-basic
|
15,011 | 15,183 | 15,000 | 15,186 | ||||||||||||
Weighted
average shares outstanding-diluted
|
15,263 | 15,342 | 15,153 | 15,417 | ||||||||||||
Dividends
declared per share
|
$ | 0.29 | $ | 0.27 | $ | 0.87 | $ | 0.81 |
Nine
months ended
|
||||||||
September
30
|
||||||||
(in
thousands)
|
2008
|
2007
|
||||||
Cash
flows from operating activities:
|
||||||||
Net
income
|
$ | 16,588 | $ | 27,356 | ||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
Depreciation
and amortization
|
3,847 | 4,299 | ||||||
Change
in net deferred tax liability
|
(5,198 | ) | 1,809 | |||||
Stock
based compensation
|
545 | 498 | ||||||
Excess
tax benefits of stock-based compensation
|
878 | 721 | ||||||
Provision
for loan and other real estate losses
|
8,103 | 4,579 | ||||||
Securities
losses/other than temporary impairment charges
|
13,511 | 0 | ||||||
Gains
on sale of mortgage loans held for sale
|
(1,332 | ) | (996 | ) | ||||
Losses
on sale of assets, net
|
415 | 159 | ||||||
Proceeds
from sale of mortgage loans held for sale
|
69,527 | 56,677 | ||||||
Funding
of mortgage loans held for sale
|
(68,036 | ) | (55,969 | ) | ||||
Amortization
of securities premiums, net
|
(134 | ) | 510 | |||||
Change
in cash surrender value of bank owned life insurance
|
(609 | ) | (653 | ) | ||||
Fair
value adjustments of mortgage servicing rights
|
104 | (71 | ) | |||||
Amortization/write-off
of debt issuance costs
|
0 | 1,950 | ||||||
Changes
in:
|
||||||||
Other liabilities
|
4,118 | 7,852 | ||||||
Other assets
|
3,651 | (1,482 | ) | |||||
Net
cash provided by operating activities
|
45,978 | 47,239 | ||||||
Cash
flows from investing activities:
|
||||||||
Securities
available-for-sale:
|
||||||||
Proceeds
from sales
|
29,950 | 106,800 | ||||||
Proceeds
from prepayments and maturities
|
53,067 | 37,179 | ||||||
Purchase
of securities
|
(55,264 | ) | (69,800 | ) | ||||
Securities
held-to-maturity:
|
||||||||
Proceeds
from prepayments and maturities
|
5,773 | 6,331 | ||||||
Change
in loans, net
|
(99,361 | ) | (75,784 | ) | ||||
Purchase
of premises, equipment, and other real estate
|
(2,384 | ) | (1,808 | ) | ||||
Proceeds
from sale of premises and equipment
|
8 | 0 | ||||||
Additional
investment in equity securities
|
(976 | ) | (14 | ) | ||||
Redemption
of investment in unconsolidated subsidiaries
|
0 | 1,841 | ||||||
Investment
in unconsolidated subsidiaries
|
0 | (1,841 | ) | |||||
Proceeds
from sale of other real estate and other repossessed
assets
|
3,623 | 2,290 | ||||||
Additional
investment in other real estate owned
|
(119 | ) | (21 | ) | ||||
Additional
investment in bank owned life insurance
|
0 | (1,391 | ) | |||||
Net
cash provided by (used in) investing activities
|
(65,683 | ) | 3,782 | |||||
Cash
flows from financing activities:
|
||||||||
Change
in deposits, net
|
(3,397 | ) | (8,292 | ) | ||||
Change
in repurchase agreements and other short-term borrowings,
net
|
(14,926 | ) | (15,244 | ) | ||||
Advances
from Federal Home Loan Bank
|
20,000 | 0 | ||||||
Payments
on advances from Federal Home Loan Bank
|
(142 | ) | (40,274 | ) | ||||
Payment
for redemption of junior subordinated debentures
|
0 | (61,341 | ) | |||||
Additional
junior subordinated debentures
|
0 | 61,341 | ||||||
Issuance
of common stock
|
2,408 | 2,409 | ||||||
Purchase
of common stock
|
(2,630 | ) | (6,184 | ) | ||||
Excess
tax benefits of stock-based compensation
|
(878 | ) | (721 | ) | ||||
Dividends
paid
|
(13,045 | ) | (12,307 | ) | ||||
Net
cash used in financing activities
|
(12,610 | ) | (80,613 | ) | ||||
Net
decrease in cash and cash equivalents
|
(32,315 | ) | (29,592 | ) | ||||
Cash
and cash equivalents at beginning of period
|
137,250 | 157,538 | ||||||
Cash
and cash equivalents at end of period
|
$ | 104,935 | $ | 127,946 | ||||
Supplemental
disclosures:
|
||||||||
Income
taxes paid
|
$ | 13,171 | $ | 8,388 | ||||
Interest
paid
|
45,078 | 61,589 | ||||||
Non-cash
activities
|
||||||||
Loans
to facilitate the sale of other real estate and other repossessed
assets
|
935 | 184 | ||||||
Common
stock dividends accrued, paid in subsequent quarter
|
4,356 | 4,058 | ||||||
Real
estate acquired in settlement of loans
|
6,135 | 5,063 | ||||||
Other
than temporary impairment of investment securities
|
13,461 | 0 |
Nine
Months Ended
|
||||||||
September
30
|
||||||||
2008
|
2007
|
|||||||
Expected
dividend yield
|
4.10 | % | 2.77 | % | ||||
Risk-free
interest rate
|
3.23 | % | 4.81 | % | ||||
Expected
volatility
|
31.01 | % | 33.50 | % | ||||
Expected
term (in years)
|
7.5 | 7.5 | ||||||
Weighted
average fair value of options
|
$ | 6.41 | $ | 12.74 |
(in
thousands)
|
Amortized
Cost
|
Fair
Value
|
||||||
U.S.
Treasury and government agencies
|
$ | 23,320 | $ | 23,691 | ||||
State
and political subdivisions
|
43,136 | 43,160 | ||||||
U.S.
government sponsored agencies and mortgage-backed pass through
certificates
|
196,666 | 196,991 | ||||||
Collateralized
mortgage obligations
|
1 | 1 | ||||||
Total
debt securities
|
263,123 | 263,843 | ||||||
Marketable
equity securities
|
21,593 | 21,070 | ||||||
Total
available-for-sale securities
|
$ | 284,716 | $ | 284,913 |
(in
thousands)
|
Amortized
Cost
|
Fair
Value
|
||||||
State
and political subdivisions
|
$ | 1,575 | $ | 1,587 | ||||
U.S.
government sponsored agencies and mortgage-backed pass through
certificates
|
25,644 | 25,478 | ||||||
Total
held-to-maturity securities
|
$ | 27,219 | $ | 27,065 |
(in
thousands)
|
Amortized
Cost
|
Fair
Value
|
||||||
U.S.
Treasury and government agencies
|
$ | 20,307 | $ | 20,736 | ||||
State
and political subdivisions
|
40,472 | 41,137 | ||||||
U.S.
government sponsored agencies and mortgage-backed pass through
certificates
|
205,049 | 202,542 | ||||||
Collateralized
mortgage obligations
|
1 | 1 | ||||||
Other
debt securities
|
20,000 | 19,687 | ||||||
Total
debt securities
|
285,829 | 284,103 | ||||||
Marketable
equity securities
|
40,050 | 40,050 | ||||||
Total
available-for-sale securities
|
$ | 325,879 | $ | 324,153 |
(in
thousands)
|
Amortized
Cost
|
Fair
Value
|
||||||
State
and political subdivisions
|
$ | 1,901 | $ | 1,914 | ||||
U.S.
government sponsored agencies and mortgage-backed pass through
certificates
|
31,058 | 30,436 | ||||||
Total
held-to-maturity securities
|
$ | 32,959 | $ | 32,350 |
(in
thousands)
|
September
30
2008
|
December
31
2007
|
||||||
Commercial
construction
|
$ | 153,325 | $ | 143,773 | ||||
Commercial
secured by real estate
|
652,610 | 640,574 | ||||||
Commercial
other
|
358,896 | 333,774 | ||||||
Real
estate construction
|
61,141 | 69,021 | ||||||
Real
estate mortgage
|
605,944 | 599,665 | ||||||
Consumer
|
472,588 | 435,273 | ||||||
Equipment
lease financing
|
11,516 | 5,817 | ||||||
Total
loans
|
$ | 2,316,020 | $ | 2,227,897 |
Nine
Months Ended
|
||||||||
September
30
|
||||||||
(in
thousands)
|
2008
|
2007
|
||||||
Allowance
balance at January 1
|
$ | 28,054 | $ | 27,526 | ||||
Additions
to allowance charged against operations
|
7,892 | 4,231 | ||||||
Recoveries
credited to allowance
|
1,846 | 1,980 | ||||||
Losses
charged against allowance
|
(7,884 | ) | (5,804 | ) | ||||
Allowance
balance at September 30
|
$ | 29,908 | $ | 27,933 |
Nine
Months Ended
|
||||||||
September
30
|
||||||||
(in
thousands)
|
2008
|
2007
|
||||||
Net
gain on sale of loans held for sale
|
$ | 1,332 | $ | 996 | ||||
Net
loan servicing income
|
||||||||
Servicing
fees
|
658 | 648 | ||||||
Late
fees
|
43 | 50 | ||||||
Ancillary
fees
|
146 | 108 | ||||||
Fair
value adjustments
|
(446 | ) | (255 | ) | ||||
Net
loan servicing income
|
401 | 551 | ||||||
Mortgage
banking income
|
$ | 1,733 | $ | 1,547 |
(in
thousands)
|
Nine
Months Ended
September
30
2008
|
|||
Fair
value, beginning of period
|
$ | 3,258 | ||
New
servicing assets created
|
342 | |||
Change
in fair value during the period due to:
|
||||
Time
decay (1)
|
(130 | ) | ||
Payoffs
(2)
|
(289 | ) | ||
Changes
in valuation inputs or assumptions (3)
|
(27 | ) | ||
Fair
value, end of period
|
$ | 3,154 |
(1)
|
Represents
decrease in value due to regularly scheduled loan principal payments and
partial loan paydowns.
|
(2)
|
Represents
decrease in value due to loans that paid off during the
period.
|
(3)
|
Represents
change in value resulting from market-driven changes in interest rates and
prepayment speeds.
|
(in
thousands)
|
September
30
2008
|
December
31
2007
|
||||||
Subsidiaries:
|
||||||||
Repurchase
agreements
|
$ | 142,238 | $ | 158,980 | ||||
Federal
funds purchased
|
20,180 | 18,364 | ||||||
Total
short-term debt
|
$ | 162,418 | $ | 177,344 |
(in
thousands)
|
September
30
2008
|
December
31
2007
|
||||||
Monthly
amortizing
|
$ | 764 | $ | 906 | ||||
Term
|
60,000 | 40,000 | ||||||
$ | 60,764 | $ | 40,906 |
Principal
Payments Due by Period at September 30, 2008
|
||||||||||||||||||||||||||||
(in
thousands)
|
Total
|
Within
1 Year
|
2
Years
|
3
Years
|
4
Years
|
5
Years
|
After
5 Years
|
|||||||||||||||||||||
Outstanding
advances, weighted average interest rate – 3.83%
|
$ | 764 | $ | 85 | $ | 623 | $ | 8 | $ | 8 | $ | 8 | $ | 32 |
(in
thousands)
|
September
30
2008
|
December
31
2007
|
||||||
Advance
#146, 3.70%, due 9/02/08
|
$ | 0 | $ | 40,000 | ||||
Advance
#154, 3.17%, due 8/04/09
|
20,000 | 0 | ||||||
Advance
#155, 3.18%, due 9/02/09
|
40,000 | 0 | ||||||
Total
Term Advances
|
$ | 60,000 | $ | 40,000 |
(in
thousands)
|
September
30
2008
|
December
31
2007
|
||||||
Junior
subordinated debentures, 6.52%, due 6/1/37
|
$ | 61,341 | $ | 61,341 |
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30
|
September
30
|
|||||||||||||||
(in
thousands)
|
2008
|
2007
|
2008
|
2007
|
||||||||||||
Numerator:
|
||||||||||||||||
Net
income (loss)
|
$ | (577 | ) | $ | 10,476 | $ | 16,588 | $ | 27,356 | |||||||
Denominator:
|
||||||||||||||||
Basic
earnings per share:
|
||||||||||||||||
Weighted
average shares
|
15,011 | 15,183 | 15,000 | 15,186 | ||||||||||||
Diluted
earnings per share:
|
||||||||||||||||
Effect
of dilutive stock options
|
252 | 159 | 153 | 231 | ||||||||||||
Adjusted
weighted average shares
|
15,263 | 15,342 | 15,153 | 15,417 | ||||||||||||
Earnings
per share:
|
||||||||||||||||
Basic
earnings (loss) per share
|
$ | (0.04 | ) | $ | 0.69 | $ | 1.11 | $ | 1.80 | |||||||
Diluted
earnings (loss) per share
|
$ | (0.04 | ) | $ | 0.68 | $ | 1.09 | $ | 1.77 |
(in
thousands)
|
Fair
Value Measurements at
September
30, 2008 Using
|
|||||||||||||||
Fair
Value
September
30
2008
|
Quoted
Prices in Active Markets for Identical Assets
(Level
1)
|
Other
Observable Inputs
(Level
2)
|
Significant
Unobservable Inputs
(Level
3)
|
|||||||||||||
Available-for-sale
securities
|
$ | 284,913 | $ | 0 | $ | 283,320 | $ | 1,593 | ||||||||
Mortgage
servicing rights
|
3,154 | 0 | 0 | 3,154 | ||||||||||||
Total
recurring assets measured at fair value
|
$ | 288,067 | $ | 0 | $ | 282,860 | $ | 5,207 |
(in
thousands)
|
Available-for-Sale
Securities
|
Mortgage
Servicing Rights
|
||||||
Beginning
balance, January 1, 2008
|
$ | 40,050 | $ | 3,258 | ||||
Total
realized and unrealized gains and losses
|
||||||||
Included
in net income
|
(13,461 | ) | (27 | ) | ||||
Included
in other comprehensive income
|
0 | |||||||
Purchases,
issuances, and settlements
|
(24,996 | ) | (77 | ) | ||||
Ending
balance, September 30, 2008
|
$ | 1,593 | $ | 3,154 |
(in
thousands)
|
Fair
Value Measurements at
September
30, 2008 Using
|
|||||||||||||||
Fair
Value
September
30
2008
|
Quoted
Prices in Active Markets for Identical Assets
(Level
1)
|
Other
Observable Inputs
(Level
2)
|
Significant
Unobservable Inputs
(Level
3)
|
|||||||||||||
Impaired
loans
|
$ | 11,036 | $ | 0 | $ | 0 | $ | 11,036 |
Pay
Date
|
Record
Date
|
Amount
Per Share
|
October
1, 2008
|
September
15, 2008
|
$0.29
|
July
1, 2008
|
June
15, 2008
|
$0.29
|
April
1, 2008
|
March
15, 2008
|
$0.29
|
January
1, 2008
|
December
15, 2007
|
$0.29
|
October
1, 2007
|
September
15, 2007
|
$0.27
|
July
1, 2007
|
June
15, 2007
|
$0.27
|
(in
thousands except per share data)
|
3Q
2008
|
2Q
2008
|
3Q
2007
|
9
Months
2008
|
9
Months
2007
|
|||||||||||||||
Net
income (loss)
|
$ | (577 | ) | $ | 8,620 | $ | 10,476 | $ | 16,588 | $ | 27,356 | |||||||||
Earnings
(loss) per share
|
$ | (0.04 | ) | $ | 0.58 | $ | 0.69 | $ | 1.11 | $ | 1.80 | |||||||||
Earnings
(loss) per share (diluted)
|
$ | (0.04 | ) | $ | 0.57 | $ | 0.68 | $ | 1.09 | $ | 1.77 | |||||||||
Return
on average assets
|
(0.08 | )% | 1.19 | % | 1.39 | % | 0.76 | % | 1.22 | % | ||||||||||
Return
on average equity
|
(0.74 | )% | 11.21 | % | 14.04 | % | 7.16 | % | 12.53 | % | ||||||||||
Efficiency
ratio
|
58.63 | % | 57.25 | % | 52.36 | % | 57.43 | % | 58.30 | % | ||||||||||
Dividends
declared per share
|
$ | 0.29 | $ | 0.29 | $ | 0.27 | $ | 0.87 | $ | 0.81 | ||||||||||
Book
value per share
|
$ | 20.26 | $ | 20.43 | $ | 19.62 | $ | 20.26 | $ | 19.62 | ||||||||||
Weighted
average shares
|
15,011 | 14,989 | 15,183 | 15,000 | 15,186 | |||||||||||||||
Weighted
average shares (diluted)
|
15,263 | 15,152 | 15,342 | 15,153 | 15,417 |
(in
thousands except per share data)
|
3Q
2008
|
2Q
2008
|
3Q
2007
|
9
Months
2008
|
9
Months
2007
|
|||||||||||||||
Net
income (loss) as reported
|
$ | (577 | ) | $ | 8,620 | $ | 10,476 | $ | 16,588 | $ | 27,356 | |||||||||
Impact
of FHLMC/FNMA securities impairment charge
|
$ | 9,386 | $ | - | $ | - | $ | 9,386 | $ | - | ||||||||||
Net
income as adjusted
|
$ | 8,809 | $ | 8,620 | $ | 10,476 | $ | 25,974 | $ | 27,356 | ||||||||||
Earnings
per share
|
$ | 0.59 | $ | 0.58 | $ | 0.69 | $ | 1.73 | $ | 1.80 | ||||||||||
Earnings
per share (diluted)
|
$ | 0.58 | $ | 0.57 | $ | 0.68 | $ | 1.71 | $ | 1.77 | ||||||||||
Return
on average assets
|
1.20 | % | 1.19 | % | 1.39 | % | 1.19 | % | 1.22 | % | ||||||||||
Return
on average equity
|
11.24 | % | 11.21 | % | 14.04 | % | 11.22 | % | 12.53 | % | ||||||||||
Efficiency
ratio
|
56.30 | % | 57.25 | % | 52.36 | % | 56.64 | % | 58.30 | % | ||||||||||
Dividends
declared per share
|
$ | 0.29 | $ | 0.29 | $ | 0.27 | $ | 0.87 | $ | 0.81 | ||||||||||
Book
value per share
|
$ | 20.86 | $ | 20.43 | $ | 19.62 | $ | 20.88 | $ | 19.62 | ||||||||||
Weighted
average shares
|
15,011 | 14,989 | 15,183 | 15,000 | 15,186 | |||||||||||||||
Weighted
average shares (diluted)
|
15,263 | 15,152 | 15,342 | 15,153 | 15,417 |
v
|
CTBI
maintains a significantly higher level of capital than required by
regulatory authorities to be designated as well-capitalized. On
September 30, 2008, our Tier 1 Leverage Ratio of 10.45% was 545 basis
points higher than the 5.00% required, our Tier 1 Risk-Based Capital Ratio
of 13.11% was 711 basis points higher than the required 6.00%, and our
Total Risk-Based Capital Ratio of 14.36% was 436 basis points higher than
the 10.00% regulatory requirement for this
designation.
|
v
|
CTBI's
basic earnings per share for the third quarter 2008 normalized for the
other than temporary impairment charge for auction rate securities
increased 1.7% from prior quarter but decreased 14.5% from prior year
third quarter primarily due to the increased provision for loan
losses. Year-to-date basic earnings per share normalized
decreased 3.9% from prior year.
|
v
|
Our
net interest margin for the nine months ended September 30, 2008 increased
9 basis points from prior year. However, net interest income
decreased $0.6 million from prior year as average earning assets decreased
by $93.7 million.
|
v
|
Noninterest
income for the third quarter and year-to-date 2008 were both impacted by
the $13.5 million other than temporary impairment charge for auction rate
securities. Normalized noninterest income for the first nine
months of 2008 increased 1.9% from prior year with increases in gains on
sales of loans, deposit service charges, and trust revenue offset by a
decrease in the fair value of mortgage servicing
rights.
|
v
|
CTBI
established a tax strategy to offset the capital loss resulting from the
other than temporary impairment charge for auction rate securities whereby
the losses would be offset against capital gains during the next five
years. This strategy was available prior to the Emergency
Economic Stabilization Act of 2008 which provides for the treatment of the
losses as ordinary losses.
|
v
|
Noninterest
expense was also impacted commensurate with the conservatorship action
with a $0.8 million charge relative to trust activity for which CTBI had
financial responsibility. Normalized noninterest expense for
the first nine months of 2008 has decreased
3.0%.
|
v
|
Nonperforming
loans increased $5.2 million at September 30, 2008 to $49.3 million
compared to $44.2 million at prior quarter-end and $31.5 million for prior
year quarter ended September 30, 2007. The majority of our
nonperforming loans continue to be in our Central Kentucky Region;
however, all regions have seen an increase during the past quarter with
the changes in national economic conditions, particularly the price of
gasoline.
|
v
|
Our
loan portfolio increased an annualized 7.4% during the quarter with $42.4
million in growth. Loan growth from prior year third quarter
was $81.5 million.
|
v
|
Our
investment portfolio decreased $24.0 million for the quarter, primarily as
a result of the other than temporary impairment charge for auction rate
securities discussed above. Our investment portfolio declined
$74.9 million year over year primarily resulting from the use of the
liquidity in the portfolio to fund loan growth and manage the net interest
margin.
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30
|
September
30
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Return
on average shareholders' equity
|
(0.74 | )% | 14.04 | % | 7.16 | % | 12.53 | % | ||||||||
Return
on average assets
|
(0.08 | )% | 1.39 | % | 0.76 | % | 1.22 | % |
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30
|
September
30
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Yield
on interest earning assets
|
6.22 | % | 7.18 | % | 6.41 | % | 7.21 | % | ||||||||
Cost
of interest bearing funds
|
2.86 | % | 4.11 | % | 3.11 | % | 4.14 | % | ||||||||
Net
interest spread
|
3.36 | % | 3.07 | % | 3.30 | % | 3.07 | % | ||||||||
Net
interest margin
|
3.97 | % | 3.86 | % | 3.95 | % | 3.86 | % |
Nine
Months Ended
|
||||||||
September
30
|
||||||||
(in
thousands)
|
2008
|
2007
|
||||||
Allowance
balance at January 1
|
$ | 28,054 | $ | 27,526 | ||||
Additions
to allowance charged against operations
|
7,892 | 4,231 | ||||||
Recoveries
credited to allowance
|
1,846 | 1,980 | ||||||
Losses
charged against allowance
|
(7,884 | ) | (5,804 | ) | ||||
Allowance
balance at September 30
|
$ | 29,908 | $ | 27,933 | ||||
Allowance
for loan losses to period-end loans
|
1.29 | % | 1.25 | % | ||||
Average
loans, net of unearned income
|
$ | 2,265,265 | $ | 2,195,940 | ||||
Provision
for loan losses to average loans, annualized
|
0.47 | % | 0.26 | % | ||||
Loan
charge-offs net of recoveries, to average loans,
annualized
|
0.36 | % | 0.23 | % |
(in
thousands)
|
Nonaccrual
Loans
|
As
a % of Loan Balances by Category
|
Restructured
Loans
|
As
a % of Loan Balances by Category
|
Accruing
Loans Past Due 90 Days or More
|
As
a % of Loan Balances by Category
|
Total
Loan Balances
|
|||||||||||||||||||||
September
30, 2008
|
||||||||||||||||||||||||||||
Commercial
construction
|
$ | 16,145 | 10.53 | % | $ | 0 | 0.00 | % | $ | 6,941 | 4.53 | % | $ | 153,325 | ||||||||||||||
Commercial
secured by real estate
|
6,308 | 0.97 | 0 | 0.00 | 6,298 | 0.97 | 652,610 | |||||||||||||||||||||
Commercial
other
|
4,499 | 1.25 | 0 | 0.00 | 1,401 | 0.39 | 358,896 | |||||||||||||||||||||
Consumer
real estate construction
|
1,330 | 2.18 | 0 | 0.00 | 125 | 0.20 | 61,141 | |||||||||||||||||||||
Consumer
real estate secured
|
2,880 | 0.48 | 0 | 0.00 | 3,107 | 0.51 | 605,944 | |||||||||||||||||||||
Consumer
other
|
0 | 0.00 | 0 | 0.00 | 273 | 0.06 | 472,588 | |||||||||||||||||||||
Equipment
lease financing
|
0 | 0.00 | 0 | 0.00 | 0 | 0.00 | 11,516 | |||||||||||||||||||||
Total
|
$ | 31,162 | 1.35 | % | $ | 0 | 0.00 | % | $ | 18,145 | 0.78 | % | $ | 2,316,020 |
(in
thousands)
|
Nonaccrual
Loans
|
As
a % of Loan Balances by Category
|
Restructured
Loans
|
As
a % of Loan Balances by Category
|
Accruing
Loans Past Due 90 Days or More
|
As
a % of Loan Balances by Category
|
Total
Loan Balances
|
|||||||||||||||||||||
December
31, 2007
|
||||||||||||||||||||||||||||
Commercial
construction
|
$ | 8,682 | 6.04 | % | $ | 0 | 0.00 | % | $ | 1,733 | 1.21 | % | $ | 143,773 | ||||||||||||||
Commercial
secured by real estate
|
5,715 | 0.89 | 0 | 0.00 | 3,300 | 0.52 | 640,574 | |||||||||||||||||||||
Commercial
other
|
4,489 | 1.34 | 20 | 0.01 | 1,305 | 0.39 | 333,774 | |||||||||||||||||||||
Consumer
real estate construction
|
723 | 1.05 | 0 | 0.00 | 722 | 1.05 | 69,021 | |||||||||||||||||||||
Consumer
real estate secured
|
2,628 | 0.44 | 0 | 0.00 | 2,113 | 0.35 | 599,665 | |||||||||||||||||||||
Consumer
other
|
0 | 0.00 | 0 | 0.00 | 449 | 0.10 | 435,273 | |||||||||||||||||||||
Equipment
lease financing
|
0 | 0.00 | 0 | 0.00 | 0 | 0.00 | 5,817 | |||||||||||||||||||||
Total
|
$ | 22,237 | 1.00 | % | $ | 20 | 0.00 | % | $ | 9,622 | 0.43 | % | $ | 2,227,897 |
Ø
|
the
preferred stock issued to the U.S. Treasury (“Treasury Preferred Stock”)
would pay 5% dividends for the first five years, and then 9% dividends
thereafter;
|
Ø
|
in
connection with the purchase of preferred stock, the U.S. Treasury will
receive warrants entitling the U.S. Treasury to buy the participating
institution’s common stock with a market price equal to 15% of the
Treasury Preferred Stock;
|
Ø
|
the
Treasury Preferred Stock may not be redeemed for a period of three years,
except with proceeds from high-quality private capital;
|
Ø
|
the
consent of the U.S. Treasury will be required to increase common dividends
per share or any share repurchases, with limited exceptions, during the
first three years, unless the Treasury Preferred Stock has been redeemed
or transferred to third parties; and
|
Ø
|
participating
companies must adopt the U.S Treasury’s standards for executive
compensation and corporate governance for the period during which the U.S.
Treasury holds the equity issued under the TARP Capital
Purchase Program.
|
Item
1.
|
Legal
Proceedings
|
None
|
Item
1A.
|
Risk
Factors
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
None
|
Item
3.
|
Defaults
Upon Senior Securities
|
None
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
None
|
Item
5.
|
Other
Information:
|
|
CTBI's
Principal Executive Officer and Principal Financial Officer have furnished
to the SEC the certifications with respect to this Form 10-Q that are
required by Sections 302 and 906 of the Sarbanes-Oxley Act of
2002
|
||
Item
6.
|
a.
Exhibits:
|
|
(1) Certifications
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
|
Exhibit
31.1
Exhibit
31.2
|
|
(2) Certifications
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
|
Exhibit
32.1
Exhibit
32.2
|
COMMUNITY TRUST BANCORP, INC. | |||
Date:
November 7, 2008
|
By:
|
/s/ Jean R. Hale | |
Jean R. Hale | |||
Chairman, President, and Chief Executive Officer | |||
|
By:
|
/s/ Kevin J. Stumbo | |
Kevin J. Stumbo | |||
Executive Vice President and Treasurer | |||
(Principal Financial Officer) |