Community Trust Bancorp, Inc. (Kentucky) :CTBI-US: Earnings Analysis: Q2, 2017 By the Numbers : September 26, 2017

Community Trust Bancorp, Inc. (Kentucky) reports financial results for the quarter ended June 30, 2017.

Highlights

  • Summary numbers: Revenues of USD 46.55 million, Net Earnings of USD 11.54 million.
  • Net interest income margins widened from 73.36% to 73.55% compared to the same period last year.
  • Net loan assets changed 5.34% compared to same period last year and 3.96% from previous period, total deposits changed 2.09% compared to same period last year and -1.71% from previous period.
  • Change in operating cash flow of 37.73% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • Earnings decline from worsening in operating margins as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2017-06-30 2017-03-31 2016-12-31 2016-09-30 2016-06-30
Relevant Numbers (Quarterly)
Revenues (mil) 46.55 44.67 45.93 46.41 45.07
Revenue Growth (%YOY) 3.3 0.84 2.26 3.14 -0.76
Earnings (mil) 11.54 11.28 11.87 12.31 11.57
Earnings Growth (%YOY) -0.22 -2.8 -0.03 9.71 -6.74
Net Margin (%) 24.79 25.25 25.84 26.53 25.66
EPS 0.65 0.64 0.67 0.7 0.66
Return on Equity (%) 2.26 2.24 2.37 2.48 2.36
Return on Assets (%) 1.14 1.13 1.2 1.26 1.19

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, CTBI-US’s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if CTBI-US’s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by 4.21% and earnings by 2.34% compared to the previous period.

Earnings Growth Analysis

{arg3)’s earnings declined year-on-year because of the increases in loan loss provisions. Its net interest income after provisions margins went from 69.20% to 67.62%. The fall in earnings would have been worse were it not for the fact that the company’s net interest income margins improved, from 73.36% to 73.55%. For comparison, net interest income margins were 74.08% and net interest income after provisions margins 71.33% in the immediate last period.

Net Interest Income Margin History
Loan Loss Provisions Margin History

Net Loans and Total Deposits

A financial institution’s core operations represented by Net Interest Income and Net Interest Income after Provisions are dependent on both the growth and quality of its deposits as well as the growth and quality of its loans. A firm could boost its interest income in the short-term by just increasing its loan assets with less concern about their quality – but this would eventually lead to greater loan loss provisions. Similarly a drive to increase deposits could result in higher interest expenses and eventually effect the firm’s equity. It is thus important to understand net interest income performance in context to loan loss provisions, loan assets and deposits.

Loan Assets Growth Rate History (Qtr YOY)
Total Deposits Growth Rate History (Qtr YOY)

The firm’s improvement in net interest income margins was influenced by the relative increase in the level of net loan assets. In addition, total deposits as a percentage of equity went from 6.16% to 6.03%. On an absolute basis, net loan assets changed 5.34% compared to the same period last year and 3.96% from the previous period, while total deposits changed 2.09% compared to the same period last year and -1.71% from the previous period.

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

CTBI-US’s year-on-year change in operating cash flow of 37.73% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.

Margins

The company’s decline in earnings has been influenced by the following factors: (1) Contraction of operating margins from 34.98% to 34.85% and (2) One-time items that contributed to a decrease in pretax margins from 34.98% to 34.85%

EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Community Trust Bancorp, Inc. (Kentucky)

Company Profile

Community Trust Bancorp, Inc. (Kentucky) is a bank holding company, which engages in the provision of community banking services through its subsidiary Community Trust Bank, Inc. It offers residential and commercial real estate loans; checking accounts; regular and term savings accounts and savings certificates; full service securities brokerage services; consumer loans; debit cards; annuity and life insurance products; Individual Retirement Accounts and Keogh plans; commercial loans; trust and wealth management services; commercial demand deposit accounts; and repurchase agreements. The company was founded on August 12, 1980 and is headquartered in Pikeville, KY.

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