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Community Trust Bancorp

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Over the past four quarters, Community Trust Bancorp Inc. (CTBI - Free Report) has beaten the Zacks Consensus Estimate three times and missed just once, amassing an average surprise of 14.8%. Most recently, this regional bank holding company delivered a solid 19.7% surprise in the second quarter 2012. With a P/B multiple of just 1.4, this Zacks #1 Rank (Strong Buy) stock is an attractive pick for value investors.

Impressive Second Quarter Results

On July 18, Community Trust Bancorp delivered second quarter 2012 earnings per share of 79 cents, substantially outpacing the Zacks Consensus Estimate of 66 cents. Moreover, earnings were up 36.2% from 58 cents in the prior-year quarter. Results benefited from impressive growth in fee income and lower operating expenses, partially offset by a marginal dip in net interest income.

Net interest income fell 2% from the year-ago quarter to $32.3 million. Similarly, net interest margin (NIM) declined 24 basis points (bps) to 3.93%. Nevertheless, non-interest income surged nearly 13% to $12.0 million, reflecting higher trust revenue as well as securities gains. Furthermore, non-interest expenses declined 11% to $24.1 million as a result of lower personnel expense and FDIC insurance premiums.

The company expects NIM to fall 7 bps in the third quarter and 2 bps points in the fourth quarter, due to the increased cost of interest bearing funds. For 2012, NIM is expected to decrease nearly 4 bps.

Community Trust witnessed a decent improvement in its asset quality during the quarter. As of June 30, 2012, total nonperforming loans stood at $35.3 million, down 41% from $59.6 million as of June 30, 2011. Likewise on an annualized basis, net loan charge-offs were 0.39% of average loans, down 13 basis points from the year-ago quarter.

Earnings Estimates Rising

Over the last 7 days, the Zacks Consensus Estimate for 2012 increased 9.0% to $2.92 per share, implying a year-over-year jump of 15.4%. For 2013, three out of four estimates have risen over the same timeframe, helping the Zacks Consensus Estimate improve 3.6% to $2.89.

Valuation Looks Reasonable

Along with a P/B multiple of 1.4, Community Trust has a forward price-to-earnings (P/E) ratio of 11.6 (A P/E ratio under 15.0 and P/B ratio under 3.0 generally indicate value). Furthermore, over the last year, the company’s share price has gained nearly 20%.

Additionally, Community Trust Bancorp currently enjoys a solid dividend yield of 3.7%. The second quarter of 2012 marked the company’s 42nd straight dividend-paying quarter. Therefore, in addition to being a value stock, the company also offers a steady income opportunity.

The chart below clearly shows that after a plunge in September/October 2011, the stock is back on the recovery path. Moreover, the Zacks Consensus Estimate is on an upward trajectory for the years ahead.

Pikeville, Kentucky-based Community Trust Bancorp is a bank holding company and has nearly 80 banking branches and about 5 trust offices spread across Kentucky, West Virginia and Tennessee. The company offers a wide range of commercial and personal banking and trust and wealth management services. With a market capitalization of $526.1 million, Community Trust competes with Heartland Financial USA Inc. (HTLF) and First Financial Bancorp (FFBC).

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