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Community Trust Bancorp, Inc. Reports Earnings for the Fourth Quarter and Year 2020

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Community Trust Bancorp, Inc. (NASDAQ:CTBI)

Earnings Summary

 

 

 

 

 

(in thousands except per share data)

4Q

2020

3Q

2020

4Q

2019

Year

2020

Year

2019

Net income

$15,826

$17,447

$16,008

$59,504

$64,540

Earnings per share

$0.89

$0.98

$0.90

$3.35

$3.64

Earnings per share - diluted

$0.89

$0.98

$0.90

$3.35

$3.64

 

 

 

 

 

 

Return on average assets

1.24%

1.38%

1.46%

1.23%

1.49%

Return on average equity

9.64%

10.81%

10.35%

9.36%

10.84%

Efficiency ratio

62.75%

55.99%

58.88%

58.30%

60.70%

Tangible common equity

11.62%

11.68%

12.78%

 

 

 

 

 

 

 

 

Dividends declared per share

$0.385

$0.385

$0.380

$1.530

$1.480

Book value per share

$36.77

$36.20

$34.56

 

 

 

 

 

 

 

 

Weighted average shares

17,755

17,746

17,737

17,748

17,724

Weighted average shares - diluted

17,769

17,752

17,760

17,756

17,740

Community Trust Bancorp, Inc. (NASDAQ:CTBI) reports earnings for the fourth quarter 2020 of $15.8 million, or $0.89 per basic share, compared to $17.4 million, or $0.98 per basic share, earned during the third quarter 2020 and $16.0 million, or $0.90 per basic share, earned during the fourth quarter 2019. Earnings for the year ended December 31, 2020 were $59.5 million, or $3.35 per basic share, compared to $64.5 million, or $3.64 per basic share, for the year ended December 31, 2019.

4th Quarter 2020 Highlights

  • Net interest income for the quarter of $38.6 million was $0.9 million, or 2.5%, above prior quarter and $2.2 million, or 6.2%, above fourth quarter 2019.
  • Provision for credit losses for the quarter ended December 31, 2020 decreased $1.5 million from prior quarter and $0.9 million from prior year same quarter.
  • Our loan portfolio decreased $3.7 million, an annualized 0.4%, during the quarter but increased $305.5 million, or 9.4%, from December 31, 2019.
  • CTBI experienced improvement in loan losses, as our net loan charge-offs for the quarter ended December 31, 2020 decreased to $0.9 million, or 0.10% of average loans annualized, compared to $1.1 million, or 0.12% annualized, experienced for the third quarter 2020 and $1.5 million, or 0.19% annualized, for the fourth quarter 2019.
  • Asset quality improvement was experienced during the quarter and year 2020, as nonperforming loans at $26.6 million decreased $3.3 million from September 30, 2020 and $7.0 million from December 31, 2019. Nonperforming assets at $34.3 million decreased $11.2 million from September 30, 2020 and $18.8 million from December 31, 2019.
  • CTBI experienced significant deposit growth for the quarter and year 2020, as deposits, including repurchase agreements, increased $110.0 million, an annualized 10.3%, during the quarter and $739.5 million, or 20.4%, from December 31, 2019.
  • Noninterest income for the quarter ended December 31, 2020 of $15.2 million was a $0.3 million, or 2.3%, increase from prior quarter and a $1.9 million, or 14.0%, increase from prior year same quarter.
  • Two specific transactions in personnel expense significantly impacted our fourth quarter noninterest expense, as noninterest expense for the quarter ended December 31, 2020 of $33.6 million increased $4.2 million, or 14.1%, from prior quarter, and $4.4 million, or 14.9%, from prior year same quarter.

COVID-19

We continue working with our customers through the COVID-19 pandemic. During the fourth quarter 2020, we approved $10.6 million in CARES Act deferrals. Our customers continue to show improvement in their ability to resume payments with 3,071 (representing $540 million) having resumed payment status. At December 31, 2020 the number of customers with CARES Act deferrals reduced to 410 for a total outstanding amount of $130 million. These loan deferrals and modifications have been executed consistent with the guidelines of the CARES Act. Pursuant to the CARES Act, these loan deferrals are not included in our nonperforming loans disclosed below. Please see below for further detail regarding the types of deferrals received and the repayment status of those loans.

CARES Act Loan Deferral Status

 

Deferrals

 

One Time

Two Times

Three Times

Four Times

Outstanding

(dollars in millions)

Number

Amount

Number

Amount

Number

Amount

Number

Amount

Number

Amount

Commercial

841

$571

153

$223

45

$83

3

$3

109

$118

Residential

552

63

100

10

15

2

1

0

108

$9

Consumer

2,088

36

41

1

3

0

0

0

193

3

3,481

$670

294

$234

63

$85

4

$3

410

$130

As of December 31, 2020, we closed 2,962 Paycheck Protection Program (PPP) loans totaling $277.0 million, stemming from the CARES Act passed by Congress as a stimulus response to the potential economic impacts of COVID-19. Of these, 2,817 were under $350 thousand, 132 were between $350 thousand and $2.0 million, and 13 were over $2.0 million. The PPP program expired on August 8, 2020, and no additional loans may be made under the program. Loan forgiveness began in August 2020. Through December 31, 2020, we have had $18.8 million of our PPP loans forgiven by the U.S. Small Business Administration (SBA). An additional stimulus package, Consolidated Appropriations Act 2021, was signed into law in late December providing for additional PPP loans under different qualifying guidelines. CTBI intends to participate in the second round of lending as soon as possible.

Net Interest Income

Net interest income for the quarter of $38.6 million was an increase of $0.9 million, or 2.5%, from third quarter 2020 and $2.2 million, or 6.2%, from fourth quarter 2019. Our net interest margin at 3.20% increased 4 basis points from prior quarter but decreased 35 basis points from prior year same quarter, while our average earning assets increased $52.3 million and $743.9 million, respectively, during those same periods. Our yield on average earning assets decreased 8 basis points from prior quarter and 88 basis points from prior year same quarter, as we continue to find limited high yield investment opportunities for our excess liquidity; and our cost of funds decreased 18 basis points from prior quarter and 76 basis points from prior year same quarter.

Our ratio of average loans to deposits, including repurchase agreements, was 82.3% for the quarter ended December 31, 2020 compared to 82.8% for the quarter ended September 30, 2020 and 88.8% for the quarter ended December 31, 2019. Year-to-date net interest income for the year ended December 31, 2020 was $151.0 million compared to $144.9 million for the year ended December 31, 2019.

Noninterest Income

Noninterest income for the quarter ended December 31, 2020 of $15.2 million was a $0.3 million, or 2.3%, increase from prior quarter and a $1.9 million, or 14.0%, increase from prior year same quarter. The increase in noninterest income from prior quarter was primarily the result of increases in loan related fees ($0.4 million), securities gains ($0.3 million), gains on sales of loans ($0.1 million), and trust revenue ($0.1 million), partially offset by a decline in net gains on other real estate owned ($0.6 million). The increase from prior year same quarter resulted from increases in gains on sales of loans ($1.9 million), loan related fees ($0.6 million), securities gains ($0.2 million), brokerage revenue ($0.1 million), and income from bankers' title insurance ($0.1 million), partially offset by declines in deposit service charges ($0.6 million) and net gains on other real estate owned ($0.5 million). Deposit service charges declined primarily due to the impact to overdraft income of a forgiveness period and higher customer liquidity resulting from the CARES Act. Noninterest income for the year ended December 31, 2020 at $54.6 million increased $4.4 million, or 8.7%, compared to the year ended December 31, 2019.

Noninterest Expense

Two specific transactions significantly impacted our fourth quarter noninterest expense, as noninterest expense for the quarter ended December 31, 2020 of $33.6 million increased $4.2 million, or 14.1%, from prior quarter, and $4.4 million, or 14.9%, from prior year same quarter. Personnel expense increased $4.0 million from prior quarter as the result of a $2.4 million charge to post retirement benefits related to our bank owned life insurance as additional liability was recognized for the lower long-term interest rate environment and increased life expectancy in updated mortality tables and a $1.3 million increase in our accruals for payments to employees as the Board of Directors approved a payment to recognize employees for their extraordinary efforts as essential workers during the COVID-19 crisis. The quarterly increase in personnel expense also included a $0.2 million increase in salaries and a $0.1 million increase in the cost of group medical and life insurance. Other factors affecting noninterest expense quarter over quarter included increases in data processing expense ($0.2 million), net other real estate owned expense ($0.2 million), operating losses ($0.2 million), and advertising ($0.1 million), partially offset by declines in legal fees ($0.3 million) and repossession expense ($0.2 million). Noninterest expense for the year ended December 31, 2020 was $1.0 million below the year ended December 31, 2019.

Balance Sheet Review

CTBI's total assets at $5.1 billion increased $118.7 million, or 9.4% annualized, from September 30, 2020 and $773.1 million, or 17.7%, from December 31, 2019. Loans outstanding at December 31, 2020 were $3.6 billion, a decrease of $3.7 million, an annualized 0.4%, from September 30, 2020 but an increase of $305.5 million, or 9.4%, from December 31, 2019. We experienced an increase in the indirect consumer loan portfolio during the quarter of $4.4 million, offset by decreases of $5.8 million in the commercial loan portfolio, $0.9 million in the residential loan portfolio, and $1.4 million in the direct consumer loan portfolio. CTBI's investment portfolio increased $48.4 million, or an annualized 20.3%, from September 30, 2020 and $397.4 million, or 66.0%, from December 31, 2019. Deposits in other banks increased $84.4 million from prior quarter and $78.0 million from prior year same quarter. Deposits, including repurchase agreements, at $4.4 billion increased $110.0 million, or an annualized 10.3%, from September 30, 2020 and $739.5 million, or 20.4%, from December 31, 2019.

Shareholders' equity at December 31, 2020 was $654.9 million, a $10.4 million increase from the $644.4 million at September 30, 2020 and a $40.0 million increase from the $614.9 million at December 31, 2019. CTBI's annualized dividend yield to shareholders as of December 31, 2020 was 4.16%.

Asset Quality

CTBI's total nonperforming loans, not including performing troubled debt restructurings, were $26.6 million, or 0.75% of total loans, at December 31, 2020 compared to $29.9 million, or 0.84% of total loans, at September 30, 2020 and $33.6 million, or 1.03% of total loans, at December 31, 2019. Accruing loans 90+ days past due decreased $0.9 million from prior quarter and $2.5 million from December 31, 2019. Nonaccrual loans decreased $2.4 million during the quarter and $4.6 million from December 31, 2019. Accruing loans 30-89 days past due at $12.5 million decreased $0.9 million from prior quarter and $10.5 million from December 31, 2019. Our loan portfolio management processes focus on the immediate identification, management, and resolution of problem loans to maximize recovery and minimize loss.

Our level of foreclosed properties at $7.7 million at December 31, 2020 was a $7.9 million decrease from the $15.6 million at September 30, 2020 and an $11.8 million decrease from the $19.5 million at December 31, 2019. Sales of foreclosed properties for the quarter ended December 31, 2020 totaled $9.8 million while new foreclosed properties totaled $2.3 million. At December 31, 2020, the book value of properties under contracts to sell was $1.2 million; however, the closings had not occurred at quarter-end. Write-downs on foreclosed properties for the fourth quarter 2020 totaled $0.4 million compared to $0.3 million in the third quarter 2020 and $0.9 million in the fourth quarter 2019. As disclosed in our Form 10-K for the year ended December 31, 2019, CTBI is required to dispose of any foreclosed property that has not been sold within 10 years. As of December 31, 2020, three foreclosed properties with a total book value of $0.2 million had been held by us for at least nine years. One property totaling $6.8 million that had been held for nine years at September 30, 2020 was sold during the fourth quarter 2020.

Net loan charge-offs for the quarter ended December 31, 2020 were $0.9 million, or 0.10% of average loans annualized, compared to $1.1 million, or 0.12%, experienced for the third quarter 2020 and $1.5 million, or 0.19%, for the fourth quarter 2019. Of the net charge-offs for the quarter, $0.5 million were in commercial loans, $0.5 million were in indirect consumer loans, and $21 thousand were in residential loans, while we had a $51 thousand recovery in indirect consumer loans. Net charge-offs for the year ended December 31, 2020 totaled $6.2 million, or 0.18% of average loans, compared to $5.6 million, or 0.18% of average loans at December 31, 2019.

Allowance for Credit Losses

Allocations to the allowance for credit losses for the quarter ended December 31, 2020 totaled $0.9 million, a decrease of $1.5 million from prior quarter and $0.9 million from prior year same quarter. Our reserve coverage (allowance for credit losses to nonperforming loans) at December 31, 2020 was 180.7% compared to 160.7% at September 30, 2020 and allowance for loan and lease losses to nonperforming loans of 104.4% at December 31, 2019. Our credit loss reserve as a percentage of total loans outstanding at December 31, 2020 remained at 1.35% from September 30, 2020, above the allowance for loan loss reserve incurred loss model of 1.08% from December 31, 2019.

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; the effects of the COVID-19 pandemic on our business operations and credit quality and on general economic and financial market conditions, as well as our ability to respond to the related challenges; 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, regulations, and enforcement actions 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 $5.1 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, three 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)
December 31, 2020
(in thousands except per share data and # of employees)
 
Three Three Three Twelve Twelve
Months Months Months Months Months
Ended Ended Ended Ended Ended
December 31, 2020 September 30, 2020 December 31, 2019 December 31, 2020 December 31, 2019
Interest income

$

43,148

$

43,626

$

45,705

$

176,441

$

185,398

Interest expense

 

4,543

 

5,946

 

9,349

 

25,450

 

40,513

Net interest income

 

38,605

 

37,680

 

36,356

 

150,991

 

144,885

Loan loss provision

 

956

 

2,433

 

1,813

 

16,047

 

4,819

 
Gains on sales of loans

 

2,520

 

2,470

 

582

 

7,226

 

1,880

Deposit service charges

 

6,282

 

6,296

 

6,855

 

23,461

 

26,359

Trust revenue

 

2,786

 

2,692

 

2,739

 

10,931

 

10,804

Loan related fees

 

1,741

 

1,383

 

1,107

 

4,041

 

2,742

Securities gains (losses)

 

441

 

142

 

209

 

1,769

 

783

Other noninterest income

 

1,479

 

1,928

 

1,881

 

7,132

 

7,616

Total noninterest income

 

15,249

 

14,911

 

13,373

 

54,560

 

50,184

 
Personnel expense

 

20,106

 

16,137

 

15,961

 

66,427

 

63,027

Occupancy and equipment

 

2,595

 

2,724

 

2,687

 

10,649

 

10,845

Data processing expense

 

2,152

 

1,936

 

1,878

 

7,941

 

7,417

FDIC insurance premiums

 

320

 

295

 

-

 

1,056

 

266

Other noninterest expense

 

8,463

 

8,381

 

8,737

 

33,166

 

36,703

Total noninterest expense

 

33,636

 

29,473

 

29,263

 

119,239

 

118,258

 
Net income before taxes

 

19,262

 

20,685

 

18,653

 

70,265

 

71,992

Income taxes

 

3,436

 

3,238

 

2,645

 

10,761

 

7,452

Net income

$

15,826

$

17,447

$

16,008

$

59,504

$

64,540

 
Memo: TEQ interest income

$

43,336

$

43,815

$

45,881

$

177,168

$

186,169

 
Average shares outstanding

 

17,755

 

17,746

 

17,737

 

17,748

 

17,724

Diluted average shares outstanding

 

17,769

 

17,752

 

17,760

 

17,756

 

17,740

Basic earnings per share

$

0.89

$

0.98

$

0.90

$

3.35

$

3.64

Diluted earnings per share

$

0.89

$

0.98

$

0.90

$

3.35

$

3.64

Dividends per share

$

0.385

$

0.385

$

0.380

$

1.530

$

1.480

 
Average balances:
Loans

$

3,548,178

$

3,539,520

$

3,219,762

$

3,453,529

$

3,195,662

Earning assets

 

4,821,196

 

4,768,869

 

4,077,277

 

4,562,172

 

4,043,975

Total assets

 

5,092,100

 

5,035,874

 

4,362,271

 

4,838,160

 

4,328,024

Deposits, including repurchase agreements

 

4,310,970

 

4,276,496

 

3,627,825

 

4,079,810

 

3,610,589

Interest bearing liabilities

 

3,261,814

 

3,238,474

 

2,839,295

 

3,111,367

 

2,848,670

Shareholders' equity

 

652,827

 

642,306

 

613,728

 

635,978

 

595,337

 
Performance ratios:
Return on average assets

 

1.24%

 

1.38%

 

1.46%

 

1.23%

 

1.49%

Return on average equity

 

9.64%

 

10.81%

 

10.35%

 

9.36%

 

10.84%

Yield on average earning assets (tax equivalent)

 

3.58%

 

3.66%

 

4.46%

 

3.88%

 

4.60%

Cost of interest bearing funds (tax equivalent)

 

0.55%

 

0.73%

 

1.31%

 

0.82%

 

1.42%

Net interest margin (tax equivalent)

 

3.20%

 

3.16%

 

3.55%

 

3.33%

 

3.60%

Efficiency ratio (tax equivalent)

 

62.75%

 

55.99%

 

58.88%

 

58.30%

 

60.70%

 
Loan charge-offs

$

1,961

$

2,268

$

2,568

$

10,453

$

9,736

Recoveries

 

(1,041)

 

(1,187)

 

(1,040)

 

(4,292)

 

(4,105)

Net charge-offs

$

920

$

1,081

$

1,528

$

6,161

$

5,631

 
Market Price:
High

$

38.50

$

35.09

$

47.54

$

46.87

$

47.54

Low

$

27.74

$

28.00

$

40.88

$

26.45

$

38.03

Close

$

37.05

$

28.26

$

46.64

$

37.05

$

46.64

 
As of As of As of
December 31, 2020 September 30, 2020 December 31, 2019
Assets:
Loans

$

3,554,211

$

3,557,899

$

3,248,664

Loan loss reserve

 

(48,022)

 

(47,986)

 

(35,096)

Net loans

 

3,506,189

 

3,509,913

 

3,213,568

Loans held for sale

 

23,259

 

20,125

 

1,167

Securities AFS

 

997,261

 

949,089

 

599,844

Securities HTM

 

-

 

-

 

517

Equity securities at fair value

 

2,471

 

2,212

 

1,953

Other equity investments

 

14,935

 

15,010

 

15,361

Other earning assets

 

286,074

 

201,651

 

208,094

Cash and due from banks

 

54,250

 

58,206

 

58,680

Premises and equipment

 

42,001

 

42,115

 

44,046

Right of use asset

 

13,215

 

13,536

 

14,550

Goodwill and core deposit intangible

 

65,490

 

65,490

 

65,490

Other assets

 

133,996

 

143,074

 

142,733

Total Assets

$

5,139,141

$

5,020,421

$

4,366,003

 
Liabilities and Equity:
Interest bearing checking

$

78,308

$

78,989

$

51,179

Savings deposits

 

1,756,178

 

1,667,120

 

1,389,473

CD's >=$100,000

 

545,613

 

533,103

 

541,638

Other time deposits

 

495,058

 

511,106

 

557,522

Total interest bearing deposits

 

2,875,157

 

2,790,318

 

2,539,812

Noninterest bearing deposits

 

1,140,925

 

1,103,863

 

865,760

Total deposits

 

4,016,082

 

3,894,181

 

3,405,572

Repurchase agreements

 

355,862

 

367,788

 

226,917

Other interest bearing liabilities

 

58,736

 

60,641

 

66,162

Lease liability

 

13,972

 

14,257

 

15,185

Other noninterest bearing liabilities

 

39,624

 

39,104

 

37,281

Total liabilities

 

4,484,276

 

4,375,971

 

3,751,117

Shareholders' equity

 

654,865

 

644,450

 

614,886

Total Liabilities and Equity

$

5,139,141

$

5,020,421

$

4,366,003

 
Ending shares outstanding

 

17,810

 

17,802

 

17,793

 
30 - 89 days past due loans

$

12,465

$

13,324

$

22,945

90 days past due loans

 

17,133

 

17,989

 

19,620

Nonaccrual loans

 

9,444

 

11,880

 

13,999

Restructured loans (excluding 90 days past due and nonaccrual)

 

68,554

 

67,500

 

60,462

Foreclosed properties

 

7,694

 

15,586

 

19,480

 
Common equity Tier 1 capital

 

17.56%

 

17.25%

 

17.18%

Tier 1 leverage ratio

 

12.70%

 

12.65%

 

14.01%

Tier 1 risk-based capital ratio

 

19.25%

 

18.94%

 

18.94%

Total risk based capital ratio

 

20.50%

 

20.19%

 

20.05%

Tangible equity to tangible assets ratio

 

11.62%

 

11.68%

 

12.78%

FTE employees

 

998

 

966

 

1,000

 

 

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