COMMUNITY TRUST BANCORP INC /KY/

Community Trust Bancorp, Inc. (CTBI) is a bank holding company that, through its subsidiaries Community Trust Bank, Inc. (CTB) and Community Trust and Investment Company (CTIC), operates in the commercial and personal banking and trust and wealth management industries. The company serves small and mid-sized communities in eastern, northeastern, central, and south central Kentucky, southern West Virginia, and northeastern Tennessee. As of December 31, 2025, CTBI had total consolidated assets of $6.7 billion ¹ and total consolidated deposits, including repurchase agreements, of $5.7 billion ². The company's lending activities include making commercial, construction, mortgage, and personal loans, while its trust and wealth management activities include acting as trustees of personal trusts, executors of estates, and providers of full-service brokerage and insurance services.

CTBI faces substantial competition from state banks, national banks, thrifts, trust companies, insurance companies, mortgage banking operations, credit unions, finance companies, brokerage companies, and other financial and non-financial companies. The company strives to offer competitively priced products along with quality customer service to build customer relationships in the communities it serves. CTBI's competitive positioning is supported by its long-standing presence in its markets, with an average employee tenure of over 10 years ³ and 21% of employees having more than 20 years of service ⁴. The company also benefits from its community bank leverage ratio (CBLR) framework, with CTBI's CBLR ratio at 13.64% ⁵ and CTB's at 13.19% ⁶ as of December 31, 2025.

CTBI generates revenue primarily through net interest income, which is the difference between interest earned from loans and investments and interest paid on deposits and borrowings. For the year ended December 31, 2025, net interest income was $219.0 million ⁷, representing 77.6% of total revenue of $282.6 million ⁸. Noninterest income, which includes deposit related fees, trust and wealth management income, and other fee-based services, contributed $63.6 million ⁹ or 22.5% of total revenue. The company's primary customer segments include individuals, corporations, and small to mid-sized businesses in its market areas. CTBI also generates revenue through trust and wealth management activities, with trust assets under management of $4.1 billion ¹⁰ at December 31, 2025.

CTBI's loan portfolio is segmented into commercial, residential, and consumer categories. As of December 31, 2025, total loans were $4,894,942 thousand ¹¹. The commercial loan portfolio totaled $2,493,275 thousand ¹², comprising hotel/motel loans of $497,764 thousand ¹³, commercial real estate residential loans of $580,652 thousand ¹⁴, commercial real estate nonresidential loans of $959,915 thousand ¹⁵, dealer floorplans of $83,812 thousand ¹⁶, and commercial other loans of $371,132 thousand ¹⁷. The residential loan portfolio totaled $1,393,618 thousand ¹⁸, consisting of real estate mortgage loans of $1,206,820 thousand ¹⁹ and home equity loans of $186,798 thousand ²⁰. The consumer loan portfolio totaled $1,008,049 thousand ²¹, with consumer direct loans of $145,591 thousand ²² and consumer indirect loans of $862,458 thousand ²³. Approximately 86% of consumer loans and 18% of total loan portfolio were consumer indirect loans ²⁴.

CTBI's investment portfolio consists primarily of debt securities available-for-sale, with an amortized cost of $1,206,938 thousand ²⁵ and a fair value of $1,120,719 thousand ²⁶ at December 31, 2025. The portfolio includes U.S. Treasury and government agency securities, state and political subdivisions, and asset-backed securities. The company also generates revenue through trust and wealth management activities, with trust and wealth management income of $16,772 thousand ²⁷ for the year ended December 31, 2025. Deposit related fees contributed $29,840 thousand ²⁸, and bank owned life insurance revenue was $4,460 thousand ²⁹ for the same period. The company's noninterest income also includes gains on sales of loans of $320 thousand ³⁰, loan related fees of $4,043 thousand ³¹, brokerage revenue of $2,130 thousand ³², and other noninterest income of $5,677 thousand ³³.

During 2025, CTBI's community development lending totaled over $59.6 million ³⁴, and the company made contributions totaling over $719 thousand ³⁵ to aid low and moderate income families and communities. Employees served over 990 hours ³⁶ throughout the year with organizations that provide affordable housing and other services. In the Mt. Sterling Market, CTBI consolidated two branches into a newly constructed modern branch which opened in February 2026, recognizing a $0.5 million ³⁷ gain on the sale of fixed assets and a $0.4 million ³⁸ contribution expense from the donation of one branch location. The annual dividend paid to stockholders was increased from $1.86 per share to $2.00 per share ³⁹ during 2025. CTBI did not acquire any shares of stock through the stock repurchase program during 2025, with 1,034,706 shares ⁴⁰ remaining under the current repurchase authorization.

CTBI reported record earnings of $98.1 million ⁴¹, or $5.44 per basic share ⁴², for the year ended December 31, 2025, compared to $82.8 million ⁴³, or $4.61 per basic share ⁴⁴, for the year ended December 31, 2024. Total revenue for 2025 was $34.0 million ⁴⁵ above the prior year, as net interest revenue increased $33.0 million ⁴⁶ and noninterest income increased $1.1 million ⁴⁷ compared to the prior year. Net interest income for the year of $219.0 million ⁴⁸ was $33.0 million ⁴⁹, or 17.7% ⁵⁰, above the prior year, as the net interest margin increased 26 basis points ⁵¹ from the prior year. The provision for credit losses at $12.4 million ⁵² for the year increased $1.5 million ⁵³ from the prior year. Noninterest expense for the year of $143.1 million ⁵⁴ was $12.1 million ⁵⁵, or 9.3% ⁵⁶, above the prior year.

Management has provided specific financial goals for 2026, which should not be viewed as a forecast but rather as a range of target performance. The 2026 goals include basic earnings per share of $5.78 - $6.02 ⁵⁷, net income of $105.1 - $109.3 million ⁵⁸, return on average assets (ROAA) of 1.53% - $1.59% ⁵⁹, return on average equity (ROAE) of 11.67% - 12.15% ⁶⁰, revenues of $294.7 - $306.7 million ⁶¹, noninterest revenue as a percentage of total revenue of 22.0% - 24.5% ⁶², assets of $6.80 - $7.23 billion ⁶³, loans of $5.02 - $5.22 billion ⁶⁴, deposits including repurchase agreements of $5.83 - $6.07 billion ⁶⁵, and shareholders' equity of $923.9 - $961.6 million ⁶⁶.

CTBI's growth strategy includes organic loan portfolio expansion, as evidenced by the loan portfolio increasing $408.3 million ⁶⁷, or 9.1% ⁶⁸, from the prior year end to $4.9 billion ⁶⁹ at December 31, 2025. The increase in loans included a $220.6 million ⁷⁰ increase in the commercial loan portfolio, a $182.8 million ⁷¹ increase in the residential loan portfolio, and a $12.2 million ⁷² increase in the indirect loan portfolio. The company also focuses on growing its trust and wealth management business, with trust assets under management of $4.1 billion ⁷³ at December 31, 2025, including CTB's investment portfolio totaling $1.1 billion ⁷⁴. Trust and wealth management income increased $1.9 million ⁷⁵ year over year to $16,772 thousand ⁷⁶ for 2025.

CTBI's growth also includes strategic branch optimization and modernization. In the Mt. Sterling Market, the company consolidated two branches into a newly constructed modern branch which opened in February 2026. The company recognized a $0.5 million ⁷⁷ gain on the sale of one branch location and a $0.4 million ⁷⁸ contribution expense from the donation of another branch location during the fourth quarter of 2025. The company has eighty-one banking locations ⁷⁹ in eastern, northern, northeastern, central, and south central Kentucky, southern West Virginia, and northeastern Tennessee, four trust offices across Kentucky, and one trust office in northeastern Tennessee.

CTBI's margin trajectory improved in 2025, with the net interest margin increasing 26 basis points ⁸⁰ from the prior year to 3.62% ⁸¹ on a fully tax equivalent basis. The yield on average earning assets for 2025 increased 6 basis points ⁸² from the prior year to 5.71% ⁸³, while the cost of interest bearing funds decreased 35 basis points ⁸⁴ to 2.95% ⁸⁵. Noninterest expense for 2025 increased $12.1 million ⁸⁶, or 9.3% ⁸⁷, from the prior year, primarily impacted by increased expenses in personnel ($6.1 million) ⁸⁸, data processing ($1.5 million) ⁸⁹, occupancy and equipment ($1.0 million) ⁹⁰, taxes other than property and payroll ($0.6 million) ⁹¹, legal fees ($0.5 million) ⁹², and contributions ($0.7 million) ⁹³.

CTBI's operational outlook includes continued investment in technology and human capital. The company provides employees with opportunities for personal and professional growth through reimbursement of educational expenses, attendance at seminars and in-house training programs, and online training with over 8,000 varied courses ⁹⁴. As of December 31, 2025, CTBI and its subsidiaries had 930 full-time equivalent employees ⁹⁵. The company also maintains a comprehensive cybersecurity program, utilizing tools in endpoint security, Security Information Event Management (SIEM), Privileged Access Management (PAM), email and web browsing filtering and management, and user analytics, along with a comprehensive third party 24-by-7 Security Operations Center (SOC) ⁹⁶.

CTBI's capital allocation strategy includes maintaining a conservative dividend policy, with the annual dividend increased from $1.86 per share to $2.00 per share ⁹⁷ during 2025. The current year cash dividend ratio was 36.8% ⁹⁸, and the 10-year average dividend payout ratio has been 40.6% ⁹⁹. The company retained 63.2% ¹⁰⁰ of its earnings in 2025 compared to 59.7% ¹⁰¹ in 2024. CTBI did not repurchase any shares during 2025, with 1,034,706 shares ¹⁰² remaining under the current repurchase authorization. The company's primary source of capital growth is the retention of earnings, with shareholders' equity increasing 13.0% ¹⁰³ from December 31, 2024 to $856.1 million ¹⁰⁴ at December 31, 2025.

CTBI faces several headwinds and constraints that management has explicitly flagged. The company's loan portfolio is concentrated primarily in eastern, northeastern, central, and south central Kentucky, southern West Virginia, and northeastern Tennessee, and although unemployment rates in many of its markets have decreased, they remain above the national average ¹⁰⁵. The company's markets include areas where the coal industry was historically a significant part of the local economy, and the importance of the coal industry to such areas has continued to decline substantially ¹⁰⁶. Additionally, the company's growth within certain markets may be adversely affected by inconsistent access to high speed internet and the lack of population and business growth in such markets in recent years ¹⁰⁷.

CTBI also faces risks related to interest rate changes, which could adversely affect earnings and financial condition. The company's earnings and financial condition are dependent to a large degree upon net interest income, and the narrowing of interest-rate spreads could adversely affect earnings and financial condition ¹⁰⁸. The company's interest rate risk simulation model estimates that in a down-rate environment of 400 basis points, net interest income would decrease by 3.45% ¹⁰⁹ over one year. Additionally, the recent increase in longer-term interest rates has negatively impacted the market value of the investment portfolio, making it more difficult to access this liquidity without an adverse impact on capital and earnings positions ¹¹⁰.

CTBI's business is highly dependent on the local economies of eastern, northeastern, central, and south central Kentucky, southern West Virginia, and northeastern Tennessee, where unemployment rates remain above the national average ¹¹¹, and weakness in these markets could depress earnings. The loan portfolio has significant concentration risk, with approximately 70% ¹¹² secured by real estate and 42% ¹¹³ consisting of commercial real estate, and as of December 31, 2025, commercial real estate residential loans comprised approximately 10% ¹¹⁴, commercial real estate nonresidential loans approximately 20% ¹¹⁵, hotel/motel loans approximately 10% ¹¹⁶, and other commercial loans approximately 9% ¹¹⁷ of the total loan portfolio. Consumer loans comprised approximately 21% ¹¹⁸ of the total loan portfolio, with approximately 86% ¹¹⁹ of consumer loans and 18% ¹²⁰ of total loans being consumer indirect loans secured by vehicles that depreciate rapidly. The company faces interest rate risk, with the earnings simulation model estimating that net interest income would decrease by 3.45% ¹²¹ in a 400 basis point down-rate environment over one year. Additionally, the recent increase in longer-term interest rates has negatively impacted the market value of the investment portfolio, with net unrealized losses on securities, net of tax, of $64.8 million ¹²² at December 31, 2025.

Management's message to shareholders emphasizes record earnings performance and strategic growth. The company reported record earnings of $98.1 million ¹²³, or $5.44 per basic share ¹²⁴, for the year ended December 31, 2025, compared to $82.8 million ¹²⁵, or $4.61 per basic share ¹²⁶, for the year ended December 31, 2024. Management has provided specific 2026 goals including basic earnings per share of $5.78 - $6.02 ¹²⁷, net income of $105.1 - $109.3 million ¹²⁸, and revenues of $294.7 - $306.7 million ¹²⁹. The strategic priorities emphasized for the period ahead include continued loan portfolio growth, with 2026 goals for loans of $5.02 - $5.22 billion ¹³⁰, and deposits including repurchase agreements of $5.83 - $6.07 billion ¹³¹, as well as maintaining strong capital levels with a 2026 goal for shareholders' equity of $923.9 - $961.6 million ¹³².