8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15 (d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)

June 30, 2018

Commission file number 0-11129

Community Trust Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Kentucky	61-0979818
(State or other jurisdiction of	(IRS Employer Identification Number)
incorporation or organization)
346 North Mayo Trail
Pikeville, Kentucky	41501
(Address of principal executive offices)	(Zip code)

 (606) 432-1414

(Registrant's telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[   ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[   ] Soliciting material pursuant to Rule 14a-12 under the Securities Act (17 CFR 240.14a-12)

[   ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[   ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Item 2.02 – Results of Operations and Financial Condition

On July 18, 2018, Community Trust Bancorp, Inc. issued a press release announcing its financial results for the quarter and six months ended June 30, 2018.  A copy of this press release is being furnished to the Securities and Exchange Commission pursuant to Item 2.02 – Results of Operations and Financial Condition and Item 7.01 – Regulation FD Disclosure of Form 8-K and is attached hereto as Exhibit 99.1.  The information in this Form 8-K and in Exhibit 99.1 attached hereto shall not be deemed filed for purposes of Section 18 of the Securities Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference.

Item 9.01 – Financial Statements and Exhibits

(d)Exhibits

The following exhibit is filed with this report:

99.1 Press Release dated July 18, 2018

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		COMMUNITY TRUST BANCORP, INC.
Date:	July 18, 2018	By:
		/s/ Jean R. Hale
		Jean R. Hale
		Chairman, President and Chief Executive Officer

Exhibit Index

Exhibit No.	Description
99.1	Press Release dated July 18, 2018

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

July 18, 2018

FOR ADDITIONAL INFORMATION, PLEASE CONTACT JEAN R. HALE, CHAIRMAN, PRESIDENT, AND C.E.O., COMMUNITY TRUST BANCORP, INC. AT (606) 437-3294

Pikeville, Kentucky:

COMMUNITY TRUST BANCORP, INC. REPORTS EARNINGS FOR THE SECOND QUARTER 2018

Earnings Summary
(in thousands except per share data)	2Q 2018			1Q 2018			2Q 2017			6 Months 2018			6 Months 2017
Net income	$	11,599		$	15,814		$	11,541		$	27,413		$	22,818
Earnings per share	$	0.66		$	0.89		$	0.65		$	1.55		$	1.29
Earnings per share - diluted	$	0.66		$	0.89		$	0.65		$	1.55		$	1.29
Return on average assets		1.11	%		1.55	%		1.14	%		1.33	%		1.15	%
Return on average equity		8.56	%		12.00	%		8.97	%		10.26	%		9.00	%
Efficiency ratio		66.05	%		59.24	%		59.32	%		62.67	%		60.23	%
Tangible common equity		11.51	%		11.43	%		11.19	%
Dividends declared per share	$	0.33		$	0.33		$	0.32		$	0.66		$	0.64
Book value per share	$	30.59		$	30.33		$	29.14
Weighted average shares		17,687			17,671			17,626			17,679			17,621
Weighted average shares - diluted		17,703			17,687			17,645			17,695			17,641

Community Trust Bancorp, Inc. (NASDAQ-CTBI) reports earnings for the second quarter 2018 of $11.6 million, or $0.66 per basic share, compared to $15.8 million, or $0.89 per basic share, earned during the first quarter 2018 and $11.5 million, or $0.65 per basic share, earned during the second quarter 2017.  Earnings for the six months ended June 30, 2018 were $27.4 million, or $1.55 per basic share, compared to $22.8 million or $1.29 per basic share earned during the six months ended June 30, 2017.

As disclosed by CTBI in Annual Reports on Form 10-K for the years ended December 31, 2017 and 2016, and previous Quarterly Reports on Form 10-Q, CTB will be required to make certain customer reimbursements related to two deposit add-on products.  CTBI further disclosed in such filings that management had established a related accrual, and that the actual reimbursement amount could materially vary from the amount management had evaluated as most likely.  On June 14, 2018, CTBI filed a Form 8-K disclosing an increase in the accrual from $1.2 million to $4.75 million to reflect a change in the amount management determined to be the most likely amount as a result of communications with regulatory agency representatives.  As a result of the increased accrual, a charge to earnings was reflected in the second quarter 2018 financial results of $2.8 million after-tax, or $0.16 per share.

2^nd Quarter 2018 Highlights

v Net interest income for the quarter of $35.1 million was an increase of $0.6 million, or 1.6%, from first quarter 2018 and $0.9 million, or 2.7%, from prior year second quarter.

v Provision for loan losses for the quarter ended June 30, 2018 increased $1.0 million from prior quarter but decreased $0.8 million from prior year same quarter.

v Our loan portfolio increased $50.8 million, an annualized 6.5%, during the quarter and $81.7 million, or 2.6%, from June 30, 2017.

v Net loan charge-offs for the quarter ended June 30, 2018 were $1.3 million, or 0.17% of average loans annualized, compared to $1.9 million, or 0.25%, experienced for the first quarter 2018 and $1.3 million, or 0.18%, for the second quarter 2017.

v Nonperforming loans at $22.0 million decreased $3.9 million from March 31, 2018 and $6.0 million from June 30, 2017.  Nonperforming assets at $52.3 million decreased $5.7 million from March 31, 2018 and $8.3 million from June 30, 2017.

v Deposits, including repurchase agreements, decreased $6.3 million during the quarter but increased $195.4 million from June 30, 2017.

v Noninterest income for the quarter ended June 30, 2018 of $13.7 million was an increase of $0.4 million, or 3.2%, from prior quarter and $1.4 million, or 11.6%, from prior year same quarter.  The increase in noninterest income was primarily due to a gain on the sale of a partnership interest resulting from a low income housing tax credit recapture and an increase in deposit service charges.

v Noninterest expense for the quarter ended June 30, 2018 of $32.4 million increased $3.8 million, or 13.1%, from prior quarter, and $4.9 million, or 17.7%, from prior year same quarter.  The variance in noninterest expense from prior quarter was primarily due to the above mentioned increase in the customer reimbursement accrual.  Additionally, personnel expense increased from prior year same quarter with increases in bonuses and the cost of group medical and life insurance.

v Income tax expense continues to be positively impacted by the change in the corporate income tax rate from 35% to 21%.  We utilize various tax exempt investments and loans, including municipal bonds, bank owned life insurance, and low income housing projects, to lower our effective income tax rate.  With the current tax laws, our effective tax rate for the six months ended June 30, 2018 was 16% compared to 28% for the six months ended June 30, 2017.

Net Interest Income

Net interest income for the quarter of $35.1 million was an increase of $0.6 million, or 1.6%, from first quarter 2018 and $0.9 million, or 2.7%, from prior year second quarter.  Our net interest margin at 3.61% decreased 4 basis points from prior quarter and 7 basis points from prior year same quarter, while our average earning assets increased $57.8 million and $145.5 million, respectively, during those same periods.  Our yield on average earning assets increased 3 basis points from prior quarter and 18 basis points from prior year same quarter, and our cost of funds increased 11 basis points from prior quarter and 37 basis points from prior year same quarter.  Our ratio of average loans to deposits, including repurchase agreements, was 88.1% for the quarter ended June 30, 2018 compared to 88.6% for the quarter ended March 31, 2018 and 89.9% for the quarter ended June 30, 2017.

Noninterest Income

Noninterest income for the quarter ended June 30, 2018 of $13.7 million was an increase of $0.4 million, or 3.2%, from prior quarter and $1.4 million, or 11.6%, from prior year same quarter.  The increase in noninterest income was primarily due to a gain on the sale of a partnership interest totaling $1.0 million related to one of our tax credit investments.  As a result of the sale of this interest, a portion of the tax credits previously claimed was recaptured during the current quarter totaling $0.8 million, which was recorded in income tax expense.   The variance in noninterest income from prior quarter was also impacted by a $0.3 million increase in deposit service charges and a $0.3 million decrease in losses on the sale of securities, offset by a $1.0 million decrease in bank owned life insurance income and a $0.2 million decrease in loan related fees as a result of fluctuations in the fair value adjustments of our mortgage servicing rights.  The increase from prior year same quarter was also positively impacted by a $0.2 million increase in trust revenue.  Additionally, noninterest income for the second quarter 2017 included a $0.6 million gain on the repurchase of trust preferred securities.  Noninterest income for the six months ended June 30, 2018 was a $3.2 million, or 13.2%, increase from prior year.

Noninterest Expense

Noninterest expense for the quarter ended June 30, 2018 of $32.4 million increased $3.8 million, or 13.1%, from prior quarter, and $4.9 million, or 17.7%, from prior year same quarter.  The variance in noninterest expense from prior quarter was primarily due to the above mentioned $3.6 million increase in the customer reimbursement accrual.  Personnel expense increased from prior year same quarter with increases in bonuses ($0.7 million) and the cost of group medical and life insurance ($0.4 million).  Noninterest expense for the six months ended June 30, 2018 was $61.1 million, a $5.9 million or 10.7% increase over the first six months of 2017, primarily due to the same items detailed above.

Balance Sheet Review

CTBI’s total assets at $4.2 billion increased $9.4 million, or 0.9% annualized, from March 31, 2018 and $124.1 million, or 3.0%, from June 30, 2017.  Loans outstanding at June 30, 2018 were $3.2 billion, an increase of $50.8 million, or an annualized 6.5%, from March 31, 2018 and $81.7 million, or 2.6%, from June 30, 2017.  We experienced an increase during the quarter of $16.1 million in the commercial loan portfolio, $5.7 million in the residential loan portfolio, $20.2 million in the indirect loan portfolio, and $8.8 million in the consumer direct loan portfolio.  CTBI’s investment portfolio decreased $19.1 million, or an annualized 12.7%, from March 31, 2018 and $24.8 million, or 4.1%, from June 30, 2017.  Deposits, including repurchase agreements, at $3.6 billion decreased $6.3 million, or an annualized 0.7%, from March 31, 2018 but increased $195.4 million, or 5.8%, from June 30, 2017.

Shareholders’ equity at June 30, 2018 was $542.2 million, a 3.5% annualized increase from the $537.5 million at March 31, 2018 and a 5.3% increase from the $514.9 million at June 30, 2017.  CTBI’s annualized dividend yield to shareholders as of June 30, 2018 was 2.64%.

Asset Quality

CTBI’s total nonperforming loans, not including troubled debt restructurings, were $22.0 million, or 0.69% of total loans, at June 30, 2018 compared to $25.9 million, or 0.83% of total loans, at March 31, 2018 and $28.0 million, or 0.91% of total loans, at June 30, 2017.  Accruing loans 90+ days past due decreased $1.8 million from prior quarter and $1.2 million from June 30, 2017.  Nonaccrual loans decreased $2.1 million during the quarter and $4.8 million from June 30, 2017.  Accruing loans 30-89 days past due at $23.5 million was an increase of $6.6 million from March 31, 2018 and $8.3 million from June 30, 2017.  The increase in past due loans 30-89 days is due to one relationship which is well-collateralized, and no loss is expected.  Our loan portfolio management processes focus on the immediate identification, management, and resolution of problem loans to maximize recovery and minimize loss.  Impaired loans, loans not expected to meet contractual principal and interest payments other than insignificant delays, at June 30, 2018 totaled $46.7 million, a $1.5 million decrease from the $48.2 million at March 31, 2018 and a $4.0 million decrease from the $50.7 million at June 30, 2017.

Our level of foreclosed properties at $30.3 million at June 30, 2018 was a $1.7 million decrease from the $32.0 million at March 31, 2018 and a $2.4 million decrease from the $32.6 million at June 30, 2017.  Sales of foreclosed properties for the quarter ended June 30, 2018 totaled $2.4 million while new foreclosed properties totaled $1.6 million.  At June 30, 2018, the book value of properties under contracts to sell was $1.9 million; however, the closings had not occurred at quarter-end.  Write-downs on foreclosed properties for the second quarter 2018 totaled $0.9 million compared to $0.5 million in the first quarter 2018 and $1.4 million in the second quarter 2017.

Net loan charge-offs for the quarter ended June 30, 2018 were $1.3 million, or 0.17% of average loans annualized, compared to $1.9 million, or 0.25%, experienced for the first quarter 2018 and $1.3 million, or 0.18%, for the second quarter 2017.  Of the net charge-offs for the quarter, $0.5 million were in commercial loans, $0.4 million were in indirect auto loans, $0.2 million were in residential loans, and $0.2 million were in consumer direct loans.  Allocations to loan loss reserves were $1.9 million for the quarter ended June 30, 2018 compared to $0.9 million for the quarter ended March 31, 2018 and $2.8 million for the quarter ended June 30, 2017.  Our reserve coverage (allowance for loan and lease loss reserve to nonperforming loans) at June 30, 2018 was 162.6% compared to 135.6% at March 31, 2018 and 132.6% at June 30, 2017.  Our loan loss reserve as a percentage of total loans outstanding remained at 1.13% from March 31, 2018 to June 30, 2018, down from the 1.20% at June 30, 2017. 

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; 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 and regulations 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 $4.2 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, four banking locations in northeastern Tennessee, four trust offices across Kentucky, and one trust office in Tennessee.

Additional information follows.

Community Trust Bancorp, Inc.
Financial Summary (Unaudited)
June 30, 2018
(in thousands except per share data and # of employees)
	Three			Three			Three			Six			Six
	Months			Months			Months			Months			Months
	Ended			Ended			Ended			Ended			Ended
	June 30, 2018			March 31, 2018			June 30, 2017			June 30, 2018			June 30, 2017
Interest income	$	42,025		$	40,580		$	38,411		$	82,605		$	75,179
Interest expense		6,877			5,989			4,171			12,866			7,849
Net interest income		35,148			34,591			34,240			69,739			67,330
Loan loss provision		1,929			946			2,764			2,875			3,993
Gains on sales of loans		304			279			251			583			507
Deposit service charges		6,480			6,221			6,199			12,701			12,159
Trust revenue		2,856			2,958			2,649			5,814			5,235
Loan related fees		919			1,144			773			2,063			1,778
Securities gains (losses)		2			(288	)		18			(286	)		10
Other noninterest income		3,179			2,996			2,421			6,175			4,201
Total noninterest income		13,740			13,310			12,311			27,050			23,890
Personnel expense		15,422			15,619			14,044			31,041			28,968
Occupancy and equipment		2,770			2,833			2,720			5,603			5,533
Data processing expense		1,634			1,636			1,757			3,270			3,546
FDIC insurance premiums		279			314			315			593			607
Other noninterest expense		12,334			8,279			8,730			20,613			16,556
Total noninterest expense		32,439			28,681			27,566			61,120			55,210
Net income before taxes		14,520			18,274			16,221			32,794			32,017
Income taxes		2,921			2,460			4,680			5,381			9,199
Net income	$	11,599		$	15,814		$	11,541		$	27,413		$	22,818
Memo: TEQ interest income	$	42,253		$	40,804		$	38,910		$	83,057		$	76,187
Average shares outstanding		17,687			17,671			17,626			17,679			17,621
Diluted average shares outstanding		17,703			17,687			17,645			17,695			17,641
Basic earnings per share	$	0.66		$	0.89		$	0.65		$	1.55		$	1.29
Diluted earnings per share	$	0.66		$	0.89		$	0.65		$	1.55		$	1.29
Dividends per share	$	0.33		$	0.33		$	0.32		$	0.66		$	0.64
Average balances:
Loans	$	3,131,964		$	3,111,116		$	3,027,044		$	3,121,597		$	2,990,865
Earning assets		3,928,066			3,870,216			3,782,548			3,899,301			3,743,834
Total assets		4,196,693			4,144,105			4,052,791			4,170,544			4,014,155
Deposits, including repurchase agreements		3,556,340			3,511,260			3,366,489			3,533,925			3,364,651
Interest bearing liabilities		2,818,168			2,782,467			2,731,147			2,800,416			2,696,164
Shareholders' equity		543,513			534,278			515,834			538,921			511,560
Performance ratios:
Return on average assets		1.11	%		1.55	%		1.14	%		1.33	%		1.15	%
Return on average equity		8.56	%		12.00	%		8.97	%		10.26	%		9.00	%
Yield on average earning assets (tax equivalent)		4.31	%		4.28	%		4.13	%		4.30	%		4.10	%
Cost of interest bearing funds (tax equivalent)		0.98	%		0.87	%		0.61	%		0.93	%		0.59	%
Net interest margin (tax equivalent)		3.61	%		3.65	%		3.68	%		3.63	%		3.68	%
Efficiency ratio (tax equivalent)		66.05	%		59.24	%		59.32	%		62.67	%		60.23	%
Loan charge-offs	$	2,526		$	2,977		$	2,189		$	5,503		$	4,680
Recoveries		(1,179	)		(1,069	)		(845	)		(2,248	)		(1,887	)
Net charge-offs	$	1,347		$	1,908		$	1,344		$	3,255		$	2,793
Market Price:
High	$	53.00		$	50.70		$	46.90		$	53.00		$	50.40
Low	$	43.95		$	43.00		$	41.07		$	43.00		$	41.07
Close	$	49.95		$	45.20		$	43.75		$	49.95		$	43.75

Community Trust Bancorp, Inc.

Financial Summary (Unaudited)

 June 30, 2018

(in thousands except per share data and # of employees)

	As of			As of			As of
	June 30, 2018			March 31, 2018			June 30, 2017
Assets:
Loans	$	3,169,042		$	3,118,241		$	3,087,342
Loan loss reserve		(35,771	)		(35,189	)		(37,133	)
Net loans		3,133,271			3,083,052			3,050,209
Loans held for sale		1,093			1,145			4,624
Securities AFS		585,764			604,890			610,368
Securities HTM		659			659			858
Other equity investments		22,814			22,814			22,814
Other earning assets		150,880			159,608			90,711
Cash and due from banks		54,987			44,792			51,224
Premises and equipment		46,483			45,860			47,036
Goodwill and core deposit intangible		65,490			65,490			65,543
Other assets		143,745			167,427			137,726
Total Assets	$	4,205,186		$	4,195,737		$	4,081,113
Liabilities and Equity:
NOW accounts	$	51,563		$	55,034		$	48,476
Savings deposits		1,156,601			1,131,371			1,070,706
CD's >=$100,000		694,641			705,978			592,794
Other time deposits		587,078			601,942			610,770
Total interest bearing deposits		2,489,883			2,494,325			2,322,746
Noninterest bearing deposits		819,525			825,345			782,864
Total deposits		3,309,408			3,319,670			3,105,610
Repurchase agreements		248,781			244,822			257,208
Other interest bearing liabilities		68,121			67,241			167,455
Noninterest bearing liabilities		36,701			26,515			35,925
Total liabilities		3,663,011			3,658,248			3,566,198
Shareholders' equity		542,175			537,489			514,915
Total Liabilities and Equity	$	4,205,186		$	4,195,737		$	4,081,113
Ending shares outstanding		17,725			17,721			17,671
Memo: Market value of HTM securities	$	660		$	660		$	858
30 - 89 days past due loans	$	23,488		$	16,914		$	15,234
90 days past due loans		7,189			9,027			8,362
Nonaccrual loans		14,812			16,923			19,651
Restructured loans (excluding 90 days past due and nonaccrual)		56,814			56,119			53,786
Foreclosed properties		30,262			32,004			32,638
Other repossessed assets		83			118			45
Common equity Tier 1 capital		15.80	%		15.73	%		14.91	%
Tier 1 leverage ratio		13.11	%		13.14	%		12.72	%
Tier 1 risk-based capital ratio		17.67	%		17.62	%		16.81	%
Total risk based capital ratio		18.84	%		18.78	%		18.05	%
Tangible equity to tangible assets ratio		11.51	%		11.43	%		11.19	%
FTE employees		988			986			1,000