8-K
COMMUNITY TRUST BANCORP INC /KY/ (CTBI)
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)
September 30, 2021
Commission file number 001-31220
Community Trust Bancorp, Inc.
(Exact name of registrant as specified in its charter)
| Kentucky | 61-0979818 |
|---|---|
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
| P.O. Box 2947<br><br> <br>346 North Mayo Trail<br><br> <br>Pikeville,<br> Kentucky | 41502 |
| (Address of principal executive offices) | (Zip code) |
| (606)<br> 432-1414<br><br> <br>(Registrant’s telephone number) | |
| Securities registered pursuant to Section 12(b) of the Act: | |
| Common Stock<br><br> <br>(Title of class) | |
| CTBI | The Nasdaq Global Select Market |
| --- | --- |
| (Trading symbol) | (Name of exchange on which registered) |
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 October 20, 2021, Community Trust Bancorp, Inc. issued a press release announcing its financial results for the quarter and nine months ended September 30, 2021. 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 October 20, 2021 |
|---|
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: | October 20, 2021 | By: |
| /s/ Jean R. Hale | ||
| Jean R. Hale | ||
| Chairman and Chief Executive Officer |
Exhibit Index
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release dated October 20, 2021 |
Exhibit 99.1
FOR IMMEDIATE RELEASE
October 20, 2021
FOR ADDITIONAL INFORMATION, PLEASE CONTACT JEAN R. HALE, CHAIRMAN AND C.E.O., COMMUNITY TRUST BANCORP, INC. AT (606) 437-3294
Pikeville, Kentucky:
COMMUNITY TRUST BANCORP, INC. REPORTS EARNINGS FOR THE THIRD QUARTER 2021
| Earnings Summary | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands except per share data) | 3Q<br><br> <br>2021 | 2Q<br><br> <br>2021 | 3Q<br><br> <br>2020 | YTD<br><br> <br>2021 | YTD<br><br> <br>2020 | ||||||||||
| Net income | $ | 21,142 | $ | 23,931 | $ | 17,447 | $ | 68,691 | $ | 43,678 | |||||
| Earnings per share | $ | 1.19 | $ | 1.35 | $ | 0.98 | $ | 3.86 | $ | 2.46 | |||||
| Earnings per share - diluted | $ | 1.19 | $ | 1.34 | $ | 0.98 | $ | 3.86 | $ | 2.46 | |||||
| Return on average assets | 1.54 | % | 1.76 | % | 1.38 | % | 1.71 | % | 1.23 | % | |||||
| Return on average equity | 12.06 | % | 14.20 | % | 10.81 | % | 13.55 | % | 9.26 | % | |||||
| Efficiency ratio | 53.50 | % | 53.17 | % | 55.99 | % | 52.35 | % | 56.72 | % | |||||
| Tangible common equity | 11.77 | % | 11.39 | % | 11.68 | % | |||||||||
| Dividends declared per share | $ | 0.400 | $ | 0.385 | $ | 0.385 | $ | 1.170 | $ | 1.145 | |||||
| Book value per share | $ | 38.78 | $ | 38.36 | $ | 36.20 | |||||||||
| Weighted average shares | 17,790 | 17,784 | 17,746 | 17,783 | 17,746 | ||||||||||
| Weighted average shares - diluted | 17,808 | 17,800 | 17,752 | 17,798 | 17,753 |
Community Trust Bancorp, Inc. (NASDAQ-CTBI) achieved earnings for the third quarter 2021 of $21.1 million, or $1.19 per basic share, compared to $23.9 million, or $1.35 per basic share, earned during the second quarter 2021 and $17.4 million, or $0.98 per basic share, earned during the third quarter 2020. Our loan portfolio quality continues to see improvement, allowing a further reduction in credit loss reserves. Noninterest income declined; however, total revenue increased as our net interest margin saw improvement resulting from a redeployment of Federal Reserve funds into our investment portfolio and forgiveness of Paycheck Protection Program (PPP) loans. Earnings for the nine months ended September 30, 2021 were $68.7 million compared to $43.7 million for the nine months ended September 30, 2020.
3^rd^ Quarter 2021 Highlights
| ❖ | Net interest income for the quarter of $42.0 million was $2.0 million, or 5.0%, above prior quarter and $4.3 million, or 11.5%,<br> above third quarter 2020. |
|---|---|
| ❖ | We recovered $0.2 million of our provision for credit losses during the quarter ended September 30, 2021. The reduction to our<br> allowance for credit losses was the result of improving credit metrics. We also recognized a recapture of allowance for credit losses in the second quarter 2021 with a credit to the provision for credit<br> losses of $4.3 million. Provision for credit losses for the third quarter 2020 totaled $2.4 million. |
| --- | --- |
| ❖ | Our loan portfolio decreased $50.3 million, an annualized 5.8%, during the quarter and $159.7 million, or 4.5%, from September 30,<br> 2020. Loans, excluding PPP loans, increased $26.6 million during the quarter. |
| --- | --- |
| ❖ | Net loan charge-offs for the quarter were $0.3 million, or 0.04% of average loans annualized, for the quarter ended September 30,<br> 2021, compared to a net recovery of loan losses of $0.6 million for the quarter ended June 30, 2021 and net loan charge-offs of $1.1 million, or 0.12% of average loans annualized, for the third quarter 2020. |
| --- | --- |
| ❖ | Asset quality remains strong from prior quarter as our nonperforming loans, excluding troubled debt restructurings, decreased to<br> $18.7 million at September 30, 2021 from $21.1 million at June 30, 2021and $29.9 million at September 30, 2020. Nonperforming assets at $23.0 million decreased $3.9 million from June 30, 2021 and $22.4 million from September 30, 2020. |
| --- | --- |
| ❖ | Deposits, including repurchase agreements, decreased $106.0 million, an annualized 9.0%, during the quarter but increased $326.3<br> million, or 7.7%, from September 30, 2020. The decrease from prior quarter was primarily due to the transfer of a $75 million repurchase agreement into a managed fund with our trust subsidiary. |
| --- | --- |
| ❖ | Noninterest income for the quarter ended September 30, 2021 of $14.4 million decreased from prior quarter by $1.1 million, or 7.3%,<br> and $0.5 million, or 3.5%, from prior year same quarter. |
| --- | --- |
| ❖ | Noninterest expense for the quarter<br> ended September 30, 2021 of $30.3 million increased $0.8 million, or 2.8%, from prior quarter, and $0.9 million, or 2.9%, from prior year same quarter. |
| --- | --- |
COVID-19
We continue working with our customers through the COVID-19 pandemic. At September 30, 2021, the number of customers with CARES Act deferrals reduced to 27 for a total outstanding amount of $15.8 million. The majority of our CARES Act deferrals have been 90 day deferrals. Total outstanding deferrals include 6 commercial loan deferrals with a total outstanding amount of $14.3 million, 17 residential loan deferrals with a total outstanding amount of $1.4 million, and 4 consumer loan deferrals with a total outstanding amount of $0.1 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.
At September 30, 2021, we had closed 6,312 Paycheck Protection Program (PPP) loans totaling $401.3 million, including 3,352 loans totaling $124.3 million stemming from the Consolidated Appropriations Act 2021 (second round). Through September 30, 2021, we have had 4,730 of our PPP loans totaling $297.7 million forgiven by the SBA, including 1,877 loans totaling $35.9 million from the second round.
Net Interest Income
| Percent Change | ||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 3Q 2021 Compared to: | ||||||||||||||||||||||||
| ($ in thousands) | 3Q<br><br> <br>2021 | 2Q<br><br> <br>2021 | 3Q<br><br> <br>2020 | 2Q<br><br> <br>2021 | 3Q<br><br> <br>2020 | YTD<br><br> <br>2021 | YTD 2020 | Percent Change | ||||||||||||||||
| Components of net interest income | ||||||||||||||||||||||||
| Income on earning assets | $ | 45,952 | $ | 44,105 | $ | 43,815 | 4.2 | % | 4.9 | % | $ | 134,485 | $ | 133,832 | 0.5 | % | ||||||||
| Expense on interest bearing liabilities | 3,712 | 3,868 | 5,946 | (4.0 | ) | (37.6 | ) | 11,549 | 20,907 | (44.8 | ) | |||||||||||||
| Net interest income (tax equivalent) | $ | 42,240 | $ | 40,237 | $ | 37,869 | 5.0 | % | 11.5 | % | $ | 122,936 | $ | 112,925 | 8.9 | % | ||||||||
| Average yield and rates paid | ||||||||||||||||||||||||
| Earning assets yield | 3.52 | % | 3.41 | % | 3.66 | % | 3.1 | % | (3.8 | )% | 3.52 | % | 3.99 | % | (11.9 | )% | ||||||||
| Rate paid on interest bearing liabilities | 0.43 | 0.45 | 0.73 | (4.7 | ) | (40.9 | ) | 0.46 | 0.91 | (50.1 | ) | |||||||||||||
| Gross interest margin | 3.09 | % | 2.96 | % | 2.93 | % | 4.3 | % | 5.4 | % | 3.06 | % | 3.08 | % | (0.6 | )% | ||||||||
| Net interest margin | 3.23 | % | 3.11 | % | 3.16 | % | 3.8 | % | 2.3 | % | 3.22 | % | 3.37 | % | (4.6 | )% | ||||||||
| Average balances | ||||||||||||||||||||||||
| Investment securities | $ | 1,511,178 | $ | 1,223,123 | $ | 946,426 | 23.55 | % | 59.7 | % | $ | 1,266,850 | $ | 770,184 | 64.5 | % | ||||||||
| Loans | $ | 3,400,194 | $ | 3,495,655 | $ | 3,539,520 | (2.73 | )% | (3.9 | )% | $ | 3,480,860 | $ | 3,421,749 | 1.7 | % | ||||||||
| Earning assets | $ | 5,184,749 | $ | 5,184,923 | $ | 4,768,869 | 0.00 | % | 8.7 | % | $ | 5,109,934 | $ | 4,475,200 | 14.2 | % | ||||||||
| Interest-bearing liabilities | $ | 3,410,286 | $ | 3,424,218 | $ | 3,238,474 | (0.41 | )% | 5.3 | % | $ | 3,390,178 | $ | 3,060,851 | 10.8 | % |
Net interest income for the quarter of $42.0 million increased $2.0 million, or 5.0%, from second quarter 2021 and $4.3 million, or 11.5%, from third quarter 2020. Our net interest income excluding PPP loans for the quarter ended September 30, 2021 was $37.9 million compared to $36.7 million for the quarter ended June 30, 2021 and $36.6 million for the quarter ended September 30, 2020. Our net interest margin at 3.23% increased 12 basis points from prior quarter and 7 basis points from prior year same quarter, as our average earning assets decreased $0.2 million from prior quarter but increased $415.9 million from prior year same quarter. Our yield on average earning assets increased 11 basis points from prior quarter but decreased 14 basis points from prior year same quarter, and our cost of funds decreased 2 basis points from prior quarter and 30 basis points from prior year same quarter. The improvement in our net interest margin resulted from a redeployment of Federal Reserve funds into our investment portfolio and forgiveness of PPP loans. As discussed more fully below, the impact of the PPP loans to the net interest margin for the third quarter 2021 was 25 basis points. Net interest income for the nine months ended September 30, 2021 increased $9.9 million, or 8.8%, compared to the nine months ended September 30, 2020.
The PPP loan portfolio had an annualized yield for the quarter of 12.24%, a 620 basis point increase from the 6.04% yield in the second quarter 2021. Interest income on the portfolio was $0.4 million during the quarter, down $0.2 million from prior quarter, while the amortization of net loan origination fees from current outstanding loans and recognition of net fee income from paid and forgiven loans was $4.0 million, up $1.0 million from prior quarter. These fees are amortized over the life of the loan with any unamortized balance fully recognized at the time of loan forgiveness. The impact of the PPP loan portfolio to the net interest margin was 25 basis points for the third quarter 2021, an 11 basis point increase from the 14 basis points for the second quarter 2021.
Our ratio of average loans to deposits, including repurchase agreements, was 73.1% for the quarter ended September 30, 2021 compared to 75.0% for the quarter ended June 30, 2021 and 82.8% for the quarter ended September 30, 2020.
Noninterest Income
| Percent Change | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 3Q 2021 Compared to: | |||||||||||||||||||
| ($ in thousands) | 3Q<br><br> <br>2021 | 2Q<br><br> <br>2021 | 3Q<br><br> <br>2020 | 2Q<br><br> <br>2021 | 3Q<br><br> <br>2020 | YTD 2021 | YTD 2020 | Percent Change | |||||||||||
| Deposit service charges | $ | 7,066 | $ | 6,358 | $ | 6,296 | 11.1 | % | 12.2 | % | $ | 19,446 | $ | 17,179 | 13.2 | % | |||
| Trust revenue | 3,039 | 3,349 | 2,692 | (9.2 | ) | 12.9 | 9,339 | 8,145 | 14.7 | ||||||||||
| Gains on sales of loans | 1,239 | 1,907 | 2,470 | (35.0 | ) | (49.8 | ) | 5,579 | 4,706 | 18.6 | |||||||||
| Loan related fees | 1,050 | 1,004 | 1,383 | 4.7 | (24.0 | ) | 4,324 | 2,300 | 88.0 | ||||||||||
| Bank owned life insurance revenue | 654 | 581 | 602 | 12.4 | 8.7 | 1,808 | 1,739 | 4.0 | |||||||||||
| Brokerage revenue | 519 | 554 | 310 | (6.3 | ) | 67.4 | 1,530 | 995 | 53.7 | ||||||||||
| Other | 821 | 1,768 | 1,158 | (53.7 | ) | (29.3 | ) | 3,460 | 4,247 | (18.6 | ) | ||||||||
| Total noninterest income | $ | 14,388 | $ | 15,521 | $ | 14,911 | (7.3 | )% | (3.5 | )% | $ | 45,486 | $ | 39,311 | 15.7 | % |
Noninterest income for the quarter ended September 30, 2021 of $14.4 million was a decrease of $1.1 million, or 7.3%, from prior quarter and $0.5 million, or 3.5%, from prior year same quarter. The decrease from prior quarter included decreases in gains on sales of loans ($0.7 million), trust revenue ($0.3 million), securities gains ($0.3 million), and other operating revenue ($0.4 million), partially offset by an increase in deposit service charges ($0.7 million). The decrease from prior year same quarter included decreases in gains on sales of loans ($1.2 million), loan related fees ($0.3 million), and securities gains ($0.2 million), partially offset by increases in deposit service charges ($0.8 million) and trust revenue ($0.3 million). Noninterest income for the nine months ended September 30, 2021 of $45.5 million was a $6.2 million, or 15.7% increase from the nine months ended September 30, 2020.
Gains on sales of loans continue to be impacted by the slowdown in the industry-wide refinancing boom. Deposit service charges were impacted during the quarter by an increase in overdraft charges. The year over year increase in noninterest income was driven by increases in gains on sales of loans, deposit service charges, trust revenue, and loan related fees. Deposit service charges were primarily impacted year over year by an increase in debit card income. Loan related fees were primarily impacted by the change in the fair market value of mortgage servicing rights.
Noninterest Expense
| Percent Change | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 3Q 2021 Compared to: | |||||||||||||||||||
| ($ in thousands) | 3Q<br><br> <br>2021 | 2Q<br><br> <br>2021 | 3Q<br><br> <br>2020 | 2Q<br><br> <br>2021 | 3Q<br><br> <br>2020 | YTD 2021 | YTD 2020 | Percent Change | |||||||||||
| Salaries | $ | 11,962 | $ | 11,706 | $ | 11,640 | 2.2 | % | 2.8 | % | $ | 35,080 | $ | 34,651 | 1.2 | % | |||
| Employee benefits | 6,891 | 7,254 | 4,497 | (5.0 | ) | 53.3 | 19,566 | 11,670 | 67.7 | ||||||||||
| Net occupancy and equipment | 2,733 | 2,668 | 2,724 | 2.4 | 0.3 | 8,229 | 8,054 | 2.2 | |||||||||||
| Data processing | 1,911 | 1,870 | 1,936 | 2.3 | (1.2 | ) | 5,940 | 5,789 | 2.6 | ||||||||||
| Legal and professional fees | 685 | 753 | 1,001 | (9.2 | ) | (31.6 | ) | 2,331 | 3,057 | (23.7 | ) | ||||||||
| Advertising and marketing | 819 | 710 | 797 | 15.5 | 2.8 | 2,251 | 1,999 | 12.6 | |||||||||||
| Telephone | 486 | 502 | 500 | (3.1 | ) | (2.7 | ) | 1,498 | 1,389 | 7.8 | |||||||||
| Other | 4,841 | 4,035 | 6,378 | 20.0 | (24.1 | ) | 13,241 | 18,994 | (30.3 | ) | |||||||||
| Total noninterest expense | $ | 30,328 | $ | 29,498 | $ | 29,473 | 2.8 | % | 2.9 | % | $ | 88,136 | $ | 85,603 | 3.0 | % |
Noninterest expense for the quarter ended September 30, 2021 of $30.3 million increased $0.8 million, or 2.8%, from prior quarter, and $0.9 million, or 2.9%, from prior year same quarter. The increase in noninterest expense quarter over quarter included increases in operating losses ($0.3 million), marketing and promotional ($0.2 million), and loan related expense ($0.2 million). The increase from prior year same quarter was the result of an increase in personnel expense ($2.7 million), partially offset by decreases in taxes other than property and payroll ($1.4 million), net other real estate owned expense ($0.2 million), and repossession expense ($0.2 million). The increase in personnel expense included a $1.8 million increase in bonuses and incentives as we increased the accruals for incentive payments based on our current projected earnings for the year. Noninterest expense for the nine months ended September 30, 2021 increased $2.5 million, or 3.0%, compared to the nine months ended September 30, 2020.
Balance Sheet Review
| Total Loans | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Percent Change | ||||||||||||
| 3Q 2021 Compared to: | ||||||||||||
| ($ in thousands) | 3Q<br><br> <br>2021 | 2Q<br><br> <br>2021 | 3Q<br><br> <br>2020 | 2Q<br><br> <br>2021 | 3Q<br><br> <br>2020 | |||||||
| Commercial nonresidential real estate | $ | 732,442 | $ | 718,338 | $ | 742,436 | 2.0 | % | (1.3 | )% | ||
| Commercial residential real estate | 330,660 | 309,627 | 284,428 | 6.8 | 16.3 | |||||||
| SBA guaranteed PPP loans | 99,116 | 175,983 | 270,271 | (43.7 | ) | (63.3 | ) | |||||
| Other commercial | 600,583 | 617,781 | 602,218 | (2.8 | ) | (0.3 | ) | |||||
| Total commercial | 1,762,801 | 1,821,729 | 1,899,353 | (3.2 | ) | (7.2 | ) | |||||
| Residential mortgage | 763,005 | 762,649 | 783,818 | 0.0 | (2.7 | ) | ||||||
| Home equity loans/lines | 105,007 | 102,551 | 105,454 | 2.4 | (0.4 | ) | ||||||
| Total residential | 868,012 | 865,200 | 889,272 | 0.3 | (2.4 | ) | ||||||
| Consumer indirect | 612,394 | 610,025 | 615,608 | 0.4 | (0.5 | ) | ||||||
| Consumer direct | 155,022 | 151,539 | 153,666 | 2.3 | 0.9 | |||||||
| Total consumer | 767,416 | 761,564 | 769,274 | 0.8 | (0.2 | ) | ||||||
| Total loans | $ | 3,398,229 | $ | 3,448,493 | $ | 3,557,899 | (1.5 | )% | (4.5 | )% | ||
| Total Deposits and Repurchase Agreements | ||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Percent Change | ||||||||||||
| 3Q 2021 Compared to: | ||||||||||||
| ($ in thousands) | 3Q<br><br> <br>2021 | 2Q<br><br> <br>2021 | 3Q<br><br> <br>2020 | 2Q 2021 | 3Q 2020 | |||||||
| Non-interest bearing deposits | $ | 1,318,158 | $ | 1,286,989 | $ | 1,103,863 | 2.4 | % | 19.4 | % | ||
| Interest bearing deposits | ||||||||||||
| Interest checking | 90,657 | 99,226 | 78,989 | (8.6 | ) | 14.8 | ||||||
| Money market savings | 1,210,551 | 1,281,431 | 1,167,516 | (5.5 | ) | 3.7 | ||||||
| Savings accounts | 616,561 | 596,426 | 499,604 | 3.4 | 23.4 | |||||||
| Time deposits | 1,060,309 | 1,059,630 | 1,044,209 | 0.1 | 1.5 | |||||||
| Repurchase agreements | 292,022 | 370,568 | 367,788 | (21.2 | ) | (20.6 | ) | |||||
| Total interest bearing deposits and repurchase agreements | $ | 3,270,100 | $ | 3,407,281 | $ | 3,158,106 | (4.0 | )% | 3.5 | % | ||
| Total deposits and repurchase agreements | $ | 4,588,258 | $ | 4,694,270 | $ | 4,261,969 | (2.3 | )% | 7.7 | % |
CTBI’s total assets at $5.4 billion decreased $108.6 million, or 7.8% annualized, from June 30, 2021 but increased $365.2 million, or 7.3%, from September 30, 2020. Loans outstanding at September 30, 2021 were $3.4 billion, a decrease of $50.3 million, an annualized 5.8%, from June 30, 2021 and $159.7 million, or 4.5%, from September 30, 2020. Loans, excluding PPP loans, increased $26.6 million during the quarter, with a $17.9 million increase in the commercial loan portfolio, a $3.5 million increase in the direct consumer loan portfolio, a $2.8 million increase in the residential loan portfolio, and a $2.4 million increase in the indirect consumer loan portfolio. The PPP loan portfolio declined $76.9 million as a result of SBA forgiveness. CTBI’s investment portfolio increased $168.1 million, or an annualized 49.0%, from June 30, 2021 and $576.9 million, or 60.6%, from September 30, 2020 as we redeployed funds from our Federal Reserve account into our investment portfolio. Deposits in other banks decreased $249.8 million from prior quarter and $58.9 million from prior year same quarter. Deposits, including repurchase agreements, at $4.6 billion decreased $106.0 million, or an annualized 9.0%, from June 30, 2021 but increased $326.3 million, or 7.7%, from September 30, 2020. The decrease from prior quarter was primarily due to the transfer of a $75 million repurchase agreement into a managed fund with our trust subsidiary.
Shareholders’ equity at September 30, 2021 was $691.6 million, a $7.6 million increase from the $684.1 million at June 30, 2021 and a $47.2 million increase from the $644.4 million at September 30, 2020. CTBI’s annualized dividend yield to shareholders as of September 30, 2021 was 3.80%.
Asset Quality
CTBI’s total nonperforming loans, not including performing troubled debt restructurings, decreased to $18.7 million at September 30, 2021 from $21.1 million at June 30, 2021 and $29.9 million at September 30, 2020. Accruing loans 90+ days past due decreased $1.6 million from prior quarter and $11.3 million from September 30, 2020. Nonaccrual loans decreased $0.8 million during the quarter but increased $0.2 million from September 30, 2020. Accruing loans 30-89 days past due at $8.9 million decreased $2.0 million from prior quarter and $4.5 million from September 30, 2020. 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 $4.3 million at September 30, 2021 was a $1.5 million decrease from the $5.8 million at June 30, 2021 and an $11.3 million decrease from the $15.6 million at June 30, 2020. Sales of foreclosed properties for the quarter ended September 30, 2021 totaled $2.0 million while new foreclosed properties totaled $0.6 million. At September 30, 2021, the book value of properties under contracts to sell was $0.4 million; however, the closings had not occurred at quarter-end.
Net loan charge-offs for the quarter were $0.3 million, or 0.04% of average loans annualized, for the quarter ended September 30, 2021, compared to a net recovery of loan losses of $0.6 million for the quarter ended June 30, 2021 and net loan charge-offs of $1.1 million, or 0.12% of average loans annualized, for the third quarter 2020. For the nine months ended September 30, 2021, we experienced a net recovery of loan losses of $0.1 million compared to net charge-offs of $5.2 million, or 0.20% of average loans annualized, for the nine months ended September 30, 2020.
Allowance for Credit Losses
We recovered $0.2 million of our provision for credit losses during the quarter ended September 30, 2021 as a result of improving credit metrics. We also recognized a recapture of allowance for credit losses in the second quarter 2021 with a credit to the provision for credit losses of $4.3 million. Provision for credit losses for the third quarter 2020 totaled $2.4 million. Our reserve coverage (allowance for credit losses to nonperforming loans) at September 30, 2021 was 220.0% compared to 197.2% at June 30, 2021 and 160.7% at September 30, 2020. Our credit loss reserve as a percentage of total loans outstanding at September 30, 2021 was 1.21% (1.25% excluding PPP loans) compared to 1.21% at June 30, 2021 (1.27% excluding PPP loans) and 1.35% at September 30, 2020 (1.46% excluding PPP loans).
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 $5.4 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) | |||||||||||||||
| September 30, 2021 | |||||||||||||||
| (in thousands except per share data and # of employees) | |||||||||||||||
| Three | Three | Three | Nine | Nine | |||||||||||
| Months | Months | Months | Months | Months | |||||||||||
| Ended | Ended | Ended | Ended | Ended | |||||||||||
| September 30, 2021 | June 30, 2021 | September 30, 2020 | September 30, 2021 | September 30, 2020 | |||||||||||
| Interest income | $ | 45,726 | $ | 43,875 | $ | 43,626 | $ | 133,812 | $ | 133,293 | |||||
| Interest expense | 3,712 | 3,868 | 5,946 | 11,549 | 20,907 | ||||||||||
| Net interest income | 42,014 | 40,007 | 37,680 | 122,263 | 112,386 | ||||||||||
| Loan loss provision | (163 | ) | (4,257 | ) | 2,433 | (6,919 | ) | 15,091 | |||||||
| Gains on sales of loans | 1,239 | 1,907 | 2,470 | 5,579 | 4,706 | ||||||||||
| Deposit service charges | 7,066 | 6,358 | 6,296 | 19,446 | 17,179 | ||||||||||
| Trust revenue | 3,039 | 3,349 | 2,692 | 9,339 | 8,145 | ||||||||||
| Loan related fees | 1,050 | 1,004 | 1,383 | 4,324 | 2,300 | ||||||||||
| Securities gains (losses) | (62 | ) | 280 | 142 | 50 | 1,328 | |||||||||
| Other noninterest income | 2,056 | 2,623 | 1,928 | 6,748 | 5,653 | ||||||||||
| Total noninterest income | 14,388 | 15,521 | 14,911 | 45,486 | 39,311 | ||||||||||
| Personnel expense | 18,853 | 18,960 | 16,137 | 54,646 | 46,321 | ||||||||||
| Occupancy and equipment | 2,733 | 2,668 | 2,724 | 8,229 | 8,054 | ||||||||||
| Data processing expense | 1,911 | 1,870 | 1,936 | 5,940 | 5,789 | ||||||||||
| FDIC insurance premiums | 393 | 323 | 295 | 1,042 | 736 | ||||||||||
| Other noninterest expense | 6,438 | 5,677 | 8,381 | 18,279 | 24,703 | ||||||||||
| Total noninterest expense | 30,328 | 29,498 | 29,473 | 88,136 | 85,603 | ||||||||||
| Net income before taxes | 26,237 | 30,287 | 20,685 | 86,532 | 51,003 | ||||||||||
| Income taxes | 5,095 | 6,356 | 3,238 | 17,841 | 7,325 | ||||||||||
| Net income | $ | 21,142 | $ | 23,931 | $ | 17,447 | $ | 68,691 | $ | 43,678 | |||||
| Memo: TEQ interest income | $ | 45,952 | $ | 44,105 | $ | 43,815 | $ | 134,485 | $ | 133,832 | |||||
| Average shares outstanding | 17,790 | 17,784 | 17,746 | 17,783 | 17,746 | ||||||||||
| Diluted average shares outstanding | 17,808 | 17,800 | 17,752 | 17,798 | 17,753 | ||||||||||
| Basic earnings per share | $ | 1.19 | $ | 1.35 | $ | 0.98 | $ | 3.86 | $ | 2.46 | |||||
| Diluted earnings per share | $ | 1.19 | $ | 1.34 | $ | 0.98 | $ | 3.86 | $ | 2.46 | |||||
| Dividends per share | $ | 0.400 | $ | 0.385 | $ | 0.385 | $ | 1.170 | $ | 1.145 | |||||
| Average balances: | |||||||||||||||
| Loans | $ | 3,400,194 | $ | 3,495,655 | $ | 3,539,520 | $ | 3,480,860 | $ | 3,421,749 | |||||
| Earning assets | 5,184,749 | 5,184,923 | 4,768,869 | 5,109,934 | 4,475,200 | ||||||||||
| Total assets | 5,457,558 | 5,450,182 | 5,035,874 | 5,376,588 | 4,752,895 | ||||||||||
| Deposits, including repurchase agreements | 4,650,885 | 4,661,615 | 4,276,496 | 4,585,812 | 4,002,194 | ||||||||||
| Interest bearing liabilities | 3,410,286 | 3,424,218 | 3,238,474 | 3,390,178 | 3,060,851 | ||||||||||
| Shareholders' equity | 695,490 | 675,727 | 642,306 | 677,632 | 630,320 | ||||||||||
| Performance ratios: | |||||||||||||||
| Return on average assets | 1.54 | % | 1.76 | % | 1.38 | % | 1.71 | % | 1.23 | % | |||||
| Return on average equity | 12.06 | % | 14.20 | % | 10.81 | % | 13.55 | % | 9.26 | % | |||||
| Yield on average earning assets (tax equivalent) | 3.52 | % | 3.41 | % | 3.66 | % | 3.52 | % | 3.99 | % | |||||
| Cost of interest bearing funds (tax equivalent) | 0.43 | % | 0.45 | % | 0.73 | % | 0.46 | % | 0.91 | % | |||||
| Net interest margin (tax equivalent) | 3.23 | % | 3.11 | % | 3.16 | % | 3.22 | % | 3.37 | % | |||||
| Efficiency ratio (tax equivalent) | 53.50 | % | 53.17 | % | 55.99 | % | 52.35 | % | 56.72 | % | |||||
| Loan charge-offs | $ | 1,042 | $ | 948 | $ | 2,268 | $ | 3,460 | $ | 8,492 | |||||
| Recoveries | (725 | ) | (1,554 | ) | (1,187 | ) | (3,572 | ) | (3,251 | ) | |||||
| Net charge-offs | $ | 317 | $ | (606 | ) | $ | 1,081 | $ | (112 | ) | $ | 5,241 | |||
| Market Price: | |||||||||||||||
| High | $ | 42.95 | $ | 45.95 | $ | 35.09 | $ | 47.53 | $ | 46.87 | |||||
| Low | $ | 38.20 | $ | 39.76 | $ | 28.00 | $ | 36.02 | $ | 26.45 | |||||
| Close | $ | 42.10 | $ | 40.38 | $ | 28.26 | $ | 42.10 | $ | 28.26 |
| Community Trust Bancorp, Inc. | ||||||||
|---|---|---|---|---|---|---|---|---|
| Financial Summary (Unaudited) | ||||||||
| September 30, 2021 | ||||||||
| (in thousands except per share data and # of employees) | ||||||||
| As of | As of | |||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| June 30, 2021 | September 30, 2020 | |||||||
| Assets: | ||||||||
| Loans | 3,398,229 | $ | 3,448,493 | $ | 3,557,899 | |||
| Loan loss reserve | (41,215 | ) | (41,695 | ) | (47,986 | ) | ||
| Net loans | 3,357,014 | 3,406,798 | 3,509,913 | |||||
| Loans held for sale | 12,056 | 4,912 | 20,125 | |||||
| Securities AFS | 1,525,738 | 1,357,597 | 949,089 | |||||
| Equity securities at fair value | 2,461 | 2,523 | 2,212 | |||||
| Other equity investments | 13,026 | 13,915 | 15,010 | |||||
| Other earning assets | 143,789 | 392,591 | 201,651 | |||||
| Cash and due from banks | 66,075 | 63,917 | 58,206 | |||||
| Premises and equipment | 40,145 | 40,391 | 42,115 | |||||
| Right of use asset | 12,399 | 12,729 | 13,536 | |||||
| Goodwill and core deposit intangible | 65,490 | 65,490 | 65,490 | |||||
| Other assets | 147,392 | 133,300 | 143,074 | |||||
| Total Assets | 5,385,585 | $ | 5,494,163 | $ | 5,020,421 | |||
| Liabilities and Equity: | ||||||||
| Interest bearing checking | 90,657 | $ | 99,226 | $ | 78,989 | |||
| Savings deposits | 1,827,112 | 1,877,857 | 1,667,120 | |||||
| CD's >=100,000 | 565,869 | 561,269 | 533,103 | |||||
| Other time deposits | 494,440 | 498,361 | 511,106 | |||||
| Total interest bearing deposits | 2,978,078 | 3,036,713 | 2,790,318 | |||||
| Noninterest bearing deposits | 1,318,158 | 1,286,989 | 1,103,863 | |||||
| Total deposits | 4,296,236 | 4,323,702 | 3,894,181 | |||||
| Repurchase agreements | 292,022 | 370,568 | 367,788 | |||||
| Other interest bearing liabilities | 58,721 | 58,726 | 60,641 | |||||
| Lease liability | 13,229 | 13,529 | 14,257 | |||||
| Other noninterest bearing liabilities | 33,734 | 43,555 | 39,104 | |||||
| Total liabilities | 4,693,942 | 4,810,080 | 4,375,971 | |||||
| Shareholders' equity | 691,643 | 684,083 | 644,450 | |||||
| Total Liabilities and Equity | 5,385,585 | $ | 5,494,163 | $ | 5,020,421 | |||
| Ending shares outstanding | 17,837 | 17,831 | 17,802 | |||||
| 30 - 89 days past due loans | 8,874 | $ | 10,847 | $ | 13,324 | |||
| 90 days past due loans | 6,650 | 8,283 | 17,989 | |||||
| Nonaccrual loans | 12,084 | 12,863 | 11,880 | |||||
| Restructured loans (excluding 90 days past due and nonaccrual) | 69,190 | 66,887 | 67,500 | |||||
| Foreclosed properties | 4,314 | 5,848 | 15,586 | |||||
| Community bank leverage ratio | 12.71 | % | 12.45 | % | 12.65 | % | ||
| Tangible equity to tangible assets ratio | 11.77 | % | 11.39 | % | 11.68 | % | ||
| FTE employees | 960 | 961 | 966 |
All values are in US Dollars.