[X]
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended September 30, 2009
|
|
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
|
Yes
|
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
2009
|
December
31
2008
|
||||||
Assets:
|
||||||||
Cash
and due from banks
|
$ | 78,510 | $ | 89,576 | ||||
Interest
bearing deposits
|
8,035 | 5,422 | ||||||
Federal
funds sold
|
33,984 | 45,880 | ||||||
Cash
and cash equivalents
|
120,529 | 140,878 | ||||||
Other
short-term investments
|
18,720 | 100 | ||||||
Securities
available-for-sale at fair value
|
||||||||
(amortized
cost of $271,828 and $265,999, respectively)
|
278,961 | 267,376 | ||||||
Securities
held-to-maturity at amortized cost
|
||||||||
(fair
value of $16,865 and $25,496, respectively)
|
16,687 | 25,597 | ||||||
Loans
held for sale
|
754 | 623 | ||||||
Loans
|
2,402,697 | 2,348,651 | ||||||
Allowance
for loan losses
|
(31,957 | ) | (30,821 | ) | ||||
Net
loans
|
2,370,740 | 2,317,830 | ||||||
Premises
and equipment, net
|
50,172 | 51,590 | ||||||
Federal
Reserve Bank and Federal Home Loan Bank stock
|
29,051 | 29,040 | ||||||
Goodwill
|
65,059 | 65,059 | ||||||
Core
deposit intangible (net of accumulated amortization of $6,698
and
|
||||||||
$6,222,
respectively)
|
806 | 1,282 | ||||||
Bank
owned life insurance
|
25,749 | 24,135 | ||||||
Mortgage
servicing rights
|
3,070 | 2,168 | ||||||
Other
real estate owned
|
36,607 | 10,425 | ||||||
Other
assets
|
18,471 | 18,428 | ||||||
Total assets
|
$ | 3,035,376 | $ | 2,954,531 | ||||
Liabilities
and shareholders’ equity:
|
||||||||
Deposits
|
||||||||
Noninterest bearing
|
$ | 462,096 | $ | 450,360 | ||||
Interest bearing
|
1,941,858 | 1,881,474 | ||||||
Total deposits
|
2,403,954 | 2,331,834 | ||||||
Repurchase
agreements
|
180,348 | 157,422 | ||||||
Federal
funds purchased and other short-term borrowings
|
11,855 | 11,492 | ||||||
Advances
from Federal Home Loan Bank
|
20,684 | 60,727 | ||||||
Long-term
debt
|
61,341 | 61,341 | ||||||
Other
liabilities
|
38,554 | 23,509 | ||||||
Total liabilities
|
2,716,736 | 2,646,325 | ||||||
Shareholders’
equity:
|
||||||||
Preferred
stock, 300,000 shares authorized and unissued
|
- | - | ||||||
Common
stock, $5 par value, shares authorized 25,000,000;
|
||||||||
shares outstanding 2009 –15,145,726; 2008 – 15,066,248
|
75,729 | 75,331 | ||||||
Capital
surplus
|
151,837 | 150,037 | ||||||
Retained
earnings
|
86,438 | 81,943 | ||||||
Accumulated
other comprehensive income, net of tax
|
4,636 | 895 | ||||||
Total shareholders’ equity
|
318,640 | 308,206 | ||||||
Total liabilities and shareholders’ equity
|
$ | 3,035,376 | $ | 2,954,531 |
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30
|
September
30
|
|||||||||||||||
(in
thousands except per share data)
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
Interest
income:
|
||||||||||||||||
Interest
and fees on loans, including loans held for sale
|
$ | 35,477 | $ | 37,501 | $ | 104,099 | $ | 114,564 | ||||||||
Interest
and dividends on securities
|
||||||||||||||||
Taxable
|
2,292 | 3,139 | 7,390 | 9,777 | ||||||||||||
Tax
exempt
|
473 | 472 | 1,401 | 1,417 | ||||||||||||
Interest
and dividends on Federal Reserve and Federal Home Loan Bank
stock
|
373 | 394 | 1,057 | 1,188 | ||||||||||||
Other,
including interest on federal funds sold
|
141 | 198 | 410 | 1,108 | ||||||||||||
Total
interest income
|
38,756 | 41,704 | 114,357 | 128,054 | ||||||||||||
Interest
expense:
|
||||||||||||||||
Interest
on deposits
|
9,833 | 12,713 | 31,322 | 41,762 | ||||||||||||
Interest
on repurchase agreements and other short-term borrowings
|
575 | 1,030 | 1,846 | 3,588 | ||||||||||||
Interest
on advances from Federal Home Loan Bank
|
304 | 462 | 1,262 | 1,215 | ||||||||||||
Interest
on long-term debt
|
999 | 1,000 | 2,999 | 3,000 | ||||||||||||
Total
interest expense
|
11,711 | 15,205 | 37,429 | 49,565 | ||||||||||||
Net
interest income
|
27,045 | 26,499 | 76,928 | 78,489 | ||||||||||||
Provision
for loan losses
|
5,772 | 2,875 | 12,275 | 7,892 | ||||||||||||
Net
interest income after provision for loan losses
|
21,273 | 23,624 | 64,653 | 70,597 | ||||||||||||
Noninterest
income:
|
||||||||||||||||
Service
charges on deposit accounts
|
5,721 | 5,739 | 16,187 | 16,341 | ||||||||||||
Gains
on sales of loans, net
|
341 | 292 | 3,581 | 1,332 | ||||||||||||
Trust
income
|
1,345 | 1,260 | 3,756 | 3,749 | ||||||||||||
Loan
related fees
|
525 | 686 | 2,767 | 2,064 | ||||||||||||
Bank
owned life insurance
|
275 | 190 | 818 | 722 | ||||||||||||
Securities
gains (losses) and other than temporary impairment charges
|
(1 | ) | (13,461 | ) | 514 | (13,511 | ) | |||||||||
Other
|
1,020 | 1,325 | 3,311 | 3,758 | ||||||||||||
Total
noninterest income
|
9,226 | (3,969 | ) | 30,934 | 14,455 | |||||||||||
Noninterest
expense:
|
||||||||||||||||
Salaries
and employee benefits
|
10,296 | 10,287 | 32,214 | 31,598 | ||||||||||||
Occupancy,
net
|
1,744 | 1,715 | 5,262 | 5,049 | ||||||||||||
Equipment
|
1,204 | 1,088 | 3,592 | 3,255 | ||||||||||||
Data
processing
|
1,510 | 1,413 | 4,511 | 4,220 | ||||||||||||
Bank
franchise tax
|
939 | 891 | 2,767 | 2,695 | ||||||||||||
Legal
and professional fees
|
847 | 823 | 2,841 | 2,260 | ||||||||||||
FDIC
Insurance
|
1,086 | 98 | 4,832 | 230 | ||||||||||||
Other
|
4,953 | 4,985 | 13,935 | 12,437 | ||||||||||||
Total
noninterest expense
|
22,579 | 21,300 | 69,954 | 61,744 | ||||||||||||
Income
(loss) before income taxes
|
7,920 | (1,645 | ) | 25,633 | 23,308 | |||||||||||
Income
tax expense (benefit)
|
2,336 | (1,068 | ) | 7,532 | 6,720 | |||||||||||
Net
income (loss)
|
5,584 | (577 | ) | 18,101 | 16,588 | |||||||||||
Other
comprehensive income, net of tax:
|
||||||||||||||||
Unrealized
holding gains on securities available-for-sale
|
2,599 | 1,837 | 3,741 | 1,250 | ||||||||||||
Comprehensive
income
|
$ | 8,183 | $ | 1,260 | $ | 21,842 | $ | 17,838 | ||||||||
Basic
earnings (loss) per share
|
$ | 0.37 | $ | (0.04 | ) | $ | 1.20 | $ | 1.11 | |||||||
Diluted
earnings (loss) per share
|
0.37 | (0.04 | ) | 1.19 | 1.09 | |||||||||||
Weighted
average shares outstanding-basic
|
15,145 | 15,011 | 15,116 | 15,000 | ||||||||||||
Weighted
average shares outstanding-diluted
|
15,198 | 15,263 | 15,207 | 15,153 | ||||||||||||
Dividends
declared per share
|
$ | 0.30 | $ | 0.29 | $ | 0.90 | $ | 0.87 |
Nine
Months Ended
|
||||||||
September
30
|
||||||||
(in
thousands)
|
2009
|
2008
|
||||||
Cash
flows from operating activities:
|
||||||||
Net
income
|
$ | 18,101 | $ | 16,588 | ||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
Depreciation
and amortization
|
4,005 | 3,847 | ||||||
Deferred
taxes
|
4,833 | (5,198 | ) | |||||
Stock
based compensation
|
420 | 545 | ||||||
Excess
tax benefits of stock-based compensation
|
732 | 878 | ||||||
Provision
for loan and other real estate losses
|
12,946 | 8,103 | ||||||
Securities
(gains)/losses and other than temporary impairment charges
|
(515 | ) | 13,511 | |||||
Gains
on sale of mortgage loans held for sale
|
(3,581 | ) | (1,332 | ) | ||||
(Gains)/losses
on sale of assets, net
|
(6 | ) | 415 | |||||
Proceeds
from sale of mortgage loans held for sale
|
181,983 | 69,527 | ||||||
Funding
of mortgage loans held for sale
|
(178,533 | ) | (68,036 | ) | ||||
Amortization
of securities premiums, net
|
1,595 | (134 | ) | |||||
Change
in cash surrender value of bank owned life insurance
|
(669 | ) | (609 | ) | ||||
Fair
value adjustments of mortgage servicing rights
|
201 | 104 | ||||||
Changes
in:
|
||||||||
Other liabilities
|
8,298 | 4,118 | ||||||
Other assets
|
(1,209 | ) | 3,651 | |||||
Net
cash provided by operating activities
|
48,601 | 45,978 | ||||||
Cash
flows from investing activities:
|
||||||||
Securities
available-for-sale:
|
||||||||
Proceeds
from sales
|
37,451 | 29,950 | ||||||
Proceeds
from prepayments and maturities
|
74,130 | 53,067 | ||||||
Purchase
of securities
|
(118,454 | ) | (55,264 | ) | ||||
Securities
held-to-maturity:
|
||||||||
Proceeds
from prepayments and maturities
|
9,360 | 5,773 | ||||||
Purchase
of securities
|
(480 | ) | 0 | |||||
Other
short-term investments
|
||||||||
Purchase
of securities
|
(29,400 | ) | 0 | |||||
Proceeds
from maturities
|
10,780 | 0 | ||||||
Change
in loans, net
|
(93,939 | ) | (99,361 | ) | ||||
Purchase
of premises and equipment
|
(2,111 | ) | (2,384 | ) | ||||
Proceeds
from sale of premises and equipment
|
24 | 8 | ||||||
Additional
investment in equity securities
|
(11 | ) | (976 | ) | ||||
Proceeds
from sale of other real estate and other repossessed
assets
|
3,589 | 3,623 | ||||||
Additional
investment in other real estate owned
|
(1,642 | ) | (119 | ) | ||||
Additional
investment in bank owned life insurance
|
(945 | ) | 0 | |||||
Net
cash used in investing activities
|
$ | (111,648 | ) | $ | (65,683 | ) | ||
Cash flows from financing
activities:
|
||||||||
Change
in deposits, net
|
$ | 72,120 | $ | (3,397 | ) | |||
Change
in repurchase agreements and other short-term borrowings,
net
|
23,289 | (14,926 | ) | |||||
Advances
from Federal Home Loan Bank
|
0 | 20,000 | ||||||
Payments
on advances from Federal Home Loan Bank
|
(40,043 | ) | (142 | ) | ||||
Issuance
of common stock
|
1,668 | 2,408 | ||||||
Purchase
of common stock
|
0 | (2,630 | ) | |||||
Excess
tax benefits of stock-based compensation
|
(732 | ) | (878 | ) | ||||
Dividends
paid
|
(13,604 | ) | (13,045 | ) | ||||
Net
cash provided by (used in) financing activities
|
42,698 | (12,610 | ) | |||||
Net
decrease in cash and cash equivalents
|
(20,349 | ) | (32,315 | ) | ||||
Cash
and cash equivalents at beginning of period
|
140,878 | 137,250 | ||||||
Cash
and cash equivalents at end of period
|
$ | 120,529 | $ | 104,935 | ||||
Supplemental
disclosures:
|
||||||||
Income
taxes paid
|
$ | 4,895 | $ | 13,171 | ||||
Interest
paid
|
21,354 | 45,078 | ||||||
Non-cash
activities
|
||||||||
Loans
to facilitate the sale of other real estate and other repossessed
assets
|
315 | 935 | ||||||
Common
stock dividends accrued, paid in subsequent quarter
|
4,549 | 4,359 | ||||||
Real
estate acquired in settlement of loans
|
29,068 | 6,135 | ||||||
Other
than temporary impairment of investment securities
|
0 | 13,461 |
Nine
Months Ended
|
||||||||
September
30
|
||||||||
2009
|
2008
|
|||||||
Expected
dividend yield
|
4.02 | % | 4.10 | % | ||||
Risk-free
interest rate
|
2.23 | % | 3.23 | % | ||||
Expected
volatility
|
37.12 | % | 31.01 | % | ||||
Expected
term (in years)
|
7.5 | 7.5 | ||||||
Weighted
average fair value of options
|
$ | 7.69 | $ | 6.41 |
(in
thousands)
|
Amortized
Cost
|
Gross
Unrealized Gains
|
Gross
Unrealized Losses
|
Fair
Value
|
||||||||||||
U.S.
Treasury and government agencies
|
$ | 2,002 | $ | 7 | $ | 0 | $ | 2,009 | ||||||||
State
and political subdivisions
|
45,774 | 1,634 | (38 | ) | 47,370 | |||||||||||
U.S.
government sponsored agencies and mortgage-backed pass through
certificates
|
203,511 | 5,571 | 0 | 209,082 | ||||||||||||
Collateralized
mortgage obligations
|
1 | 0 | 0 | 1 | ||||||||||||
Total
debt securities
|
251,288 | 7,212 | (38 | ) | 258,462 | |||||||||||
Marketable
equity securities
|
20,540 | 4 | (45 | ) | 20,499 | |||||||||||
Total
available-for-sale securities
|
$ | 271,828 | $ | 7,216 | $ | (83 | ) | $ | 278,961 |
(in
thousands)
|
Amortized
Cost
|
Gross
Unrealized Gains
|
Gross
Unrealized Losses
|
Fair
Value
|
||||||||||||
State
and political subdivisions
|
$ | 1,576 | $ | 10 | $ | 0 | $ | 1,586 | ||||||||
U.S.
government sponsored agencies and mortgage-backed pass through
certificates
|
14,631 | 168 | 0 | 14,799 | ||||||||||||
Other
debt securities
|
480 | 0 | 0 | 480 | ||||||||||||
Total
held-to-maturity securities
|
$ | 16,687 | $ | 178 | $ | 0 | $ | 16,865 |
(in
thousands)
|
Amortized
Cost
|
Gross
Unrealized Gains
|
Gross
Unrealized Losses
|
Fair
Value
|
||||||||||||
U.S.
Treasury and government agencies
|
$ | 18,330 | $ | 576 | $ | 0 | $ | 18,906 | ||||||||
State
and political subdivisions
|
39,738 | 757 | (651 | ) | 39,844 | |||||||||||
U.S.
government sponsored agencies and mortgage-backed pass through
certificates
|
187,390 | 1,305 | (390 | ) | 188,305 | |||||||||||
Collateralized
mortgage obligations
|
1 | 0 | 0 | 1 | ||||||||||||
Total
debt securities
|
245,459 | 2,638 | (1,041 | ) | 247,056 | |||||||||||
Marketable
equity securities
|
20,540 | 0 | (220 | ) | 20,320 | |||||||||||
Total
available-for-sale securities
|
$ | 265,999 | $ | 2,638 | $ | (1,261 | ) | $ | 267,376 |
(in
thousands)
|
Amortized
Cost
|
Gross
Unrealized Gains
|
Gross
Unrealized Losses
|
Fair
Value
|
||||||||||||
State
and political subdivisions
|
$ | 1,576 | $ | 9 | $ | 0 | $ | 1,585 | ||||||||
U.S.
government sponsored agencies and mortgage-backed pass through
certificates
|
24,021 | 0 | (110 | ) | 23,911 | |||||||||||
Total
held-to-maturity securities
|
$ | 25,597 | $ | 9 | $ | (110 | ) | $ | 25,496 |
Available-for-Sale
|
Held-to-Maturity
|
|||||||||||||||
(in
thousands)
|
Amortized
Cost
|
Fair
Value
|
Amortized
Cost
|
Fair
Value
|
||||||||||||
Due
in one year or less
|
$ | 9,733 | $ | 9,824 | $ | 0 | $ | 0 | ||||||||
Due
after one through five years
|
17,799 | 18,511 | 395 | 403 | ||||||||||||
Due
after five through ten years
|
5,195 | 5,344 | 0 | 0 | ||||||||||||
Due
after ten years
|
15,050 | 15,701 | 1,181 | 1,183 | ||||||||||||
Mortgage-backed
securities and collateralized mortgage obligations
|
203,511 | 209,082 | 14,631 | 14,799 | ||||||||||||
Other
securities
|
0 | 0 | 480 | 480 | ||||||||||||
Total
debt securities
|
251,288 | 258,462 | 16,687 | 16,865 | ||||||||||||
Marketable
equity securities
|
20,540 | 20,499 | 0 | 0 | ||||||||||||
$ | 271,828 | $ | 278,961 | $ | 16,687 | $ | 16,865 |
(in
thousands)
|
Amortized
Cost
|
Gross
Unrealized Losses
|
Fair
Value
|
|||||||||
Less
Than 12 Months
|
||||||||||||
U.S.
Treasury and government agencies
|
$ | 0 | $ | 0 | $ | 0 | ||||||
State
and political subdivisions
|
0 | 0 | 0 | |||||||||
U.S.
government sponsored agencies and mortgage-backed pass through
certificates
|
0 | 0 | 0 | |||||||||
Total
debt securities
|
0 | 0 | 0 | |||||||||
Marketable
equity securities
|
540 | (45 | ) | 495 | ||||||||
Total
securities
|
$ | 540 | $ | (45 | ) | $ | 495 | |||||
12
Months or More
|
||||||||||||
U.S.
Treasury and government agencies
|
$ | 0 | $ | 0 | $ | 0 | ||||||
State
and political subdivisions
|
1,601 | (38 | ) | 1,563 | ||||||||
U.S.
government sponsored agencies and mortgage-backed pass through
certificates
|
0 | 0 | 0 | |||||||||
Total
debt securities
|
1,601 | (38 | ) | 1,563 | ||||||||
Marketable
equity securities
|
0 | 0 | 0 | |||||||||
Total
securities
|
$ | 1,601 | $ | (38 | ) | $ | 1,563 | |||||
Total
|
||||||||||||
U.S.
Treasury and government agencies
|
$ | 0 | $ | 0 | $ | 0 | ||||||
State
and political subdivisions
|
1,601 | (38 | ) | 1,563 | ||||||||
U.S.
government sponsored agencies and mortgage-backed pass through
certificates
|
0 | 0 | 0 | |||||||||
Total
debt securities
|
1,601 | (38 | ) | 1,563 | ||||||||
Marketable
equity securities
|
540 | (45 | ) | 495 | ||||||||
Total
securities
|
$ | 2,141 | $ | (83 | ) | $ | 2,058 |
(in
thousands)
|
Amortized
Cost
|
Gross
Unrealized Losses
|
Fair
Value
|
|||||||||
Less
Than 12 Months
|
||||||||||||
State
and political subdivisions
|
$ | 8,929 | $ | (453 | ) | $ | 8,476 | |||||
U.S.
government sponsored agencies and mortgage-backed pass through
certificates
|
76,984 | (321 | ) | 76,663 | ||||||||
Total
debt securities
|
85,913 | (774 | ) | 85,139 | ||||||||
Marketable
equity securities
|
20,000 | (220 | ) | 19,780 | ||||||||
Total
securities
|
$ | 105,913 | $ | (994 | ) | $ | 104,919 | |||||
12
Months or More
|
||||||||||||
State
and political subdivisions
|
$ | 1,385 | $ | (198 | ) | $ | 1,187 | |||||
U.S.
government sponsored agencies and mortgage-backed pass through
certificates
|
22,299 | (69 | ) | 22,230 | ||||||||
Total
debt securities
|
23,684 | (267 | ) | 23,417 | ||||||||
Marketable
equity securities
|
0 | 0 | 0 | |||||||||
Total
securities
|
$ | 23,684 | $ | (267 | ) | $ | 23,417 | |||||
Total
|
||||||||||||
State
and political subdivisions
|
$ | 10,314 | $ | (651 | ) | $ | 9,663 | |||||
U.S.
government sponsored agencies and mortgage-backed pass through
certificates
|
99,283 | (390 | ) | 98,893 | ||||||||
Total
debt securities
|
109,597 | (1,041 | ) | 108,556 | ||||||||
Marketable
equity securities
|
20,000 | (220 | ) | 19,780 | ||||||||
Total
securities
|
$ | 129,597 | $ | (1,261 | ) | $ | 128,336 |
(in
thousands)
|
Amortized
Cost
|
Gross
Unrealized Losses
|
Fair
Value
|
|||||||||
Less
Than 12 Months
|
||||||||||||
State
and political subdivisions
|
$ | 0 | $ | 0 | $ | 0 | ||||||
U.S.
government sponsored agencies and mortgage-backed pass through
certificates
|
24,021 | (110 | ) | 23,911 | ||||||||
Total
securities
|
$ | 24,021 | $ | (110 | ) | $ | 23,911 |
(in
thousands)
|
September
30
2009
|
December
31
2008
|
||||||
Commercial
construction
|
$ | 140,449 | $ | 156,425 | ||||
Commercial
secured by real estate
|
696,206 | 663,663 | ||||||
Commercial
other
|
352,622 | 365,685 | ||||||
Real
estate construction
|
50,102 | 56,298 | ||||||
Real
estate mortgage
|
611,701 | 609,394 | ||||||
Consumer
|
529,991 | 484,843 | ||||||
Equipment
lease financing
|
21,626 | 12,343 | ||||||
Total
loans
|
$ | 2,402,697 | $ | 2,348,651 |
Nine
Months Ended
|
||||||||
September
30
|
||||||||
(in
thousands)
|
2009
|
2008
|
||||||
Allowance
balance at January 1
|
$ | 30,821 | $ | 28,054 | ||||
Additions
to allowance charged against operations
|
12,275 | 7,892 | ||||||
Recoveries
credited to allowance
|
2,418 | 1,846 | ||||||
Losses
charged against allowance
|
(13,557 | ) | (7,884 | ) | ||||
Allowance
balance at September 30
|
$ | 31,957 | $ | 29,908 |
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30
|
September
30
|
|||||||||||||||
(in
thousands)
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
Net
gain on sale of loans held for sale
|
$ | 341 | $ | 292 | $ | 3,581 | $ | 1,332 | ||||||||
Net
loan servicing income (loss)
|
||||||||||||||||
Servicing
fees
|
267 | 227 | 767 | 658 | ||||||||||||
Late
fees
|
21 | 12 | 54 | 43 | ||||||||||||
Ancillary
fees
|
39 | 32 | 427 | 146 | ||||||||||||
Fair
value adjustments
|
(438 | ) | (201 | ) | (201 | ) | (446 | ) | ||||||||
Net
loan servicing income (loss)
|
(111 | ) | 70 | 1,047 | 401 | |||||||||||
Mortgage
banking income
|
$ | 230 | $ | 362 | $ | 4,628 | $ | 1,733 |
Nine
Months Ended
|
||||||||
September
30
|
||||||||
(in
thousands)
|
2009
|
2008
|
||||||
Fair
value, beginning of period
|
$ | 2,168 | $ | 3,258 | ||||
New
servicing assets created
|
1,103 | 342 | ||||||
Change
in fair value during the period due to:
|
||||||||
Time
decay (1)
|
(99 | ) | (130 | ) | ||||
Payoffs
(2)
|
(504 | ) | (289 | ) | ||||
Changes
in valuation inputs or assumptions (3)
|
402 | (27 | ) | |||||
Fair
value, end of period
|
$ | 3,070 | $ | 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
2009
|
December
31
2008
|
||||||
Subsidiaries:
|
||||||||
Repurchase
agreements
|
$ | 180,348 | $ | 157,422 | ||||
Federal
funds purchased
|
11,855 | 11,492 | ||||||
Total
short-term debt
|
$ | 192,203 | $ | 168,914 |
(in
thousands)
|
September
30
2009
|
December
31
2008
|
||||||
Monthly
amortizing
|
$ | 684 | $ | 727 | ||||
Term
|
20,000 | 60,000 | ||||||
$ | 20,684 | $ | 60,727 |
Principal
Payments Due by Period at September 30, 2009
|
||||||||||||||||||||||||||||
(in
thousands)
|
Total
|
Within
1 Year
|
2
Years
|
3
Years
|
4
Years
|
5
Years
|
After
5 Years
|
|||||||||||||||||||||
Outstanding
advances, weighted average interest rate – 3.75%
|
$ | 684 | $ | 628 | $ | 8 | $ | 8 | $ | 8 | $ | 8 | $ | 24 |
(in
thousands)
|
September
30
2009
|
December
31
2008
|
||||||
Advance
#154, 3.17%, due 8/04/09
|
$ | 0 | $ | 20,000 | ||||
Advance
#155, 3.18%, due 9/02/09
|
0 | 40,000 | ||||||
Advance
#156, 0.43%, due 1/29/10
|
20,000 | 0 | ||||||
Total
Term Advances
|
$ | 20,000 | $ | 60,000 |
(in
thousands)
|
September
30
2009
|
December
31
2008
|
||||||
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)
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
Numerator:
|
||||||||||||||||
Net
income (loss)
|
$ | 5,584 | $ | (577 | ) | $ | 18,101 | $ | 16,588 | |||||||
Denominator:
|
||||||||||||||||
Basic
earnings per share:
|
||||||||||||||||
Weighted
average shares
|
15,145 | 15,011 | 15,116 | 15,000 | ||||||||||||
Diluted
earnings per share:
|
||||||||||||||||
Effect
of dilutive stock options
|
53 | 252 | 91 | 153 | ||||||||||||
Adjusted
weighted average shares
|
15,198 | 15,263 | 15,207 | 15,153 | ||||||||||||
Earnings
(loss) per share:
|
||||||||||||||||
Basic
earnings (loss) per share
|
$ | 0.37 | $ | (0.04 | ) | $ | 1.20 | $ | 1.11 | |||||||
Diluted
earnings (loss) per share
|
$ | 0.37 | $ | (0.04 | ) | $ | 1.19 | $ | 1.09 |
(in
thousands)
|
Fair
Value Measurements at
September
30, 2009 Using
|
|||||||||||||||
Fair
Value
September
30
2009
|
Quoted
Prices in Active Markets for Identical Assets
(Level
1)
|
Other
Observable Inputs
(Level
2)
|
Significant
Unobservable Inputs
(Level
3)
|
|||||||||||||
Available-for-sale
securities:
|
||||||||||||||||
U.S.
Treasury and government agencies
|
$ | 2,009 | $ | 0 | $ | 2,009 | $ | 0 | ||||||||
State
and political subdivisions
|
47,370 | 0 | 47,370 | 0 | ||||||||||||
U.S.
government sponsored agencies and mortgage-backed pass through
certificates
|
209,082 | 0 | 209,082 | 0 | ||||||||||||
Collateralized
mortgage obligations
|
1 | 0 | 1 | 0 | ||||||||||||
Marketable
equity securities
|
20,499 | 0 | 20,288 | 211 | ||||||||||||
Mortgage
servicing rights
|
3,070 | 0 | 0 | 3,070 | ||||||||||||
Total
recurring assets measured at fair value
|
$ | 282,031 | $ | 0 | $ | 278,750 | $ | 3,281 |
(in
thousands)
|
Fair
Value Measurements at
December
31, 2008 Using
|
|||||||||||||||
Fair
Value
December
31
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:
|
||||||||||||||||
U.S.
Treasury and government agencies
|
$ | 18,906 | $ | 0 | $ | 18,906 | $ | 0 | ||||||||
State
and political subdivisions
|
39,844 | 0 | 39,844 | 0 | ||||||||||||
U.S.
government sponsored agencies and mortgage-backed pass through
certificates
|
188,305 | 0 | 188,305 | 0 | ||||||||||||
Collateralized
mortgage obligations
|
1 | 0 | 1 | 0 | ||||||||||||
Marketable
equity securities
|
20,320 | 0 | 19,780 | 540 | ||||||||||||
Mortgage
servicing rights
|
2,168 | 0 | 0 | 2,168 | ||||||||||||
Total
recurring assets measured at fair value
|
$ | 269,544 | $ | 0 | $ | 266,836 | $ | 2,708 |
Marketable Equity
Securities (in
thousands)
|
Three
Months Ended
September
30, 2009
|
Nine
Months Ended
September
30, 2009
|
||||||
Beginning
balance
|
$ | 211 | $ | 540 | ||||
Total
realized and unrealized gains and losses
|
||||||||
Included
in net income
|
0 | 0 | ||||||
Transfer
of Securities from Level 3 to Level 2
|
0 | (329 | ) | |||||
Purchases,
issuances, and settlements
|
0 | 0 | ||||||
Ending
balance, September 30, 2009
|
$ | 211 | $ | 211 |
Mortgage Servicing
Rights (in
thousands)
|
Three
Months Ended
September
30, 2009
|
Nine
Months Ended
September
30, 2009
|
||||||
Beginning
balance
|
$ | 3,407 | $ | 2,168 | ||||
Total
realized and unrealized gains and losses
|
||||||||
Included
in net income
|
(303 | ) | 402 | |||||
Transfer
of Securities from Level 3 to Level 2
|
0 | 0 | ||||||
Purchases,
issuances, and settlements
|
(34 | ) | 500 | |||||
Ending
balance, September 30, 2009
|
$ | 3,070 | $ | 3,070 |
(in
thousands)
|
Fair
Value Measurements at
September
30, 2009 Using
|
|||||||||||||||
Fair
Value
September
30
2009
|
Quoted
Prices in Active Markets for Identical Assets
(Level
1)
|
Other
Observable Inputs
(Level
2)
|
Significant
Unobservable Inputs
(Level
3)
|
|||||||||||||
Impaired
loans
|
$ | 6,801 | $ | 0 | $ | 0 | $ | 6,801 | ||||||||
Other
real estate/assets owned
|
$ | 31,296 | $ | 0 | $ | 0 | $ | 31,296 |
(in
thousands)
|
Fair
Value Measurements at
December
31, 2008 Using
|
|||||||||||||||
Fair
Value
December
31
2008
|
Quoted
Prices in Active Markets for Identical Assets
(Level
1)
|
Other
Observable Inputs
(Level
2)
|
Significant
Unobservable Inputs
(Level
3)
|
|||||||||||||
Impaired
loans
|
$ | 10,285 | $ | 0 | $ | 0 | $ | 10,285 |
(in
thousands)
|
September
30, 2009
|
December
31, 2008
|
||||||||||||||
Carrying
Amount
|
Estimated
Fair Value
|
Carrying
Amount
|
Estimated
Fair Value
|
|||||||||||||
Financial
assets
|
||||||||||||||||
Cash
and cash equivalents
|
$ | 120,529 | $ | 120,529 | $ | 140,878 | $ | 140,878 | ||||||||
Other
short-term investments
|
18,720 | 18,691 | 100 | 100 | ||||||||||||
Securities
available-for-sale
|
278,961 | 278,961 | 267,376 | 267,376 | ||||||||||||
Securities
held-to-maturity
|
16,687 | 16,865 | 25,597 | 25,496 | ||||||||||||
Loans,
net (including impaired loans)
|
2,370,740 | 2,386,958 | 2,317,830 | 2,329,044 | ||||||||||||
Loans
held for sale
|
754 | 868 | 623 | 638 | ||||||||||||
Federal
Reserve Bank stock
|
4,351 | 4,351 | 4,340 | 4,340 | ||||||||||||
Federal
Home Loan Bank stock
|
24,700 | 24,700 | 24,700 | 24,700 | ||||||||||||
Accrued
interest receivable
|
12,096 | 12,096 | 12,926 | 12,926 | ||||||||||||
Capitalized
mortgage servicing rights
|
3,070 | 3,070 | 2,168 | 2,168 | ||||||||||||
$ | 2,850,608 | $ | 2,867,089 | $ | 2,796,538 | $ | 2,807,666 | |||||||||
Financial
liabilities
|
||||||||||||||||
Deposits
|
$ | 2,403,954 | $ | 2,405,342 | $ | 2,331,834 | $ | 2,342,136 | ||||||||
Short-term
borrowings
|
192,203 | 192,418 | 168,914 | 168,866 | ||||||||||||
Advances
from Federal Home Loan Bank
|
20,684 | 20,592 | 60,727 | 61,245 | ||||||||||||
Long-term
debt
|
61,341 | 29,496 | 61,341 | 29,424 | ||||||||||||
Accrued
interest payable
|
11,933 | 11,933 | 5,570 | 5,570 | ||||||||||||
$ | 2,690,115 | $ | 2,659,781 | $ | 2,628,386 | $ | 2,607,241 |
Pay
Date
|
Record
Date
|
Amount
Per Share
|
October
1, 2009
|
September
15, 2009
|
$0.30
|
July
1, 2009
|
June
15, 2009
|
$0.30
|
April
1, 2009
|
March
15, 2009
|
$0.30
|
January
1, 2009
|
December
15, 2008
|
$0.30
|
October
1, 2008
|
September
15, 2008
|
$0.29
|
July
1, 2008
|
June
15, 2008
|
$0.29
|
Earnings
Summary
|
||||||||||||||||||||
(in
thousands except per share data)
|
3Q 2009 | 2Q 2009 | 3Q 2008 |
9
Months
2009
|
9
Months
2008
|
|||||||||||||||
Net
income/(loss)
|
$ | 5,584 | $ | 5,937 | $ | (577 | ) | $ | 18,101 | $ | 16,588 | |||||||||
Earnings/(loss)
per share
|
$ | 0.37 | $ | 0.39 | $ | (0.04 | ) | $ | 1.20 | $ | 1.11 | |||||||||
Earnings/(loss)
per share—diluted
|
$ | 0.37 | $ | 0.39 | $ | (0.04 | ) | $ | 1.19 | $ | 1.09 | |||||||||
Return
on average assets
|
0.72 | % | 0.78 | % | (0.08 | )% | 0.80 | % | 0.76 | % | ||||||||||
Return
on average equity
|
6.94 | % | 7.54 | % | (0.74 | )% | 7.65 | % | 7.16 | % | ||||||||||
Efficiency
ratio
|
61.67 | % | 64.25 | % | 58.63 | % | 64.59 | % | 57.43 | % | ||||||||||
Tangible
common equity
|
8.51 | % | 8.38 | % | 8.39 | % | 8.51 | % | 8.39 | % | ||||||||||
Dividends
declared per share
|
$ | 0.30 | $ | 0.30 | $ | 0.29 | $ | 0.90 | $ | 0.87 | ||||||||||
Book
value per share
|
$ | 21.04 | $ | 20.80 | $ | 20.26 | $ | 21.04 | $ | 20.26 | ||||||||||
Weighted
average shares
|
15,145 | 15,127 | 15,011 | 15,116 | 15,000 | |||||||||||||||
Weighted
average shares—diluted
|
15,198 | 15,219 | 15,263 | 15,207 | 15,153 |
v
|
CTBI's
basic earnings per share decreased $0.02 per share from prior quarter and
increased $0.41 per share from prior year third quarter. Year
over year basic earnings per share increased $0.09 per
share. 2009 YTD earnings were impacted by increased provision
for loan losses, increased FDIC insurance premiums and special FDIC
assessment, and increased noninterest income compared to 2008 YTD which
was impacted by the $13.5 million impairment charge referenced
above.
|
v
|
CTBI
recorded an increase in loan loss provision for the quarter and
year-to-date, primarily due to increases in the loan portfolio of $22.4
million and $86.7 million, respectively, as well as negative trends
experienced recently in its net charge-offs and classified loan portfolios
resulting from current economic
conditions.
|
v
|
Net
loan charge-offs for the quarter ended September 30, 2009 were 0.87% of
average loans compared to 0.63% for the quarter ended June 30, 2009 and
0.36% for the third quarter 2008. Year-to-date net charge-offs
increased $5.1 million from prior
year.
|
v
|
Noninterest
income was impacted by increased gains on sales of loans and loan related
fees year over year; however, both declined in the third quarter 2009 as
refinancing of mortgage loans has slowed and the fair value of mortgage
servicing rights decreased.
|
v
|
Noninterest
expense increased year over year as a result of increases in legal fees,
net OREO expense, and repossession expense as CTBI works through its
problem real estate loans resulting from the decline in the housing
market. CTBI also experienced increased personnel expense and
increased FDIC insurance premiums including the special FDIC
assessment. The decline in FDIC premiums quarter over quarter
was due to the special FDIC assessment booked in the second quarter
2009.
|
v
|
Expenses
associated with group medical and life insurance increased $0.7 million
during the third quarter 2009, but were offset by a $0.6 million reversal
of a performance-based employee incentive
accrual.
|
v
|
Our
net interest margin increased 18 basis points during the third quarter
2009, although it remains below prior year as pressure continues due to
the current interest rate environment and economic
conditions. Our net interest margin compared to prior
year-to-date and same quarter ended September 2008 decreased 27 basis
points and 16 basis points,
respectively.
|
v
|
Our
loan portfolio grew $22.4 million, an annualized rate of 3.7%, during the
quarter with growth in the residential and consumer loan categories offset
by declines in commercial loan categories. Year over year loan
growth was $86.7 million or 3.7%.
|
v
|
Nonperforming
loans decreased $14.4 million during the third quarter 2009 to $45.2
million compared to $59.6 million at prior quarter end and $49.3 million
at September 30, 2008. The decrease in nonperforming loans was
in both the 90 day and accruing and the nonaccrual
classifications. Nonperforming assets, however, increased $1.8
million from prior quarter-end, June 30, 2009, and $23.0 million from
prior year quarter-end, September 30, 2008, as a result of increased other
real estate owned.
|
v
|
Our
investment portfolio declined $22.2 million for the quarter and $16.5
million year over year.
|
v
|
Our
tangible common equity/tangible assets ratio remains strong at
8.51%.
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30
|
September
30
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Return
on average shareholders' equity
|
6.94 | % | (0.74 | )% | 7.65 | % | 7.16 | % | ||||||||
Return
on average assets
|
0.72 | % | (0.08 | )% | 0.80 | % | 0.76 | % |
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30
|
September
30
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Yield
on interest earning assets
|
5.44 | % | 6.22 | % | 5.45 | % | 6.41 | % | ||||||||
Cost
of interest bearing funds
|
2.07 | % | 2.86 | % | 2.25 | % | 3.11 | % | ||||||||
Net
interest spread
|
3.37 | % | 3.36 | % | 3.20 | % | 3.30 | % | ||||||||
Net
interest margin
|
3.81 | % | 3.97 | % | 3.68 | % | 3.95 | % |
Nine Months Ended | ||||||||
September
30
|
||||||||
(in
thousands)
|
2009
|
2008
|
||||||
Allowance
balance at January 1
|
$ | 30,821 | $ | 28,054 | ||||
Additions
to allowance charged against operations
|
12,275 | 7,892 | ||||||
Recoveries
credited to allowance
|
2,418 | 1,846 | ||||||
Losses
charged against allowance
|
(13,557 | ) | (7,884 | ) | ||||
Allowance
balance at September 30
|
$ | 31,957 | $ | 29,908 | ||||
Allowance
for loan losses to period-end loans
|
1.33 | % | 1.29 | % | ||||
Average
loans, net of unearned income
|
$ | 2,367,577 | $ | 2,265,265 | ||||
Provision
for loan losses to average loans, annualized
|
0.69 | % | 0.47 | % | ||||
Loan
charge-offs net of recoveries, to average loans,
annualized
|
0.63 | % | 0.36 | % |
(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, 2009
|
||||||||||||||||||||||||||||
Commercial
construction
|
$ | 7,841 | 5.58 | % | $ | 0 | 0.00 | % | $ | 5,370 | 3.82 | % | $ | 140,449 | ||||||||||||||
Commercial
secured by real estate
|
11,225 | 1.61 | 0 | 0.00 | 3,271 | 0.47 | 696,206 | |||||||||||||||||||||
Commercial
other
|
5,343 | 1.52 | 0 | 0.00 | 2,396 | 0.68 | 352,622 | |||||||||||||||||||||
Consumer
real estate construction
|
1,178 | 2.35 | 0 | 0.00 | 799 | 1.59 | 50,102 | |||||||||||||||||||||
Consumer
real estate secured
|
3,889 | 0.64 | 0 | 0.00 | 3,157 | 0.52 | 611,701 | |||||||||||||||||||||
Consumer
other
|
0 | 0.00 | 0 | 0.00 | 692 | 0.13 | 529,991 | |||||||||||||||||||||
Equipment
lease financing
|
0 | 0.00 | 0 | 0.00 | 0 | 0.00 | 21,626 | |||||||||||||||||||||
Total
|
$ | 29,476 | 1.23 | % | $ | 0 | 0.00 | % | $ | 15,685 | 0.65 | % | $ | 2,402,697 |
(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, 2008
|
||||||||||||||||||||||||||||
Commercial
construction
|
$ | 21,602 | 13.81 | % | $ | 0 | 0.00 | % | $ | 3,741 | 2.39 | % | $ | 156,425 | ||||||||||||||
Commercial
secured by real estate
|
10,780 | 1.62 | 0 | 0.00 | 3,319 | 0.50 | 663,663 | |||||||||||||||||||||
Commercial
other
|
4,471 | 1.22 | 0 | 0.00 | 634 | 0.17 | 365,685 | |||||||||||||||||||||
Consumer
real estate construction
|
1,255 | 2.23 | 0 | 0.00 | 55 | 0.10 | 56,298 | |||||||||||||||||||||
Consumer
real estate secured
|
2,837 | 0.47 | 0 | 0.00 | 3,008 | 0.49 | 609,394 | |||||||||||||||||||||
Consumer
other
|
0 | 0.00 | 0 | 0.00 | 488 | 0.10 | 484,843 | |||||||||||||||||||||
Equipment
lease financing
|
0 | 0.00 | 0 | 0.00 | 0 | 0.00 | 12,343 | |||||||||||||||||||||
Total
|
$ | 40,945 | 1.74 | % | $ | 0 | 0.00 | % | $ | 11,245 | 0.48 | % | $ | 2,348,651 |
1)
|
Expansion
of the review process to include the Executive Vice President/Treasurer’s
review of all significant transactions including any balance sheet entries
associated with these transactions to ensure that all such transactions
are identified and recorded
properly.
|
2)
|
Expansion
of procedures for analyzing and documenting new and recurring accounting
and reporting issues, to ensure decisions are properly documented,
reviewed, and approved.
|
3)
|
Expansion
of documentation process when questions arise regarding the proper
accounting treatment of particular transactions to include in the
documentation the nature of the issue, the resolution of the issue and the
supporting documentation to support the position
taken.
|
4)
|
Development
of an emerging issues committee within the Finance Department, consisting
of all senior level accounting managers, which is charged with meeting
monthly to identify new accounting pronouncements and developments and
determining the appropriate application to CTBI’s financial
reporting. This committee communicates monthly to executive
management and to the accounting staff the results of these meetings and
any required changes in accounting policy or
procedure.
|
Item
1.
|
Legal
Proceedings
|
None
|
Item
1A.
|
Risk
Factors
|
None
|
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:
Novembe 6, 2009
|
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/Treasurer | |||
(Principal Financial Officer) |