Community Trust Bank(CTBI) - 2020 Q4 - Annual Report

PART I Business CTBI is a $5.1 billion bank holding company providing banking and wealth management services in KY, WV, and TN Financial Snapshot (as of December 31, 2020) | Metric | Value | | :--- | :--- | | Total Consolidated Assets | $5.1 billion | | Total Consolidated Deposits | $4.4 billion | | Total Shareholders' Equity | $654.9 million | | Trust Assets Under Management | $2.8 billion | - CTBI is a bank holding company owning one commercial bank and one trust company, serving communities in Kentucky, West Virginia, and Tennessee[19] - The company offers a wide range of services including commercial and personal banking, cash management, and wealth management[21] - As of December 31, 2020, CTBI employed 998 full-time equivalent employees, with females comprising 75% of the workforce[33] - The company is well-capitalized under the Community Bank Leverage Ratio (CBLR) framework, with a ratio of 12.70% as of December 31, 2020[46] Risk Factors The company faces significant credit, operational, and economic risks concentrated in its primary operating markets - Financial performance is highly dependent on the economic conditions of its primary markets, which have been disrupted by the COVID-19 pandemic[50][52] - The loan portfolio has concentrations in higher-risk segments, including commercial real estate (21%), hotel/motel (7%), and consumer indirect auto loans (17%)[69][70][72] - The company faces significant interest rate risk and must manage the transition from LIBOR, affecting over $200 million in financial instruments[63] - The COVID-19 pandemic poses multifaceted risks, with 3,844 loan deferrals totaling $992 million processed through year-end 2020[125][131] - Participation in the SBA's Paycheck Protection Program (PPP) exposes the company to potential litigation and credit risk if loan guarantees are denied[142][144] Unresolved Staff Comments The company reports no unresolved comments from the Securities and Exchange Commission staff - None[145] Selected Statistical Information This section details the company's financial condition and performance from 2018-2020 through various statistical tables Net Interest Income and Margin (2018-2020) | Year | Net Interest Income (Tax Equivalent) | Net Interest Margin | | :--- | :--- | :--- | | 2020 | $151.7 million | 3.33% | | 2019 | $145.7 million | 3.60% | | 2018 | $143.1 million | 3.66% | Loan Portfolio Composition (December 31, 2020) | Loan Category | Amount (in thousands) | % of Total | | :--- | :--- | :--- | | Total Commercial | $1,893,527 | 53.27% | | Total Residential | $888,329 | 24.99% | | Total Consumer | $772,355 | 21.74% | | Total Loans | $3,554,211 | 100.00% | Nonperforming Assets Trend (2018-2020) | (in thousands) | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Total nonperforming loans | $26,577 | $33,619 | $22,065 | | Foreclosed properties | $7,694 | $19,480 | $27,273 | | Total nonperforming assets | $34,271 | $53,099 | $49,380 | | Nonperforming assets to total loans & foreclosed properties | 0.96% | 1.62% | 1.53% | - The Allowance for Credit Losses (ACL) increased to $48.0 million in 2020, driven by a $16.0 million provision and a $3.0 million CECL adoption adjustment[174] Properties The company operates from 80 locations, the majority of which are owned properties - As of December 31, 2020, the company operated from 80 total locations, with 71 being owned and 9 being leased[187][189] Legal Proceedings The company is involved in ordinary course legal actions that are not expected to have a material financial impact - Management believes that any pending legal actions will not have a material effect on the company's financial condition[193] Mine Safety Disclosures This item is not applicable to the company's operations - Not applicable[194] Information about our Executive Officers This section lists the company's executive officers, their positions, and their tenure - A table lists the executive officers of CTBI, including their names, ages, positions, and tenure, with Jean R. Hale serving as Chairman, President, and CEO[197] PART II Market for the Registrant's Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities The company's stock (CTBI) trades on NASDAQ, with increased dividends and share repurchases in 2020 - The annual dividend was increased to $1.53 per share in 2020, with a payout ratio of 45.7%[201] - CTBI repurchased 32,664 shares of its common stock in 2020, with 1,034,706 shares remaining under its repurchase authorization[203] 5-Year Cumulative Total Return Comparison (Investment of $100 on Dec 31, 2015) | Index | 2020 Value | | :--- | :--- | | Community Trust Bancorp, Inc. | $124.15 | | NASDAQ Stock Market (U.S.) | $206.32 | | NASDAQ Bank Stocks | $149.83 | Selected Financial Data 2016-2020 This section presents a five-year summary of key financial data, showing asset growth but declining profitability in 2020 Selected Financial Highlights (2019 vs. 2020) | (in thousands except per share data and ratios) | 2020 | 2019 | | :--- | :--- | :--- | | Net Income | $59,504 | $64,540 | | Diluted Earnings Per Share | $3.35 | $3.64 | | Total Assets (Year-End) | $5,139,141 | $4,366,003 | | Return on Average Assets (ROAA) | 1.23% | 1.49% | | Return on Average Equity (ROAE) | 9.36% | 10.84% | | Net Interest Margin (Tax Equivalent) | 3.33% | 3.60% | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses 2020 performance, highlighting balance sheet growth alongside decreased net income due to higher credit loss provisions - Net income for 2020 was $59.5 million, a decrease from $64.5 million in 2019, primarily due to an $11.2 million increase in the provision for credit losses[230][232] - The company actively participated in COVID-19 relief, closing 2,962 PPP loans totaling $277.0 million and processing loan deferrals totaling $992 million[224][238] - Asset quality improved significantly in 2020, with nonperforming assets decreasing by 35.5% to $34.3 million[235] - The company adopted the CECL accounting standard on January 1, 2020, increasing the allowance for credit losses by $3.0 million[228][387] - CTBI remains well-capitalized, with a Community Bank Leverage Ratio (CBLR) of 12.70% as of December 31, 2020[277] Balance Sheet Growth (Year-over-Year) | Metric | Dec 31, 2020 | % Change from 2019 | | :--- | :--- | :--- | | Total Assets | $5.1 billion | +17.7% | | Total Loans | $3.6 billion | +9.4% | | Total Deposits | $4.4 billion | +20.4% | Quantitative and Qualitative Disclosures about Market Risk The company does not use material hedging or derivatives and refers to Item 7 for its interest rate risk analysis - The company does not engage in material hedging or derivative activity, with interest rate sensitivity analysis provided in Item 7[308] Financial Statements and Supplementary Data This section contains the company's audited consolidated financial statements and the independent auditor's report for 2020 Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Total Assets | $5,139,141 | $4,366,003 | | Net Loans | $3,506,189 | $3,213,568 | | Total Deposits | $4,016,082 | $3,405,572 | | Total Shareholders' Equity | $654,865 | $614,886 | Consolidated Income Statement Highlights (in thousands) | Account | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Net Interest Income | $150,991 | $144,885 | $142,155 | | Provision for Credit Losses | $16,047 | $4,819 | $6,167 | | Net Income | $59,504 | $64,540 | $59,228 | - The Notes to Financial Statements detail the adoption of the CECL accounting standard (ASU 2016-13) effective January 1, 2020[381] - The independent auditor's report from BKD, LLP, issued an unqualified opinion on the financial statements and internal controls[626][627][633] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants - None[648] Controls and Procedures Management concluded that the company's disclosure controls, procedures, and internal controls were effective as of year-end 2020 - Management concluded that disclosure controls and procedures were effective as of December 31, 2020[649] - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2020[657] Other Information The company reports no other information required under this item - None[661] PART III Directors, Executive Officers, Corporate Governance, Compensation, and Principal Accountant Fees Required information on governance and compensation is incorporated by reference from the company's proxy statement - Information required by Items 10-14 is incorporated by reference from the Registrant's Proxy Statement for the 2021 Annual Meeting[13][663][664] PART IV Exhibits and Financial Statement Schedules This section lists all financial statements, schedules, and exhibits filed as part of the Form 10-K report - This section lists all financial statements and exhibits filed, including the auditor's report, corporate documents, and management plans[672][674] Form 10-K Summary The company has elected not to provide a Form 10-K summary - None[680]