COMMUNITY TRUST BANCORP INC /KY/

Previous wording

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand Community Trust Bancorp, Inc. (“CTBI”), our operations, and our present business environment. The MD&A is provided as a supplement to—and should be read in conjunction with—our condensed consolidated financial statements and the accompanying notes thereto contained in Part I, Item 1 of this quarterly report, as well as our consolidated financial statements, the accompanying notes thereto, and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations in our annual report on Form 10-K for the year ended December, 31, 2023. The MD&A includes the following sections:

Current wording

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand Community Trust Bancorp, Inc. (“CTBI”), our operations, and our present business environment. The MD&A is provided as a supplement to—and should be read in conjunction with—our condensed consolidated financial statements and the accompanying notes thereto contained in Part I, Item 1 of this quarterly report, as well as our consolidated financial statements, the accompanying notes thereto, and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations in our annual report on Form 10-K for the year ended December, 31, 2024.

Previous wording

Community Trust Bancorp, Inc. (“CTBI”) is a bank holding company headquartered in Pikeville, Kentucky. Currently, we own one commercial bank, Community Trust Bank, Inc. (“CTB”) and one trust company, Community Trust and Investment Company. Through our subsidiaries, we have eighty-one banking locations in eastern, northeastern, central, and south central Kentucky, southern West Virginia, and northeastern Tennessee, four trust offices across Kentucky, and one trust office in northeastern Tennessee. At September 30, 2024, we had total consolidated assets of $6.0 billion and total consolidated deposits, including repurchase agreements, of $5.1 billion. Total shareholders’ equity at September 30, 2024 was $760.8 million. Trust assets at September 30, 2024 totaled $4.0 billion with assets under management of $3.7 billion, including CTB’s investment portfolio totaling $1.1 billion.

Current wording

Community Trust Bancorp, Inc. (“CTBI”) is a bank holding company headquartered in Pikeville, Kentucky. Currently, we own one commercial bank, Community Trust Bank, Inc. (“CTB”) and one trust company, Community Trust and Investment Company. Through our subsidiaries, we have eighty-one banking locations in eastern, northeastern, central, and south central Kentucky, southern West Virginia, and northeastern Tennessee, four trust offices across Kentucky, and one trust office in northeastern Tennessee. At March 31, 2025, we had total consolidated assets of $6.3 billion and total consolidated deposits, including repurchase agreements, of $5.4 billion. Total shareholders’ equity at March 31, 2025 was $784.2 million. Trust assets under management at March 31, 2025 were $3.6 billion, including CTB’s investment portfolio totaling $1.0 billion.

Previous wording

We reported earnings for the third quarter 2024 of $22.1 million, or $1.23 per basic share, compared to $19.5 million, or $1.09 per basic share, earned during the second quarter 2024 and $20.6 million, or $1.15 per basic share, earned during the third quarter 2023. Total revenue for the quarter was $1.4 million above prior quarter and $4.1 million above prior year same quarter. Net interest revenue for the quarter increased $1.5 million compared to prior quarter and $4.1 million compared to prior year same quarter, and noninterest income decreased $0.1 million compared to prior quarter but increased $0.1 million compared to prior year same quarter. Our provision for credit losses for the quarter decreased $0.2 million from prior quarter but increased $0.9 million from prior year same quarter. Noninterest expense increased $0.1 million compared to prior quarter and $1.7 million compared to prior year same quarter. Net income for the nine months ended September 30, 2024 was $60.3 million, or $3.36 per basic share, compared to $59.3 million, or $3.32 per basic share, for the nine months ended September 30, 2023.

Current wording

We reported earnings for the first quarter of 2025 of $22.0 million, or $1.22 per basic share, compared to $22.5 million, or $1.25 per basic share, earned during the fourth quarter of 2024 and $18.7 million, or $1.04 per basic share, earned during the first quarter of 2024. Total revenue for the quarter was $0.5 million above prior quarter and $7.4 million above prior year same quarter. Net interest revenue for the quarter increased $1.7 million compared to prior quarter and $7.7 million compared to prior year same quarter, and noninterest income decreased $1.3 million compared to prior quarter and $0.2 million compared to prior year same quarter. Our provision for credit losses for the quarter increased $1.0 million from prior quarter and $0.9 million from prior year same quarter. Noninterest expense increased $0.4 million compared to prior quarter and $2.0 million compared to prior year same quarter.

Previous wording

Net interest income for the quarter of $47.2 million was $1.5 million, or 3.3%, above prior quarter and $4.1 million, or 9.4%, above prior year same quarter. Our net interest margin, on a fully tax equivalent basis, at 3.39% increased 1 basis point from prior quarter and 12 basis points from prior year same quarter. Our quarterly average earning assets increased $100.3 million from prior quarter and $295.6 million from prior year same quarter. Our yield on average earning assets increased 6 basis points from prior quarter and 47 basis points from prior year same quarter, while our cost of funds increased 6 basis points from prior quarter and 43 basis points from prior year same quarter. Net interest income for the nine months ended September 30, 2024 was $136.5 million compared to $130.1 million for the nine months ended September 30, 2023.

Current wording

Net interest income for the quarter of $51.3 million was $1.7 million, or 3.5%, above prior quarter and $7.7 million, or 17.6%, above prior year same quarter. Our net interest margin, on a fully tax equivalent basis, at 3.57% increased 14 basis points from prior quarter and 34 basis points from prior year same quarter. Our quarterly average earning assets increased $68.7 million from prior quarter and $390.0 million from prior year same quarter. Our yield on average earning assets increased 5 basis points from prior quarter and 16 basis points from prior year same quarter, while our cost of funds decreased 16 basis points from prior quarter and 33 basis points from prior year same quarter. Our ratio of average loans to deposits, including repurchase agreements, was 85.9% for the quarter ended March 31, 2025 compared to 84.4% for the quarter ended December 31, 2024 and 82.7% for the quarter ended March 31, 2024.

Previous wording

Our provision for credit losses at $2.7 million for the quarter decreased $0.2 million from prior quarter but increased $0.9 million from prior year same quarter. Of the provision for the quarter, $1.1 million was allotted to fund loan growth. Year-to-date provision for credit losses increased $3.4 million from the nine months ended September 30, 2023. Our reserve coverage (allowance for credit losses to nonperforming loans) at September 30, 2024 was 212.7% compared to 263.0% at June 30, 2024 and 375.2% at September 30, 2023. Our credit loss reserve as a percentage of total loans outstanding at September 30, 2024 was 1.23% compared to 1.22% at June 30, 2024 and September 30, 2023.

Current wording

Our provision for credit losses at $3.6 million for the quarter increased $1.0 million from prior quarter and $0.9 million from prior year same quarter. Of the provision for the quarter, $2.0 million was allotted to fund loan growth, while the remainder was used to fund net losses. Our reserve coverage (allowance for credit losses to nonperforming loans) at March 31, 2025 was 214.7% compared to 206.0% at December 31, 2024 and 319.0% at March 31, 2024. Our credit loss reserve as a percentage of total loans outstanding at March 31, 2025 remained at 1.23% from December 31, 2024 compared to 1.22% at March 31, 2024.

Previous wording

Noninterest income for the quarter ended September 30, 2024 of $15.6 million was $0.1 million, or 0.9%, below prior quarter but $0.1 million, or 0.4%, above prior year same quarter. Quarter over quarter increases in deposit related fees ($0.6 million) and securities gains ($0.7 million) were offset by decreases in loan related fees ($0.5 million) and bank owned life insurance revenue ($0.6 million). Year over year increase in trust fees ($0.4 million) was offset by a decrease in loan related fees ($0.5 million). Noninterest income for the nine months ended September 30, 2024 was $46.4 million compared to $43.9 million for the nine months ended September 30, 2023.

Current wording

Noninterest income for the quarter ended March 31, 2025 of $14.9 million was $1.3 million, or 7.8%, below prior quarter and $0.2 million, or 1.6%, below prior year same quarter. The variance quarter over quarter was primarily the result of decreases in deposit related fees ($0.8 million) and loan related fees ($0.5 million). Year over year decreases in loan related fees ($0.4 million), bank owned life insurance revenue ($0.3 million), and deposit related fees ($0.2 million) were partially offset by increases in trust revenue ($0.5 million) and securities gains ($0.1 million). The decrease in loan related fees resulted primarily from the fluctuation in the fair market value of our mortgage servicing rights.

Previous wording

CTBI’s total assets at September 30, 2024 of $6.0 billion increased $158.6 million, or an annualized 10.9%, from June 30, 2024 and $193.3 million, or an annualized 4.5%, from December 31, 2023. Loans outstanding at September 30, 2024 were $4.4 billion, an increase of $89.2 million, or an annualized 8.3%, from June 30, 2024 and $299.6 million, or an annualized 9.9%, from December 31, 2023. The increase in loans from prior quarter included a $62.3 million increase in the commercial loan portfolio and a $33.7 million increase in the residential loan portfolio, partially offset by a $3.5 million decrease in the indirect consumer loan portfolio and a $3.3 million decrease in the consumer direct loan portfolio. CTBI’s investment portfolio increased $8.0 million, or an annualized 2.9%, from June 30, 2024 but decreased $65.6 million, or an annualized 7.5%, from December 31, 2023. Deposits in other banks increased $48.3 million from prior quarter but decreased $57.6 million from December 31, 2023. Deposits, including repurchase agreements, at $5.1 billion increased $110.2 million, or an annualized 8.8%, from June 30, 2024 and $121.7 million, or an annualized 3.3%, from December 31, 2023. CTBI is not dependent on any one customer or group of customers for its source of deposits. As of September 30, 2024, no one customer accounted for more than 3% of our $5.1 billion in deposits. Only two customer relationships accounted for more than 1% each.

Current wording

CTBI’s total assets at $6.3 billion as of March 31, 2025 increased $83.3 million, or 5.5% annualized, from December 31, 2024 and $426.3 million, or 7.3%, from March 31, 2024. Loans outstanding at $4.6 billion increased $149.9 million, an annualized 13.5%, from December 31, 2024 and $475.4 million, or 11.4%, from March 31, 2024. The increase in loans from prior quarter included an $85.0 million increase in the commercial loan portfolio, a $28.8 million increase in the residential loan portfolio, and a $38.3 million increase in the indirect consumer loan portfolio, partially offset by a $2.2 million decrease in the consumer direct loan portfolio. CTBI’s investment portfolio decreased $46.7 million, or an annualized 17.9%, from December 31, 2024 and $102.2 million, or 9.2%, from March 31, 2024. The decrease in the investment portfolio during the quarter was due to management’s decision to reinvest certain maturities into the loan portfolio. Deposits in other banks decreased $24.4 million from prior quarter but increased $34.7 million from March 31, 2024.

Previous wording

Shareholders’ equity at $760.8 million increased $41.4 million, or an annualized 22.9%, during the quarter and $58.6 million, or an annualized 11.1%, from December 31, 2023. Net unrealized losses on securities, net of deferred taxes, were $80.6 million at September 30, 2024, compared to $107.1 million at June 30, 2024 and $103.3 million at December 31, 2023.

Current wording

Shareholders’ equity at $784.2 million increased $26.6 million, or an annualized 14.2%, during the quarter and $76.4 million, or 10.8%, from March 31, 2024. Net unrealized losses on securities, net of deferred taxes, were $86.1 million at March 31, 2025, compared to $98.4 million at December 31, 2024 and $106.9 million at March 31, 2024. CTBI’s annualized dividend yield to shareholders as of March 31, 2025 was 3.73%.

Previous wording

Our total nonperforming loans increased to $25.1 million at September 30, 2024 from $19.8 million at June 30, 2024 and $14.0 million at December 31, 2023. Accruing loans 90+ days past due at $19.1 million increased $4.4 million from prior quarter and $9.2 million from December 31, 2023. Nonaccrual loans at $6.0 million increased $0.9 million from prior quarter and $1.9 million from December 31, 2023. Accruing loans 30-89 days past due at $20.6 million decreased $3.5 million from prior quarter but increased $5.2 million from December 31, 2023. Our loan portfolio management processes focus on the immediate identification, management, and resolution of problem loans to maximize recovery and minimize loss. Our loan portfolio risk management processes include weekly delinquent loan review meetings at the market levels and monthly delinquent loan review meetings involving senior corporate management to review all nonaccrual loans and loans 30 days or more past due. Any activity regarding a criticized/classified loan (i.e. problem loan) must be approved by CTB’s Watch List Asset Committee (i.e. Problem Loan Committee). CTB’s Watch List Asset Committee also meets on a quarterly basis and reviews every criticized/classified loan of $100,000 or greater. CTB’s Loan Portfolio Risk Management Committee also meets quarterly focusing on the overall asset quality and risk metrics of the loan portfolio. We also have a Loan Review Department that reviews every market within CTB annually and performs extensive testing of the loan portfolio to assure the accuracy of loan grades and classifications for delinquency, if a borrower is experiencing financial difficulty with significant payment delay, nonaccrual status, and adequate loan loss reserves. The Loan Review Department has annually reviewed, on average, 97% of the outstanding commercial loan portfolio for the past three years. The average annual review percentage of the consumer and residential loan portfolio for the past three years was 81% based on the loan production during the number of months included in the review scope. The review scope is generally four to six months of production. CTBI generally does not offer high risk loans such as option ARM products, high loan to value ratio mortgages, interest-only loans, loans with initial teaser rates, or loans with negative amortizations, and therefore, CTBI would have no significant exposure to these products.

Current wording

Our total nonperforming loans decreased to $26.5 million at March 31, 2025 from $26.7 million at December 31, 2024 but increased from $15.9 million at March 31, 2024. Accruing loans 90+ days past due at $10.8 million increased $0.5 million from prior quarter but decreased $0.7 million from March 31, 2024. Nonaccrual loans at $15.7 million decreased $0.7 million from prior quarter but increased $11.4 million from March 31, 2024. Accruing loans 30-89 days past due at $14.5 million decreased $2.3 million from prior quarter but increased $2.3 million from March 31, 2024. Nonaccrual loans to totals loans for the quarters ended March 31, 2025 and 2024 were 0.3% and 0.1%, respectively. The allowance for credit losses to nonaccrual loans for the quarters ended March 31, 2025 and 2024 was 363.0% and 1,175.5%, respectively. Our loan portfolio risk management processes include weekly delinquent loan review meetings at the market levels and monthly delinquent loan review meetings involving senior corporate management to review all nonaccrual loans and loans 30 days or more past due. Any activity regarding a criticized/classified loan (i.e. problem loan) must be approved by CTB’s Watch List Asset Committee (i.e. Problem Loan Committee). CTB’s Watch List Asset Committee also meets on a quarterly basis and reviews every criticized/classified loan of $100,000 or greater. CTB’s Loan Portfolio Risk Management Committee also meets quarterly focusing on the overall asset quality and risk metrics of the loan portfolio. We also have a Loan Review Department that reviews every market within CTB annually and performs extensive testing of the loan portfolio to assure the accuracy of loan grades and classifications for delinquency, loan modifications for borrowers experiencing financial difficulty, nonaccrual status, and adequate loan loss reserves. The Loan Review Department has annually reviewed on average 97% of the outstanding commercial loan portfolio for the past three years. The average annual review percentage of the consumer and residential loan portfolio for the past three years was 81% based on the loan production during the number of months included in the review scope. The review scope is generally four to six months of production. CTBI generally does not offer high risk loans such as option ARM products, high loan to value ratio mortgages, interest-only loans, loans with initial teaser rates, or loans with negative amortizations, and therefore, CTBI would have no significant exposure to these products. For further information regarding nonperforming loans, see Note 4 to the condensed consolidated financial statements contained herein.

Previous wording

We had net loan charge-offs of $1.5 million, or 0.14% of average loans annualized, for the third quarter 2024 compared to $1.4 million, or 0.13% of average loans annualized, for the second quarter 2024 and $1.2 million, or 0.12% of average loans annualized, for the third quarter 2023. Of the net charge-offs for the quarter, $1.2 million were in indirect consumer loans, $0.2 million were in direct consumer loans, and $0.1 million were in residential loans. Net charge-offs for the nine months ended September 30, 2024 were $4.5 million, or 0.14% of average loans annualized, compared to $2.3 million, or 0.08% of average loans annualized, for the nine months ended September 30, 2023. Year-to-date net loan charge-offs are in line with management’s expectations.

Current wording

We had net loan charge-offs of $1.6 million, or 0.14% of average loans annualized, for the first quarter of 2025 compared to $1.0 million, or 0.09% of average loans annualized, for the fourth quarter of 2024 and $1.6 million, or 0.16% of average loans annualized, for the first quarter of 2024. Of the net charge-offs for the quarter, $0.4 million were in indirect consumer loans, $0.3 million were in commercial loans, $0.8 million were in direct consumer loans, and $0.1 million were in residential loans.

Previous wording

The objective of CTBI’s Asset/Liability management function is to maintain consistent growth in net interest income within our policy limits. This objective is accomplished through management of our consolidated balance sheet composition, liquidity, and interest rate risk exposures arising from changing economic conditions, interest rates, and customer preferences. The goal of liquidity management is to provide adequate funds to meet changes in loan and lease demand or deposit withdrawals. This is accomplished by maintaining liquid assets in the form of cash and cash equivalents and investment securities, sufficient unused borrowing capacity, and growth in core deposits. As of September 30, 2024, we had approximately $240.9 million in cash and cash equivalents and approximately $186.0 million in unpledged securities valued at estimated fair value designated as available-for-sale and available to meet liquidity needs on a continuing basis compared to $271.4 million and $157.5 million at December 31, 2023. Additional asset-driven liquidity is provided by the remainder of the securities portfolio and the repayment of loans. In addition to core deposit funding, we also have a variety of other short-term and long-term funding sources available. We also rely on Federal Home Loan Bank advances for both liquidity and management of our asset/liability position. Federal Home Loan Bank advances were $0.3 million at September 30, 2024 and December 31, 2023. As of September 30, 2024, we had a $517.1 million available borrowing position with the Federal Home Loan Bank, compared to $476.2 million at December 31, 2023. We generally rely upon net inflows of cash from financing activities, supplemented by net inflows of cash from operating activities, to provide cash for our investing activities. As is typical of many financial institutions, significant financing activities include deposit gathering, use of short-term borrowing facilities such as repurchase agreements and federal funds purchased, and issuance of long-term debt. At September 30, 2024 and December 31, 2023, we had $50 million in lines of credit with various correspondent banks available to meet any future cash needs. Our primary investing activities include purchases of securities and loan originations. We do not rely on any one source of liquidity and manage availability in response to changing consolidated balance sheet needs. Included in our cash and cash equivalents at September 30, 2024 were deposits with the Federal Reserve of $146.3 million, compared to $207.6 million at December 31, 2023. Additionally, we project cash flows from our investment portfolio to generate additional liquidity over the next 90 days.

Current wording

The objective of CTBI’s Asset/Liability management function is to maintain consistent growth in net interest income within our policy limits. This objective is accomplished through management of our consolidated balance sheet composition, liquidity, and interest rate risk exposures arising from changing economic conditions, interest rates, and customer preferences. The goal of liquidity management is to provide adequate funds to meet changes in loan and lease demand or deposit withdrawals. This is accomplished by maintaining liquid assets in the form of cash and cash equivalents and investment securities, sufficient unused borrowing capacity, and growth in core deposits. As of March 31, 2025, we had approximately $340.7 million in cash and cash equivalents and approximately $111.0 million in unpledged securities valued at estimated fair value designated as available-for-sale and available to meet liquidity needs on a continuing basis compared to $369.5 million and $170.6 million, respectively, at December 31, 2024. Additional asset-driven liquidity is provided by the remainder of the securities portfolio and the repayment of loans. In addition to core deposit funding, we also have a variety of other short-term and long-term funding sources available. We also rely on Federal Home Loan Bank advances for both liquidity and management of our asset/liability position. Federal Home Loan Bank advances were $0.3 million at March 31, 2025 and December 31, 2024. As of March 31, 2025, we had a $508.5 million available borrowing position with the Federal Home Loan Bank, compared to $485.0 million at December 31, 2024. We generally rely upon net inflows of cash from financing activities, supplemented by net inflows of cash from operating activities, to provide cash for our investing activities. As is typical of many financial institutions, significant financing activities include deposit gathering, use of short-term borrowing facilities such as repurchase agreements and federal funds purchased, and issuance of long-term debt. At March 31, 2025 and December 31, 2024, we had $50 million in lines of credit with various correspondent banks available to meet any future cash needs. Our primary investing activities include purchases of securities and loan originations. We do not rely on any one source of liquidity and manage availability in response to changing consolidated balance sheet needs. Included in our cash and cash equivalents at March 31, 2025 were deposits with the Federal Reserve of $265.1 million, compared to $289.4 million at December 31, 2024. Additionally, we project cash flows from our investment portfolio to generate additional liquidity over the next 90 days.

Previous wording

The investment portfolio consists of investment grade short-term issues suitable for bank investments. The majority of the investment portfolio is in U.S. government and government sponsored agency issuances. At September 30, 2024, available-for-sale (“AFS”) securities comprised all of the total investment portfolio, and the AFS portfolio was approximately 144% of equity capital. Eighty-four percent of the pledge-eligible portfolio was pledged.

Current wording

The investment portfolio consists of investment grade short-term issues suitable for bank investments. The majority of the investment portfolio is in U.S. government and government sponsored agency issuances. At March 31, 2025, available-for-sale (“AFS”) securities comprised all of the total investment portfolio, and the AFS portfolio was approximately 129% of equity capital. Ninety-one percent of the pledge-eligible portfolio was pledged.

Previous wording

We continue to offer a dividend to our shareholders, providing an annualized dividend yield for the quarter ended September 30, 2024 of 3.79%. Our primary source of capital growth is the retention of earnings. Cash dividends were $1.39 per share and $1.34 per share for the nine months ended September 30, 2024 and 2023, respectively. We retained 58.6% of our earnings for the first nine months of 2024 compared to 59.6% for the first nine months of 2023.

Current wording

We continue to offer a dividend to our shareholders, providing an annualized dividend yield for the quarter ended March 31, 2025 of 3.73%. Our primary source of capital growth is the retention of earnings. Cash dividends were $0.47 per share for the three months ended March 31, 2025. We retained 61.5% of our earnings for the first three months of 2025 compared to 55.8% for the first three months of 2024.

Previous wording

Insured depository institutions are required to meet certain capital level requirements. 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. Accordingly, a qualifying community banking organization that has a community bank leverage ratio greater than 9% will be considered to have met: (i) the risk-based and leverage capital requirements of the generally applicable capital rules; (ii) the capital ratio requirements in order to be considered well-capitalized under the prompt corrective action framework; and (iii) any other applicable capital or leverage requirements.

Current wording

Insured depository institutions are required to meet certain capital level requirements. 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. Accordingly, a qualifying community banking organization that has a community bank leverage ratio greater than 9% will be considered to have met: (i) the risk-based and leverage capital requirements of the generally applicable capital rules; (ii) the capital ratio requirements in order to be considered well-capitalized under the prompt corrective action framework; and (iii) any other applicable capital or leverage requirements. Management elected to use the CBLR framework for CTBI and CTB. CTBI’s CBLR ratio as of March 31, 2025 was 13.81%. CTB’s CBLR ratio as of March 31, 2025 was 13.32%.

Previous wording

CTBI’s stock repurchase program began in December 1998 with the authorization to acquire up to 500,000 shares and was increased by an additional 1,000,000 shares in each of July 2000, May 2003, and March 2020. CTBI repurchased 32,664 shares of its common stock during the first quarter 2020, leaving 1,034,706 shares remaining under our current repurchase authorization. As of September 30, 2024, a total of 2,465,294 shares have been repurchased through this program.

Current wording

CTBI’s stock repurchase program began in December 1998 with the authorization to acquire up to 500,000 shares and was increased by an additional 1,000,000 shares in each of July 2000, May 2003, and March 2020. As of March 31, 2025, a total of 2,465,294 shares have been repurchased through this program, leaving 1,034,706 shares remaining under our current repurchase authorization.

Previous wording

We believe the application of accounting policies and the estimates required therein are reasonable. These accounting policies and estimates are constantly reevaluated, and adjustments are made when facts and circumstances dictate a change. Historically, we have found our application of accounting policies to be appropriate, and actual results have not differed materially from those determined using necessary estimates.

Current wording

We believe the application of accounting policies and the estimates required therein are reasonable. These accounting policies and estimates are constantly reevaluated, and adjustments are made when facts and circumstances dictate a change. Historically, we have found our application of accounting estimates to be appropriate, and actual results have not differed materially from those determined using necessary estimates.

Previous wording

Our accounting policies are described in Note 1 to the condensed consolidated financial statements contained herein. We have identified the following critical accounting policies:

Current wording

Our accounting policies are described in Note 1 to the condensed consolidated financial statements contained herein. We have identified the following critical accounting estimates:

Previous wording

We disaggregate our portfolio loans into portfolio segments for purposes of determining the ACL. Our loan portfolio segments include commercial, residential mortgage, and consumer. We further disaggregate our portfolio segments into classes for purposes of monitoring and assessing credit quality based on certain risk characteristics. For an analysis of CTBI’s ACL by portfolio segment and credit quality information by class, refer to Note 4 to the condensed consolidated financial statements contained herein.

Current wording

Allowance for Credit Losses– We disaggregate our portfolio loans into portfolio segments for purposes of determining the ACL. Our loan portfolio segments include commercial, residential mortgage, and consumer. We further disaggregate our portfolio segments into classes for purposes of monitoring and assessing credit quality based on certain risk characteristics. For an analysis of CTBI’s ACL by portfolio segment and credit quality information by class, refer to Note 4 to the condensed consolidated financial statements contained herein.

Previous wording

Credit losses are charged and recoveries are credited to the ACL. The ACL is maintained at a level CTBI considers to be adequate and is based on ongoing quarterly assessments and evaluations of the collectability of loans, including historical credit loss experience, current and forecasted market and economic conditions, and consideration of various qualitative factors that, in management’s judgment, deserve consideration in estimating expected credit losses. Provisions for credit losses are recorded for the amounts necessary to adjust the ACL to CTBI’s current estimate of expected credit losses on portfolio loans. CTBI’s strategy for credit risk management includes a combination of conservative exposure limits significantly below legal lending limits and conservative underwriting, documentation, and collection standards. The strategy also emphasizes diversification on a geographic, industry, and customer level, regular credit examinations, and quarterly management reviews of large credit exposures and loans experiencing deterioration of credit quality.

Current wording

The ACL is maintained at a level CTBI considers to be adequate and is based on ongoing quarterly assessments and evaluations of the collectability of loans, including historical credit loss experience, current and forecasted market and economic conditions, and consideration of various qualitative factors that, in management’s judgment, deserve consideration in estimating expected credit losses. Provisions for credit losses are recorded for the amounts necessary to adjust the ACL to CTBI’s current estimate of expected credit losses on portfolio loans. CTBI’s strategy for credit risk management includes a combination of conservative exposure limits significantly below legal lending limits and conservative underwriting, documentation, and collection standards. The strategy also emphasizes diversification on a geographic, industry, and customer level, regular credit examinations, and quarterly management reviews of large credit exposures and loans experiencing deterioration of credit quality.

Previous wording

Expected credit losses are estimated on a collective basis for loans that are not individually evaluated. These include commercial loans that do not meet the criteria for individual evaluation as well as homogeneous loans in the residential mortgage and consumer portfolio segments. CTBI uses a third party ACL software to calculate reserve estimates. Discounted cash flow (“DCF”) modeling was used for all loan segments. The primary reasons that contributed to this decision were: DCF models allow for the effective incorporation of a reasonable and supportable forecast in a directionally consistent and objective manner; the analysis aligns well with other calculations outside of the ACL estimation which will mitigate model risk in other areas; and peer data is available for certain inputs if first party data is not available or meaningful. Expected credit losses are estimated on a collective basis for loans that are not individually evaluated. These include commercial loans that do not meet the criteria for individual evaluation as well as homogeneous loans in the residential mortgage and consumer portfolio segments. See Note 4 to the condensed consolidated financial statements contained herein for information on CTBI’s risk rating system.

Current wording

Expected credit losses are estimated on a collective basis for loans that are not individually evaluated. These include commercial loans that do not meet the criteria for individual evaluation as well as homogeneous loans in the residential mortgage and consumer portfolio segments. CTBI uses a discounted cash flow (“DCF”) model for all loan segments. The primary reasons that contributed to this decision were: DCF models allow for the effective incorporation of a reasonable and supportable forecast in a directionally consistent and objective manner; the analysis aligns well with other calculations outside of the ACL estimation which will mitigate model risk in other areas; and peer data is available for certain inputs if first party data is not available or meaningful. Expected credit losses are estimated on a collective basis for loans that are not individually evaluated. These include commercial loans that do not meet the criteria for individual evaluation as well as homogeneous loans in the residential mortgage and consumer portfolio segments. See Note 4 to the condensed consolidated financial statements contained herein for information on CTBI’s risk rating system.

Previous wording

CTBI’s expected credit loss models consider historical credit loss experience, peer data, current market and economic conditions, and forecasted changes in market and economic conditions if such forecasts are considered reasonable and supportable. Generally, CTBI considers our forecasts to be reasonable and supportable for a period of up to one year from the estimation date. For periods beyond the reasonable and supportable forecast period, expected credit losses are estimated by reverting to historical loss information. CTBI evaluates the length of our reasonable and supportable forecast period, our reversion period, and reversion methodology at least annually, or more often if warranted by economic conditions or other circumstances.

Current wording

CTBI’s expected credit loss models consider historical credit loss experience, peer data, current market and economic conditions, and forecasted changes in market and economic conditions if such forecasts are considered reasonable and supportable. Generally, CTBI considers our forecasts to be reasonable and supportable for a period of up to one year from the estimation date. For periods beyond the reasonable and supportable forecast period, expected credit losses are estimated by reverting to historical loss information on an input basis. CTBI reverts to a long-run average of the modeled economic factors over four quarters to derive a long-run average probability of default/loss given default. CTBI evaluates the length of our reasonable and supportable forecast period, our reversion period, and reversion methodology at least annually, or more often if warranted by economic conditions or other circumstances.

Previous wording

The reserve for unfunded commitments is maintained at a level believed by management to be sufficient to absorb estimated expected credit losses related to unfunded credit facilities and is included in other liabilities in the consolidated balance sheets. The determination of the adequacy of the reserve is based upon expected credit losses over the remaining contractual life of the commitments, taking into consideration the current funded balance and estimated exposure over the reasonable and supportable forecast period. This process takes into consideration the same risk elements that are analyzed in the determination of the adequacy of CTBI’s ACL, as previously discussed. Net adjustments to the reserve for unfunded commitments are included in other noninterest expense in the consolidated statements of income.

Current wording

The reserve for unfunded commitments is maintained at a level believed by management to be sufficient to absorb estimated expected credit losses related to unfunded credit facilities and is included in other liabilities in the consolidated balance sheets. The determination of the adequacy of the reserve is based upon expected credit losses over the remaining contractual life of the commitments, taking into consideration the current funded balance and estimated exposure over the reasonable and supportable forecast period. This process takes into consideration the same risk elements that are analyzed in the determination of the adequacy of CTBI’s ACL, as previously discussed.

Previous wording

Goodwill –Business combinations entered into by CTBI typically include the recognition of goodwill. GAAP requires goodwill to be tested for impairment on an annual basis, which for CTBI is October 1, and more frequently if events or circumstances indicate that there may be impairment. Refer to Note 1 to the condensed consolidated financial statements contained herein for a discussion on the methodology used by CTBI to assess goodwill for impairment.

Current wording

Goodwill –Business combinations entered into by CTBI typically include the recognition of goodwill. GAAP requires goodwill to be tested for impairment on an annual basis, which for CTBI is October 1, and more frequently if events or circumstances indicate that there may be impairment.