Regulatory Matters

12 Months Ended

Dec. 31, 2020

Regulatory Matters [Abstract]

Regulatory Matters

20.  Regulatory Matters

CTBI’s principal source of funds is dividends received from our banking subsidiary, CTB.  Regulations limit the amount of dividends that may be paid by CTB without prior approval.  During 2021, approximately $66.6 million plus any 2021 net profits can be paid by CTB without prior regulatory approval.

CTBI and CTB are subject to various regulatory capital requirements administered by the federal banking agencies.  Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a material adverse effect on CTBI’s financial statements.  Under regulatory capital adequacy guidelines, CTBI and CTB must meet specific capital guidelines that involve quantitative measures of CTBI’s and CTB’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices.  Additionally, CTB must meet specific capital guidelines to be considered well capitalized per the regulatory framework for prompt corrective action. CTBI’s and CTB’s capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weightings, and other factors.

CTBI and CTB must maintain certain minimum capital ratios as set forth in the table below for capital adequacy purposes.  On October 29, 2019, federal banking regulators adopted a final rule to simplify the regulatory capital requirements for eligible community banks and holding companies that opt-in to the community bank leverage ratio framework (the “CBLR framework”), as required by Section 201 of the Economic Growth, Relief and Consumer Protection Act of 2018.  Under the final rule, which became effective as of January 1, 2020, community banks and holding companies (which includes CTB and CTBI) that satisfy certain qualifying criteria, including having less than $10 billion in average total consolidated assets and a leverage ratio (referred to as the “community bank leverage ratio”) of greater than 9%, were eligible to opt-in to the CBLR framework.  The community bank leverage ratio is the ratio of a banking organization’s Tier 1 capital to its average total consolidated assets, both as reported on the banking organization’s applicable regulatory filings.

In April 2020, as directed by Section 4012 of the CARES Act, the regulatory agencies introduced temporary changes to the CBLR.  These changes, which subsequently were adopted as a final rule, temporarily reduced the CBLR requirement to 8% through the end of calendar year 2020.  Beginning in calendar year 2021, the CBLR requirement will increase to 8.5% for the calendar year before returning to 9% in calendar year 2022.  The final rule also provides for a two-quarter grace period for qualifying community banking organizations whose leverage ratios fall no more than 100 basis points below the applicable CBLR requirement.  Management elected to use the CBLR framework for CTBI and CTB.  Before electing to use the CBLR framework, CTBI and CTB were required to maintain a capital conservation buffer above certain minimum risk-based capital ratios for capital adequacy purposes in order to avoid certain restrictions on capital distributions and other payments including dividends, share repurchases, and certain compensation. The capital conservation buffer was 2.5%, and CTBI and CTB both exceeded the capital conservation buffer requirement at that time.  Management believes, as of December 31, 2020, that CTBI and CTB meet all capital adequacy requirements to which they are subject and there were no conditions or events subsequent to December 31, 2020 that would change CTBI’s or CTB’s category.

Consolidated Capital Ratios

	Actual					For Capital Adequacy Purposes
(in thousands)	Amount		Ratio			Amount		Ratio
As of December 31, 2020:
CBLR	$	636,672		12.70	%	$	401,158		8.00	%

As of December 31, 2019:
Tier 1 capital (to average assets)	$	601,142	14.01	%	$	171,632	4.00	%
Common equity Tier 1 capital (to risk weighted assets)		545,142	17.18			142,790	4.50
Tier 1 capital (to risk weighted assets)		601,142	18.94			190,436	6.00
Total capital (to risk weighted assets)		636,512	20.05			253,970	8.00

Community Trust Bank, Inc.’s Capital Ratios

Actual

For Capital Adequacy Purposes

To Be Well-Capitalized Under Prompt Corrective Action Provision

(in thousands)

Amount

Ratio

Amount

Ratio

Amount

Ratio

As of December 31, 2020:

CBLR

$

605,606

12.13

%

$

399,303

8.00

%

N/A

N/A

As of December 31, 2019:
Tier 1 capital (to average assets)	$	570,256	13.34	%	$	170,991	4.00	%	$	213,739	5.00	%
Common equity Tier 1 capital (to risk weighted assets)		570,256	18.01			142,485	4.50			205,811	6.50
Tier 1 capital (to risk weighted assets)		570,256	18.01			189,980	6.00			253,306	8.00
Total capital (to risk weighted assets)		605,625	19.12			253,400	8.00			316,749	10.00