COMMUNITY TRUST BANCORP INC /KY/ Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

Insight

The following MD&A and analysis of financial condition and results of operations (“MD&A”) is intended to help the reader understand
Bancorp Community Trust, Inc. (“CTBI”), our operations and our current business environment. The MD&A is provided in addition to our condensed consolidated financial statements and accompanying notes contained in Part I, Section 1 of this quarterly report, and should be read in conjunction with those financial statements, as well as our consolidated financial statements, notes thereto, and related MD&A on financial condition and results of operations in our Annual Report on Form 10-K for the year ended December 31, 2021. The MD&A includes the following sections :

? Our business

? Financial objectives and performance

? Results of operations and financial situation


? Liquidity and Market Risk



? Interest Rate Risk



? Capital Resources


? Impact of inflation, price changes and economic conditions


? Stock Repurchase Program


? Significant Accounting Policies and Estimates

Our business

CTBI is a bank holding company headquartered in Pikeville, Kentucky. Currently, we own a commercial bank, Community Trust Bank, Inc. (“CTB”) and a trust company, Community Trust and Investment Company. Through our subsidiaries, we have 78 banking locations in the East, Northeast, Central and South Central
Kentuckysouth West Virginiaand northeast Tennesseefour fiduciary offices across Kentuckyand a trust office in the northeast Tennessee. To September 30, 2022we had total consolidated assets of $5.5 billion and total consolidated deposits, including repurchase agreements, of $4.8 billion. Total equity at September 30, 2022 has been $602.6 million. Trust assets under management at September 30, 2022 were $3.1 billionincluding BTC’s investment portfolio totaling $1.3 billion.

Through our subsidiaries, CTBI engages in a wide range of commercial and personal banking and trust and wealth management activities, which include accepting term and demand deposits; provide secured and unsecured loans to companies, individuals and others; providing cash management services to businesses and individuals; issuance of letters of credit; rental of safes; and provide remittance services. BTC’s lending activities include the making of commercial, construction, mortgage and personal loans. Leasing, lines of credit, revolving lines of credit, term loans and other specialty loans, including asset-based financing, are also available. Our corporate subsidiaries act as trustees of personal trusts, as executors of estates, as trustees of employee benefit trusts, as paying agents for bond and stock issues, as placement agents, as securities custodians and as full-service brokerage and insurance providers. services. For more information, see Item 1 of our Annual Report on Form 10-K for the year ended.
December 31, 2021.

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Results of operations and financial situation

We have published the results for the third quarter of 2022 of $19.4 millionWhere $1.09 per basic share, compared to $20.3 millionWhere $1.14 per basic share, acquired during the second quarter of 2022 and $21.1 millionWhere $1.19 per basic share, earned during the third quarter of 2021. Total revenue was $2.9 million above the previous quarter and $1.8 million above the same quarter of the previous year. Net interest income increased $2.7 million compared to the previous quarter and $1.5 million compared to the same quarter of the previous year, and non-interest income increased $0.2 million compared to the previous quarter and $0.3 million compared to the same quarter of the previous year. The allowance for credit losses for the quarter was $2.4 millionin relation to the supply of $0.1 million for the quarter ended June 30, 2022 and a provision reversal of $0.2 million for the third quarter of 2021. Non-interest expense increased $1.5 million compared to the previous quarter and $1.1 million compared to the same quarter of the previous year. Net profit for the nine months ended September 30, 2022 was lower than the previous year by $9.3 millionmainly due to the $6.9 million
reversal of the provision for credit losses taken in 2021 and the $4.2 million
lower gains on loan sales.

As indicated in our Form 10-Q for the quarter ended June 30, 2022several eastern counties Kentucky experienced major flooding in which six of our branches were affected. After assessing the situation, we determined that the flooding had no material impact on our financial situation.

Quarterly Highlights

? Net interest income for the quarter of $43.5 million has been $2.7 million above

previous quarter and $1.5 million above the same quarter of the previous year.

? The allowance for credit losses for the quarter was $2.4 millioncompared to

supply of $0.1 million for the quarter ended June 30, 2022 and a recovery of

provision of $0.2 million for the third quarter of 2021.

? Our loan portfolio has grown $72.2 millionan 8.0% annualized, during the

quarter and $221.8 millionan 8.7% annualized, of December 31, 2021.

? Net loan write-offs were $0.3 millioni.e. 0.04% of annualized average loans,

for the quarter ended September 30, 2022 compared to $0.04 millionor less

greater than 0.01% of annualized average loans, for the second quarter of 2022 and $0.3

million, or 0.04% of annualized average loans for the quarter ended September

30, 2021.

? Asset quality remains strong compared to the prior quarter as our non-performing loans,

excluding distressed debt restructurings (“TDR”), slightly decreased for $13.7

million to September 30, 2022 of $13.8 million at June 30, 2022 and decreased

$2.9 million from $16.6 million at December 31, 2021. Non-performing assets

at $15.6 million decreases $0.2 million of June 30, 2022 and $4.6 million

of December 31, 2021.

? Deposits, including repos, increased $53.5 milliona

4.5% annualized, during the quarter and $149.8 millionan annualized 4.3%,

of December 31, 2021.

? Equity has decreased $29.5 millionan annualized 18.5%, during the

quarter and $95.6 millionan 18.3% annualized, of December 31, 2021like a

result of the continued increase in unrealized losses on our securities

wallet.

? Non-interest income for the quarter ended September 30, 2022 of $14.7 million

has been $0.2 millionor 1.2%, above the previous quarter and $0.3 millionor 2.0%, above

same quarter of the previous year.

? Non-interest expenses for the quarter ended September 30, 2022 of $31.5 million

has been $1.5 millionor 5.0%, higher than the previous quarter and $1.1 millioni.e. 3.8%,

above the same quarter of the previous year.



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