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What changed in COMMUNITY TRUST BANCORP INC /KY/'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of COMMUNITY TRUST BANCORP INC /KY/'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+207 added−198 removedSource: 10-K (2024-02-28) vs 10-K (2023-02-28)

Top changes in COMMUNITY TRUST BANCORP INC /KY/'s 2023 10-K

207 paragraphs added · 198 removed · 158 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeCommunity Trust and Investment Company is also regulated by the Kentucky Department of Financial Institutions and the Federal Reserve. 3 Table of Contents Deposits of CTB are insured up to applicable limits by the FDIC, which subjects banks to regulation and examination under the provisions of the Federal Deposit Insurance Act.
Biggest changeDeposits of CTB are insured up to applicable limits by the FDIC, which subjects banks to regulation and examination under the provisions of the Federal Deposit Insurance Act. The operations of CTBI and our subsidiaries are also affected by other banking legislation and policies and practices of various regulatory authorities.
At the time of this filing, our Board of Directors is 20% female. CTBI offers our employees competitive compensation, as well as a highly competitive benefits package. A retirement plan, an employee stock ownership plan, group life insurance, major medical insurance, a cafeteria plan, education reimbursement, and management and employee incentive compensation plans are available to all eligible personnel.
At the time of this filing, our Board of Directors is 25% female. CTBI offers our employees competitive compensation, as well as a highly competitive benefits package. A retirement plan, an employee stock ownership plan, group life insurance, major medical insurance, a cafeteria plan, education reimbursement, and management and employee incentive compensation plans are available to all eligible personnel.
Our employees served over 1,400 hours throughout the year with organizations that provide affordable housing and other services to low and moderate income families, encourage economic development for small businesses and farms, and respond to natural disasters. COMPETITION CTBI’s subsidiaries face substantial competition for deposit, credit, trust, wealth management, and brokerage relationships in the communities we serve.
Our employees served over 1,500 hours throughout the year with organizations that provide affordable housing and other services to low and moderate income families and encourage economic development for small businesses and farms. COMPETITION CTBI’s subsidiaries face substantial competition for deposit, credit, trust, wealth management, and brokerage relationships in the communities we serve.
Trust assets under management at December 31, 2022 were $3.2 billion, including CTB’s investment portfolio totaling $1.3 billion.
Trust assets under management at December 31, 2023 were $3.4 billion, including CTB’s investment portfolio totaling $1.2 billion.
Employees are also offered the opportunity to complete periodic employee satisfaction surveys anonymously. We actively support our employees with a wellness program. Since beginning the program in 2004, participating employees have experienced improvements in preventing cardiovascular disease, cancer, and diabetes.
Employees are also offered the opportunity to complete periodic employee satisfaction surveys anonymously. We have actively supported our employees with a wellness program for the past 20 years. Since beginning the program in 2004, participating employees have experienced improvements in preventing cardiovascular disease, cancer, and diabetes.
These are funded through our Educational Assistance Program. As of December 31, 2022, CTBI and our subsidiaries had 985 full-time equivalent employees. Females comprise 75% of our workforce, and 61% of our managerial positions (supervisor or above) are held by females. This includes 68% of our branch managers, 29% of our market presidents, and 32% of our senior vice presidents.
These are funded through our Educational Assistance Program. As of December 31, 2023, CTBI and our subsidiaries had 967 full-time equivalent employees. Females comprise 76% of our workforce, and 60% of our managerial positions (supervisor or above) are held by females. This includes 65% of our branch managers, 29% of our market presidents, and 32% of our senior vice presidents.
The commercial bank is Community Trust Bank, Inc., Pikeville, Kentucky (“CTB”) and the trust company is Community Trust and Investment Company, Lexington, Kentucky. At December 31, 2022, CTBI had total consolidated assets of $5.4 billion and total consolidated deposits, including repurchase agreements, of $4.6 billion. Total shareholders’ equity at December 31, 2022 was $628.0 million.
The commercial bank is Community Trust Bank, Inc., Pikeville, Kentucky (“CTB”) and the trust company is Community Trust and Investment Company, Lexington, Kentucky (“CTIC”). At December 31, 2023, CTBI had total consolidated assets of $5.8 billion and total consolidated deposits, including repurchase agreements, of $4.9 billion. Total shareholders’ equity at December 31, 2023 was $702.2 million.
CTB is also a member of the Federal Reserve System and is subject to certain restrictions imposed by and to examination and supervision under the Federal Reserve Act.
CTB is also a member of the Federal Reserve System and is subject to certain restrictions imposed by and to examination and supervision under the Federal Reserve Act. Community Trust and Investment Company is also regulated by the Kentucky Department of Financial Institutions and the Federal Reserve.
CTBI’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports are available free of charge on our website at www.ctbi.com as soon as reasonably practicable after such materials are electronically filed with or furnished to the Securities and Exchange Commission.
Such legislation and policies include statutory maximum rates on some loans, reserve requirements, domestic monetary and fiscal policy, and limitations on the kinds of services that may be offered. 3 Table of Contents CTBI’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports are available free of charge on our website at www.ctbi.com as soon as reasonably practicable after such materials are electronically filed with or furnished to the Securities and Exchange Commission.
CTB’s community development lending totaled over $32 million for the year 2022. Also, during 2022, CTBI made contributions totaling over $196 thousand to aid low and moderate income families and communities, encourage economic development, and provide relief to those impacted by natural disasters throughout our footprint and beyond.
CTB’s community development lending totaled over $43 million for the year 2023. Also, during 2023, CTBI made contributions totaling over $807 thousand to aid low and moderate income families and communities and encourage economic development.
Many of our employees have experienced decreases in elevated medical risk factors, including alcohol consumption, tobacco usage, physical inactivity, high stress, high cholesterol, and high blood pressure. In late July 2022, heavy rain and thunderstorms caused severe flooding in eastern Kentucky. The overwhelming amounts of rain and resultant flooding led to 39 deaths and widespread catastrophic damage.
Many of our employees have experienced decreases in elevated medical risk factors, including alcohol consumption, tobacco usage, physical inactivity, high stress, high cholesterol, and high blood pressure.
CTBI’s CBLR ratio as of December 31, 2022 was 13.55%. CTB’s CBLR ratio as of December 31, 2022 was 12.98%. 4 Table of Contents
CTBI’s CBLR ratio as of December 31, 2023 was 13.69%. CTB’s CBLR ratio as of December 31, 2023 was 13.22%.
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Entire homes and parts of some communities were swept away by flood waters, leading to costly damage to infrastructure in the region. Over 600 helicopter rescues and countless swift water rescues by boat were needed to evacuate people who were trapped by the quickly rising flood waters. CTBI was directly impacted with six of its branches being flooded.
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One of these branches was destroyed and had to be rebuilt. The rebuilt branch was re-opened on February 13, 2023. CTBI and its employees responded to this disaster by providing cash, replacement clothing, and furniture and by volunteering time to help flood victims clean their homes.
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CTBI provided paid time off to our employees willing to spend that time helping those impacted. Teams of employees worked directly in the affected communities helping with the cleanup. CTBI established a foundation to help its directors, officers, employees, and the public make donations to help the affected families.
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CTBI had 20 families that were directly affected, six of these families lost their homes. Through the newly formed foundation, these families were provided direct assistance allowing them to get back into their home more quickly.
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The operations of CTBI and our subsidiaries are also affected by other banking legislation and policies and practices of various regulatory authorities. Such legislation and policies include statutory maximum rates on some loans, reserve requirements, domestic monetary and fiscal policy, and limitations on the kinds of services that may be offered.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn addition, because the methods and techniques employed by perpetrators of fraud and others to attack systems and applications change frequently and often are not fully recognized or understood until after they have been launched, we and our third-party service providers and partners may be unable to anticipate certain attack methods in order to implement effective preventative measures. 11 Table of Contents While we have policies and procedures designed to prevent or limit the effect of the possible security breach of our information systems, if unauthorized persons were somehow to get access to confidential or proprietary information in our possession or to our proprietary information, it could result in litigation and regulatory investigations, significant legal and financial exposure, damage to our reputation, or a loss of confidence in the security of our systems that could materially adversely affect our results of operation.
Biggest changeWhile we have policies and procedures designed to prevent or limit the effect of the possible security breach of our information systems, if unauthorized persons were somehow to get access to confidential or proprietary information in our possession or to our proprietary information, it could result in litigation and regulatory investigations, significant legal and financial exposure, damage to our reputation, or a loss of confidence in the security of our systems that could materially adversely affect our results of operation. 11 Table of Contents Counterparty Risk The soundness of other financial institutions could adversely affect CTBI.
The extent to which a widespread health crisis, including the continuation of COVID-19, may impact our business, results of operations, and financial condition, as well as its regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain and are difficult to predict, including, but not limited to, the duration and severity of the crisis, the potential for seasonal or other resurgences, actions taken by governmental authorities and other third parties to contain and treat such an epidemic, a pandemic or another infections disease outbreak, and how quickly and to what extent normal economic and operating conditions can resume.
The extent to which a widespread health crisis may impact our business, results of operations, and financial condition, as well as its regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain and are difficult to predict, including, but not limited to, the duration and severity of the crisis, the potential for seasonal or other resurgences, actions taken by governmental authorities and other third parties to contain and treat such an epidemic, a pandemic or another infections disease outbreak, and how quickly and to what extent normal economic and operating conditions can resume.
For example, the spread of COVID-19, which has been identified as a pandemic by the World Health Organization and declared a national emergency in the United States, created a global public-health crisis that resulted in significant economic uncertainty, and has impacted household, business, economic, and market conditions, including in the states and local economies in which we conduct nearly all of our business.
For example, the spread of COVID-19, which was identified as a pandemic by the World Health Organization and declared a national emergency in the United States, created a global public-health crisis that resulted in significant economic uncertainty, and has impacted household, business, economic, and market conditions, including in the states and local economies in which we conduct nearly all of our business.
An economic slow-down, or the reversal of the economic recovery, in the regions in which we conduct our business could result in declines in loan demand and collateral values. Furthermore, negative impacts on our customers caused by such a health crisis, including the continuation of COVID-19, could result in increased risk of delinquencies, defaults, foreclosures, and losses on our loans.
An economic slow-down, or the reversal of the economic recovery, in the regions in which we conduct our business could result in declines in loan demand and collateral values. Furthermore, negative impacts on our customers caused by such a health crisis, including the resurgence of COVID-19, could result in increased risk of delinquencies, defaults, foreclosures, and losses on our loans.
As of December 31, 2022, commercial real estate residential loans comprised approximately 10% of our total loan portfolio. • Commercial Real Estate Nonresidential . Repayment is dependent on income being generated in amounts sufficient to cover operating expenses and debt service.
As of December 31, 2023, commercial real estate residential loans comprised approximately 10% of our total loan portfolio. • Commercial Real Estate Nonresidential . Repayment is dependent on income being generated in amounts sufficient to cover operating expenses and debt service.
In addition, an epidemic, a pandemic or another infectious disease outbreak, or the continuation of the COVID-19 pandemic, could again significantly impact households and businesses, or cause limitations on commercial activity, increased unemployment, and general economic and financial instability.
In addition, an epidemic, a pandemic or another infectious disease outbreak, or the resurgence of the COVID-19 pandemic, could again significantly impact households and businesses, or cause limitations on commercial activity, increased unemployment, and general economic and financial instability.
The continuation of the COVID-19 pandemic, or a new epidemic, pandemic or infectious disease outbreak, may result in us having to close certain offices and may require us to limit how customers conduct business through our branch network.
The resurgence of the COVID-19 pandemic, or a new epidemic, pandemic or infectious disease outbreak, may result in us having to close certain offices and may require us to limit how customers conduct business through our branch network.
Changes in market interest rates will also affect the level of voluntary prepayments on our loans and the receipt of payments on our mortgage-backed securities resulting in the receipt of proceeds that may be reinvested at a lower rate than the loan or mortgage-backed security being prepaid. We originate residential loans for sale and for our portfolio.
Changes in market interest rates will also affect the level of voluntary prepayments on our loans and the receipt of payments on our mortgage-backed securities resulting in the receipt of proceeds that may be reinvested at a lower rate than the loan or mortgage-backed security being prepaid. 6 Table of Contents We originate residential loans for sale and for our portfolio.
Our loan portfolio is concentrated primarily in eastern, northeastern, central, and south central Kentucky, southern West Virginia, and northeastern Tennessee. Our profits depend on providing products and services to clients in these local regions. Although unemployment rates in many of our markets have decreased, they remain high compared to the national average.
Our loan portfolio is concentrated primarily in eastern, northeastern, central, and south central Kentucky, southern West Virginia, and northeastern Tennessee. Our profits depend on providing products and services to clients in these local regions. Although unemployment rates in many of our markets have decreased, they remain above the national average.
Counterparty Risk The soundness of other financial institutions could adversely affect CTBI. Our ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services companies are interrelated as a result of trading, clearing, counterparty, or other relationships.
Our ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services companies are interrelated as a result of trading, clearing, counterparty, or other relationships.
As of December 31, 2022, hotel/motel loans comprised approximately 9% of our total loan portfolio. • Other Commercial Loans . Repayment is generally dependent upon the successful operation of the borrower’s business. In addition, the collateral securing the loans may depreciate over time, be difficult to appraise, be illiquid, or fluctuate in value based on the success of the business.
As of December 31, 2023, hotel/motel loans comprised approximately 10% of our total loan portfolio. • Other Commercial Loans . Repayment is generally dependent upon the successful operation of the borrower’s business. In addition, the collateral securing the loans may depreciate over time, be difficult to appraise, be illiquid, or fluctuate in value based on the success of the business.
As of December 31, 2022, commercial real estate nonresidential loans comprised approximately 21% of our total loan portfolio. • Hotel/Motel . The hotel and motel industry is highly susceptible to changes in the domestic and global economic environments, which has caused the industry to experience substantial volatility due to the recent global pandemic.
As of December 31, 2023, commercial real estate nonresidential loans comprised approximately 19% of our total loan portfolio. • Hotel/Motel . The hotel and motel industry is highly susceptible to changes in the domestic and global economic environments, which has caused the industry to experience substantial volatility due to the recent global pandemic.
The Chairman of this Committee makes a quarterly report to the Board covering key risk areas. We have an annual third-party information technology review conducted by information security professionals following industry-standard testing procedures. All employees go through information security training annually, in addition to random quarterly phishing testing. CTBI has not experienced any data breaches.
The Chairman of this Committee makes a quarterly report to the Board covering key risk areas. We have an annual third-party information technology review conducted by information security professionals following industry-standard testing procedures. All employees go through information security training annually, in addition to random quarterly phishing testing.
Collateral values and the ability of borrowers to repay their loans may be affected at any time by factors such as: • The length and severity of downturns in the local economies in which we operate or the national economy; • The length and severity of downturns in one or more of the business sectors in which our customers operate, particularly the automobile, hotel/motel, and residential development industries; or • A rapid increase in interest rates. 7 Table of Contents Our loan portfolio includes loans with a higher risk of loss.
Collateral values and the ability of borrowers to repay their loans may be affected at any time by factors such as: • The length and severity of downturns in the local economies in which we operate or the national economy; • The length and severity of downturns in one or more of the business sectors in which our customers operate, particularly the automobile, hotel/motel, and residential development industries; or • A rapid increase in interest rates.
After these acquisitions, we may experience adverse changes in results of operations of acquired entities, unforeseen liabilities, asset quality problems of acquired entities, loss of key personnel, loss of clients because of change of identity, difficulties in integrating data processing and operational procedures, and deterioration in local economic conditions.
After these acquisitions, we may experience adverse changes in results of operations of acquired entities, unforeseen liabilities, asset quality problems of acquired entities, loss of key personnel, loss of clients because of change of identity, difficulties in integrating data processing and operational procedures, and deterioration in local economic conditions. These various acquisition risks can be heightened in larger transactions.
As of December 31, 2022, consumer loans comprised approximately 24% of our total loan portfolio. As of December 31, 2022, approximately 82% of our consumer loans and 20% of our total loan portfolio were consumer indirect loans.
As of December 31, 2023, consumer loans comprised approximately 24% of our total loan portfolio. As of December 31, 2023, approximately 84% of our consumer loans and 20% of our total loan portfolio were consumer indirect loans.
As of December 31, 2022, other commercial loans comprised approximately 11% of our total loan portfolio. Consumer loans may carry a higher degree of repayment risk than residential mortgage loans, particularly when the consumer loan is unsecured.
As of December 31, 2023, other commercial loans comprised approximately 10% of our total loan portfolio. 7 Table of Contents Consumer loans may carry a higher degree of repayment risk than residential mortgage loans, particularly when the consumer loan is unsecured.
In the event of an information security breach, we have an insurance policy in place. 10 Table of Contents Although we and our third party service providers devote significant resources to maintain and upgrade our systems and processes that are designed to protect the security of computer systems, software, networks, and other technology assets and the confidentiality, integrity, and availability of information belonging to us and our customers, there is no assurance that our security systems and those of our third party service providers will provide absolute security.
Although we and our third party service providers devote significant resources to maintain and upgrade our systems and processes that are designed to protect the security of computer systems, software, networks, and other technology assets and the confidentiality, integrity, and availability of information belonging to us and our customers, there is no assurance that our security systems and those of our third party service providers will provide absolute security.
Complications or difficulties in the conversion of the core operating systems, data systems, and products of these other banks to those of CTBI may result in the loss of clients, damage to our reputation within the financial services industry, operational problems, one-time costs currently not anticipated by us, and/or reduced cost savings resulting from the merger activities.
Complications or difficulties in the conversion of the core operating systems, data systems, and products of these other banks to those of CTBI may result in the loss of clients, damage to our reputation within the financial services industry, operational problems, one-time costs currently not anticipated by us, and/or reduced cost savings resulting from the merger activities. 12 Table of Contents Market and Liquidity Risks Market Risk CTBI’s stock price is volatile.
The related revenue reduction could adversely affect our financial condition, cash flows, and results of operations. Operational Risk An extended disruption of vital infrastructure or a security breach could negatively impact our business, results of operations, and financial condition. Our operations depend upon, among other things, our infrastructure, including equipment and facilities.
Operational Risk An extended disruption of vital infrastructure or a security breach could negatively impact our business, results of operations, and financial condition. Our operations depend upon, among other things, our infrastructure, including equipment and facilities.
These various acquisition risks can be heightened in larger transactions. 12 Table of Contents Integration Risk We may not be able to achieve the expected integration and cost savings from our bank acquisition activities. We have a long history of acquiring financial institutions and, subject to regulatory approval, we expect this acquisition activity to resume in the future.
Integration Risk We may not be able to achieve the expected integration and cost savings from our bank acquisition activities. We have a long history of acquiring financial institutions and, subject to regulatory approval, we expect this acquisition activity to resume in the future.
Any such financial liability or reputational damage could have an adverse effect on our business, financial condition, and results of operations. Significant legal actions could subject us to uninsured liabilities. From time to time, we may be subject to claims related to our operations. These claims and legal actions, including supervisory actions by our regulators, could involve significant amounts.
Any such financial liability or reputational damage could have an adverse effect on our business, financial condition, and results of operations. 9 Table of Contents Significant legal actions could subject us to uninsured liabilities. From time to time, we may be subject to claims related to our operations.
We maintain insurance coverage in amounts and with deductibles we believe are appropriate for our operations. However, our insurance coverage may not cover all claims against us and related costs, and further insurance coverage may not continue to be available at a reasonable cost.
These claims and legal actions, including supervisory actions by our regulators, could involve significant amounts. We maintain insurance coverage in amounts and with deductibles we believe are appropriate for our operations. However, our insurance coverage may not cover all claims against us and related costs, and further insurance coverage may not continue to be available at a reasonable cost.
Market and Liquidity Risks Market Risk CTBI’s stock price is volatile. Our stock price has been volatile in the past, and several factors could cause the price to fluctuate substantially in the future.
Our stock price has been volatile in the past, and several factors could cause the price to fluctuate substantially in the future.
Our earnings and financial condition are dependent to a large degree upon net interest income, which is the difference between interest earned from loans and investments and interest paid on deposits and borrowings.
Operational Risks Interest Rate Risk Changes in interest rates could adversely affect our earnings and financial condition. Our earnings and financial condition are dependent to a large degree upon net interest income, which is the difference between interest earned from loans and investments and interest paid on deposits and borrowings.
We originate commercial real estate residential loans, commercial real estate nonresidential loans, hotel/motel loans, other commercial loans, consumer loans, and residential mortgage loans, primarily within our market area.
Our loan portfolio includes loans with a higher risk of loss. We originate commercial real estate residential loans, commercial real estate nonresidential loans, hotel/motel loans, other commercial loans, consumer loans, and residential mortgage loans, primarily within our market area.
Weakness in the real estate market or other segments of our loan portfolio would lead to additional losses, which could have a material adverse effect on our business, financial condition, and results of operations. 8 Table of Contents As of December 31, 2022, approximately 65% of our loan portfolio was secured by real estate, with approximately 40% of the portfolio consisting of commercial real estate.
Weakness in the real estate market or other segments of our loan portfolio would lead to additional losses, which could have a material adverse effect on our business, financial condition, and results of operations.
The financial services industry has experienced leadership changes at federal banking agencies, which may impact regulations and government policy applicable to us. New appointments to the Board of Governors of the Federal Reserve could affect monetary policy and interest rates.
The financial services industry has experienced leadership changes at federal banking agencies, which may impact regulations and government policy applicable to us.
See also, “Cautionary Statement Regarding Forward-Looking Statements.” If any of the following risks actually occur, our financial condition and results of operations could be materially and adversely affected. If this were to happen, the value of our common stock could decline significantly, and you could lose all or part of your investment.
See also, “Cautionary Statement Regarding Forward-Looking Statements.” If any of the following risks actually occur, our financial condition and results of operations could be materially and adversely affected.
In addition, to stay competitive in our markets we may need to adjust the interest rates on our products to match the rates offered by our competitors, which could adversely affect our net interest margin. As a result, our profitability depends upon our continued ability to successfully compete in our market areas while achieving our investment objectives.
In addition, to stay competitive in our markets we may need to adjust the interest rates on our products to match the rates offered by our competitors, which could adversely affect our net interest margin.
A failure to meet minimum capital requirements could result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a material adverse effect on our financial condition and results of operations. 14 Table of Contents Environmental Liability Risk We are subject to environmental liability risk associated with lending activity.
See Item 1 above for additional information regarding current capital requirements. A failure to meet minimum capital requirements could result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a material adverse effect on our financial condition and results of operations.
To the extent that consumer confidence in other investment vehicles, such as the stock market, increases, customers may move funds from bank deposits and products into such other investment vehicles.
To the extent that consumer confidence in other investment vehicles, such as the stock market, increases, customers may move funds from bank deposits and products into such other investment vehicles. In addition, given the adoption of electronic banking, these transfers could occur more quickly than they have historically.
A successful breach of the security of our systems or those of our third party service providers could cause serious negative consequences to us, including significant disruption of our operations, misappropriation of our confidential information or the confidential information of our customers, or damage to our computers or operating systems, and could result in violations of applicable privacy and other laws, financial loss to us or to our customers, loss in confidence in our security measures, customer dissatisfaction, litigation exposure, and harm to our reputation, all of which could have a material adverse effect on us.
Despite our efforts and those of our third party service providers to ensure the integrity of these systems, it is possible that we or our third party service providers may not be able to anticipate or to implement effective preventive measures against all security breaches of these types, especially because techniques used change frequently or are not recognized until launched, and because security attacks can originate from a wide variety of sources. 10 Table of Contents A successful breach of the security of our systems or those of our third party service providers could cause serious negative consequences to us, including significant disruption of our operations, misappropriation of our confidential information or the confidential information of our customers, or damage to our computers or operating systems, and could result in violations of applicable privacy and other laws, financial loss to us or to our customers, loss in confidence in our security measures, customer dissatisfaction, litigation exposure, and harm to our reputation, all of which could have a material adverse effect on us.
A significant portion of our loan portfolio is secured by real property. During the ordinary course of business, we may foreclose on and take title to properties securing loans. In doing so, there is a risk that hazardous or toxic substances could be found on these properties.
Environmental Liability Risk We are subject to environmental liability risk associated with lending activity. A significant portion of our loan portfolio is secured by real property. During the ordinary course of business, we may foreclose on and take title to properties securing loans.
Our stock price may fluctuate significantly in the future, and these fluctuations may be unrelated to CTBI’s performance. Although investor confidence in financial institutions has strengthened, the financial crisis adversely impacted investor confidence in the financial institutions sector.
Our stock price may fluctuate significantly in the future, and these fluctuations may be unrelated to CTBI’s performance. Investor confidence in financial institutions has declined as a result of the bank failures that occurred in 2023.
We are required to maintain certain minimum amounts and types of capital and may be subject to more stringent capital requirements in the future. A failure to meet applicable capital requirements could have a material adverse effect on our financial condition and results of operations.
A failure to meet applicable capital requirements could have a material adverse effect on our financial condition and results of operations. We are subject to regulatory requirements specifying minimum amounts and types of capital that we must maintain. From time to time, banking regulators change these regulatory capital adequacy guidelines.
As a result, the negative effects on our business, results of operations, and financial condition from an epidemic, a pandemic, or another infectious disease outbreak, including the continuation or resurgence of the COVID-19 pandemic, could be material. 6 Table of Contents Operational Risks Interest Rate Risk Changes in interest rates could adversely affect our earnings and financial condition.
Moreover, the effects of a widespread health crisis may heighten many of the other risks described in this “Risk Factors” section. As a result, the negative effects on our business, results of operations, and financial condition from an epidemic, a pandemic, or another infectious disease outbreak, including the resurgence of the COVID-19 pandemic, could be material.
A failure to maintain adequate liquidity could have a material adverse effect on our financial condition and results of operations. 13 Table of Contents Legal, Legislation, and Regulation Risks Risks Related to Regulatory Policies and Oversight The banking industry is heavily regulated, and our business may be adversely affected by legislation or changes in regulatory policies and oversight.
These possible impacts may adversely affect our future operating results, including net income, and negatively impact capital. 13 Table of Contents Legal, Legislation, and Regulation Risks Risks Related to Regulatory Policies and Oversight The banking industry is heavily regulated, and our business may be adversely affected by legislation or changes in regulatory policies and oversight.
Such disruptions could damage our reputation and otherwise adversely impact our business and results of operations. 9 Table of Contents Third party vendors provide key components of our business infrastructure, such as processing, internet connections, and network access.
We may not be successful in implementing new systems and transitioning data, which could cause business disruptions and be more expensive, time-consuming, disruptive, and resource intensive. Such disruptions could damage our reputation and otherwise adversely impact our business and results of operations. Third party vendors provide key components of our business infrastructure, such as processing, internet connections, and network access.
The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on our financial condition and results of operations.
Although we have policies and procedures to perform an environmental review before initiating any foreclosure action on real property, these reviews may not be sufficient to detect all potential environmental hazards. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on our financial condition and results of operations. Item1B.
Technology and other changes are allowing consumers to complete financial transactions through alternative methods to those which historically involved banks. For example, consumers can now hold funds that would have been held as bank deposits in mutual funds, brokerage accounts, general purpose reloadable prepaid cards, or cyber currency.
For example, consumers can now hold funds that would have been held as bank deposits in mutual funds, brokerage accounts, general purpose reloadable prepaid cards, or cyber currency. In addition, consumers can complete transactions, such as paying bills or transferring funds, directly without utilizing the services of a bank.
In addition, consumers can complete transactions, such as paying bills or transferring funds, directly without utilizing the services of a bank. The process of eliminating banks as intermediaries (known as disintermediation) could result in the loss of fee income, as well as the loss of deposits and the income that might be generated from those deposits.
The process of eliminating banks as intermediaries (known as disintermediation) could result in the loss of fee income, as well as the loss of deposits and the income that might be generated from those deposits. The related revenue reduction could adversely affect our financial condition, cash flows, and results of operations.
If hazardous or toxic substances are found, we may be liable for remediation costs, as well as for personal injury and property damage. Environmental laws may require us to incur substantial expenses and may materially reduce the affected property’s value or limit our ability to use or sell the affected property.
Environmental laws may require us to incur substantial expenses and may materially reduce the affected property’s value or limit our ability to use or sell the affected property. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental liability.
Economic Environment Risks Economic Risk CTBI may continue to be adversely affected by economic and market conditions.
If this were to happen, the value of our common stock could decline significantly, and you could lose all or part of your investment. 4 Table of Contents Economic Environment Risks Economic Risk CTBI may continue to be adversely affected by economic and market conditions.
Despite our efforts and those of our third party service providers to ensure the integrity of these systems, it is possible that we or our third party service providers may not be able to anticipate or to implement effective preventive measures against all security breaches of these types, especially because techniques used change frequently or are not recognized until launched, and because security attacks can originate from a wide variety of sources.
In addition, because the methods and techniques employed by perpetrators of fraud and others to attack systems and applications change frequently and often are not fully recognized or understood until after they have been launched, we and our third-party service providers and partners may be unable to anticipate certain attack methods in order to implement effective preventative measures.
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Moreover, the effects of a widespread health crisis, including the continuation of the COVID-19 pandemic, may heighten many of the other risks described in this “Risk Factors” section.
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As of December 31, 2023, approximately 66% of our loan portfolio was secured by real estate, with approximately 39% of the portfolio consisting of commercial real estate.
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We may not be successful in implementing new systems and transitioning data, which could cause business disruptions and be more expensive, time-consuming, disruptive, and resource intensive.
Added
As a result, our profitability depends upon our continued ability to successfully compete in our market areas while achieving our investment objectives. 8 Table of Contents Technology and other changes are allowing consumers to complete financial transactions through alternative methods to those which historically involved banks.
Removed
We are subject to regulatory requirements specifying minimum amounts and types of capital that we must maintain. From time to time, banking regulators change these regulatory capital adequacy guidelines. See Item 1 above for additional information regarding current capital requirements.
Added
In the event of an information security breach, we have an insurance policy in place.
Removed
In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental liability. Although we have policies and procedures to perform an environmental review before initiating any foreclosure action on real property, these reviews may not be sufficient to detect all potential environmental hazards.
Added
CTBI has not experienced any data breaches; however, one of our third party vendors did experience a data breach during 2023 as disclosed in note 19 to our consolidated financial statements. The incident did not impact the ongoing operations of CTBI, and we expect our insurance policy to cover many of the costs related to the incident.
Added
A failure to maintain adequate liquidity could have a material adverse effect on our financial condition and results of operations. Adverse developments affecting the financial services industry, such as recent bank failures or concerns involving liquidity, may have a material effect on our operations.
Added
Recent events relating to the failures of Silicon Valley Bank and Signature Bank in March 2023 have caused general uncertainty and concerns regarding the adequacy of liquidity in the banking sector as a whole.
Added
A financial institution’s liquidity reflects its ability to meet customer demand for loans, accommodating possible outflows in deposits, and accessing alternative sources of funds when needed, while at the same time taking advantage of interest rate market opportunities. The ability to manage liquidity is fundamental to a financial institution’s business and success.
Added
The bank failures in March 2023 highlight the potential results of an insured depository institution unexpectedly having to obtain needed liquidity to satisfy deposit withdrawal requests, including how quickly such requests can accelerate once uninsured depositors lose confidence in an institutions ability to satisfy its obligations to depositors.
Added
Current market uncertainties and other external factors may impact the competitive landscape for deposits in the banking industry in an unpredictable manner. In addition, the rising interest rate environment has continued to increase competition for liquidity and the premium at which liquidity is available to meet funding needs.
Added
New appointments to the Board of Governors of the Federal Reserve could affect monetary policy and interest rates. 14 Table of Contents We are required to maintain certain minimum amounts and types of capital and may be subject to more stringent capital requirements in the future.
Added
In doing so, there is a risk that hazardous or toxic substances could be found on these properties. If hazardous or toxic substances are found, we may be liable for remediation costs, as well as for personal injury and property damage.
Added
Unresolved Staff Comments None. Item1C. Cybersecurity As referenced in the Operational Risks/Cyber Risks section of Item 1A. Risk Factors included in this Form 10-K, our organization may be materially affected by cybersecurity threats and incidents that target its internally managed information technology systems or our critical vendor systems.
Added
Our institution utilizes industry standard and regulatory approved assessment tools to identify cybersecurity risks and measure preparedness. The tools provide a repeatable and measurable framework for our organization to measure its cybersecurity preparedness over time.
Added
The assessment process spans over five domains of interest: (1) cyber risk management and oversight, (2) threat intelligence and collaboration, (3) cybersecurity controls, (4) external dependencies, and (5) cyber incident management and resilience. All domains are currently assessed at an evolving maturity level which is in line with our organizations inherent risk assessment score.
Added
Our institution has purchased and is using best of breed tools in the areas of endpoint security, Security Information Event Management (“SIEM”), Privileged Access Management (“PAM”), email and web browsing filtering and management, and user analytics.
Added
We also use a comprehensive third party 24-by-7 Security Operations Center (“SOC”) that monitors, detects, and remediates cybersecurity threats adhering to strict service response levels.
Added
The internal assessment process and internal tools and SOC related key indicators are reported on a quarterly basis to the Security and Information Security Committee and the Enterprise-wide Risk Management Committee and annually to the Board of Directors. 15 Table of Contents The assessment process, internal tools, and corresponding SOC related services are also reviewed when new threats arise or when considering changes to the business strategy, such as expanding operations, offering new products and services, or entering into new third-party relationships that support critical activities.
Added
Consequently, management shall determine whether additional risk management practices or controls are needed to maintain or augment the institution’s cybersecurity maturity.
Added
A comprehensive and layered auditing approach including people, processes and technology components is executed by our internal audit program in order to evaluate the effectiveness of existing controls and ensure that cybersecurity risk has been adequately mitigated within our institution.
Added
Periodic phishing tests, network and application security reviews, third-party vulnerability assessments and penetration testing are used to gauge the overall effectiveness of our cybersecurity defenses. In an effort to continually share threat intelligence and increase awareness of cybersecurity threats, routine communication to employees is conducted to highlight internal control requirements, common cybersecurity threats and schemes.
Added
Our incident response team members also participate in the annual Financial Services Information Sharing and Analysis Center tabletop cybersecurity tabletop exercises. Our comprehensive vendor management program and processes assess all new vendors and segments them into criticality tiers.
Added
Our most critical vendors (tiers 1 and 2) are evaluated annually based on requested vendor documents, such as Statements on Standards Attestation Engagements No. 18 (SSAE 18), financial statements, insurance, and due diligence questionnaires. The vendor management team also monitors all news alerts related to all critical vendors.
Added
As of the date of this report, we are not aware of any cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect CTBI. However, future incidents could have a material impact on CTBI’s business strategy, results of operations, or financial condition.
Added
For additional discussion of the risks posed by cybersecurity threats, see the Operational Risks/Cyber Risks section of Item 1A. Risk Factors included in this Form 10-K .
Added
Management receives information on cyber activities, incidents, and risk assessments quarterly from the VP/Corporate Information Security, Resilience and Data Officer (CISRDO), the SVP/Manager Application Systems, and the EVP/Operations during the Security and Information Security Committee and the Information Technology Steering Committee meetings. This information is also shared and discussed quarterly with the Enterprise-wide Risk Management Committee.
Added
Various key risk measures related to cyber risk are tracked and reported quarterly to the Enterprise-wide Risk Management Committee. Our VP/CISRDO has been with CTBI for five years and has extensive 30+ years of experience in information technology management roles in various industries.
Added
Our SVP/Manager Application Systems has been with CTBI for 32 years and has held various information technology leadership roles. Our EVP/Operations has been with the company for 30 years, leading and guiding our technology teams. The Board of Directors monitors cyber risk through quarterly reports from the Board’s Risk and Compliance Committee.
Added
This Board committee meets quarterly and receives information concerning cyber risk activities, including cyber risk assessments and incident reporting. The Board also receives an annual report covering cyber risk from the Chief Information Technology Officer.
Added
Controls over cyber risk are reviewed throughout the year by internal audit activities and third-party assessments whose reports are reviewed by the Board’s Audit Committee. 16 Table of Contents

Item 2. Properties

Properties — owned and leased real estate

3 edited+1 added−1 removed3 unchanged
Biggest changeSee notes 7 and 15 to the consolidated financial statements contained herein for the year ended December 31, 2022, for additional information relating to lease commitments and amounts invested in premises and equipment.
Biggest changeSee notes 7 and 15 to the consolidated financial statements contained herein for the year ended December 31, 2023, for additional information relating to lease commitments and amounts invested in premises and equipment. A new Lexington Market location opened in January 2024 in Boone County, Kentucky, and a new Campbellsville Market location will open in 2024 in Hardin County, Kentucky.
Following is a schedule of properties owned and leased by CTBI and our subsidiaries as of December 31, 2022: Location Owned Leased Total Banking locations: Community Trust Bank, Inc. * Pikeville Market (lease land at 3 owned locations) 9 1 10 10 locations in Pike County, Kentucky Floyd/Knott/Johnson Market (lease land at 1 owned location) 3 1 4 2 locations in Floyd County, Kentucky, 1 location in Knott County, Kentucky, and 1 location in Johnson County, Kentucky Tug Valley Market (lease land at 1 owned location) 2 0 2 1 location in Pike County, Kentucky, 1 location in Mingo County, West Virginia Whitesburg Market (lease land at 1 owned location) 4 1 5 5 locations in Letcher County, Kentucky Hazard Market (lease land at 2 owned locations) 3 0 3 3 locations in Perry County, Kentucky * Lexington Market (lease land at 3 owned locations) 4 2 6 6 locations in Fayette County, Kentucky Winchester Market 2 0 2 2 locations in Clark County, Kentucky Richmond Market (lease land at 1 owned location) 3 0 3 3 locations in Madison County, Kentucky Mt.
Following is a schedule of properties owned and leased by CTBI and our subsidiaries as of December 31, 2023: Location Owned Leased Total Banking locations: Community Trust Bank, Inc. * Pikeville Market (lease land at 3 owned locations) 9 1 10 10 locations in Pike County, Kentucky Floyd/Knott/Johnson Market (lease land at 1 owned location) 3 1 4 2 locations in Floyd County, Kentucky, 1 location in Knott County, Kentucky, and 1 location in Johnson County, Kentucky Tug Valley Market (lease land at 1 owned location) 2 0 2 1 location in Pike County, Kentucky, 1 location in Mingo County, West Virginia Whitesburg Market (lease land at 1 owned location) 4 1 5 5 locations in Letcher County, Kentucky Hazard Market (lease land at 2 owned locations) 3 0 3 3 locations in Perry County, Kentucky * Lexington Market (lease land at 3 owned locations) 4 2 6 6 locations in Fayette County, Kentucky Winchester Market 2 0 2 2 locations in Clark County, Kentucky Richmond Market (lease land at 1 owned location) 3 0 3 3 locations in Madison County, Kentucky Mt.
Sterling Market 2 0 2 2 locations in Montgomery County, Kentucky Versailles Market (lease land at 3 owned locations) 3 2 5 1 location in Woodford County, Kentucky, 2 locations in Franklin County, Kentucky, and 2 locations in Scott County, Kentucky * Danville Market (lease land at 1 owned location) 3 0 3 2 locations in Boyle County, Kentucky and 1 location in Mercer County, Kentucky 15 Table of Contents * Ashland Market (lease land at 1 owned location) 5 0 5 4 locations in Boyd County, Kentucky and 1 location in Greenup County, Kentucky Flemingsburg Market 3 0 3 3 locations in Fleming County, Kentucky Advantage Valley Market 3 1 4 2 locations in Lincoln County, West Virginia, 1 location in Wayne County, West Virginia, and 1 location in Cabell County, West Virginia Summersville Market 1 0 1 1 location in Nicholas County, West Virginia Middlesboro Market (lease land at 1 owned location) 3 0 3 3 locations in Bell County, Kentucky Williamsburg Market 5 0 5 2 locations in Whitley County, Kentucky and 3 locations in Laurel County, Kentucky Campbellsville Market (lease land at 2 owned locations) 8 0 8 2 locations in Taylor County, Kentucky, 2 locations in Pulaski County, Kentucky, 1 location in Adair County, Kentucky, 1 location in Green County, Kentucky, 1 location in Russell County, Kentucky, and 1 location in Marion County, Kentucky Mt.
Sterling Market 2 0 2 2 locations in Montgomery County, Kentucky Versailles Market (lease land at 2 owned locations) 3 2 5 1 location in Woodford County, Kentucky, 2 locations in Franklin County, Kentucky, and 2 locations in Scott County, Kentucky * Danville Market (lease land at 1 owned location) 3 0 3 2 locations in Boyle County, Kentucky and 1 location in Mercer County, Kentucky * Ashland Market (lease land at 1 owned location) 5 0 5 4 locations in Boyd County, Kentucky and 1 location in Greenup County, Kentucky Flemingsburg Market 3 0 3 3 locations in Fleming County, Kentucky Advantage Valley Market 3 1 4 2 locations in Lincoln County, West Virginia, 1 location in Wayne County, West Virginia, and 1 location in Cabell County, West Virginia Summersville Market 1 0 1 1 location in Nicholas County, West Virginia Middlesboro Market (lease land at 1 owned location) 3 0 3 3 locations in Bell County, Kentucky Williamsburg Market 5 0 5 2 locations in Whitley County, Kentucky and 3 locations in Laurel County, Kentucky Campbellsville Market (lease land at 2 owned locations) 8 0 8 2 locations in Taylor County, Kentucky, 2 locations in Pulaski County, Kentucky, 1 location in Adair County, Kentucky, 1 location in Green County, Kentucky, 1 location in Russell County, Kentucky, and 1 location in Marion County, Kentucky Mt.
Removed
In April 2022, Versailles Main relocated into a new branch location and Woodford Plaza Branch closed as part of a branch consolidation. A new branch, Georgetown Main, opened in November 2022.
Added
We owned the land for both of these locations at December 31, 2023.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

9 edited+2 added−2 removed0 unchanged
Biggest changeDraughn; 63 Executive Vice President 2001 Executive Vice President/Operations of Community Trust Bank, Inc. James J. Gartner; 81 Executive Vice President 2002 Executive Vice President/ Chief Credit Officer of Community Trust Bank, Inc. Steven E. Jameson; 66 Executive Vice President 2004 (5) Executive Vice President/ Chief Internal Audit & Risk Officer Ricky D.
Biggest changeJameson; 67 Executive Vice President 2004 (5) Executive Vice President/Chief Internal Audit & Risk Officer of CTB Ricky D. Sparkman; 61 Executive Vice President 2002 Executive Vice President/South Central Region President of CTB D.
Item 4. Mine Safety Disclosures Not applicable. 16 Table of Contents Information about our Executive Officers Set forth below are the executive officers of CTBI, their positions with CTBI, and the year in which they first became an executive officer. Name and Age (1) Positions and Offices Currently Held Date First Became Executive Officer Principal Occupation Mark A.
Item 4. Mine Safety Disclosures Not applicable. 17 Table of Contents Information about our Executive Officers Set forth below are the executive officers of CTBI, their positions with CTBI, and the year in which they first became an executive officer. Name and Age (1) Positions and Offices Currently Held Date First Became Executive Officer Principal Occupation Mark A.
Gooch became President of Community Trust Bancorp, Inc. on July 27, 2021 and assumed the additional positions of Vice Chairman and Chief Executive Officer of CTBI effective February 7, 2022, upon the retirement of Jean R. Hale. Mr.
Gooch became President of CTBI on July 27, 2021 and assumed the additional positions of Vice Chairman and Chief Executive Officer of CTBI effective February 7, 2022, upon the retirement of Jean R. Hale. Mr.
Dollins became Executive Vice President of Community Trust Bancorp, Inc. and President of the Central Kentucky Region of Community Trust Bank, Inc. on January 3, 2023, following the retirement of Larry W. Jones. She previously held the position of President of the Versailles Market of Community Trust Bank, Inc. PART II
Dollins became Executive Vice President of CTBI and President of the Central Kentucky Region of CTB on January 3, 2023, following the retirement of Larry W. Jones. She previously held the position of President of the Versailles Market of CTB. (8) James J.
Gooch retained his previous position as Chief Executive Officer of Community Trust Bank, Inc. and assumed the additional roles of Chairman of Community Trust Bank, Inc. and Chairman of Community Trust and Investment Company also effective with Ms. Hale’s retirement on February 7, 2022. 17 Table of Contents (3) Mr.
Gooch retained his previous position as Chief Executive Officer of CTB and assumed the additional roles of Chairman of CTB and Chairman of CTIC also effective with Ms. Hale’s retirement on February 7, 2022. (3) Mr. Newsom became President of CTB on February 7, 2022. He previously served as President of the Eastern Region of CTB. (4) Mr.
Gooch; 64 Vice Chairman, President, and Chief Executive Officer 1997 (2) Vice Chairman, President, and CEO of Community Trust Bancorp, Inc. Kevin J. Stumbo; 62 Executive Vice President, Chief Financial Officer, and Treasurer 2002 Executive Vice President/ Chief Financial Officer of Community Trust Bank, Inc. Richard W.
Gooch; 65 Vice Chairman, President, and Chief Executive Officer 1997 (2) Vice Chairman, President, and CEO of CTBI Kevin J. Stumbo; 63 Executive Vice President, Chief Financial Officer, and Treasurer 2002 Executive Vice President/Chief Financial Officer of CTBI Richard W. Newsom; 69 Executive Vice President 2002 (3) Executive Vice President/President of CTB Andy D.
Tackett became Executive Vice President of Community Trust Bancorp, Inc. and President of the Eastern Region of Community Trust Bank, Inc. on February 7, 2022. He previously held the position of President of the Floyd, Knott, and Johnson Market of Community Trust Bank, Inc. (7) Ms.
Hancock became Secretary of CTBI on February 7, 2022. (5) Mr. Jameson is a non-voting member of the Executive Committee. (6) Mr. Tackett became Executive Vice President of CTBI and President of the Eastern Region of CTB on February 7, 2022. He previously held the position of President of the Floyd, Knott, and Johnson Market of CTB. (7) Ms.
Dollins; 62 Executive Vice President 2023 (7) Executive Vice President/ Central Kentucky Region President of Community Trust Bank, Inc. (1) The ages listed for CTBI’s executive officers are as of February 28, 2023. (2) Mr.
Smith; 53 Executive Vice President 2024 (8) Executive Vice President/Chief Credit Officer of CTB (1) The ages listed for CTBI’s executive officers are as of February 28, 2024. (2) Mr.
Sparkman; 60 Executive Vice President 2002 Executive Vice President/ South Central Region President of Community Trust Bank, Inc. D. Andrew Jones; 60 Executive Vice President 2010 Executive Vice President/ Northeastern Region President of Community Trust Bank, Inc. David Tackett; 57 Executive Vice President 2022 (6) Executive Vice President/ Eastern Region President of Community Trust Bank, Inc. Billie J.
Andrew Jones; 61 Executive Vice President 2010 Executive Vice President/Northeastern Region President of CTB David Tackett; 58 Executive Vice President 2022 (6) Executive Vice President/Eastern Region President of CTB Billie J. Dollins; 63 Executive Vice President 2023 (7) Executive Vice President/Central Kentucky Region President of CTB Mark E.
Removed
Newsom; 68 Executive Vice President 2002 (3) Executive Vice President/ President of Community Trust Bank, Inc. Andy D. Waters; 57 Executive Vice President 2011 President and CEO of Community Trust and Investment Company C. Wayne Hancock; 48 Executive Vice President and Secretary 2014 (4) Executive Vice President/ Senior Staff Attorney James B.
Added
Waters; 58 Executive Vice President 2011 President and CEO of CTIC C. Wayne Hancock; 49 Executive Vice President and Secretary 2014 (4) Executive Vice President/Chief Legal Officer of CTB James B. Draughn; 64 Executive Vice President 2001 Executive Vice President/Operations of CTB Steven E.
Removed
Newsom became President of Community Trust Bank, Inc. on February 7, 2022. He previously served as President of the Eastern Region of Community Trust Bank, Inc. (4) Mr. Hancock became Secretary of Community Trust Bancorp, Inc. on February 7, 2022. (5) Mr. Jameson is a non-voting member of the Executive Committee. (6) Mr.
Added
Gartner, former Executive Vice President of CTBI and Executive Vice President/Chief Credit Officer of CTB, retired effective December 29, 2023. Mr. Smith was named Executive Vice President of CTBI and Executive Vice President/Chief Credit Officer of CTB effective January 2, 2024. 18 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

8 edited+0 added−1 removed0 unchanged
Biggest changeSecurities Authorized for Issuance Under Equity Compensation Plans For information concerning securities authorized for issuance under CTBI’s equity compensation plans, see Part III, Item 12.
Biggest changeFor further information, see the Stock Repurchase Program section of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Securities Authorized for Issuance Under Equity Compensation Plans For information concerning securities authorized for issuance under CTBI’s equity compensation plans, see Part III, Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters. 18 Table of Contents Common Stock Performance The following graph shows the cumulative total return experienced by CTBI’s shareholders during the last five years compared to the NASDAQ Stock Market (U.S.) and the NASDAQ Bank Stock Index.
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters. 19 Table of Contents Common Stock Performance The following graph shows the cumulative total return experienced by CTBI’s shareholders during the last five years compared to the NASDAQ Stock Market (U.S.) and the NASDAQ Bank Stock Index.
The graph assumes the investment of $100 on December 31, 2017 in CTBI’s common stock and in each index and the reinvestment of all dividends paid during the five-year period.
The graph assumes the investment of $100 on December 31, 2018 in CTBI’s common stock and in each index and the reinvestment of all dividends paid during the five-year period.
Item 5. Market for the Registrant’s Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities Our common stock is listed on The NASDAQ Global Select Market under the symbol CTBI. As of January 31, 2023, there were approximately 8,700 holders of record of our outstanding common shares.
Item 5. Market for the Registrant’s Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities Our common stock is listed on The NASDAQ Global Select Market under the symbol CTBI. As of January 31, 2024, there were approximately 8,400 holders of record of our outstanding common shares.
Dividends The annual dividend paid to our stockholders was increased from $1.57 per share to $1.68 per share during 2022. We have adopted a conservative policy of cash dividends by generally maintaining an average annual cash dividend ratio of approximately 45%, with periodic stock dividends.
Dividends The annual dividend paid to our stockholders was increased from $1.68 per share to $1.80 per share during 2023. We have adopted a conservative policy of cash dividends by generally maintaining an average annual cash dividend ratio of approximately 45%, with periodic stock dividends.
The current year cash dividend ratio was 36.6%; however, the 10-year average dividend payout ratio has been 42.4%. Dividends are typically paid on a quarterly basis. Future dividends are subject to the discretion of CTBI’s Board of Directors, cash needs, general business conditions, dividends from our subsidiaries, and applicable governmental regulations and policies.
The current year cash dividend ratio was 41.3%, and the 10-year average dividend payout ratio has been 42.2%. Dividends are typically paid on a quarterly basis. Future dividends are subject to the discretion of CTBI’s Board of Directors, cash needs, general business conditions, dividends from our subsidiaries, and applicable governmental regulations and policies.
For information concerning restrictions on dividends from the subsidiary bank to CTBI, see note 20 to the consolidated financial statements contained herein for the year ended December 31, 2022. Stock Repurchases CTBI did not acquire any shares of stock through the stock repurchase program during the year 2022.
For information concerning restrictions on dividends from the subsidiary bank to CTBI, see note 20 to the consolidated financial statements contained herein for the year ended December 31, 2023. Stock Repurchases CTBI did not acquire any shares of stock through the stock repurchase program during the year 2023. There are 1,034,706 shares remaining under CTBI's current repurchase authorization.
Comparison of 5 Year Cumulative Total Return among Community Trust Bancorp, Inc., NASDAQ Stock Market (U.S.), and NASDAQ Bank Stocks Fiscal Year Ending December 31 ($) 2017 2018 2019 2020 2021 2022 Community Trust Bancorp, Inc. 100.00 87.03 105.73 87.45 106.64 116.43 NASDAQ Stock Market (U.S.) 100.00 94.56 124.03 150.41 189.36 152.00 NASDAQ Bank Stocks 100.00 83.60 114.68 100.00 137.32 113.60
Comparison of 5 Year Cumulative Total Return among Community Trust Bancorp, Inc., NASDAQ Stock Market (U.S.), and NASDAQ Bank Stocks Fiscal Year Ending December 31 ($) 2018 2019 2020 2021 2022 2023 Community Trust Bancorp, Inc. 100.00 121.48 100.49 122.54 133.78 132.99 NASDAQ Stock Market (U.S.) 100.00 131.17 159.07 200.26 160.75 203.23 NASDAQ Bank Stocks 100.00 137.18 119.62 164.26 135.89 149.56
Removed
CTBI repurchased 32,664 shares of its common stock during 2020, leaving 1,034,706 shares remaining under CTBI's current repurchase authorization. For further information, see the Stock Repurchase Program section of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

81 edited+17 added−27 removed61 unchanged
Biggest changeCTBI’s annualized dividend yield to shareholders as of December 31, 2022 was 3.83%. 26 Table of Contents Loans (dollars in thousands) December 31, 2022 Loan Category Balance Variance from Prior Year Net (Charge-Offs)/ Recoveries Nonperforming ACL Commercial: Hotel/motel $ 343,640 33.7 % $ (216 ) $ 0 $ 5,171 Commercial real estate residential 372,914 11.2 (43 ) 613 4,894 Commercial real estate nonresidential 762,349 0.6 689 3,063 9,419 Dealer floorplans 77,533 11.6 0 0 1,776 Commercial other 311,539 7.3 (84 ) 1,338 5,285 Commercial unsecured SBA PPP 883 (98.1 ) 0 13 0 Total commercial 1,868,858 6.3 346 5,027 26,545 Residential: Real estate mortgage 824,996 7.5 (171 ) 8,998 7,932 Home equity 120,540 13.0 (17 ) 778 1,106 Total residential 945,536 8.2 (188 ) 9,776 9,038 Consumer: Consumer direct 157,504 0.5 (47 ) 41 1,694 Consumer indirect 737,392 18.8 (791 ) 465 8,704 Total consumer 894,896 15.1 (838 ) 506 10,398 Total loans $ 3,709,290 8.8 % $ (680 ) $ 15,309 $ 45,981 (dollars in thousands) December 31, 2021 Loan Category Balance Variance from Prior Year Net (Charge-Offs)/ Recoveries Nonperforming ACL Commercial: Hotel/motel $ 257,062 (1.4 )% $ 0 $ 1,075 $ 5,080 Commercial real estate residential 335,233 16.4 10 897 3,986 Commercial real estate nonresidential 757,893 2.0 31 4,193 8,884 Dealer floorplans 69,452 0.5 0 0 1,436 Commercial other 290,478 3.8 (255 ) 378 4,422 Commercial unsecured SBA PPP 47,335 (81.3 ) 0 0 0 Total commercial 1,757,453 (7.2 ) (214 ) 6,543 23,808 Residential: Real estate mortgage 767,185 (2.2 ) (198 ) 8,740 7,637 Home equity 106,667 2.8 (17 ) 1,092 866 Total residential 873,852 (1.6 ) (215 ) 9,832 8,503 Consumer: Consumer direct 156,683 2.9 (168 ) 44 1,951 Consumer indirect 620,825 0.1 717 206 7,494 Total consumer 777,508 0.7 549 250 9,445 Total loans $ 3,408,813 (4.1 )% $ 120 $ 16,625 $ 41,756 27 Table of Contents Total Deposits and Repurchase Agreements (dollars in thousands) 2022 2021 Percent Change Noninterest bearing deposits $ 1,394,915 $ 1,331,103 4.8 % Interest bearing deposits Interest checking 112,265 97,064 15.7 % Money market savings 1,348,809 1,206,401 11.8 % Savings accounts 654,380 632,645 3.4 % Time deposits 915,774 1,077,079 (15.0 )% Repurchase agreements 215,431 271,088 (20.5 )% Total interest bearing deposits and repurchase agreements 3,246,659 3,284,277 (1.1 )% Total deposits and repurchase agreements $ 4,641,574 $ 4,615,380 0.6 % Average Deposits and Other Borrowed Funds (in thousands) 2022 2021 Deposits: Noninterest bearing deposits $ 1,398,778 $ 1,276,367 Interest bearing deposits 104,631 94,762 Money market accounts 1,248,067 1,238,009 Savings accounts 667,367 592,492 Certificates of deposit of $100,000 or more 556,849 562,525 Certificates of deposit 470,877 494,822 Total deposits 4,446,569 4,258,977 Other borrowed funds: Repurchase agreements and federal funds purchased 243,102 334,520 Advances from Federal Home Loan Bank 898 384 Long-term debt 59,430 59,274 Total other borrowed funds 303,430 394,178 Total deposits and other borrowed funds $ 4,749,999 $ 4,653,155 The maximum balance for federal funds purchased and repurchase agreements at any month-end during 2022 occurred at February 28, 2022, with a month-end balance of $277.9 million.
Biggest changeCTBI’s annualized dividend yield to shareholders as of December 31, 2023 was 4.20%. 27 Table of Contents Loans (dollars in thousands) December 31, 2023 Loan Category Balance Variance from Prior Year Net (Charge-Offs)/ Recoveries Nonperforming ACL Commercial: Hotel/motel $ 395,765 15.2 % $ 0 $ 0 $ 4,592 Commercial real estate residential 417,943 12.1 97 1,557 4,285 Commercial real estate nonresidential 778,637 2.1 393 2,950 7,560 Dealer floorplans 70,308 (9.3 ) 0 0 659 Commercial other 321,082 2.8 (1,434 ) 850 3,760 Total commercial 1,983,735 6.1 (944 ) 5,357 20,856 Residential: Real estate mortgage 937,524 13.6 (99 ) 7,298 10,197 Home equity 147,036 22.0 (17 ) 743 1,367 Total residential 1,084,560 14.7 (116 ) 8,041 11,564 Consumer: Consumer direct 159,106 1.0 (237 ) 15 3,261 Consumer indirect 823,505 11.7 (1,952 ) 555 13,862 Total consumer 982,611 9.8 (2,189 ) 570 17,123 Total loans $ 4,050,906 9.2 % $ (3,249 ) $ 13,968 $ 49,543 Total Deposits and Repurchase Agreements (dollars in thousands) 2023 2022 Percent Change Noninterest bearing deposits $ 1,260,690 $ 1,394,915 (9.6 )% Interest bearing deposits Interest checking 123,927 112,265 10.4 % Money market savings 1,525,537 1,348,809 13.1 % Savings accounts 535,063 654,380 (18.2 )% Time deposits 1,279,405 915,774 39.7 % Repurchase agreements 225,245 215,431 4.6 % Total interest bearing deposits and repurchase agreements 3,689,177 3,246,659 13.6 % Total deposits and repurchase agreements $ 4,949,867 $ 4,641,574 6.6 % 28 Table of Contents Average Deposits and Other Borrowed Funds (in thousands) 2023 2022 Deposits: Noninterest bearing deposits $ 1,343,917 $ 1,398,778 Interest bearing deposits 128,061 104,631 Money market accounts 1,407,611 1,248,067 Savings accounts 600,981 667,367 Certificates of deposit of $100,000 or more 572,959 556,849 Certificates of deposit 498,625 470,877 Total deposits 4,552,154 4,446,569 Other borrowed funds: Repurchase agreements and federal funds purchased 219,591 243,102 Advances from Federal Home Loan Bank 18,494 898 Long-term debt 64,351 57,841 Finance lease liability 3,469 1,589 Total other borrowed funds 305,905 303,430 Total deposits and other borrowed funds $ 4,858,059 $ 4,749,999 The maximum balance for federal funds purchased and repurchase agreements at any month-end during 2023 occurred at October 31, 2023, with a month-end balance of $235.0 million.
The following table shows Board authorizations and repurchases made through the stock repurchase program for the years 1998 through 2022: Board Authorizations Repurchases* Shares Available for Repurchase Average Price ($) # of Shares 1998 500,000 - 0 1999 0 14.45 144,669 2000 1,000,000 10.25 763,470 2001 0 13.35 489,440 2002 0 17.71 396,316 2003 1,000,000 19.62 259,235 2004 0 23.14 60,500 2005 0 - 0 2006 0 - 0 2007 0 28.56 216,150 2008 0 25.53 102,850 2009-2019 0 - 0 2020 1,000,000 33.64 32,664 2021 0 - 0 2022 0 - 0 Total 3,500,000 16.17 2,465,294 1,034,706 *Repurchased shares and average prices have been restated to reflect stock dividends that have occurred; however, board authorized shares have not been adjusted.
The following table shows Board authorizations and repurchases made through the stock repurchase program for the years 1998 through 2023: Board Authorizations Repurchases* Shares Available for Repurchase Average Price ($) # of Shares 1998 500,000 - 0 1999 0 14.45 144,669 2000 1,000,000 10.25 763,470 2001 0 13.35 489,440 2002 0 17.71 396,316 2003 1,000,000 19.62 259,235 2004 0 23.14 60,500 2005 0 - 0 2006 0 - 0 2007 0 28.56 216,150 2008 0 25.53 102,850 2009-2019 0 - 0 2020 1,000,000 33.64 32,664 2021 0 - 0 2022 0 - 0 2023 0 - 0 Total 3,500,000 16.17 2,465,294 1,034,706 *Repurchased shares and average prices have been restated to reflect stock dividends that have occurred; however, board authorized shares have not been adjusted.
The lending activities of CTB include making commercial, construction, mortgage, and personal loans. Lease-financing, lines of credit, revolving lines of credit, term loans, and other specialized loans, including asset-based financing, are also available.
The lending activities of CTB include making commercial, construction, mortgage, and personal loans. Lines of credit, revolving lines of credit, term loans, and other specialized loans, including asset-based financing, are also available.
The weighted average rates on state and political subdivisions are computed on a taxable equivalent basis using a 24.95% tax rate. 31 Table of Contents Loan Maturities The following table shows the amounts of loans (excluding residential mortgages of 1-4 family residences, consumer loans, and lease financing) which, based on the remaining scheduled repayments of principal are due in the periods indicated.
The weighted average rates on state and political subdivisions are computed on a taxable equivalent basis using a 24.95% tax rate. Loan Maturities The following table shows the amounts of loans (excluding residential mortgages of 1-4 family residences, consumer loans, and lease financing) which, based on the remaining scheduled repayments of principal are due in the periods indicated.
As of December 31, 2022, a total of 2,465,294 shares have been repurchased through this program, leaving 1,034,706 shares remaining under our current repurchase authorization.
As of December 31, 2023, a total of 2,465,294 shares have been repurchased through this program, leaving 1,034,706 shares remaining under our current repurchase authorization.
(3) Tax exempt income on securities and loans is reported on a fully taxable equivalent basis using a 24.95% rate. 23 Table of Contents Net Interest Differential The following table illustrates the approximate effect of volume and rate changes on net interest differentials between 2022 and 2021.
(3) Tax exempt income on securities and loans is reported on a fully taxable equivalent basis using a 24.95% rate. 24 Table of Contents Net Interest Differential The following table illustrates the approximate effect of volume and rate changes on net interest differentials between 2023 and 2022.
Rather, the goals represent a range of target performance for 2023. There is no assurance that any or all of these goals will be achieved.
Rather, the goals represent a range of target performance for 2024. There is no assurance that any or all of these goals will be achieved.
We have analyzed our financial exposure related to the discontinuation of LIBOR and consider our exposure to be insignificant. As of December 31, 2022, our remaining contractual commitment for operating and finance leases due in one year or less is $2.0 million and operating leases due in more than one year is $23.4 million.
We have analyzed our financial exposure related to the discontinuation of LIBOR and consider our exposure to be insignificant. As of December 31, 2023, our remaining contractual commitment for operating and finance leases due in one year or less is $2.0 million and operating leases due in more than one year is $21.4 million.
For further information, see Item 1 of this annual report. 20 Table of Contents Financial Goals and Performance The following table shows the primary measurements used by management to assess annual performance. The goals in the table below should not be viewed as a forecast of our performance for 2023.
For further information, see Item 1 of this annual report. 21 Table of Contents Financial Goals and Performance The following table shows the primary measurements used by management to assess annual performance. The goals in the table below should not be viewed as a forecast of our performance for 2024.
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, troubled debt restructuring, nonaccrual status, and adequate loan loss reserves.
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, TDR, nonaccrual status, and adequate loan loss reserves.
We believe our liquidity sources as mentioned in the liquidity discussion are adequate to meet our future cash requirements. Investment Maturities Estimated Maturity at December 31, 2022 Within 1 Year 1-5 Years 5-10 Years After 10 Years Total Fair Value Amortized Cost (in thousands) Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield Amount U.S.
We believe our liquidity sources as mentioned in the liquidity discussion are adequate to meet our future cash requirements. 31 Table of Contents Investment Maturities Estimated Maturity at December 31, 2023 Within 1 Year 1-5 Years 5-10 Years After 10 Years Total Fair Value Amortized Cost (in thousands) Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield Amount U.S.
The Loan Review Department has annually reviewed on average 96% 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 85% based on the loan production during the number of months included in the review scope.
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 83% based on the loan production during the number of months included in the review scope.
In 2022 and 2021, proceeds of $66.0 million and $307.8 million, respectively, were realized on the sale of fixed rate residential mortgages. We focus our efforts on consistent net interest revenue and net interest margin growth through each of the retail and wholesale business lines. We do not currently engage in trading activities.
In 2023 and 2022, proceeds of $15.2 million and $66.0 million, respectively, were realized on the sale of fixed rate residential mortgages. We focus our efforts on consistent net interest revenue and net interest margin growth through each of the retail and wholesale business lines. We do not currently engage in trading activities.
Through our subsidiaries, we have seventy-eight 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 December 31, 2022, we had total consolidated assets of $5.4 billion and total consolidated deposits, including repurchase agreements, of $4.6 billion.
Through our subsidiaries, we have seventy-nine 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 December 31, 2023, we had total consolidated assets of $5.8 billion and total consolidated deposits, including repurchase agreements, of $4.9 billion.
Our purchase obligations consist of agreements to purchase goods and services entered into in the ordinary course of business. As of December 31, 2022, the value of our non-cancellable unconditional purchase obligations was $10.3 million. These contractual obligations impact our liquidity and capital resource needs.
Our purchase obligations consist of agreements to purchase goods and services entered into in the ordinary course of business. As of December 31, 2023, the value of our non-cancellable unconditional purchase obligations was $9.8 million. These contractual obligations impact our liquidity and capital resource needs.
Beginning in calendar year 2021, the CBLR requirement increased to 8.5% for the calendar year before returning to 9% in calendar year 2022. Management elected to use the CBLR framework for CTBI and CTB. CTBI’s CBLR ratio as of December 31, 2022 was 13.55%. CTB’s CBLR ratio as of December 31, 2022 was 12.98%.
Beginning in calendar year 2021, the CBLR requirement increased to 8.5% for the calendar year before returning to 9% in calendar year 2022. Management elected to use the CBLR framework for CTBI and CTB. CTBI’s CBLR ratio as of December 31, 2023 was 13.69%. CTB’s CBLR ratio as of December 31, 2023 was 13.22%.
As a practical expedient, the fair value of the collateral may be used for a loan when determining the ACL for which the repayment is expected to be provided substantially through the operation or sale of the collateral when the borrower is experiencing financial difficulty.
As a practical expedient, the fair value of the collateral may be used for a loan when determining the ACL for which the repayment is expected to be provided substantially through the operation or sale of the collateral when the borrower is experiencing financial difficulty. The fair value shall be adjusted for selling costs when foreclosure is probable.
As of December 31, 2022, the commitments due in one year or less for other commitments is $646.6 million and commitments due in more than one year is $227.7 million. Refer to note 17 to the consolidated financial statements contained herein for additional information regarding other commitments.
As of December 31, 2023, the commitments due in one year or less for other commitments is $730.4 million and commitments due in more than one year is $305.6 million. Refer to note 17 to the consolidated financial statements contained herein for additional information regarding other commitments.
Total shareholders’ equity at December 31, 2022 was $628.0 million. Trust assets under management at December 31, 2022 were $3.2 billion, including CTB’s investment portfolio totaling $1.3 billion.
Total shareholders’ equity at December 31, 2023 was $702.2 million. Trust assets under management at December 31, 2023 were $3.4 billion, including CTB’s investment portfolio totaling $1.2 billion.
We have identified the following critical accounting policies: Allowance for Credit Losses – CTBI accounts for the allowance for credit losses (“ACL”) and the reserve for unfunded commitments in accordance with Accounting Standards Update (“ASU”) 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , and its related subsequent amendments, commonly known as CECL. 35 Table of Contents We disaggregate our portfolio loans into portfolio segments for purposes of determining the ACL.
We have identified the following critical accounting policies: Allowance for Credit Losses – CTBI accounts for the allowance for credit losses (“ACL”) and the reserve for unfunded commitments in accordance with Accounting Standards Update (“ASU”) 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , and its related subsequent amendments, commonly known as CECL.
As of December 31, 2022, we had approximately $128.7 million in cash and cash equivalents and approximately $309.2 million in securities valued at estimated fair value designated as available-for-sale and available to meet liquidity needs on a continuing basis compared to $311.8 million and $568.9 million at December 31, 2021.
As of December 31, 2023, we had approximately $271.4 million in cash and cash equivalents and approximately $157.5 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 $128.7 million and $309.2 million at December 31, 2022.
Net unrealized losses on securities were $129.2 million at December 31, 2022, compared to $4.8 million at December 31, 2021. Management has the ability and intent to hold these securities to recovery or maturity.
Net unrealized losses on securities, net of tax, were $103.3 million at December 31, 2023, compared to $129.2 million at December 31, 2022. Management has the ability and intent to hold these securities to recovery or maturity.
Accruing loans 30-89 days past due at $15.3 million was an increase of $4.4 million from December 31, 2021. Our loan portfolio management processes focus on the immediate identification, management, and resolution of problem loans to maximize recovery and minimize loss.
Accruing loans 30-89 days past due at $15.3 million were relatively flat to December 31, 2022. Our loan portfolio management processes focus on the immediate identification, management, and resolution of problem loans to maximize recovery and minimize loss.
Federal Home Loan Bank advances were $0.4 million at December 31, 2022 and at December 31, 2021. As of December 31, 2022, we had a $501.0 million available borrowing position with the Federal Home Loan Bank compared to $484.4 million at December 31, 2021.
Federal Home Loan Bank advances were $0.3 million at December 31, 2023 compared to $0.4 million at December 31, 2022. As of December 31, 2023, we had a $476.2 million available borrowing position with the Federal Home Loan Bank.
Cash dividends were $1.68 per share for 2022 compared to $1.57 per share for 2021. We retained 63.4% of our earnings in 2022 compared to 68.2% in 2021. 33 Table of Contents Insured depository institutions are required to meet certain capital level requirements.
Cash dividends were $1.80 per share for 2023 compared to $1.68 per share for 2022. We retained 58.7% of our earnings in 2023 compared to 63.4% in 2022. Insured depository institutions are required to meet certain capital level requirements.
Capital Resources We continue to grow our shareholders’ equity while also providing an annual dividend yield for the year 2022 of 3.83% to shareholders. Shareholders’ equity decreased 10.0% from December 31, 2021 to $628.0 million at December 31, 2022. Our primary source of capital growth is the retention of earnings.
Capital Resources We continue to grow our shareholders’ equity while also providing an annual dividend yield for the year 2023 of 4.10% to shareholders. Shareholders’ equity increased 11.8% from December 31, 2022 to $702.2 million at December 31, 2023. Our primary source of capital growth is the retention of earnings.
Critical Accounting Policies and Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires the appropriate application of certain accounting policies, many of which require us to make estimates and assumptions about future events and their impact on amounts reported in our consolidated financial statements and related notes.
With certain exceptions, the value of stock repurchased is determined net of stock issued in the year, including shares issued pursuant to compensatory arrangements. 35 Table of Contents Critical Accounting Policies and Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires the appropriate application of certain accounting policies, many of which require us to make estimates and assumptions about future events and their impact on amounts reported in our consolidated financial statements and related notes.
See “Cautionary Statement Regarding Forward Looking Statements.” 2022 Goals 2022 Performance 2023 Goals Basic earnings per share $4.15 - $4.31 $4.59 $4.57 - $4.75 Net income $74.1 - $77.1 million $81.8 million $82.0 - $85.4 million ROAA 1.35% - 1.40% 1.50% 1.50% - 1.56% ROAE 10.18% - 10.59% 12.73% 12.26% - 12.76% Revenues $216.0 - $224.8 million $227.0 million $237.9 - $247.6 million Noninterest revenue as % of total revenue 24.00% - 26.00% 25.51% 24.00% - 26.00% Assets $5.42 - $5.75 billion $5.38 billion $5.38 - $5.72 billion Loans $3.41 - $3.55 billion $3.71 billion $3.77 - $3.92 billion Deposits, including repurchase agreements $4.63 - $4.82 billion $4.64 billion $4.64 - $4.83 billion Shareholders’ equity $ 733.5 - $763.4 million $628.0 million $ 686.5 - $714.5 million Results of Operations and Financial Condition We reported earnings of $81.8 million, or $4.59 per basic share, for the year ended December 31, 2022 compared to $87.9 million, or $4.94 per basic share, for the year ended December 31, 2021.
See “Cautionary Statement Regarding Forward Looking Statements.” 2023 Goals 2023 Performance 2024 Goals Basic earnings per share $4.57 - $4.75 $4.36 $4.31 - $4.49 Net income $82.0 - $85.4 million $78.0 million $77.7 - $80.8 million ROAA 1.50% - 1.56% 1.40% 1.33% - 1.39% ROAE 12.26% - 12.76% 11.75% 10.99% - 11.44% Revenues $237.9 - $247.6 million $230.8 million $236.8 - $246.5 million Noninterest revenue as % of total revenue 24.00% - 26.00% 25.00% 23.50% - 25.50% Assets $5.38 - $5.72 billion $5.77 billion $5.74 - $6.10 billion Loans $3.77 - $3.92 billion $4.05 billion $4.18 - $4.35 billion Deposits, including repurchase agreements $4.64 - $4.83 billion $4.95 billion $4.97 - $5.17 billion Shareholders’ equity $686.5 - $714.5 million $702.2 million $711.2 - $740.3 million Results of Operations and Financial Condition We reported earnings of $78.0 million, or $4.36 per basic share, for the year ended December 31, 2023 compared to $81.8 million, or $4.59 per basic share, for the year ended December 31, 2022.
Refer to note 10 to the consolidated financial statements contained herein for additional information regarding long-term debt. 30 Table of Contents On March 5, 2021, LIBOR’s administrator, ICE Benchmarks Administration, announced that LIBOR would no longer be provided (i) for the one-week and two-month U.S. dollar settings after December 31, 2021 and (ii) for the remaining U.S. dollar settings after June 30, 2023.
On March 5, 2021, LIBOR’s administrator, ICE Benchmarks Administration, announced that LIBOR would no longer be provided (i) for the one-week and two-month U.S. dollar settings after December 31, 2021 and (ii) for the remaining U.S. dollar settings after June 30, 2023.
As of December 31, 2022, we are not aware of any current recommendations by banking regulatory authorities which, if they were to be implemented, would have, or are reasonably likely to have, a material adverse impact on our liquidity, capital resources, or operations.
As of December 31, 2023, we are not aware of any current recommendations by banking regulatory authorities which, if they were to be implemented, would have, or are reasonably likely to have, a material adverse impact on our liquidity, capital resources, or operations. 34 Table of Contents Impact of Inflation, Changing Prices, and Economic Conditions The majority of our assets and liabilities are monetary in nature.
Significant management judgment is necessary in the preparation of the forecasted cash flows surrounding expectations for earnings projections, growth and credit loss expectations, and actual results may differ from forecasted results. Income Taxes – Income tax liabilities or assets are established for the amount of taxes payable or refundable for the current year.
Significant management judgment is necessary in the preparation of the forecasted cash flows surrounding expectations for earnings projections, growth and credit loss expectations, and actual results may differ from forecasted results.
Our current exposure to interest rate risks is determined by measuring the anticipated change in net interest income spread evenly over the twelve-month period. 32 Table of Contents The following table shows our estimated earnings sensitivity profile as of December 31, 2022: Change in Interest Rates (basis points) Percentage Change in Net Interest Income (12 Months) +400 9.98% +300 7.26% +200 4.60% +100 1.94% -100 (1.95)% -200 (3.92)% -300 (5.96)% -400 (7.91)% The following table shows our estimated earnings sensitivity profile as of December 31, 2021: Change in Interest Rates (basis points) Percentage Change in Net Interest Income (12 Months) +400 11.23% +300 7.61% +200 4.56% +100 2.01% -25 (0.66)% The simulation model used the yield curve spread evenly over a twelve-month period.
The following table shows our estimated earnings sensitivity profile as of December 31, 2023: Change in Interest Rates (basis points) Percentage Change in Net Interest Income (12 Months) +400 11.50% +300 8.89% +200 6.29% +100 3.65% -100 (0.67)% -200 (2.41)% -300 (4.06)% -400 (5.68)% The following table shows our estimated earnings sensitivity profile as of December 31, 2022: Change in Interest Rates (basis points) Percentage Change in Net Interest Income (12 Months) +400 9.98% +300 7.26% +200 4.60% +100 1.94% -100 (1.95)% -200 (3.92)% -300 (5.96)% -400 (7.91)% 33 Table of Contents The simulation model used the yield curve spread evenly over a twelve-month period.
Total revenue for 2022 was $3.5 million above prior year, as net interest revenue increased $6.0 million and noninterest income decreased $2.5 million compared to prior year. 21 Table of Contents 2022 Highlights ❖ Net interest income for the year ended December 31, 2022 increased $6.0 million, or 3.7%, from December 31, 2021 with an 11 basis point increase in our net interest margin and a $13.4 million increase in average earning assets. ❖ Provision for credit losses was $4.9 million for the year ended December 31, 2022 compared to a recovery of provision of $6.4 million for the year ended December 31, 2021. ❖ Our loan portfolio increased $300.5 million, or 8.8%, from December 31, 2021.
Total revenue for 2023 was $3.8 million above prior year, as net interest revenue increased $4.0 million and noninterest income decreased $0.3 million compared to prior year. 22 Table of Contents 2023 Highlights ❖ Net interest income for the year ended December 31, 2023 increased $4.0 million, or 2.4%, from December 31, 2022 with a $114.8 million increase in average earning assets. ❖ Provision for credit losses was $6.8 million for the year ended December 31, 2023 compared to $4.9 million for the year ended December 31, 2022. ❖ Our loan portfolio increased $341.6 million, or 9.2%, from December 31, 2022 to December 31, 2023. ❖ Net loan charge-offs were $3.2 million, or 0.08% of average loans annualized, for the year ended December 31, 2023 compared to $0.7 million, or 0.02% of average loans annualized, for the year ended December 31, 2022. ❖ Our total nonperforming loans at $14.0 million at December 31, 2023 decreased $1.3 million, or 8.8%, from December 31, 2022.
Balance Sheet Review CTBI’s total assets at $5.4 billion decreased $37.9 million, or 0.7%, from December 31, 2021. Loans outstanding at December 31, 2022 were $3.7 billion, increasing $300.5 million, or 8.8%, year over year.
Balance Sheet Review CTBI’s total assets at $5.8 billion increased $389.4 million, or 7.2%, from December 31, 2022. Loans outstanding at December 31, 2023 were $4.1 billion, increasing $341.6 million, or 9.2%, year over year.
At December 31, 2022 and at December 31, 2021, we had $75 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.
At December 31, 2023, we had $50 million in lines of credit with various correspondent banks available to meet any future cash needs compared to $75 million at December 31, 2022. Our primary investing activities include purchases of securities and loan originations.
Nonperforming assets at $19.0 million decreased $1.1 million, or 5.6%, from December 31, 2021. ❖ Deposits, including repurchase agreements, increased $26.2 million, or 0.6%, from December 31, 2021. ❖ Noninterest income for the year ended December 31, 2022 at $57.9 million decreased $2.5 million, or 4.2%, compared to the year ended December 31, 2021. ❖ Noninterest expense for the year ended December 31, 2022 at $121.1 million increased $1.8 million, or 1.5%, compared to the year ended December 31, 2021.
Nonperforming assets at $15.6 million decreased $3.4 million, or 17.9%, from December 31, 2022. ❖ Deposits, including repurchase agreements, at December 31, 2023 increased $308.3 million, or 6.6%, from December 31, 2022. ❖ Noninterest income for the year ended December 31, 2023 of $57.7 million decreased $0.3 million, or 0.4%, compared to the year ended December 31, 2022. ❖ Noninterest expense for the year ended December 31, 2023 of $125.4 million increased $4.3 million, or 3.6%, compared to the year ended December 31, 2022.
In a down-rate environment, net interest income would decrease 1.95% at a 100 basis point change, decrease by 3.92% at a 200 basis point change, decrease by 5.96% at a 300 basis point change, and decrease by 7.91% at a 400 basis point change over one year.
In a down-rate environment, net interest income would decrease 0.67% at a 100 basis point change, decrease by 2.41% at a 200 basis point change, decrease by 4.06% at a 300 basis point change, and decrease by 5.68% at a 400 basis point change over one year.
Income is stated at a fully taxable equivalent basis, using a 24.95% tax rate. 24 Table of Contents Net Interest Income (dollars in thousands) Year Ended December 31 2022 2021 Percent Change Components of net interest income: Income on earning assets $ 197,742 $ 178,169 11.0 % Expense on interest bearing liabilities 28,640 15,090 89.8 % Net interest income 169,102 163,079 3.7 % TEQ 956 897 6.5 % Net interest income, tax equivalent $ 170,058 $ 163,976 3.7 % Average yield and rates paid: Earning assets yield 3.87 % 3.50 % 10.7 % Rate paid on interest bearing liabilities 0.85 % 0.45 % 91.3 % Gross interest margin 3.02 % 3.05 % (1.1 )% Net interest margin 3.32 % 3.21 % 3.4 % Average balances: Investment securities $ 1,402,052 $ 1,327,114 5.6 % Loans $ 3,552,941 $ 3,455,742 2.8 % Earning assets $ 5,129,345 $ 5,115,961 0.3 % Interest-bearing liabilities $ 3,351,221 $ 3,376,788 (0.8 )% Net interest income for the year ended December 31, 2022 of $169.1 million increased $6.0 million, or 3.7%, from prior year.
Income is stated at a fully taxable equivalent basis, using a 24.95% tax rate. 25 Table of Contents Net Interest Income (dollars in thousands) Year Ended December 31 2023 2022 Percent Change Components of net interest income: Income on earning assets $ 268,650 $ 197,742 35.9 % Expense on interest bearing liabilities 95,540 28,640 233.6 % Net interest income 173,110 169,102 2.4 % TEQ 1,191 956 24.6 % Net interest income, tax equivalent $ 174,301 $ 170,058 2.5 % Average yield and rates paid: Earning assets yield 5.15 % 3.87 % 33.1 % Rate paid on interest bearing liabilities 2.72 % 0.85 % 220.0 % Gross interest margin 2.43 % 3.02 % (19.6 )% Net interest margin 3.32 % 3.32 % 0.0 % Average balances: Investment securities $ 1,203,470 $ 1,402,052 (14.2 )% Loans $ 3,888,585 $ 3,552,941 9.4 % Earning assets $ 5,244,128 $ 5,129,345 2.2 % Interest-bearing liabilities $ 3,514,142 $ 3,351,221 4.9 % Net interest income for the year ended December 31, 2023 of $173.1 million increased $4.0 million, or 2.4%, from prior year with an increase in average earning assets for the year 2023 of $114.8 million, or 2.2%.
These include adjustments for changes in policies or procedures in underwriting, monitoring or collections, lending and risk management personnel, and results of internal audit and quality control reviews. These may also include adjustments, when deemed necessary, for specific idiosyncratic risks such as geopolitical events, natural disasters and their effects on regional borrowers, and changes in product structures.
These may also include adjustments, when deemed necessary, for specific idiosyncratic risks such as geopolitical events, natural disasters and their effects on regional borrowers, and changes in product structures.
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 consolidated financial statements contained herein.
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.
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. 28 Table of Contents For further information regarding nonperforming loans, see note 4 to the consolidated financial statements contained herein.
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.
Income Statement Review (dollars in thousands) Change 2022 vs. 2021 Year Ended December 31 2022 2021 Amount Percent Net interest income $ 169,102 $ 163,079 $ 6,023 3.7 % Provision for credit losses (recovery) 4,905 (6,386 ) 11,291 (176.8 ) Noninterest income 57,916 60,463 (2,547 ) (4.2 ) Noninterest expense 121,071 119,285 1,786 1.5 Income taxes 19,228 22,704 (3,476 ) (15.3 ) Net income $ 81,814 $ 87,939 $ (6,125 ) (7.0 )% Average earning assets $ 5,129,345 $ 5,115,961 $ 13,384 0.3 % Yield on average earnings assets, tax equivalent* 3.87 % 3.50 % 0.37 % 10.7 % Cost of interest bearing funds 0.85 % 0.45 % 0.40 % 91.3 % Net interest margin, tax equivalent* 3.32 % 3.21 % 0.11 % 3.4 % *Yield on average earning assets and net interest margin are computed on a taxable equivalent basis using a 24.95% tax rate. 22 Table of Contents Consolidated Average Balance Sheets and Taxable Equivalent Income/Expense and Yields/Rates 2022 2021 (in thousands) Average Balances Interest Average Rate Average Balances Interest Average Rate Earning assets: Loans (1)(2)(3) $ 3,552,941 $ 169,950 4.78 % $ 3,455,742 $ 159,893 4.63 % Loans held for sale 893 94 10.53 8,737 379 4.34 Securities: U.S.
Income Statement Review (dollars in thousands) Change 2023 vs. 2022 Year Ended December 31 2023 2022 Amount Percent Net interest income $ 173,110 $ 169,102 $ 4,008 2.4 % Provision for credit losses (recovery) 6,811 4,905 1,906 38.9 Noninterest income 57,659 57,916 (257 ) (0.4 ) Noninterest expense 125,390 121,071 4,319 3.6 Income taxes 20,564 19,228 1,336 6.9 Net income $ 78,004 $ 81,814 $ (3,810 ) (4.7 )% Average earning assets $ 5,244,128 $ 5,129,345 $ 114,783 2.2 % Yield on average earnings assets, tax equivalent* 5.15 % 3.87 % 1.28 % 33.1 % Cost of interest bearing funds 2.72 % 0.85 % 1.87 % 220.0 % Net interest margin, tax equivalent* 3.32 % 3.32 % 0.0 % 0.0 % *Yield on average earning assets and net interest margin are computed on a taxable equivalent basis using a 24.95% tax rate. 23 Table of Contents Consolidated Average Balance Sheets and Taxable Equivalent Income/Expense and Yields/Rates 2023 2022 (in thousands) Average Balances Interest Average Rate Average Balances Interest Average Rate Earning assets: Loans (1)(2)(3) $ 3,888,585 $ 231,114 5.94 % $ 3,552,941 $ 169,950 4.78 % Loans held for sale 228 31 13.60 893 94 10.53 Securities: U.S.
The measurement at December 31, 2022 estimates that our net interest income in an up-rate environment would increase by 9.98% at a 400 basis point change, increase by 7.26% at a 300 basis point change, increase by 4.60% at a 200 basis point change, and increase by 1.94% at a 100 basis point change.
The measurement at December 31, 2023 estimates that our net interest income in an up-rate environment would increase by 11.50% at a 400 basis point change, increase by 8.89% at a 300 basis point change, increase by 6.29% at a 200 basis point change, and increase by 3.65% at a 100 basis point change.
Contractual Commitments Our significant contractual obligations and commitments as of December 31, 2022 include debt, lease, and purchase obligations. As disclosed in the notes to the consolidated financial statements, we have certain obligations and commitments to make future payments under contracts. As of December 31, 2022, our outstanding balance on long-term debt was $57.8 million.
As disclosed in the notes to the consolidated financial statements, we have certain obligations and commitments to make future payments under contracts. 30 Table of Contents As of December 31, 2023, our outstanding balance on long-term debt was $64.2 million, which includes junior subordinated debentures of $57.8 million and loan related borrowings of $6.4 million.
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.
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.
We seek to maintain an essentially balanced position between interest rate sensitive assets and liabilities in order to protect against the effects of wide interest rate fluctuations. 34 Table of Contents Stock Repurchase Program 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.
Stock Repurchase Program 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.
Our level of foreclosed properties at $3.7 million at December 31, 2022 was an increase of $0.2 million from the $3.5 million at December 31, 2021. Sales of foreclosed properties for the year ended December 31, 2022 totaled $2.0 million while new foreclosed properties totaled $2.4 million.
Sales of foreclosed properties for the year ended December 31, 2023 totaled $2.5 million while new foreclosed properties totaled $0.7 million.
Impact of Inflation, Changing Prices, and Economic Conditions The majority of our assets and liabilities are monetary in nature. Therefore, CTBI differs greatly from most commercial and industrial companies that have significant investment in nonmonetary assets, such as fixed assets and inventories.
Therefore, CTBI differs greatly from most commercial and industrial companies that have significant investment in nonmonetary assets, such as fixed assets and inventories.
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. Other qualitative factors are used by CTBI in determining the ACL.
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.
Net adjustments to the reserve for unfunded commitments are included in other noninterest expense in the consolidated statements of income. 37 Table of Contents Goodwill – Business combinations entered into by CTBI typically include the recognition of goodwill.
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. Goodwill – Business combinations entered into by CTBI typically include the recognition of goodwill.
Treasury and agencies 1,022,511 14,699 1.44 970,754 9,958 1.03 Tax exempt state and political subdivisions (3) 119,118 3,795 3.19 138,158 3,921 2.84 Other securities 260,423 6,996 2.69 218,202 4,023 1.84 Federal Reserve Bank and Federal Home Loan Bank stock 12,388 603 4.87 14,005 486 3.47 Federal funds sold 414 15 3.62 73 0 0.00 Interest bearing deposits 158,563 2,484 1.57 308,200 372 0.12 Other investments 245 0 0.00 245 0 0.00 Investment in unconsolidated subsidiaries 1,849 62 3.35 1,845 34 1.84 Total earning assets $ 5,129,345 $ 198,698 3.87 % $ 5,115,961 $ 179,066 3.50 % Allowance for credit losses (43,081 ) (44,157 ) 5,086,264 5,071,804 Nonearning assets: Cash and due from banks 59,645 60,160 Premises and equipment and right of use assets, net 53,928 53,441 Other assets 238,859 201,836 Total assets $ 5,438,696 $ 5,387,241 Interest bearing liabilities: Deposits: Savings and demand deposits $ 2,020,065 $ 16,526 0.82 % $ 1,925,263 $ 4,505 0.23 % Time deposits 1,027,726 7,542 0.73 1,057,347 8,248 0.78 Repurchase agreements and federal funds purchased 243,102 2,540 1.04 334,520 1,254 0.37 Advances from Federal Home Loan Bank 898 20 2.23 384 0 0.00 Long-term debt 57,841 1,943 3.36 57,841 1,028 1.78 Finance lease liability 1,589 69 4.34 1,433 55 3.84 Total interest bearing liabilities $ 3,351,221 $ 28,640 0.85 % $ 3,376,788 $ 15,090 0.45 % Noninterest bearing liabilities: Demand deposits 1,398,778 1,276,367 Other liabilities 46,274 51,389 Total liabilities 4,796,273 4,704,544 Shareholders’ equity 642,423 682,697 Total liabilities and shareholders’ equity $ 5,438,696 $ 5,387,241 Net interest income, tax equivalent $ 170,058 $ 163,976 Less tax equivalent interest income 956 897 Net interest income $ 169,102 $ 163,079 Net interest spread 3.02 % 3.05 % Benefit of interest free funding 0.30 0.16 Net interest margin 3.32 % 3.21 % (1) Interest includes fees on loans of $1,723 and $1,763 in 2022 and 2021, respectively.
Treasury and agencies 855,300 17,369 2.03 1,022,511 14,699 1.44 Tax exempt state and political subdivisions (3) 105,158 3,568 3.39 119,118 3,795 3.19 Other securities 243,012 9,894 4.07 260,423 6,996 2.69 Federal Reserve Bank and Federal Home Loan Bank stock 10,841 759 7.00 12,388 603 4.87 Federal funds sold 256 9 3.52 414 15 3.62 Interest bearing deposits 138,646 6,968 5.03 158,563 2,484 1.57 Other investments 245 0 0.00 245 0 0.00 Investment in unconsolidated subsidiaries 1,857 129 6.95 1,849 62 3.35 Total earning assets $ 5,244,128 $ 269,841 5.15 % $ 5,129,345 $ 198,698 3.87 % Allowance for credit losses (47,606 ) (43,081 ) 5,196,522 5,086,264 Nonearning assets: Cash and due from banks 61,184 59,645 Premises and equipment and right of use assets, net 60,232 53,928 Other assets 254,203 238,859 Total assets $ 5,572,141 $ 5,438,696 Interest bearing liabilities: Deposits: Savings and demand deposits $ 2,136,653 $ 52,336 2.45 % $ 2,020,065 $ 16,526 0.82 % Time deposits 1,071,584 28,831 2.69 1,027,726 7,542 0.73 Repurchase agreements and federal funds purchased 219,591 8,994 4.10 243,102 2,540 1.04 Advances from Federal Home Loan Bank 18,494 1,004 5.43 898 20 2.23 Long-term debt 64,351 4,257 6.62 57,841 1,943 3.36 Finance lease liability 3,469 118 3.40 1,589 69 4.34 Total interest bearing liabilities $ 3,514,142 $ 95,540 2.72 % $ 3,351,221 $ 28,640 0.85 % Noninterest bearing liabilities: Demand deposits 1,343,917 1,398,778 Other liabilities 50,418 46,274 Total liabilities 4,908,477 4,796,273 Shareholders’ equity 663,664 642,423 Total liabilities and shareholders’ equity $ 5,572,141 $ 5,438,696 Net interest income, tax equivalent $ 174,301 $ 170,058 Less tax equivalent interest income 1,191 956 Net interest income $ 173,110 $ 169,102 Net interest spread 2.43 % 3.02 % Benefit of interest free funding 0.89 0.30 Net interest margin 3.32 % 3.32 % (1) Interest includes fees on loans of $1,770 and $1,723 in 2023 and 2022, respectively.
Noninterest Income (dollars in thousands) Year Ended December 31 2022 2021 Percent Change Deposit service charges $ 29,049 $ 26,529 9.5 % Trust revenue 12,394 12,644 (2.0 )% Gains on sales of loans 1,525 6,820 (77.6 )% Loan related fees 6,185 5,578 10.9 % Bank owned life insurance revenue 2,708 2,844 (4.8 )% Brokerage revenue 1,846 1,962 (5.9 )% Other 4,209 4,086 3.0 % Total noninterest income $ 57,916 $ 60,463 (4.2 )% Noninterest income for the year 2022 decreased $2.5 million from the year ended December 31, 2021 primarily due to a $5.3 million decline in gains on sales of loans, partially offset by a $2.5 million increase in deposit related fees.
Noninterest Income (dollars in thousands) Year Ended December 31 2023 2022 Percent Change Deposit service charges $ 29,935 $ 29,049 3.0 % Trust revenue 13,025 12,394 5.1 % Gains on sales of loans 395 1,525 (74.1 )% Loan related fees 3,792 6,185 (38.7 )% Bank owned life insurance revenue 3,517 2,708 29.8 % Brokerage revenue 1,473 1,846 (20.2 )% Other 5,522 4,209 31.2 % Total noninterest income $ 57,659 $ 57,916 (0.4 )% Noninterest income for the year 2023 was $57.7 million compared to $57.9 million for the year 2022.
These assumptions are uncertain, and as a result, the actual payments will differ from the projection due to changes in economic conditions.
These assumptions are uncertain, and as a result, the actual payments will differ from the projection due to changes in economic conditions. Refer to note 10 to the consolidated financial statements contained herein for additional information regarding long-term debt.
Net loan charge-offs were $0.7 million, 0.02% of average loans annualized, for the year ended December 31, 2022, compared to a net recovery of loan losses of $0.1 million for the year ended December 31, 2021. 29 Table of Contents Allowance for Credit Losses Our reserve coverage (allowance for credit losses to nonperforming loans) at December 31, 2022 was 300.4% compared to 251.2% at December 31, 2021.
Nonperforming assets to loans and foreclosed properties at December 31, 2023 were 0.4% compared to 0.5% at December 31, 2022. 29 Table of Contents Net loan charge-offs were $3.2 million, 0.08% of average loans annualized, for the year ended December 31, 2023, compared to $0.7 million, 0.02% of average loans annualized, for the year ended December 31, 2022.
These considerations inherently require significant management judgment to determine the appropriate factors to be considered and the extent of their impact on the ACL estimate. Qualitative factors are used to capture characteristics in the portfolio that impact expected credit losses but that are not fully captured within CTBI’s expected credit loss models.
Other qualitative factors are used by CTBI in determining the ACL. These considerations inherently require significant management judgment to determine the appropriate factors to be considered and the extent of their impact on the ACL estimate.
The fair value shall be adjusted for selling costs when foreclosure is probable. 36 Table of Contents 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.
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.
The increase in loans from prior year included a $157.9 million increase in the commercial loan portfolio (excluding PPP loans), a $116.6 million increase in the indirect loan portfolio, a $71.7 million increase in the residential loan portfolio, and a $0.8 million increase in the consumer direct loan portfolio. PPP loans decreased $46.5 million during the year.
The increase in loans from prior year included a $114.9 million increase in the commercial loan portfolio, a $139.0 million increase in the residential loan portfolio, an $86.1 million increase in the indirect loan portfolio, and a $1.6 million increase in the consumer direct loan portfolio.
We believe one of the most significant impacts on financial and operating results is our ability to react to changes in interest rates.
We believe one of the most significant impacts on financial and operating results is our ability to react to changes in interest rates. We seek to maintain an essentially balanced position between interest rate sensitive assets and liabilities in order to protect against the effects of wide interest rate fluctuations.
CTBI developed our models from historical observations capturing a full economic cycle when possible. CTBI’s expected credit loss models consider historical credit loss experience, current market and economic conditions, and forecasted changes in market and economic conditions if such forecasts are considered reasonable and supportable.
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.
Nonaccrual loans to total loans at December 31, 2022 was 0.2% compared to 0.3% at December 31, 2021. Our allowance for credit losses to nonaccrual loans at December 31, 2022 was 674.9% compared to 391.3% at December 31, 2021.
Allowance for Credit Losses Our reserve coverage (allowance for credit losses to nonperforming loans) at December 31, 2023 was 354.7% compared to 300.4% at December 31, 2022. Nonaccrual loans to total loans at December 31, 2023 was 0.1% compared to 0.2% at December 31, 2022.
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.
Liquidity and Market Risk 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.
Included in our cash and cash equivalents at December 31, 2022 were deposits with the Federal Reserve of $72.6 million compared to $262.4 million at December 31, 2021. Additionally, we project cash flows from our investment portfolio to generate additional liquidity over the next 90 days. The investment portfolio consists of investment grade short-term issues suitable for bank investments.
Additionally, we project cash flows from our investment portfolio to generate additional liquidity over the next 90 days. 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.
Average earning assets for the year 2022 increased $13.4 million over prior year. Our yield on average earning assets for the year 2022 increased 37 basis points from prior year, and our cost of interest bearing funds increased 40 basis points during the same time period.
Our yield on average earning assets for the year 2023 increased 128 basis points from prior year, and our cost of interest bearing funds increased 187 basis points during the same time period. Our net interest margin, on a fully tax equivalent basis, for the year 2023 remained at 3.32% from the year ended December 31, 2022.
The three-month LIBOR rate is projected using the most likely rate forecast from assumptions incorporated in the interest rate risk model and is determined two business days prior to the interest payment date. Interest on long-term debt assumes the liability will not be prepaid and interest is calculated to maturity.
The three-month CME Term SOFR rate is projected using the most likely rate forecast from assumptions incorporated in the interest rate risk model and is determined two business days prior to the interest payment date. The interest on the $6.4 million in loan related borrowings is based on a fixed rate of 3.25%.
Overall, the collective evaluation process requires significant management judgment when determining the estimation methodology and inputs into the models, as well as in evaluating the reasonableness of the modeled results and the appropriateness of qualitative adjustments.
When evaluating the adequacy of allowances, consideration is also given to regional geographic concentrations and the closely associated effect that changing economic conditions may have on CTBI’s customers. 37 Table of Contents Overall, the collective evaluation process requires significant management judgment when determining the estimation methodology and inputs into the models, as well as in evaluating the reasonableness of the modeled results and the appropriateness of qualitative adjustments.
Larger commercial loans with balances exceeding $1 million that exhibit probable or observed credit weaknesses, (i) have a criticized risk rating, (ii) are on nonaccrual status, (iii) are classified as TDRs, or (iv) are 90 days or more past due, are individually evaluated for an ACL.
CTBI’s methodology for determining the ACL requires significant management judgment and includes an estimate of expected credit losses on a collective basis for groups of loans with similar risk characteristics and specific allowances for loans which are individually evaluated. 36 Table of Contents Larger commercial loans with balances exceeding $1 million that exhibit probable or observed credit weaknesses and (i) have a criticized risk rating, (ii) are on nonaccrual status, (iii) have a borrower experiencing financial difficulty with significant payment delay, or (iv) are 90 days or more past due, are individually evaluated for an ACL.
CTBI maintains the ACL to absorb the amount of credit losses that are expected to be incurred over the remaining contractual terms of the related loans.
For an analysis of CTBI’s ACL by portfolio segment and credit quality information by class, refer to note 4 to the consolidated financial statements contained herein. CTBI maintains the ACL to absorb the amount of credit losses that are expected to be incurred over the remaining contractual terms of the related loans.
Deposit related fees were primarily impacted by debit card income and overdraft charges . 25 Table of Contents Noninterest Expense (dollars in thousands) Year Ended December 31 2022 2021 Percent Change Salaries $ 48,934 $ 47,061 4.0 % Employee benefits 23,556 27,053 (12.9 )% Net occupancy and equipment 11,083 10,854 2.1 % Data processing 8,910 8,039 10.8 % Legal and professional fees 3,434 3,199 7.3 % Advertising and marketing 3,005 2,928 2.6 % Taxes other than property and payroll 1,570 1,750 (10.3 )% Net other real estate owned expense 456 1,401 (67.4 )% Other 20,123 17,000 18.4 % Total noninterest expense $ 121,071 $ 119,285 1.5 % Noninterest expense for the year ended December 31, 2022 was $1.8 million, or 1.5%, higher than the year 2021.
Noninterest income was impacted year over year by a $2.4 million decline in loan related fees, a $1.1 million decline in gains on sales of loans, and a $0.4 million decline in brokerage revenue, offset by increases of $0.9 million in deposit related fees, $0.6 million in trust revenue, $1.2 million in securities gains, and $0.8 million in bank owned life insurance revenue . 26 Table of Contents Noninterest Expense (dollars in thousands) Year Ended December 31 2023 2022 Percent Change Salaries $ 51,283 $ 48,934 4.8 % Employee benefits 22,428 23,556 (4.8 )% Net occupancy and equipment 11,843 11,083 6.9 % Data processing 9,726 8,910 9.2 % Legal and professional fees 3,350 3,434 (2.4 )% Advertising and marketing 3,214 3,005 7.0 % Taxes other than property and payroll 1,706 1,570 8.7 % Net other real estate owned expense 350 456 (23.4 )% Other 21,490 20,123 6.8 % Total noninterest expense $ 125,390 $ 121,071 3.6 % Noninterest expense for the year 2023 was $125.4 million compared to $121.1 million for the year 2022 with increases of $1.2 million in personnel expense, $0.8 million in occupancy and equipment, $0.8 million in data processing expense, $1.0 million in FDIC insurance premiums, and $0.4 million in telephone expense.
The majority of the investment portfolio is in U.S. government and government sponsored agency issuances. At December 31, 2022, available-for-sale (“AFS”) securities comprised all of the total investment portfolio, and the AFS portfolio was approximately 200% of equity capital. Eighty-one percent of the pledge eligible portfolio was pledged.
At December 31, 2023, available-for-sale (“AFS”) securities comprised all of the total investment portfolio, and the AFS portfolio was approximately 166% of equity capital. Eighty-eight percent of the pledge-eligible portfolio was pledged. Contractual Commitments Our significant contractual obligations and commitments as of December 31, 2023 include debt, lease, and purchase obligations.
Specific allowances on individually evaluated commercial loans, including TDRs, are reviewed quarterly and adjusted as necessary based on changing borrower and/or collateral conditions and actual collection and charge-off experience. Regardless of an initial measurement method, once it is determined that foreclosure is probable, the ACL is measured based on the fair value of the collateral as of the measurement date.
Specific allowances on individually evaluated commercial loans, including loans to borrowers experiencing financial difficulty, are reviewed quarterly and adjusted as necessary based on changing borrower and/or collateral conditions and actual collection and charge-off experience.
The benefit of these deposits increased 30 basis points during the year. Noninterest bearing deposits increased $63.8 million over prior year. Average loans to deposits, including repurchase agreements, for the year ended December 31, 2022 were 75.8% compared to 75.3% for the year ended December 31, 2021.
Noninterest bearing deposits decreased $134.2 million over prior year. Average loans to deposits, including repurchase agreements, for the year ended December 31, 2023 were 81.5% compared to 75.8% for the year ended December 31, 2022. Provision for Credit Losses P rovision for credit losses for the year 2023 was $6.8 million compared to $4.9 million during the year 2022 .
The interest payments on long-term debt due in one year or less is $3.9 million, and interest payments on long-term debt due in more than one year is $31.3 million. The interest on $57.8 million in long-term debt is calculated based on the three-month LIBOR plus 1.59% until its maturity of June 1, 2037.
The interest payments on long-term debt due in one year or less is $4.1 million, and interest payments on long-term debt due in more than one year is $28.1 million.
Treasury and agencies 4,741 556 4,185 Tax exempt state and political subdivisions (126 ) (505 ) 379 Other securities 2,973 884 2,089 Federal Reserve Bank and Federal Home Loan Bank stock 117 (51 ) 168 Federal funds sold 15 0 15 Interest bearing deposits 2,112 (96 ) 2,208 Other investments 0 0 0 Investment in unconsolidated subsidiaries 28 0 28 Total interest income 19,632 5,201 14,431 Interest expense: Savings and demand deposits 12,021 233 11,788 Time deposits (706 ) (235 ) (471 ) Repurchase agreements and federal funds purchased 1,286 (261 ) 1,547 Advances from Federal Home Loan Bank 20 0 20 Long-term debt 915 0 915 Finance lease liability 14 6 8 Total interest expense 13,550 (257 ) 13,807 Net interest income $ 6,082 $ 5,458 $ 624 For purposes of the above table, changes which are due to both rate and volume are allocated based on a percentage basis, using the absolute values of rate and volume variance as a basis for percentages.
Treasury and agencies 2,670 (2,122 ) 4,792 Tax exempt state and political subdivisions (227 ) (426 ) 199 Other securities 2,898 (440 ) 3,338 Federal Reserve Bank and Federal Home Loan Bank stock 156 (68 ) 224 Federal funds sold (6 ) (6 ) 0 Interest bearing deposits 4,484 (275 ) 4,759 Other investments 0 0 0 Investment in unconsolidated subsidiaries 67 0 67 Total interest income 71,143 13,755 57,388 Interest expense: Savings and demand deposits 35,810 1,007 34,803 Time deposits 21,289 335 20,954 Repurchase agreements and federal funds purchased 6,454 (223 ) 6,677 Advances from Federal Home Loan Bank 984 917 67 Long-term debt 2,314 241 2,073 Finance lease liability 49 67 (18 ) Total interest expense 66,900 2,344 64,556 Net interest income $ 4,243 $ 11,411 $ (7,168 ) For purposes of the above table, changes which are due to both rate and volume are allocated based on a percentage basis, using the absolute values of rate and volume variance as a basis for percentages.
Total Change Change Due to (in thousands) 2022/2021 Volume Rate Interest income: Loans $ 10,057 $ 4,566 $ 5,491 Loans held for sale (285 ) (153 ) (132 ) U.S.
Total Change Change Due to (in thousands) 2023/2022 Volume Rate Interest income: Loans $ 61,164 $ 17,147 $ 44,017 Loans held for sale (63 ) (55 ) (8 ) U.S.
The maximum balance for federal funds purchased and repurchase agreements at any month-end during 2021 occurred at May 31, 2021, with a month-end balance of $373.8 million.
The maximum balance for federal funds purchased and repurchase agreements at any month-end during 2022 occurred at February 28, 2022, with a month-end balance of $277.9 million. Asset Quality CTBI’s total nonperforming loans were $14.0 million, or 0.34% of total loans, at December 31, 2023 compared to $15.3 million, or 0.41% of total loans, at December 31, 2022.
For collectively evaluated commercial loans, CTBI uses a static pool methodology based on our risk rating system. See note 4 to the consolidated financial statements contained herein for information on CTBI’s risk rating system. Other homogenous loans such as the residential mortgage and consumer portfolio segments derive their ACL from vintage modeling.
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 consolidated financial statements contained herein for information on CTBI’s risk rating system.
Personnel expense year over year was impacted by a $1.8 million increase in salaries, offset by decreases of $1.5 million in bonuses and $1.9 million in post-retirement benefits. * Please refer to our annual report on Form 10-K for the year ended December 31, 2021 for more detailed income discussion related to the year 2020.
This discretionary gift/payment was paid on January 19, 2024 to all eligible employees. This payment was accrued as of December 31, 2023 in the amount of $1.2 million. * Please refer to our annual report on Form 10-K for the year ended December 31, 2022 for detailed income discussion related to the year 2021.
Loans held for sale at $0.1 million at December 31, 2022 decreased $2.5 million over prior year. CTBI’s investment portfolio decreased $199.3 million, or 13.7%, from December 31, 2021. Deposits in other banks decreased $187.8 million from December 31, 2021. Deposits, including repurchase agreements, at $4.6 billion increased $26.2 million, or 0.6%, from December 31, 2021.
Deposits in other banks increased $135.2 million from December 31, 2022. Deposits, including repurchase agreements, at $4.9 billion increased $308.3 million, or 6.6%, from December 31, 2022. Shareholders’ equity at December 31, 2023 of $702.2 million was a $74.2 million, or 11.8%, increase from the $628.0 million at December 31, 2022.
Our credit loss reserve as a percentage of total loans outstanding at December 31, 2022 was 1.24%, an increase from the 1.22% at December 31, 2021. Liquidity and Market Risk The objective of CTBI’s Asset/Liability management function is to maintain consistent growth in net interest income within our policy limits.
Our allowance for credit losses to nonaccrual loans at December 31, 2023 was 1,223.9% compared to 674.9% at December 31, 2022. Our credit loss reserve as a percentage of total loans outstanding at December 31, 2023 was 1.22%, a decrease from the 1.24% at December 31, 2022.
Maturity at December 31, 2022 After one Within but within After (in thousands) one year five years five years Total Commercial secured by real estate and commercial other $ 215,139 $ 175,242 $ 1,324,122 $ 1,714,503 Commercial and real estate construction 71,107 19,643 185,340 276,090 $ 286,246 $ 194,885 $ 1,509,462 $ 1,990,593 Rate sensitivity: Predetermined rate $ 43,680 $ 101,315 $ 77,546 $ 222,541 Adjustable rate 242,566 93,570 1,431,916 1,768,052 $ 286,246 $ 194,885 $ 1,509,462 $ 1,990,593 Deposit Maturities Maturities and/or repricing of time deposits of $100,000 or more outstanding at December 31, 2022 are summarized as follows: (in thousands) Certificates of Deposit Other Time Deposits Total Three months or less $ 78,400 $ 10,955 $ 89,355 Over three through six months 68,841 10,304 79,145 Over six through twelve months 213,139 15,841 228,980 Over twelve through sixty months 111,400 22,390 133,790 Over sixty 154 0 154 $ 471,934 $ 59,490 $ 531,424 Interest Rate Risk We consider interest rate risk one of our most significant market risks.
Maturity at December 31, 2023 (in thousands) Within one year After one but within five years After five years Total Commercial secured by real estate and commercial other $ 225,512 $ 163,087 $ 1,423,460 $ 1,812,059 Commercial and real estate construction 70,070 23,270 193,066 286,406 $ 295,582 $ 186,357 $ 1,616,526 $ 2,098,465 Rate sensitivity: Predetermined rate $ 52,585 $ 86,552 $ 73,797 $ 212,934 Adjustable rate 242,997 99,805 1,542,729 1,885,531 $ 295,582 $ 186,357 $ 1,616,526 $ 2,098,465 32 Table of Contents Deposit Maturities Maturities and/or repricing of time deposits of $100,000 or more outstanding at December 31, 2023 are summarized as follows: (in thousands) Certificates of Deposit Other Time Deposits Total Three months or less $ 165,959 $ 7,721 $ 173,680 Over three through six months 246,052 24,859 270,911 Over six through twelve months 241,584 18,360 259,944 Over twelve through sixty months 50,627 11,529 62,156 Over sixty 0 0 0 $ 704,222 $ 62,469 $ 766,691 Interest Rate Risk We consider interest rate risk one of our most significant market risks.

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