Finance

Community Trust Charge-Off Spike Cuts Third-Quarter Profit

The Tip Desk · October 22, 2026 · 4 min read

Net income fell to $25.9 million, or $1.43 a share, as net charge-offs hit $6.6 million and the provision rose to $9.2 million.

Community Trust Bancorp, Inc. (CTBI), the Pikeville, Kentucky community bank with $7.1 billion in assets, reported third-quarter 2026 net income of $25.9 million, or $1.43 a share, down from $29.6 million, or $1.64 a share, in the second quarter.

The decline tracked a sharp rise in credit costs rather than a collapse in revenue. Total revenue was $1.2 million above the prior quarter. Net interest income was $61.1 million, up 0.3% from the second quarter after a 3.6% sequential increase there. Noninterest income was $18.6 million.

The provision for credit losses jumped to $9.2 million from $2.8 million in the second quarter. The bank said the increase reflected higher net charge-offs and significant loan growth. Of the provision, $5.8 million went to the allowance for credit losses and $0.6 million to unfunded commitments.

Net loan charge-offs were $6.6 million, or 0.50% annualized of average loans, versus $0.9 million, or 0.07%, in the second quarter. The bank attributed the spike primarily to an $8.7 million commercial relationship that had been accruing 90+ days past due and in collection. At June 30, management’s analysis suggested the loan was well secured. In September, collateral was sold at auction for a significantly lower bid, producing a $4.3 million charge-off. Of the quarter’s net charge-offs, $5.0 million were in commercial loans, $1.3 million in consumer indirect, and $0.3 million in consumer direct.

Total nonperforming loans fell $7.3 million to $22.5 million at September 30, 2026, reversing a $9.0 million increase in the second quarter. Nonaccrual loans were $9.5 million and accruing loans 90+ days past due were $13.0 million. Accruing loans 30–89 days past due were $23.1 million. Reserve coverage of nonperforming loans rose to 289.3% from 211.8% at June 30. The allowance for credit losses ended at $65.1 million and remained 1.23% of loans.

The tax-equivalent net interest margin compressed 17 basis points to 3.63% from 3.80% in the second quarter, after a 1 basis point expansion in that prior quarter. The earning-asset yield fell 5 basis points to 5.63% and the cost of interest-bearing funds rose 14 basis points to 2.78%, squeezing the gross interest margin to 2.85% from 3.04%. Average loans rose 2.5% to $5.18 billion and average deposits including repos rose 3.7% to $6.01 billion; the loan-to-deposit ratio slipped to 86.2% from 87.2%.

Period-end loans of $5.30 billion increased $177.9 million, an annualized 13.8%, versus a $134.1 million, or 10.8% annualized, increase in the second quarter. Commercial loans rose $80.9 million to $2.68 billion, residential $53.0 million to $1.54 billion, and consumer indirect $46.8 million to $0.95 billion. Consumer direct fell $2.8 million to $137.0 million.

Deposits including repos of $6.04 billion increased $86.1 million, an annualized 5.7%, after a $221.9 million, or 15.5% annualized, increase in the second quarter. Time deposits rose $141.0 million to $1.89 billion and repurchase agreements rose $54.0 million to $351.1 million. Money market savings fell $100.5 million to $1.86 billion. Noninterest-bearing deposits were essentially unchanged at $1.25 billion.

Noninterest income rose 6.0% from the second quarter, after a 14.2% sequential increase there. Deposit-related fees were $8.6 million. Noninterest expense fell $0.9 million to $36.5 million, reversing a $0.8 million sequential increase in the second quarter, primarily from a $1.7 million drop in group medical and life insurance costs. The efficiency ratio improved to 45.90% from 47.99%.

The quarterly dividend was raised to $0.71 a share from $0.53. Shareholders’ equity fell $14.5 million to $877.3 million and tangible common equity declined to 11.60% from 11.93%. Net unrealized losses on securities, net of deferred taxes, widened to $96.7 million at September 30 from $68.4 million at June 30.

More on CTBI

September 28, 2026 QBook Stronger demand supports expansion as pricing diverges

COMMUNITY TRUST BANCORP INC /KY/ — all coverage and financials