10-Q - CTBI - Equibles

UNITED STATES

SECURITIES AND

    EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended March 31, 2024
	Or
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _____________ to _____________

Commission file number 001-31220

COMMUNITY TRUST BANCORP, INC.

(Exact name of registrant as specified in its charter)

Kentucky	61-0979818
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
346 North Mayo Trail<br><br> <br>P.O. Box 2947<br><br> <br>Pikeville, Kentucky	41502
(Address of principal executive offices)	(Zip code)
(606) 432-1414
---
(Registrant’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock<br><br> <br>(Title of class)
CTBI	The NASDAQ Global Select Market
---	---
(Trading symbol)	(Name of exchange on which registered)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑	No

Indicate by check mark whether the registrant has submitted electronically every interactive data file required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☑	No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☐	Accelerated Filer ☑	Non-accelerated Filer ☐
Smaller Reporting Company ☐	Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised ﬁnancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐	No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.

Common stock – 18,026,091 shares outstanding

  at April 30, 2024

CAUTIONARY STATEMENT

REGARDING FORWARD LOOKING STATEMENTS

Certain of the statements contained herein that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Community Trust Bancorp, Inc.’s (“CTBI”) actual results may differ materially from those included in the forward-looking statements. Forward-looking statements are typically identified by words or phrases such as “believe,” “expect,” “anticipate,” “intend,” “estimate,” “may increase,” “may fluctuate,” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” and “could.” These forward-looking statements involve risks and uncertainties including, but not limited to, economic conditions, portfolio growth, the credit performance of the portfolios, including bankruptcies, and seasonal factors; changes in general economic conditions including the performance of financial markets, prevailing inflation and interest rates, realized gains from sales of investments, gains from asset sales, and losses on commercial lending activities; the effects of epidemics, pandemics, or other infectious disease outbreaks; results of various investment activities; the effects of competitors’ pricing policies, changes in laws and regulations, competition, and demographic changes on target market populations’ savings and financial planning needs; industry changes in information technology systems on which we are highly dependent; failure of acquisitions to produce revenue enhancements or cost savings at levels or within the time frames originally anticipated or unforeseen integration difficulties; and the resolution of legal proceedings and related matters. In addition, the banking industry in general is subject to various monetary, operational, and fiscal policies and regulations, which include, but are not limited to, those determined by the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Consumer Financial Protection Bureau, and state regulators, whose policies, regulations, and enforcement actions could affect CTBI’s results. These statements are representative only on the date hereof, and CTBI undertakes no obligation to update any forward-looking statements made.

PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

The accompanying information has not been audited by our independent registered public accountants; however, in the opinion of management such information reflects all adjustments necessary for a fair presentation of the results for the interim period. All such adjustments are of a normal and recurring nature.

The accompanying condensed consolidated financial statements are presented in accordance with the requirements of Form 10-Q and consequently do not include all of the disclosures normally required by accounting principles generally accepted in the United States of America or those normally made in the Registrant’s annual report on Form 10-K. Accordingly, the reader of the Form 10-Q should refer to the Registrant’s Form 10-K for the year ended December 31, 2023 for further information in this regard.

Community Trust Bancorp, Inc.

Condensed Consolidated Balance Sheets

(dollars in thousands)			December 31<br><br> <br>2023
Assets:
Cash and due from banks	55,841		$	58,833
Interest bearing deposits	237,457			212,567
Cash and cash equivalents	293,298			271,400
Certificates of deposit in other banks	245			245
Debt securities available-for-sale at fair value (amortized cost of 1,253,750 and 1,301,244,<br> respectively)	1,111,505			1,163,724
Equity securities at fair value	3,529			3,158
Loans held for sale	57			152
Loans	4,161,175			4,050,906
Allowance for credit losses	(50,571	)		(49,543	)
Net loans	4,110,604			4,001,363
Premises and equipment, net	46,595			45,311
Operating right-of-use assets	12,433			12,607
Finance right-of-use assets	3,067			3,096
Federal Home Loan Bank stock	4,440			4,712
Federal Reserve Bank stock	4,887			4,887
Goodwill	65,490			65,490
Bank owned life insurance	101,178			101,461
Mortgage servicing rights	7,792			7,665
Other real estate owned	1,266			1,616
Deferred tax asset	29,917			28,141
Accrued interest receivable	23,532			23,575
Other assets	30,420			31,093
Total assets	5,850,255		$	5,769,696
Liabilities and shareholders’ equity:
Deposits:
Noninterest bearing	1,274,583		$	1,260,690
Interest bearing	3,509,687			3,463,932
Total deposits	4,784,270			4,724,622
Repurchase agreements	234,671			225,245
Federal funds purchased	500			500
Advances from Federal Home Loan Bank	329			334
Long-term debt	64,185			64,241
Operating lease liability	12,771			12,958
Finance lease liability	3,437			3,435
Accrued interest payable	9,365			7,389
Other liabilities	33,003			28,764
Total liabilities	5,142,531			5,067,488
Shareholders’ equity:
Preferred stock, 300,000 shares authorized and unissued	-			-
Common stock, 5.00<br> par value, shares authorized 25,000,000; shares issued and outstanding 2024 – 18,019,349; 2023 – 17,999,840	90,096			89,999
Capital surplus	231,626			231,130
Retained earnings	492,869			484,400
Accumulated other comprehensive loss, net of tax	(106,867	)		(103,321	)
Total shareholders’ equity	707,724			702,208
Total liabilities and shareholders’ equity	5,850,255		$	5,769,696

All values are in US Dollars.

See notes to condensed consolidated financial statements.

Community Trust Bancorp, Inc.

Condensed Consolidated Statements of Income and Comprehensive Income

(unaudited)

	Three Months Ended
	March 31
(in thousands except per share data)	2024			2023
Interest income:
Interest and fees on loans, including loans held for sale	$	64,716		$	51,947
Interest and dividends on securities
Taxable		6,730			6,758
Tax exempt		659			682
Interest and dividends on Federal Reserve Bank and Federal Home Loan Bank stock		209			174
Interest on Federal Reserve Bank deposits		2,591			1,350
Other, including interest on federal funds sold		97			84
Total interest income		75,002			60,995
Interest expense:
Interest on deposits		27,676			14,391
Interest on repurchase agreements and federal funds purchased		2,575			1,616
Interest on advances from Federal Home Loan Bank		0			43
Interest on long-term debt		1,160			1,029
Total interest expense		31,411			17,079
Net interest income		43,591			43,916
Provision for credit losses		2,656			1,116
Net interest income after provision for credit losses		40,935			42,800
Noninterest income:
Deposit related fees		7,011			7,287
Gains on sales of loans, net		45			121
Trust and wealth management income		3,517			3,079
Loan related fees		1,352			845
Bank owned life insurance		1,292			858
Brokerage revenue		490			348
Securities gains		371			218
Other noninterest income		1,056			926
Total noninterest income		15,134			13,682
Noninterest expense:
Officer salaries and employee benefits		4,241			4,152
Other salaries and employee benefits		15,881			14,756
Occupancy, net		2,378			2,302
Equipment		650			726
Data processing		2,518			2,303
Bank franchise tax		424			419
Legal fees		218			268
Professional fees		614			548
Advertising and marketing		577			820
FDIC insurance		642			606
Repossession expense		226			231
Other noninterest expense		3,851			4,759
Total noninterest expense		32,220			31,890
Income before income taxes		23,849			24,592
Income taxes		5,170			5,279
Net income		18,679			19,313
Other comprehensive gain (loss):
Unrealized holding gains (losses) on debt securities available-for-sale:
Unrealized holding gains (losses) arising during the period		(4,725	)		24,716
Less: Reclassification adjustments for realized gains included in net income		0			4
Tax expense (benefit)		(1,179	)		7,997
Other comprehensive gain (loss), net of tax		(3,546	)		16,715
Comprehensive income	$	15,133		$	36,028
Basic earnings per share	$	1.04		$	1.08
Diluted earnings per share	$	1.04		$	1.08
Weighted average shares outstanding-basic		17,926			17,872
Weighted average shares outstanding-diluted		17,943			17,884

See notes to condensed consolidated financial statements.

Consolidated Statements of Changes in Shareholders’ Equity

(unaudited)

(in thousands except per share and share amounts)			Common<br><br> <br>Stock			Capital<br><br> <br>Surplus			Retained<br><br> <br>Earnings			Accumulated<br><br> <br>Other<br><br> <br>Comprehensive<br><br> <br>Income (Loss),<br><br> <br>Net of Tax			Total
Balance, December 31, 2023	17,999,840		$	89,999		$	231,130		$	484,400		$	(103,321	)	$	702,208
Net income										18,679						18,679
Other comprehensive loss													(3,546	)		(3,546	)
Cash dividends declared (0.46 per share)										(8,249	)					(8,249	)
Issuance of common stock	29,026			145			146									291
Issuance of restricted stock	15,000			75			(75	)								0
Vesting of restricted stock	(22,408	)		(112	)		112									0
Forfeiture of<br> restricted stock	(2,109	)		(11	)		11									0
Stock-based compensation							302									302
Cumulative effect of FASB adjustment										(1,961	)					(1,961	)
Balance, March 31, 2024	18,019,349		$	90,096		$	231,626		$	492,869		$	(106,867	)	$	707,724

All values are in US Dollars.

(in thousands except per share and share amounts)			Common<br><br> <br>Stock			Capital<br><br> <br>Surplus			Retained<br><br> <br>Earnings			Accumulated<br><br> <br>Other<br><br> <br>Comprehensive<br><br> <br>Income (Loss),<br><br> <br>Net of Tax			Total
Balance, December 31, 2022	17,918,280		$	89,591		$	229,012		$	438,596		$	(129,152	)	$	628,047
Net income										19,313						19,313
Other comprehensive income													16,715			16,715
Cash dividends declared (0.44 per share)										(7,865	)					(7,865	)
Issuance of common stock	26,118			131			147									278
Issuance of restricted stock	52,865			264			(264	)								0
Vesting of restricted stock	(20,128	)		(101	)		101									0
Forfeiture of restricted stock	(790	)		(4	)		4									0
Stock-based compensation							333									333
Balance, March 31, 2023	17,976,345		$	89,881		$	229,333		$	450,044		$	(112,437	)	$	656,821

All values are in US Dollars.

See notes to condensed consolidated financial statements.

Community Trust Bancorp, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

	Three Months Ended
	March 31
(in thousands)	2024			2023
Cash flows from operating activities:
Net income	$	18,679		$	19,313
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,100			907
Non-cash operating lease expense		0			398
Deferred taxes		246			228
Stock-based compensation		343			377
Provision for credit losses		2,656			1,116
Write-downs of other real estate owned and other repossessed assets		42			81
Gains on sale of mortgage loans held for sale		(45	)		(121	)
Securities gains		0			(4	)
Fair value adjustments in equity securities		(371	)		(214	)
Gains on sale of assets, net		(40	)		(37	)
Proceeds from sale of mortgage loans held for sale		1,758			4,658
Funding of mortgage loans held for sale		(1,619	)		(4,610	)
Amortization of securities premiums and discounts, net		595			752
Change in cash surrender value of bank owned life insurance		(983	)		(578	)
Changes in lease liabilities		(187	)		(376	)
Mortgage servicing rights:
Fair value adjustments		(108	)		397
New servicing assets created		(19	)		(50	)
Changes in:
Accrued interest receivable		43			580
Other assets		(2,131	)		(658	)
Accrued interest payable		1,976			1,901
Other liabilities		4,211			1,113
Net cash provided by operating activities		26,146			25,173
Cash flows from investing activities:
Securities available-for-sale (AFS):
Purchase of AFS securities		(8,448	)		(161	)
Proceeds from sales of AFS securities		1,084			18,561
Proceeds from prepayments, calls, and maturities of AFS securities		54,263			20,710
Change in loans, net		(111,772	)		(67,837	)
Purchase of premises and equipment		(2,181	)		(910	)
Proceeds from sale of stock by Federal Home Loan Bank		272			1,850
Proceeds from sale of other real estate owned and repossessed assets		236			204
Additional investment in other real estate owned and repossessed assets		(13	)		0
Liquidation of cash surrender value of bank owned life insurance		870			0
Proceeds from settlement of bank owned life insurance		396			0
Net cash used in investing activities		(65,293	)		(27,583	)
Cash flows from financing activities:
Change in deposits, net		59,648			117,281
Change in repurchase agreements and federal funds purchased, net		9,426			(6,654	)
Proceeds from Federal Home Loan Bank advances		0			50,000
Payments on advances from Federal Home Loan Bank		(5	)		(50,005	)
Proceeds from long-term debt/other borrowings		0			6,563
Repayment of long-term debt/other borrowings		(56	)		0
Issuance of common stock		291			278
Dividends paid		(8,259	)		(7,865	)
Net cash provided by financing activities		61,045			109,598
Net increase in cash and cash equivalents		21,898			107,188
Cash and cash equivalents at beginning of period		271,400			128,686
Cash and cash equivalents at end of period	$	293,298		$	235,874
Supplemental disclosures:
---	---	---	---	---
Income<br> taxes paid	$	160	$	578
Interest paid		29,435		15,177
Non-cash activities:
Loans to facilitate the sale of other real estate owned and repossessed assets		157		698
Common stock dividends accrued, paid in subsequent quarter		281		279
Real estate acquired in settlement of loans		31		51
Right-of-use assets obtained in exchange for new operating lease liabilities		0		364

See notes to condensed consolidated financial statements.

Community Trust Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

Note 1 - Summary of Significant Accounting Policies

In the opinion of management, the unaudited condensed consolidated financial statements include all adjustments (which consist of normal recurring adjustments) necessary, to present fairly the condensed consolidated financial position as of March 31, 2024, the results of operations, other comprehensive income (loss), changes in shareholders’ equity, and the cash flows for the three months ended March 31, 2024 and 2023. In accordance with accounting principles generally accepted in the United States of America for interim financial information, these statements do not include certain information and footnote disclosures required by accounting principles generally accepted in the United States of America for complete annual financial statements. The results of operations, other comprehensive income (loss), changes in shareholders’ equity, and the cash flows for the three months ended March 31, 2024 and 2023 are not necessarily indicative of the results to be expected for the full year. The condensed consolidated balance sheet as of December 31, 2023 has been derived from the audited consolidated financial statements of Community Trust Bancorp, Inc. (“CTBI”) for that period. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended December 31, 2023, included in our annual report on Form 10-K.

Principles of Consolidation – The

unaudited condensed consolidated financial statements include the accounts of CTBI and its separate and distinct, wholly owned subsidiaries Community Trust Bank, Inc. \(“CTB”\) and Community Trust and Investment Company.  All significant intercompany
transactions have been eliminated in consolidation.

New Accounting Standards –

➢ Facilitation of the Effects of Reference Rate Reform on Financial Reporting – In December 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which extends the period of time preparers can utilize the reference rate reform relief guidance. The amendments in ASU No. 2022-06 are effective for all entities upon issuance. In 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The objective of the guidance in Topic 848 is to provide relief during the temporary transition period, so the FASB included a sunset provision within Topic 848 based on expectations of when the London Interbank Offered Rate (“LIBOR”) would cease being published. The amendments in ASU No. 2020-04 provide optional guidance for a limited time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting and provide optional expedients and exceptions for applying generally accepted accounting principles (“GAAP”) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. This ASU applies only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. In 2021, the UK Financial Conduct Authority delayed the intended cessation date of certain tenors of USD LIBOR to June 30, 2023. To ensure the relief in Topic 848 covers the period of time during which a significant number of modifications may take place, ASU No. 2022-06 defers the sunset date of Topic 848 from December 31, 2022 to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.

On January 27, 2023, CTBI received notice from the trustee of the trust subsidiary, that based on their review of the junior subordinated debentures and the related trust preferred securities (the “TRUPS Documents”), after application of the LIBOR Act (as implemented by the Final Regulations (defined below), the “LIBOR Act”) and the final regulations of the Board of Governors of the Federal Reserve System issued on December 16, 2022 implementing the LIBOR Act (the “Final Regulations”), the TRUPS Documents issued by the trust subsidiary do not provide a replacement rate for Applicable LIBOR (a “Replacement Rate”) or include other fallback provisions which would apply on the first London banking day after June 30, 2023 (the “LIBOR Replacement Date”). Absent an amendment to the TRUPS Documents, some other change in applicable law, rule, regulation, or some other development, the LIBOR Act as implemented by the Final Regulations provides that (i) on and after the LIBOR Replacement Date, 3-month CME Term SOFR or 6-month CME Term SOFR (as defined in the Final Regulations) as adjusted by the relevant spread adjustment, which is 0.26161 percent or 0.42826 percent, shall be the benchmark replacement for the Applicable LIBOR in the TRUPS Documents and (ii) all applicable benchmark replacement conforming changes (as specified in the Final Regulations) will become an integral part of the TRUPS Documents, without any action by any party.

➢ Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions – In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement Topic 820: Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The FASB issued this ASU to (1) clarify the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, (2) amend a related illustrative example, and (3) introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. The amendments in this ASU clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. The amendments in this ASU also require the following disclosures for equity securities subject to contractual sale restrictions: (1) the fair value of equity securities subject to contractual sale restrictions reflected in the balance sheet; (2) the nature and remaining duration of the restriction(s); and (3) the circumstances that could cause a lapse in the restriction(s). For public business entities, the amendments in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The adoption of the ASU did not have a significant impact to our consolidated financial statements.

➢

FASB Improves the

            Accounting for Investments in Tax Credit Structures

– The FASB issued ASU No. 2023-02, Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method, which is intended to improve the accounting and disclosures for investments in tax credit structures. This ASU is a consensus of the FASB’s Emerging Issues Task Force (“EITF”). This ASU allows reporting entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits. This ASU responds to stakeholder feedback that the proportional amortization method provides investors and other allocators of capital with a better understanding of the returns from investments that are made primarily for the purpose of receiving income tax credits and other income tax benefits. Reporting entities were previously permitted to apply the proportional amortization method only to qualifying tax equity investments in low-income housing tax credit (“LIHTC”) structures. In recent years, stakeholders asked the FASB to extend the application of the proportional amortization method to qualifying tax equity investments that generate tax credits through other programs, which resulted in the EITF addressing this issue. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

As a result of the implementation of this ASU, we

recorded a

                    cumulative effect impact that reduced retained earnings by $2.0 million

. Additionally, we had a decrease in amortization expense, recognized in other direct expenses, that totaled $0.7 million for the three months ended December 31, 2023. The amortization expense included in income tax expense for the three months ended March 31,2024 was $0.8 million.The amount of income tax credits and other tax benefits recognized during the quarter was $1.1 million and was included in income tax expense on the statement of income and in net income on the statement of cash flows. We had $18.3 million in tax investments at March 31, 2024 included in other assets on the balance sheet. There were no non-income tax related activities or other returns received that were recognized outside of income tax expense and the statement of income and the statement of cash flows. There were also no significant modifications or events that resulted in a change in the nature of the investment or change in the relationship with the underlying projects. No investment income or loss was included in pre-tax income, and no impairment was recognized during the quarter resulting from the forfeiture or ineligibility of income tax credits or other circumstances. At March 31, 2024, there was $4.7 million in unfunded commitments. Of the amount outstanding, the contribution schedule is as follows:

(in thousands)<br><br> <br>Amount due in:	Unfunded Commitments
2024	$	1,512
2025		2,000
2026		315
2027		146
2028		146
After		538

➢

FASB Issues Standard that Enhance Income Tax Disclosures

– In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which addresses requests for improved income tax disclosures from investors, lenders, creditors, and other allocators of capital that use the financial statements to make capital allocation decisions. The new update is effective for public business entities for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The ASU is intended to improve the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments intended to improve the effectiveness of income tax disclosures. CTBI does not intend to early adopt. We do not anticipate a significant impact to our consolidated financial statements.

Significant Accounting Policies –

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. Since future events and their impact cannot be determined with certainty, the actual results will inevitably differ from our estimates. Such differences could be material to our consolidated financial statements.

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

We have identified the following significant accounting policies:

Investments – Management determines the classification of securities at purchase. We classify debt securities into held-to-maturity, trading, or available-for-sale categories. Held-to-maturity (“HTM”) securities are those which we have the positive intent and ability to hold to maturity and are reported at amortized cost. In accordance with the FASB Accounting Standards Codification (“ASC”) 320, Investments – Debt Securities, investments in debt securities that are not classified as held-to-maturity shall be classified in one of the following categories and measured at fair value in the statement of financial position:

a.	Trading securities. Securities that are<br> bought and held principally for the purpose of selling them in the near term (thus held for only a short period of time) shall be classified as trading securities. Trading generally reflects active and frequent buying and selling, and trading securities are generally used with the objective of generating profits on short-term differences in price.
b.	Available-for-sale securities. Investments not classified as trading securities (nor as HTM securities) shall be classified as available-for-sale<br> (“AFS”) securities.
---	---

We do not have any securities that are classified as trading securities. AFS securities are reported at fair value, with unrealized gains and losses included as a separate component of shareholders’ equity, net of tax. If declines in fair value are other than temporary, the carrying value of the securities is written down to fair value as a realized loss with a charge to income for the portion attributable to credit losses and a charge to other comprehensive income for the portion that is not credit related.

For AFS debt securities in an unrealized loss position, we evaluate the securities to determine whether the decline in the fair value below the amortized cost basis (impairment) is due to credit-related factors or non-credit related factors. Any impairment that is not credit-related is recognized in accumulated other comprehensive income, net of tax. Credit-related impairment is recognized as an allowance for credit losses (“ACL”) for AFS debt securities on the consolidated balance sheet, limited to the amount by which the amortized cost basis exceeds the fair value, with a corresponding adjustment to earnings. Accrued interest receivable on AFS debt securities is excluded from the estimate of credit losses. Both the ACL for AFS debt securities and the adjustment to net income may be reversed if conditions change. However, if we intend to sell an impaired AFS debt security or more likely than not will be required to sell such a security before recovering its amortized cost basis, the entire impairment amount would be recognized in earnings with a corresponding adjustment to the security’s amortized cost basis. Because the security’s amortized cost basis is adjusted to fair value, there is no ACL for AFS debt securities in this situation.

In evaluating AFS debt securities in unrealized loss positions for impairment and the criteria regarding its intent or requirement to sell such securities, we consider the extent to which fair value is less than amortized cost, whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuers’ financial condition, among other factors. There were no credit related factors underlying unrealized losses on AFS debt securities at March 31, 2024 and December 31, 2023, therefore, no ACL for AFS securities was recorded.

Changes in the ACL for AFS debt securities are recorded as expense. Losses are charged against the ACL for AFS debt securities when management believes the uncollectability of an AFS debt security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

Gains or losses on disposition of debt securities are computed by specific identification for those securities. Interest and dividend income, adjusted by amortization of purchase premium or discount, is included in earnings.

HTM securities are subject to an allowance for lifetime expected credit losses, determined by adjusting historical loss information for current conditions and reasonable and supportable forecasts. The forward-looking evaluation of lifetime expected losses will be performed on a pooled basis for debt securities that share similar risk characteristics. These allowances for expected losses must be made by the holder of the HTM debt security when the security is purchased. At March 31, 2024 and 2023, CTBI held no securities designated as HTM.

CTBI accounts for equity securities in accordance with ASC 321, Investments – Equity Securities. ASC 321 requires equity investments (except those accounted for under the equity method and those that result in the consolidation of the investee) to be measured at fair value, with

changes in fair values recognized in net income.

Equity securities with a readily determinable fair value are required to be measured at fair value, with changes in fair value recognized

in net income.  Equity securities without a readily determinable fair value are carried at cost, less any impairment, if any, plus or minus changes resulting from observable price changes for identical or similar investments.  As permitted by ASC
321-10-35-2, CTBI can make an irrevocable election to subsequently measure an equity security without a readily determinable fair value, and all identical or similar investments of the same issuer, including future purchases of identical or similar
investments of the same issuer, at fair value.  CTBI has made this election for our Visa Class B equity securities.  The fair value of these securities was determined by a third party service provider using Level 3 inputs as defined in ASC 820, Fair Value Measurement, and changes in fair value are recognized in income.

Loans – Loans with the ability and the intent to be held until maturity and/or payoff are reported at the carrying value of unpaid principal reduced by unearned interest, an ACL, and

unamortized deferred fees or costs and premiums.  Income is recorded on the level yield basis.  Interest accrual is discontinued when management believes, after considering economic and business conditions, collateral value, and collection efforts,
that the borrower’s financial condition is such that collection of interest is doubtful.  Any loan greater than 90 days past due must be
well secured and in the process of collection to continue accruing interest.  Cash payments received on nonaccrual loans generally are applied against principal, and interest income is only recorded once principal recovery is reasonably assured.  Loans
are not reclassified as accruing until principal and interest payments remain current for a period of time, generally six months, and future
payments appear reasonably certain. Loan origination and commitment fees and certain direct loan origination costs are deferred and the net amount amortized over the estimated life of the related loans, or commitments as a yield adjustment.

Allowance for Credit Losses – CTBI accounts for the ACL under ASC 326. CTBI measures expected credit losses of financial assets on a collective (pool) basis using the discounted cash

flow method when the financial assets share similar risk characteristics.  Loans that do not share risk characteristics are evaluated on an individual basis.  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.  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.  For collateral-dependent financial assets,
the credit loss expected may be zero if the fair value less costs to sell exceed the amortized cost of the loan.  Loans shall not be included in both collective assessments and individual assessments.

In the event that collection of principal becomes uncertain, CTBI has policies in place to reverse accrued interest in a timely manner. Therefore, CTBI elected ASU 2019-04 which allows that accrued interest would continue to be presented separately and not part of the amortized cost of the loan. The methodology used by CTBI is developed using the current loan balance, which is then compared to amortized cost balances to analyze the impact. The difference in amortized cost basis versus consideration of loan balances impacts the ACL calculation by one basis point and is considered immaterial.

We maintain an ACL at a level that is appropriate to cover estimated credit losses on individually evaluated loans, as well as estimated credit losses inherent in the remainder of the loan and lease portfolio. Credit losses are charged and recoveries are credited to the ACL.

We utilize an internal risk grading system for commercial credits. Those credits that meet the following criteria are subject to individual evaluation: the loan has an outstanding bank share balance of $1 million or greater and meets one of the following criteria: (i) has a criticized risk rating, (ii) is in nonaccrual status, (iii) the borrower is experiencing financial difficulty with significant payment delay, or (iv) is 90 days or more past due. The borrower’s cash flow, adequacy of collateral coverage, and other options available to CTBI, including legal remedies, are evaluated. We evaluate the collectability of both principal and interest when assessing the need for loss provision. Historical loss rates are analyzed and applied to other commercial loan segments not subject to individual evaluation.

Homogenous loans, such as consumer installment, residential mortgages, and home equity lines are not individually risk graded. The associated ACL for these loans is measured in pools with similar risk characteristics under ASC 326.

When any secured commercial loan is considered uncollectable, whether past due or not, a current assessment of the value of the underlying collateral is made. If the balance of the loan exceeds the fair value of the collateral, the loan is placed on nonaccrual and the loan is charged down to the value of the collateral less estimated cost to sell. For commercial loans greater than $1 million that are categorized as individually evaluated based on the criteria listed above, a specific reserve is established if a loss is determined to be possible and then charged-off once it is probable. When the foreclosed collateral has been legally assigned to CTBI, the estimated fair value of the collateral less costs to sell is then transferred to other real estate owned or other repossessed assets, and a charge-off is taken for any remaining balance. When any unsecured commercial loan is considered uncollectable the loan is charged off no later than at 90 days past due.

All closed-end consumer loans (excluding conventional 1-4 family residential loans and installment and revolving loans secured by real estate) are charged off no later than 120 days (five monthly payments) delinquent. If a loan is considered uncollectable, it is charged off earlier than 120 days delinquent. For conventional 1-4 family residential loans and installment and revolving loans secured by real estate, when a loan is 90 days past due, a current assessment of the value of the real estate is made. If the balance of the loan exceeds the fair value of the property, the loan is placed on nonaccrual. Foreclosure proceedings are normally initiated after 120 days. When the foreclosed property has been legally assigned to CTBI, the fair value less estimated costs to sell is transferred to other real estate owned and the remaining balance is taken as a charge-off.

CTBI utilizes third party software and discounted cash flow loss rate methodologies for all loan segments. Within the discount cash flow calculation, an effective yield of the instrument is calculated, net of the impacts of prepayment assumptions, and the instrument expected cash flows. The expected cash flows were modeled considering probability of default and segment-specific loss given default (“LGD”) risk factors, utilizing the software’s proprietary database of financial institutions’ filings, evaluated first by geography and asset size and then with the utilization of standard deviations, to assure relevance to CTBI’s loan segments along with CTBI’s own loss history. Cash flows are then discounted at that effective yield to produce an instrument-level net present value (“NPV”) of expected cash flows. An ACL is established for the difference between the instrument’s NPV and amortized cost basis. Any changes in NPV between periods is recorded as provision for credit losses. The modeling of expected prepayment speeds, curtailment rates, and time to recovery are based on historical internal data and adjusted, if necessary, based on the reasonable and supportable forecast of economic conditions. Management incorporates qualitative factors to loss estimates used to derive CTBI’s total ACL including delinquency trends, current economic conditions and trends, strength of supervision and administration of the loan portfolio, levels of underperforming loans, and underwriting exceptions. Forecast factors were expanded to include gross domestic product, retail and food service sales, and S&P/Case-Shiller US National Home Price Index, while industry concentrations was added as a qualitative factor. Management continually reevaluates the other subjective factors included in our ACL analysis.

Goodwill and Core

      Deposit Intangible

– We evaluate total goodwill and core deposit intangible for impairment, based upon ASC 350, Intangibles-Goodwill and Other, using fair value techniques including multiples of price/equity. Goodwill and core deposit intangible are evaluated for impairment on an annual basis or as other events may warrant.

The balance of goodwill, at $65.5 million, has not changed since January 1, 2015.

Income Taxes – Income tax expense is based on the taxes due on the consolidated tax return plus deferred taxes

based on the expected future tax benefits and consequences of temporary differences between carrying amounts and tax bases of assets and liabilities, using enacted tax rates.  Any interest and penalties incurred in connection with income taxes are
recorded as a component of income tax expense in our consolidated financial statements.  During the three months ended March 31, 2024 and 2023, CTBI has not recognized a significant amount of interest expense or penalties in connection with income
taxes.

Estimated

      Credit Losses on Off-Balance Sheet Credit Exposures Recognized as Other Liabilities – CTBI estimates expected credit losses over the contractual period in which it has exposure to credit risk via a contractual obligation to extend
  credit, unless that obligation is unconditionally cancellable by CTBI.  The ACL on off-balance sheet credit exposures recognized in other liabilities, is adjusted as an expense in other non-interest expense. The estimate includes consideration of the
  likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over their estimated lives.  Estimating credit losses on unfunded commitments requires CTBI to consider the following categories of
  off-balance sheet credit exposure: unfunded commitments to extend credit, unfunded lines of credit, and standby letters of credit.  Each of these unfunded commitments is then analyzed for a probability of funding to calculate a probable funding
  amount.  The life of loan loss factor by related portfolio segment from the loan ACL calculation is then applied to the probable funding amount to calculate the estimated credit losses on off-balance sheet credit exposures recognized as other
  liabilities.

Note 2 – Stock-Based Compensation

Restricted stock expense for the three months ended March 31, 2024 and 2023 was $343 thousand and $377 thousand, respectively, including $40 thousand and $44 thousand, respectively, in dividends paid for those periods. As of March 31, 2024, there was a total of $3.2 million of unrecognized compensation expense related to restricted stock grants that will be recognized as expense as the awards vest over a weighted average period of 3.1 years. There were 15,000 and 52,865 shares of restricted stock granted during the three months ended March 31, 2024 and 2023, respectively. The restricted stock was issued pursuant to the terms of CTBI’s 2015 Stock Ownership Incentive Plan. The restrictions on the restricted stock will lapse ratably over four years, subject to such employee’s continued employment. However, in the event of certain participant employee termination events occurring within 24 months of a change in control of CTBI or the death of the participant, the restrictions will lapse, and in the event of the participant’s disability, the restrictions will lapse on a pro rata basis. The Compensation Committee will have discretion to review and revise restrictions applicable to a participant’s restricted stock in the event of the participant’s retirement. There were 2,109 and 790 shares of restricted stock forfeited during the three months ended March 31, 2024 and 2023, respectively.

There was no compensation expense related to stock option grants for the three months ended March 31, 2024 and 2023. As of March 31, 2024, there was no unrecognized compensation expense related to unvested stock option awards, as all stock option awards have fully vested. There were no stock options granted in the first three months of 2024 or 2023.

Note 3 – Securities

The amortized cost and fair value of debt securities at March 31, 2024 are summarized as follows:

Available-for-Sale

(in thousands)	Amortized<br><br> <br>Cost		Gross<br><br> <br>Unrealized<br><br> <br>Gains		Gross<br><br> <br>Unrealized<br><br> <br>Losses			Fair Value
U.S. Treasury and government agencies	$	367,961	$	115	$	(27,575	)	$	340,501
State and political subdivisions		311,207		31		(49,808	)		261,430
U.S. government sponsored agency mortgage-backed securities		500,922		228		(64,774	)		436,376
Asset-backed securities		73,660		0		(462	)		73,198
Total available-for-sale securities	$	1,253,750	$	374	$	(142,619	)	$	1,111,505

The amortized cost and fair value of debt securities at December 31, 2023 are summarized as follows:

Available-for-Sale

(in thousands)	Amortized<br><br> <br>Cost		Gross<br><br> <br>Unrealized<br><br> <br>Gains		Gross<br><br> <br>Unrealized<br><br> <br>Losses			Fair Value
U.S. Treasury and government agencies	$	381,268	$	121	$	(26,572	)	$	354,817
State and political subdivisions		313,147		88		(48,290	)		264,945
U.S. government sponsored agency mortgage-backed securities		518,836		36		(62,136	)		456,736
Asset-backed securities		87,993		0		(767	)		87,226
Total available-for-sale securities	$	1,301,244	$	245	$	(137,765	)	$	1,163,724

The amortized cost and fair value of debt securities at March 31, 2024 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Available-for-Sale
(in thousands)	Amortized<br><br> <br>Cost		Fair Value
Due in one year or less	$	105,493	$	102,371
Due after one through five years		275,234		249,805
Due after five through ten years		136,040		118,168
Due after ten years		162,401		131,587
U.S. government sponsored agency mortgage-backed securities		500,922		436,376
Asset-backed securities		73,660		73,198
Total debt securities	$	1,253,750	$	1,111,505

During

    the three months ended March 31, 2024, we had an unrealized gain of $371 thousand from the fair value adjustment of equity securities. 
    During the three months ended March 31, 2023, we had a net securities gain of $218 thousand, consisting of a pre-tax gain of $4 thousand on the sale of AFS securities and an unrealized gain of $214 thousand from the fair value adjustment of equity securities.

Equity Securities at Fair Value

CTBI made the election permitted by ASC 321-10-35-2 to record its Visa Class B shares at fair value. Equity securities at fair value as of March 31, 2024 were $3.5 million, as a result of a $371 thousand increase in the fair value in the first quarter 2024. The fair value of equity securities increased $214 thousand in the first quarter 2023. No equity securities were sold during the three months ended March 31, 2024 and 2023.

The amortized cost of securities pledged as collateral, to secure public deposits and for other purposes, was $737.6 million at March 31, 2024 and $761.5 million at December 31, 2023.

The amortized cost of securities sold under agreements to repurchase amounted to $332.4 million at March 31, 2024 and $333.6 million at December 31, 2023.

CTBI evaluates its investment portfolio on a quarterly basis for impairment. The analysis performed as of March 31, 2024 indicates that all impairment is considered temporary, market and interest rate driven, and not credit-related. The percentage of total debt securities with unrealized losses as of March 31, 2024 was 96.8% compared to 97.3% as of December 31, 2023. The following table provides the amortized cost, gross unrealized losses, and fair value, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position as of March 31, 2024 that are not deemed to have credit losses.

Available-for-Sale

(in thousands)	Amortized<br><br> <br>Cost		Gross<br><br> <br>Unrealized<br><br> <br>Losses			Fair Value
Less Than 12 Months
U.S. Treasury and government agencies	$	2,785	$	(1	)	$	2,784
State and political subdivisions		11,081		(234	)		10,847
U.S. government sponsored agency mortgage-backed securities		2,869		(18	)		2,851
Asset-backed securities		1,932		(3	)		1,929
Total <12 months		18,667		(256	)		18,411
12 Months or More
U.S. Treasury and government agencies		351,685		(27,574	)		324,111
State and political subdivisions		297,619		(49,574	)		248,045
U.S. government sponsored agency mortgage-backed securities		479,271		(64,756	)		414,515
Asset-backed securities		71,728		(459	)		71,269
Total ≥12 months		1,200,303		(142,363	)		1,057,940
Total
U.S. Treasury and government agencies		354,470		(27,575	)		326,895
State and political subdivisions		308,700		(49,808	)		258,892
U.S. government sponsored agency mortgage-backed securities		482,140		(64,774	)		417,366
Asset-backed securities		73,660		(462	)		73,198
Total	$	1,218,970	$	(142,619	)	$	1,076,351

The analysis performed as of December 31, 2023 indicated that all impairment was considered temporary, market and interest rate driven, and not credit-related. The following table provides the amortized cost, gross unrealized losses, and fair value, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position as of December 31, 2023 that are not deemed to be other-than-temporarily impaired.

Available-for-Sale

(in thousands)	Amortized<br><br> <br>Cost		Gross<br><br> <br>Unrealized<br><br> <br>Losses			Fair Value
Less Than 12 Months
U.S. Treasury and government agencies	$	3,761	$	(5	)	$	3,756
State and political subdivisions		16,154		(1,250	)		14,904
U.S. government sponsored agency mortgage-backed securities		16,056		(289	)		15,767
Asset-backed securities		0		0			0
Total <12 months		35,971		(1,544	)		34,427
12 Months or More
U.S. Treasury and government agencies		361,038		(26,567	)		334,471
State and political subdivisions		284,397		(47,040	)		237,357
U.S. government sponsored agency mortgage-backed securities		500,763		(61,847	)		438,916
Asset-backed securities		87,993		(767	)		87,226
Total ≥12 months		1,234,191		(136,221	)		1,097,970
Total
U.S. Treasury and government agencies		364,799		(26,572	)		338,227
State and political subdivisions		300,551		(48,290	)		252,261
U.S. government sponsored agency mortgage-backed securities		516,819		(62,136	)		454,683
Asset-backed securities		87,993		(767	)		87,226
Total	$	1,270,162	$	(137,765	)	$	1,132,397

U.S. Treasury and Government Agencies

The unrealized losses in U.S. Treasury and government agencies were caused by interest rate changes. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than par which will equal amortized cost at maturity. CTBI does not intend to sell the investments and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost.

State and Political Subdivisions

The unrealized losses in securities of state and political subdivisions were caused by interest rate changes. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than par which will equal amortized cost at maturity. CTBI does not intend to sell the investments before recovery of their amortized cost and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost.

U.S. Government Sponsored Agency Mortgage-Backed Securities

The unrealized losses in U.S. government sponsored agency mortgage-backed securities were caused by interest rate changes. CTBI expects to recover the amortized cost basis over the term of the securities. CTBI does not intend to sell the investments and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost.

Asset-Backed Securities

The unrealized losses in asset-backed securities were caused by interest rate changes. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than par which will equal amortized cost at maturity. CTBI does not intend to sell the investments and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost.

Note 4 – Loans

Major classifications of loans, net of unearned income, deferred loan origination costs and fees, and net premiums on acquired loans, are summarized as follows:

(in thousands)	March 31<br><br> <br>2024		December 31<br><br> <br>2023
Hotel/motel	$	416,759	$	395,765
Commercial real estate residential		456,585		417,943
Commercial real estate nonresidential		813,904		778,637
Dealer floorplans		77,221		70,308
Commercial other		320,701		321,082
Commercial loans		2,085,170		1,983,735
Real estate mortgage		955,616		937,524
Home equity lines		151,577		147,036
Residential loans		1,107,193		1,084,560
Consumer direct		155,807		159,106
Consumer indirect		813,005		823,505
Consumer loans		968,812		982,611
Loans and lease financing	$	4,161,175	$	4,050,906

The loan portfolios presented above are net of unearned fees and unamortized premiums. Unearned fees included above totaled $0.8 million as of March 31, 2024 and December 31, 2023, while the unamortized premiums on the indirect lending portfolio totaled $30.9 million as of March 31, 2024 and $31.4 million as of December 31, 2023.

CTBI has segregated and evaluates our loan portfolio through nine portfolio segments with similar risk characteristics. CTBI serves customers in small and mid-sized communities in eastern, northeastern, central, and south central Kentucky, southern West Virginia, and northeastern Tennessee. Therefore, CTBI’s exposure to credit risk is significantly affected by changes in these communities.

Commercial real estate residential loans are commercial purpose construction and permanent financed loans for commercial purpose 1-4 family/multi-family properties. These loans are originated based on the borrower’s ability to service the debt and secondarily based on the fair value of the underlying collateral.

Commercial real estate nonresidential loans are secured by nonfarm, nonresidential properties, farmland, and other commercial real estate. These loans are originated based on the borrower’s ability to service the debt and secondarily based on the fair value of the underlying collateral. Construction for commercial real estate nonresidential loans are also included in this segment as these loans are generally one loan for construction to permanent financing.

Dealer floorplans consist of loans to dealerships to finance inventory and are collateralized under a blanket security agreement and without specific liens on individual units. This risk is mitigated by the use of periodic inventory audits. These audits are performed monthly and follow up is required on any out of compliance items identified. These audits are subject to increasing frequency when fact patterns suggest more scrutiny is required.

Commercial

  other loans consist of agricultural loans, receivable financing, loans to financial institutions, loans for purchasing or carrying securities, and other commercial purpose loans.  Commercial loans are underwritten based on the borrower’s ability to
  service debt from the business’s underlying cash flows.  As a general practice, we obtain collateral such as equipment, or other assets, although such loans may be uncollateralized but guaranteed.

Residential real estate loans are a mixture of fixed rate and adjustable rate first and second lien residential mortgage loans and also include real estate construction loans which are typically for owner-occupied properties. The terms of the real estate construction loans are generally short-term with permanent financing upon completion. As a policy, CTBI holds adjustable rate loans and sells the majority of our fixed rate first lien mortgage loans into the secondary market. Changes in interest rates or market conditions may impact a borrower’s ability to meet contractual principal and interest payments. Residential real estate loans are secured by real property.

Home equity lines are primarily revolving adjustable rate credit lines secured by real property.

Consumer direct loans are a mixture of fixed rate and adjustable rate products comprised of unsecured loans, consumer revolving credit lines, deposit secured loans, and all other consumer purpose loans.

Indirect loans are primarily fixed rate consumer loans secured by automobiles, trucks, vans, and recreational vehicles originated at the selling dealership underwritten and purchased by CTBI’s indirect lending department. Both new and used products are financed. Only dealers who have executed dealer agreements with CTBI participate in the indirect lending program.

Not included in the loan balances above were loans held for sale in the amount of $57 thousand at March 31, 2024 and $152 thousand at December 31, 2023.

The following tables present the balance in the ACL for the periods ended March 31, 2024, December 31, 2023 and March 31, 2023.

	Three Months Ended<br><br> <br>March 31, 2024
(in thousands)	Beginning<br><br> <br>Balance		Provision<br><br> <br>Charged to<br><br> <br>Expense			Losses<br><br> <br>Charged Off			Recoveries		Ending<br><br> <br>Balance
ACL
Hotel/motel	$	4,592	$	348		$	0		$	0	$	4,940
Commercial real estate residential		4,285		(161	)		0			4		4,128
Commercial real estate nonresidential		7,560		615			0			3		8,178
Dealer floorplans		659		62			0			0		721
Commercial other		3,760		114			(167	)		92		3,799
Real estate mortgage		10,197		141			(27	)		14		10,325
Home equity		1,367		(65	)		0			2		1,304
Consumer direct		3,261		803			(533	)		40		3,571
Consumer indirect		13,862		799			(1,940	)		884		13,605
Total	$	49,543	$	2,656		$	(2,667	)	$	1,039	$	50,571
	Year Ended<br><br> <br>December 31, 2023
---	---	---	---	---	---	---	---	---	---	---	---	---
(in thousands)	Beginning<br><br> <br>Balance		Provision<br><br> <br>Charged to<br><br> <br>Expense			Losses<br><br> <br>Charged Off			Recoveries		Ending<br><br> <br>Balance
ACL
Hotel/motel	$	5,171	$	(579	)	$	0		$	0	$	4,592
Commercial real estate residential		4,894		(706	)		(28	)		125		4,285
Commercial real estate nonresidential		9,419		(2,252	)		(294	)		687		7,560
Dealer floorplans		1,776		(1,117	)		0			0		659
Commercial other		5,285		(91	)		(1,900	)		466		3,760
Real estate mortgage		7,932		2,364			(140	)		41		10,197
Home equity		1,106		278			(23	)		6		1,367
Consumer direct		1,694		1,804			(541	)		304		3,261
Consumer indirect		8,704		7,110			(5,333	)		3,381		13,862
Total	$	45,981	$	6,811		$	(8,259	)	$	5,010	$	49,543
	Three Months Ended<br><br> <br>March 31, 2023
---	---	---	---	---	---	---	---	---	---	---	---	---
(in thousands)	Beginning<br><br> <br>Balance		Provision<br><br> <br>Charged to<br><br> <br>Expense			Losses<br><br> <br>Charged Off			Recoveries		Ending<br><br> <br>Balance
ACL
Hotel/motel	$	5,171	$	116		$	0		$	0	$	5,287
Commercial real estate residential		4,894		186			0			77		5,157
Commercial real estate nonresidential		9,419		(553	)		0			144		9,010
Dealer floorplans		1,776		(82	)		0			0		1,694
Commercial other		5,285		(416	)		(187	)		100		4,782
Real estate mortgage		7,932		21			(40	)		4		7,917
Home equity		1,106		(64	)		0			2		1,044
Consumer direct		1,694		105			(156	)		103		1,746
Consumer indirect		8,704		1,803			(1,382	)		921		10,046
Total	$	45,981	$	1,116		$	(1,765	)	$	1,351	$	46,683

Using the ACL software, forecasts include gross domestic product (GDP), retail sales and housing price index considerations. CTBI leverages economic projections from the Federal Open Market Committee to obtain various forecasts for unemployment rate and gross domestic product, the PNC forecast for the Case-Shiller National Home Price Index, and the Wells Fargo forecast for the Advanced Retail Sales. CTBI has elected to forecast the first four quarters of the credit loss estimate and revert to a long-run average of each considered economic factor, as permitted in ASC 326-20-30-9, over four quarters.

All periods during the reasonable and supportable forecast period are utilizing a forecasted probability of default. Loss driver analysis was performed during which regression models were built relating default rates of the various segments to the economic factors noted above. Historical loss data for both CTBI and segment-specific selected peers was incorporated from Federal Financial Institutions Examination Council call report data. For loss given default, the Frye-Jacobs LGD estimation technique was utilized in the ACL software provided a risk curve that most approximates the asset class under consideration. Management elected to evaluate internal prepayment experience over a trailing timeframe to determine the appropriate prepayment and curtailment rates to be used in the credit loss estimate.

CTBI uses management judgement for qualitative loss factors such as delinquency trends, supervision and administration, quality control exceptions, collateral values, and industry concentrations. The ACL software allows management to approve a “worst case” scenario or a maximum loss rate for each segment. Qualitative dollars available for allocation then become the difference between the worst case and the ACL quantitative reserve estimate. Each factor is then given a risk weighting that is applied to determine a basis point allocation. The qualitative loss factors are as follows:

•	Changes in delinquency trends by loan segment
•	Changes in international, national, regional, and local conditions
---	---
•	The effect of other external factors (i.e. competition, legal and regulatory requirements) on the level of estimated credit losses
---	---
•	The existence and effect of any concentrations of credit and changes in the levels of such concentrations
---	---
•	A supervision and administration allocation based on CTBI’s loan review process
---	---
•	Exceptions in lending policies and procedures as measured by quarterly loan portfolio exceptions reports
---	---
•	Changes in the nature and volume of the portfolio and terms of loans
---	---
•	Changes in the experience, depth, and ability of lending management
---	---

Our provision for credit losses for the quarter increased $0.8 million from prior quarter and $1.5 million from prior year same quarter. Our reserve coverage (ACL to nonperforming loans) at March 31, 2024 was 319.0%, compared to 354.7% at December 31, 2023 and 382.3% at March 31, 2023. Our credit loss reserve as a percentage of total loans outstanding at March 31, 2024 remained at 1.22% from December 31, 2023, down from the 1.24% at March 31, 2023.

Management continues to note the continued impact of global uncertainty, the current rate of inflation, the uncertain interest rate environment, and the fact that there is no immediate end foreseen, and these conditions are now part of qualitative factors noted above. As in previous periods, an allocation was made for delinquency trends, industry concentrations, supervisory and administration, loan exceptions, and collateral values.

Refer to Note 1 to the condensed consolidated financial statements for further information regarding our nonaccrual policy. Nonaccrual loans and loans 90 days past due and still accruing segregated by class of loans for both March 31, 2024 and December 31, 2023 were as follows:

	March 31, 2024
(in thousands)	Nonaccrual Loans<br><br> <br>with No ACL		Nonaccrual Loans<br><br> <br>with ACL		90+ and Still<br><br> <br>Accruing		Total<br><br> <br>Nonperforming<br><br> <br>Loans
Hotel/motel	$	0	$	0	$	0	$	0
Commercial real estate residential		0		283		1,458		1,741
Commercial real estate nonresidential		0		632		2,136		2,768
Commercial other		232		398		748		1,378
Total commercial loans		232		1,313		4,342		5,887
Real estate mortgage		0		2,149		5,853		8,002
Home equity lines		0		157		588		745
Total residential loans		0		2,306		6,441		8,747
Consumer direct		0		451		48		499
Consumer indirect		0		0		719		719
Total consumer loans		0		451		767		1,218
Loans and lease financing	$	232	$	4,070	$	11,550	$	15,852
	December 31, 2023
---	---	---	---	---	---	---	---	---
(in thousands)	Nonaccrual Loans<br><br> <br>with No ACL		Nonaccrual Loans<br><br> <br>with ACL		90+ and Still<br><br> <br>Accruing		Total<br><br> <br>Nonperforming<br><br> <br>Loans
Hotel/motel	$	0	$	0	$	0	$	0
Commercial real estate residential		0		498		1,059		1,557
Commercial real estate nonresidential		0		680		2,270		2,950
Dealer floorplans		0		0		0		0
Commercial other		236		452		162		850
Total commercial loans		236		1,630		3,491		5,357
Real estate mortgage		0		1,996		5,302		7,298
Home equity lines		0		186		557		743
Total residential loans		0		2,182		5,859		8,041
Consumer direct		0		0		15		15
Consumer indirect		0		0		555		555
Total consumer loans		0		0		570		570
Loans and lease financing	$	236	$	3,812	$	9,920	$	13,968

Discussion of the Nonaccrual Policy

The accrual of interest income on loans is discontinued when management believes, after considering economic and business conditions, collateral value, and collection efforts, that the borrower’s financial condition is such that the collection of interest is doubtful. Cash payments received on nonaccrual loans generally are applied against principal, and interest income is only recorded once principal recovery is reasonably assured. Any loans greater than 90 days past due must be well secured and in the process of collection to continue accruing interest. See Note 1 to the condensed consolidated financial statements for further discussion on our nonaccrual policy.

The following tables present CTBI’s loan portfolio aging analysis, segregated by class, as of March 31, 2024 and December 31, 2023 (includes loans 90 days past due and still accruing as well):

	March 31, 2024
(in thousands)	30-59 Days<br><br> <br>Past Due		60-89<br><br> <br>Days Past<br><br> <br>Due		90+ Days<br><br> <br>Past Due		Total Past<br><br> <br>Due		Current		Total Loans
Hotel/motel	$	0	$	0	$	0	$	0	$	416,759	$	416,759
Commercial real estate residential		406		0		1,741		2,147		454,438		456,585
Commercial real estate nonresidential		1,295		757		2,490		4,542		809,362		813,904
Dealer floorplans		0		0		0		0		77,221		77,221
Commercial other		317		172		1,201		1,690		319,011		320,701
Total commercial loans		2,018		929		5,432		8,379		2,076,791		2,085,170
Real estate mortgage		894		2,471		6,801		10,166		945,450		955,616
Home equity lines		749		317		719		1,785		149,792		151,577
Total residential loans		1,643		2,788		7,520		11,951		1,095,242		1,107,193
Consumer direct		623		168		499		1,290		154,517		155,807
Consumer indirect		3,596		831		719		5,146		807,859		813,005
Total consumer loans		4,219		999		1,218		6,436		962,376		968,812
Loans and lease financing	$	7,880	$	4,716	$	14,170	$	26,766	$	4,134,409	$	4,161,175
	December<br> 31, 2023
---	---	---	---	---	---	---	---	---	---	---	---	---
(in thousands)	30-59 Days<br><br> <br>Past Due		60-89<br><br> <br>Days Past<br><br> <br>Due		90+ Days<br><br> <br>Past Due		Total Past<br><br> <br>Due		Current		Total Loans
Hotel/motel	$	0	$	0	$	0	$	0	$	395,765	$	395,765
Commercial real estate residential		1,047		275		1,525		2,847		415,096		417,943
Commercial real estate nonresidential		549		332		2,619		3,500		775,137		778,637
Dealer floorplans		0		0		0		0		70,308		70,308
Commercial other		663		494		641		1,798		319,284		321,082
Total commercial loans		2,259		1,101		4,785		8,145		1,975,590		1,983,735
Real estate mortgage		1,323		3,455		6,168		10,946		926,578		937,524
Home equity lines		911		273		707		1,891		145,145		147,036
Total residential loans		2,234		3,728		6,875		12,837		1,071,723		1,084,560
Consumer direct		1,013		118		15		1,146		157,960		159,106
Consumer indirect		4,550		1,029		555		6,134		817,371		823,505
Total consumer loans		5,563		1,147		570		7,280		975,331		982,611
Loans and lease financing	$	10,056	$	5,976	$	12,230	$	28,262	$	4,022,644	$	4,050,906

The risk characteristics of CTBI’s material portfolio segments are as follows:

Hotel/motel loans are a significant concentration for CTBI, representing approximately 10.0% of total loans. This industry has unique risk characteristics as it is highly susceptible to changes in the domestic and global economic environments, which can cause the industry to experience substantial volatility. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Hotel/motel lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Management monitors and evaluates all commercial real estate loans based on collateral and risk grade criteria. Commercial construction loans generally are made to customers for the purpose of building income-producing properties, and any hotel/motel construction loan would be included in this segment. Personal guarantees of the principals are generally required. Such loans are made on a projected cash flow basis and are secured by the project being constructed. Construction loan draw procedures are included in each specific loan agreement, including required documentation items and inspection requirements. Construction loans may convert to term loans at the end of the construction period, or may be repaid by the take-out commitment from another financing source. If the loan is to convert to a term loan, the repayment ability is based on the borrower’s projected cash flow. Risk is mitigated during the construction phase by requiring proper documentation and inspections whenever a draw is requested.

Commercial real estate residential loans are commercial purpose construction and permanent financed loans for commercial purpose 1-4 family/multi-family properties. All commercial real estate loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Management monitors and evaluates all commercial real estate loans based on collateral and risk grade criteria. Commercial residential construction loans generally are made to customers for the purpose of building income-producing properties. Personal guarantees of the principals are generally required. Such loans are made on a projected cash flow basis and are secured by the project being constructed. Construction loan draw procedures are included in each specific loan agreement, including required documentation items and inspection requirements. Construction loans may convert to term loans at the end of the construction period, or may be repaid by the take-out commitment from another financing source. If the loan is to convert to a term loan, the repayment ability is based on the borrower’s projected cash flow. Risk is mitigated during the construction phase by requiring proper documentation and inspections whenever a draw is requested.

Commercial real estate nonresidential loans are secured by nonfarm, nonresidential properties, farmland, and other commercial real estate. Construction for commercial real estate nonresidential loans are also included in this segment as these loans are generally one loan for construction to permanent financing. All commercial real estate loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Management monitors and evaluates all commercial real estate loans based on collateral and risk grade criteria. Commercial nonresidential construction loans generally are made to customers for the purpose of building income-producing properties. Personal guarantees of the principals are generally required. Such loans are made on a projected cash flow basis and are secured by the project being constructed. Construction loan draw procedures are included in each specific loan agreement, including required documentation items and inspection requirements. Construction loans may convert to term loans at the end of the construction period, or may be repaid by the take-out commitment from another financing source. If the loan is to convert to a term loan, the repayment ability is based on the borrower’s projected cash flow. Risk is mitigated during the construction phase by requiring proper documentation and inspections whenever a draw is requested.

Dealer floorplans are segmented separately as they are a unique product with unique risk factors. CTBI maintains strict processing procedures over our floorplan product with any exceptions requested by a loan officer approved by the appropriate loan committee and the floorplan manager.

Commercial other loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from our customers. As we underwrite our equipment lease financing in a manner similar to our commercial loan portfolio described below, the risk characteristics for this portfolio mirror that of the commercial loan portfolio.

With respect to residential loans that are secured by 1-4 family residences and are generally owner occupied, CTBI generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. Home equity loans are typically secured by a subordinate interest in 1-4 family residences. Residential construction loans are handled through the home mortgage area of the bank. The repayment ability of the borrower and the maximum loan-to-value ratio are calculated using the normal mortgage lending criteria. Draws are processed based on percentage of completion stages including normal inspection procedures. Such loans generally convert to term loans after the completion of construction.

Consumer loans are secured by consumer assets such as automobiles or recreational vehicles. Some consumer loans are unsecured such as small installment loans and certain lines of credit. Our determination of a borrower’s ability to repay these loans is primarily dependent on the personal income and credit rating of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Repayment can also be impacted by changes in property values on residential properties. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

The indirect lending area of the bank is generally responsible for purchasing/funding consumer contracts with new and used automobile dealers. Dealer loan applications are forwarded to the indirect loan processing area for approval or denial. Loan approvals or denials are based on the creditworthiness and repayment ability of the borrowers, and on the collateral value. Upon a dealer being funded on an approved loan application and assignment of the retail installment contract to CTB, CTB will have limited recourse with the dealer, as set forth in the CTB dealer agreement. On occasion, the dealer will execute a separate, full recourse agreement with CTB to obtain customer financing.

Credit Quality Indicators:

CTBI categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. CTBI also considers the fair value of the underlying collateral and the strength and willingness of the guarantor(s). CTBI analyzes commercial loans individually by classifying the loans as to credit risk. Loans classified as loss, doubtful, substandard, or special mention are reviewed quarterly by CTBI for further deterioration or improvement to determine if appropriately classified and valued if deemed impaired. All other commercial loan reviews are completed every 12 to 18 months. In addition, during the renewal process of any loan, as well as if a loan becomes past due or if other information becomes available, CTBI will evaluate the loan grade. CTBI uses the following definitions for risk ratings:

➢	Pass grades<br> include investment grade, low risk, moderate risk, and acceptable risk loans. The loans range from loans that have no chance of resulting in a loss to loans that have a limited chance of resulting in a loss. Customers in this grade have<br> excellent to fair credit ratings. The cash flows are adequate to meet required debt repayments.
➢	Watch graded<br> loans are loans that warrant extra management attention but are not currently criticized. Loans on the watch list may be potential troubled credits or may warrant “watch” status for a reason not directly related to the asset quality of the<br> credit. The watch grade is a management tool to identify credits which may be candidates for future classification or may temporarily warrant extra management monitoring.
---	---

➢

Pass grades<br> include investment grade, low risk, moderate risk, and acceptable risk loans. The loans range from loans that have no chance of resulting in a loss to loans that have a limited chance of resulting in a loss. Customers in this grade have<br> excellent to fair credit ratings. The cash flows are adequate to meet required debt repayments.

➢

Watch graded<br> loans are loans that warrant extra management attention but are not currently criticized. Loans on the watch list may be potential troubled credits or may warrant “watch” status for a reason not directly related to the asset quality of the<br> credit. The watch grade is a management tool to identify credits which may be candidates for future classification or may temporarily warrant extra management monitoring.

---

➢	Other assets especially mentioned (OAEM) reflects loans that are currently protected but are potentially weak. These loans constitute an undue and unwarranted credit risk but not to the point of justifying a classification of substandard. The credit<br> risk may be relatively minor yet constitute an unwarranted risk in light of circumstances surrounding a specific asset. Loans in this grade display potential weaknesses which may, if unchecked or uncorrected, inadequately protect CTBI’s<br> credit position at some future date. The loans may be adversely affected by economic or market conditions.
➢	Substandard<br> grading indicates that the loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged. These loans have a well-defined weakness or weaknesses that jeopardize the orderly<br> liquidation of the debt with the distinct possibility that CTBI will sustain some loss if the deficiencies are not corrected.
---	---
➢	Doubtful graded<br> loans have the weaknesses inherent in the substandard grading with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable<br> and improbable. The probability of loss is extremely high, but because of certain important and reasonably specific pending factors which may work to CTBI’s advantage or strengthen the asset(s), its classification as an estimated loss is<br> deferred until its more exact status may be determined. Pending factors include proposed merger, acquisition, or liquidation procedures, capital injection, perfecting liens on additional collateral, and refinancing plans.
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The following tables present the credit risk profile of CTBI’s commercial loan portfolio based on rating category and payment activity, segregated by class of loans and based on last credit decision or year of origination:

	Term Loans Amortized Cost Basis by Origination Year
(in thousands)<br><br> <br>March 31		2024			2023		2022			2021		2020		Prior		Revolving<br><br> <br>Loans		Total
Hotel/motel
Risk rating:
Pass	$	23,157		$	75,614	$	148,082		$	27,789	$	17,576		$	81,081	$	5,146	$	378,445
Watch		0			11,494		2,801			6,745		4,566			4,925		0		30,531
OAEM		0			0		3,982			0		0			1,954		0		5,936
Substandard		0			0		0			0		0			1,847		0		1,847
Doubtful		0			0		0			0		0			0		0		0
Total hotel/motel		23,157			87,108		154,865			34,534		22,142			89,807		5,146		416,759
Commercial real estate residential
Risk rating:
Pass		53,504			100,676		88,387			96,851		30,029			44,984		15,866		430,297
Watch		91			2,211		3,661			425		1,422			6,830		177		14,817
OAEM		0			0		0			0		0			62		0		62
Substandard		0			995		414			4,188		734			4,936		142		11,409
Doubtful		0			0		0			0		0			0		0		0
Total commercial real estate residential		53,595			103,882		92,462			101,464		32,185			56,812		16,185		456,585
Commercial real estate nonresidential
Risk rating:
Pass		50,150			152,323		135,583			133,424		66,865			190,555		32,112		761,012
Watch		0			548		3,643			6,249		2,298			7,637		338		20,713
OAEM		0			0		15			0		7,255			1,459		0		8,729
Substandard		470			4,341		1,594			2,523		4,480			9,966		74		23,448
Doubtful		0			0		0			0		0			2		0		2
Total commercial real estate nonresidential		50,620			157,212		140,835			142,196		80,898			209,619		32,524		813,904
Dealer floorplans
Risk rating:
Pass		0			0		0			0		0			0		76,789		76,789
Watch		0			0		0			0		0			0		432		432
OAEM		0			0		0			0		0			0		0		0
Substandard		0			0		0			0		0			0		0		0
Doubtful		0			0		0			0		0			0		0		0
Total dealer floorplans		0			0		0			0		0			0		77,221		77,221
Commercial other
Risk rating:
Pass		25,705			57,125		45,270			38,679		28,943			23,401		80,907		300,030
Watch		457			700		620			291		119			837		6,065		9,089
OAEM		0			28		0			0		0			0		30		58
Substandard		1,584			4,579		2,552			538		862			253		1,006		11,374
Doubtful		0			0		117			33		0			0		0		150
Total commercial other		27,746			62,432		48,559			39,541		29,924			24,491		88,008		320,701
Commercial other current period gross charge-offs		(145	)		0		(20	)		0		(2	)		0		0		(167	)
Commercial loans
Risk rating:
Pass		152,516			385,738		417,322			296,743		143,413			340,021		210,820		1,946,573
Watch		548			14,953		10,725			13,710		8,405			20,229		7,012		75,582
OAEM		0			28		3,997			0		7,255			3,475		30		14,785
Substandard		2,054			9,915		4,560			7,249		6,076			17,002		1,222		48,078
Doubtful		0			0		117			33		0			2		0		152
Total commercial loans	$	155,118		$	410,634	$	436,721		$	317,735	$	165,149		$	380,729	$	219,084	$	2,085,170
Total commercial loans current period gross charge-offs	$	(145	)	$	0	$	(20	)	$	0	$	(2	)	$	0	$	0	$	(167	)

	Term Loans Amortized Cost Basis by Origination Year
(in thousands)<br><br> <br>December 31	2023			2022			2021			2020			2019			Prior			Revolving<br><br> <br>Loans		Total
Hotel/motel
Risk rating:
Pass	$	79,651		$	144,826		$	28,011		$	17,664		$	40,873		$	42,030		$	4,042	$	357,097
Watch		11,569			2,826			6,835			4,623			3,361			1,648			0		30,862
OAEM		0			3,982			0			0			0			1,954			0		5,936
Substandard		0			0			0			0			0			1,118			0		1,118
Doubtful		0			0			0			0			0			752			0		752
Total hotel/motel		91,220			151,634			34,846			22,287			44,234			47,502			4,042		395,765
Commercial real estate residential
Risk rating:
Pass		109,304			89,119			98,896			30,972			11,908			36,964			14,700		391,863
Watch		2,317			2,131			473			1,395			721			6,359			124		13,520
OAEM		0			0			0			0			0			63			0		63
Substandard		760			854			4,532			834			285			5,232			0		12,497
Doubtful		0			0			0			0			0			0			0		0
Total commercial real estate residential		112,381			92,104			103,901			33,201			12,914			48,618			14,824		417,943
Commercial real estate residential current period gross charge-offs		0			0			(28	)		0			0			0			0		(28	)
Commercial real estate nonresidential
Risk rating:
Pass		149,633			142,580			136,090			68,240			55,850			140,074			31,536		724,003
Watch		552			3,664			6,305			2,347			1,938			6,003			354		21,163
OAEM		2,375			15			0			7,255			0			1,486			0		11,131
Substandard		2,520			1,598			2,538			4,472			2,000			9,199			0		22,327
Doubtful		0			0			0			0			0			13			0		13
Total commercial real estate nonresidential		155,080			147,857			144,933			82,314			59,788			156,775			31,890		778,637
Commercial real estate nonresidential current period gross charge-offs		0			0			(7	)		0			0			(287	)		0		(294	)
Dealer floorplans
Risk rating:
Pass		0			0			0			0			0			0			70,308		70,308
Watch		0			0			0			0			0			0			0		0
OAEM		0			0			0			0			0			0			0		0
Substandard		0			0			0			0			0			0			0		0
Doubtful		0			0			0			0			0			0			0		0
Total dealer floorplans		0			0			0			0			0			0			70,308		70,308
Commercial other
Risk rating:
Pass		73,115			47,575			40,448			30,033			4,780			22,588			81,791		300,330
Watch		1,138			1,109			569			126			239			635			5,877		9,693
OAEM		29			0			0			0			0			0			30		59
Substandard		4,921			3,581			381			890			211			403			613		11,000
Doubtful		0			0			0			0			0			0			0		0
Total commercial other		79,203			52,265			41,398			31,049			5,230			23,626			88,311		321,082
Commercial other current period gross charge-offs		(725	)		(710	)		(302	)		(27	)		(90	)		(46	)		0		(1,900	)
Commercial loans
Risk rating:
Pass		411,703			424,100			303,445			146,909			113,411			241,655			202,377		1,843,600
Watch		15,576			9,730			14,182			8,491			6,259			14,645			6,355		75,238
OAEM		2,404			3,997			0			7,255			0			3,503			30		17,189
Substandard		8,201			6,033			7,451			6,196			2,496			15,952			613		46,942
Doubtful		0			0			0			0			0			766			0		766
Total commercial loans	$	437,884		$	443,860		$	325,078		$	168,851		$	122,166		$	276,521		$	209,375	$	1,983,735
Total commercial loans current period gross charge-offs	$	(725	)	$	(710	)	$	(337	)	$	(27	)	$	(90	)	$	(333	)	$	0	$	(2,222	)

The following tables present the credit risk profile of CTBI’s residential real estate and consumer loan portfolios based on performing or nonperforming status, segregated by class:

(in thousands)	Term Loans Amortized Cost Basis by Origination Year
March 31	2024		2023			2022			2021			2020			Prior			Revolving<br><br> <br>Loans		Total
Home equity lines
Performing	$	0	$	0		$	0		$	0		$	0		$	7,846		$	142,986	$	150,832
Nonperforming		0		0			0			0			0			471			274		745
Total home equity lines		0		0			0			0			0			8,317			143,260		151,577
Mortgage loans
Performing		35,865		207,193			154,086			156,133			116,396			277,941			0		947,614
Nonperforming		0		29			469			188			192			7,124			0		8,002
Total mortgage loans		35,865		207,222			154,555			156,321			116,588			285,065			0		955,616
Mortgage loans current period gross charge-offs		0		0			0			0			0			(27	)		0		(27	)
Residential loans
Performing		35,865		207,193			154,086			156,133			116,396			285,787			142,986		1,098,446
Nonperforming		0		29			469			188			192			7,595			274		8,747
Total residential loans	$	35,865	$	207,222		$	154,555		$	156,321		$	116,588		$	293,382		$	143,260	$	1,107,193
Total residential loans current period gross charge-offs	$	0	$	0		$	0		$	0		$	0		$	(27	)	$	0	$	(27	)
Consumer direct loans
Performing	$	14,253	$	54,867		$	30,487		$	24,055		$	14,354		$	17,292		$	0	$	155,308
Nonperforming		0		44			451			0			4			0			0		499
Total consumer direct loans		14,253		54,911			30,938			24,055			14,358			17,292			0		155,807
Total consumer direct loans current period gross charge-offs		0		(24	)		(470	)		(14	)		(7	)		(18	)		0		(533	)
Consumer indirect loans
Performing		72,500		329,063			227,378			97,397			59,720			26,228			0		812,286
Nonperforming		0		316			249			110			3			41			0		719
Total consumer indirect loans		72,500		329,379			227,627			97,507			59,723			26,269			0		813,005
Total consumer indirect loans current period gross charge-offs		0		(577	)		(743	)		(442	)		(79	)		(99	)		0		(1,940	)
Consumer loans
Performing		86,753		383,930			257,865			121,452			74,074			43,520			0		967,594
Nonperforming		0		360			700			110			7			41			0		1,218
Total consumer loans	$	86,753	$	384,290		$	258,565		$	121,562		$	74,081		$	43,561		$	0	$	968,812
Total consumer loans current period gross charge-offs	$	0	$	(601	)	$	(1,213	)	$	(456	)	$	(86	)	$	(117	)	$	0	$	(2,473	)

(in thousands)	Term Loans Amortized Cost Basis by Origination Year
December<br> 31	2023			2022			2021			2020			2019			Prior			Revolving<br><br> <br>Loans		Total
Home equity lines
Performing	$	0		$	0		$	0		$	0		$	0		$	7,630		$	138,663	$	146,293
Nonperforming		0			0			0			0			0			442			301		743
Total home equity lines		0			0			0			0			0			8,072			138,964		147,036
Home equity lines current period gross charge-offs		0			0			0			0			0			(23	)		0		(23	)
Mortgage loans
Performing		200,442			162,407			159,857			119,772			56,601			231,147			0		930,226
Nonperforming		0			200			151			192			533			6,222			0		7,298
Total mortgage loans		200,442			162,607			160,008			119,964			57,134			237,369			0		937,524
Mortgage loans current period gross charge-offs		0			0			(47	)		0			(40	)		(53	)		0		(140	)
Residential loans
Performing		200,442			162,407			159,857			119,772			56,601			238,777			138,663		1,076,519
Nonperforming		0			200			151			192			533			6,664			301		8,041
Total residential loans	$	200,442		$	162,607		$	160,008		$	119,964		$	57,134		$	245,441		$	138,964	$	1,084,560
Total residential loans current period gross charge-offs	$	0		$	0		$	(47	)	$	0		$	(40	)	$	(76	)	$	0	$	(163	)
Consumer direct loans
Performing	$	63,686		$	34,722		$	26,250		$	15,560		$	6,951		$	11,922		$	0	$	159,091
Nonperforming		0			4			11			0			0			0			0		15
Total consumer direct loans		63,686			34,726			26,261			15,560			6,951			11,922			0		159,106
Total consumer direct loans current period gross charge-offs		(65	)		(263	)		(129	)		(37	)		(27	)		(20	)		0		(541	)
Consumer indirect loans
Performing		359,049			251,086			109,231			69,319			23,767			10,498			0		822,950
Nonperforming		133			223			157			11			22			9			0		555
Total consumer indirect loans		359,182			251,309			109,388			69,330			23,789			10,507			0		823,505
Total consumer indirect loans current period gross charge-offs		(541	)		(2,320	)		(1,688	)		(492	)		(121	)		(171	)		0		(5,333	)
Consumer loans
Performing		422,735			285,808			135,481			84,879			30,718			22,420			0		982,041
Nonperforming		133			227			168			11			22			9			0		570
Total consumer loans	$	422,868		$	286,035		$	135,649		$	84,890		$	30,740		$	22,429		$	0	$	982,611
Total consumer loans current period gross charge-offs	$	(606	)	$	(2,583	)	$	(1,817	)	$	(529	)	$	(148	)	$	(191	)	$	0	$	(5,874	)

* A loan is considered nonperforming if it is 90 days or more past due and/or on nonaccrual.

The total of consumer mortgage loans secured by real estate properties for which formal foreclosure proceedings are in process was $3.1 million and $3.5 million at March 31, 2024 and December 31, 2023, respectively.

In accordance with ASC 326-20-30-2, if a loan does not share risk characteristics with other pooled loans in determining the ACL, the loan shall be evaluated for expected credit losses on an individual basis. Of the loans that CTBI has individually evaluated, the loans listed below by segment are those that are collateral dependent:

	March 31, 2024
(in thousands)	Number of<br><br> <br>Loans		Recorded<br><br> <br>Investment		Specific<br><br> <br>Reserve
Hotel/motel		3	$	6,798	$	0
Commercial real estate residential		2		4,530		0
Commercial real estate nonresidential		9		21,549		325
Commercial other		2		5,265		0
Total collateral dependent loans		16	$	38,142	$	325
	December 31, 2023
---	---	---	---	---	---	---
(in thousands)	Number of<br><br> <br>Loans		Recorded<br><br> <br>Investment		Specific<br><br> <br>Reserve
Hotel/motel		3	$	6,810	$	0
Commercial real estate residential		2		5,080		0
Commercial real estate nonresidential		9		21,637		250
Commercial other		2		5,658		0
Total collateral dependent loans		16	$	39,185	$	250

	March 31, 2023
(in thousands)	Number of<br><br> <br>Loans		Recorded<br><br> <br>Investment		Specific<br><br> <br>Reserve
Hotel/motel		2	$	8,193	$	0
Commercial real estate residential		3		6,380		0
Commercial real estate nonresidential		6		11,712		0
Commercial other		2		8,043		0
Total collateral dependent loans		13	$	34,328	$	0

The hotel/motel, commercial real estate residential, and commercial real estate nonresidential segments are all collateralized with real estate. The two loans listed in the commercial other segment at March 31, 2024 are collateralized by inventory, equipment, and accounts receivable.

Certain loans have been modified where the customer is facing financial difficulty and economic concessions were granted to borrowers consisting of reductions in the interest rates, payment extensions, forgiveness of principal, and forbearances. These loans, segregated by class of loans and concession granted, are presented below for the quarters ended March 31, 2024 and 2023:

	Amortized Cost at March 31, 2024
(in thousands)	Interest Rate<br><br> <br>Reduction			% of total			Term Extension			% of total
Hotel/motel		$	0		0.00	%		$	0		0.00	%
Commercial real estate residential			0		0.00				65		0.01
Commercial real estate nonresidential			0		0.00				0		0.00
Dealer floorplans			0		0.00				0		0.00
Commercial other			0		0.00				1,517		0.47
Commercial loans			0		0.00				1,582		0.08
Real estate mortgage			189		0.02				2,782		0.29
Home equity lines			0		0.00				32		0.02
Residential loans			189		0.02				2,814		0.25
Consumer direct			0		0.00				38		0.02
Consumer indirect			0		0.00				269		0.03
Consumer loans			0		0.00				307		0.03
Loans and lease financing		$	189		0.00	%		$	4,703		0.11	%
	Amortized Cost at March 31, 2024
(in thousands)	Combination –<br><br> <br>Term Extension<br><br> <br>and Interest Rate<br><br> <br>Reduction			% of total			Payment Change			% of total
Hotel/motel		$	0		0.00	%		$	0		0.00	%
Commercial real estate residential			15		0.00				0		0.00
Commercial real estate nonresidential			28		0.00				11		0.00
Dealer floorplans			0		0.00				0		0.00
Commercial other			0		0.00				858		0.27
Commercial loans			43		0.00				869		0.04
Real estate mortgage			278		0.03				0		0.00
Home equity lines			39		0.03				0		0.00
Residential loans			317		0.03				0		0.00
Consumer direct			0		0.00				0		0.00
Consumer indirect			0		0.00				25		0.00
Consumer loans			0		0.00				25		0.00
Loans and lease financing		$	360		0.01	%		$	894		0.02	%

	Interest Rate Reduction					Term Extension
(in thousands)	Amortized Cost at<br><br> <br>March 31,<br> 2023		% of total			Amortized Cost at<br><br> <br>March 31,<br> 2023		% of total
Hotel/motel	$	0		0.00	%	$	0		0.00	%
Commercial real estate residential		358		0.09			1,369		0.36
Commercial real estate nonresidential		4,506		0.60			4,715		0.63
Dealer floorplans		0		0.00			0		0.00
Commercial other		0		0.00			963		0.30
Commercial loans		4,864		0.26			7,047		0.38
Real estate mortgage		59		0.01			2,446		0.29
Home equity lines		0		0.00			55		0.04
Residential loans		59		0.01			2,501		0.26
Consumer direct		0		0.00			178		0.11
Consumer indirect		0		0.00			396		0.05
Consumer loans		0		0.00			574		0.06
Loans and lease financing	$	4,923		0.13	%	$	10,122		0.27	%
	Combination – Term Extension<br><br> <br>and Interest Rate Reduction					Payment Change
---	---	---	---	---	---	---	---	---	---	---
(in thousands)	Amortized Cost at <br><br> March 31, 2023		% of total			Amortized Cost at<br><br> <br>March 31,<br> 2023		% of total
Hotel/motel	$	0		0.00	%	$	0		0.00	%
Commercial real estate residential		45		0.01			0		0.00
Commercial real estate nonresidential		0		0.00			0		0.00
Dealer floorplans		0		0.00			0		0.00
Commercial other		0		0.00			111		0.04
Commercial loans		45		0.00			111		0.01
Real estate mortgage		217		0.03			0		0.00
Home equity lines		35		0.03			60		0.05
Residential loans		252		0.03			60		0.01
Consumer direct		0		0.00			21		0.01
Consumer indirect		0		0.00			0		0.00
Consumer loans		0		0.00			21		0.00
Loans and lease financing	$	297		0.01	%	$	192		0.01	%

The following tables describe the financial effect of the modifications made to borrowers experiencing financial difficulty for the three months ended March 31, 2024:

	Interest Rate Reduction	Term Extension
Loan Type	Financial Impact	Financial Impact
Hotel/motel
Commercial real estate residential		Added a weighted-average 0.3 years to life of the loans
Commercial real estate nonresidential
Dealer floorplans
Commercial other		Added a weighted-average 0.5<br> years to life of the loans
Real estate mortgage	Reduced weighted-average contractual interest rate from 9.8% to 5.0%	Added a weighted-average 0.4 years to life of<br> the loans
Home equity lines		Added a weighted-average 0.5<br> years to life of the loans
Consumer direct		Added a weighted-average 0.1 years to life of<br> the loans
Consumer indirect		Added a weighted-average 0.1 years to life of<br> the loans

	Combination – Term Extension and<br><br> <br>Interest Rate Reduction	Payment Changes
Loan Type	Financial Impact	Financial Impact
Hotel/motel
Commercial real estate residential	Weighted-average contractual interest rate remained at 8.5% and increased the weighted-average life by 4.0 years
Commercial real estate nonresidential	Weighted-average contractual interest rate remained at 6.0% and increased the weighted-average life by 10.3<br> years	Provided payment changes that will be added to the end of the original loan term.
Dealer floorplans
Commercial other		Provided payment changes that will be added to the end of the original loan term.
Real estate mortgage	Reduced weighted-average contractual interest rate from 5.3%<br> to 5.2% and increased the weighted-average life by 5 years
Home equity lines	Reduced weighted-average contractual interest rate from 10.0%<br> to 8.5% and increased the weighted-average life by 17.7 years
Consumer direct
Consumer indirect		Provided payment changes that will be added to the end of the original loan term.

The following tables describe the financial effect of the modifications made to borrowers experiencing financial difficulty at March 31, 2023:

Loan Type	Interest Rate Reduction<br><br> <br>Financial Impact	Term Extension<br><br> <br>Financial Impact
Hotel/motel
Commercial real estate residential	Reduced weighted-average contractual interest rate from 9.6% to<br> 8.0%	The weighted-average term was not increased with the changes to this portfolio
Commercial real estate nonresidential	Reduced weighted-average contractual interest rate from 9.5% to<br> 7.5%	The weighted-average term was not increased with the changes to this portfolio
Dealer floorplans
Commercial other		Added a weighted-average 1.8 years to life of the loans, which<br> reduced monthly payment amounts to the borrower
Real estate mortgage	Changed from an adjustable rate to a fixed rate mortgage maintaining the contractual interest rate of 3.0%	Added a weighted-average 2.3 years to life of the loans, which<br> reduced monthly payment amounts to the borrower
Home equity lines		Added a weighted-average 6.67 years to life of the loans, which<br> reduced monthly payment amounts to the borrower
Consumer direct		Added a weighted-average 0.2 years to the life of the loans
Consumer indirect		Added a weighted-average 0.3 years to the life of the loans

Loan Type	Combination – Term Extension and<br><br> <br>Interest Rate Reduction<br><br> <br>Financial Impact	Payment Changes<br><br> <br>Financial Impact
Hotel/motel
Commercial real estate residential	Reduced weighted-average contractual interest rate from 10.8%<br> to 6.5% and increased the weighted-average life by 0.3 years
Commercial real estate nonresidential
Dealer floorplans
Commercial other		Provided payment changes that will be added to the end of the original loan term
Real estate mortgage	Reduced weighted-average contractual interest rate from 7.4%<br> to 6.1% and increased the weighted-average life by 12.9 years
Home equity lines	While the weighted-average contractual interest rate did not change materially from 7.7%, the weighted-average life increased by 5.0 years	Provided payment changes that will be added to the end of the original loan term
Consumer direct		Provided payment changes that will be added to the end of the original loan term
Consumer indirect

Loans retain their accrual status at the time of their modification. As a result, if a loan is on nonaccrual at the time it is modified, it stays as nonaccrual, and if a loan is on accrual at the time of the modification, it generally stays on accrual. Commercial and consumer loans modified due to a borrower’s financial difficulty are closely monitored for delinquency as an early indicator of possible future default. If a loan to a borrower experiencing financial difficulty subsequently defaults, CTBI evaluates the loan for possible further impairment. The

      table below represents the payment status of modified loans to borrowers experiencing financial difficulty.

	Past Due Status (Amortized Cost Basis)
(in thousands)	Current			30-89 Days		90+ Days	Nonaccrual
Hotel/motel	$	1,955	$	0	$	0	$	0
Commercial real estate residential		624		0		412		0
Commercial real estate nonresidential		1,606		0		28		0
Dealer floorplans		0		0		0		0
Commercial other		5,961		135		389		75
Real estate mortgage		6,145		418		380		365
Home equity lines		423		0		0		0
Consumer direct		64		14		0		0
Consumer indirect		346		3		0		0
Total	$	17,124	$	570	$	1,209	$	440

The allowance for credit losses may be increased, adjustments may be made in the allocation of the allowance, or partial charge-offs may be taken to further write-down the carrying value of the loan. CTBI considers a loan in default when it is 90 days or more past due or transferred to nonaccrual. Presented below, segregated by class of loans, are loans to borrowers experiencing financial difficulty for which there was a payment default during the period indicated and such default was within twelve months of the loan modification. There were no defaults as of March 31, 2023.

	Three Months Ended<br><br> <br>March 31, 2024
(in thousands)	Number of Loans		Recorded Balance
Commercial:
Commercial other		4		$	422
Commercial real estate residential		2			412
Real estate mortgage		3			197
Total defaulted restructured loans		9		$	1,031

Financial instrument credit losses apply to off-balance sheet credit exposures such as unfunded loan commitments and standby letters of credit. A liability for expected credit losses for off-balance sheet exposures is recognized if the entity has a present contractual obligation to extend the credit and the obligation is not unconditionally cancellable by the entity. Changes in this allowance are reflected in other operating expenses within the non-interest expense category. As of March 31, 2024 and December 31, 2023, the total unfunded commitment off-balance sheet credit exposure was $1.5 million, respectively.

Note 5 – Other Real Estate Owned

Activity for other real estate owned was as follows:

	Three Months Ended
	March 31
(in thousands)	2024			2023
Beginning balance of other real estate owned	$	1,616		$	3,671
New assets acquired		31			51
Capitalized costs		12			0
Fair value adjustments		(42	)		(81	)
Sale of assets		(351	)		(865	)
Ending balance of other real estate owned	$	1,266		$	2,776

Carrying costs and fair value adjustments associated with foreclosed properties for the three months ended March 31, 2024 and 2023 were $40 thousand and $0.1 million, respectively. See Note 1 for a description of our accounting policies relative to foreclosed properties and other real estate owned.

The major classifications of foreclosed properties are shown in the following table:

(in thousands)	March 31<br><br> <br>2024		December 31<br><br> <br>2023
1-4 family	$	492	$	827
Construction/land development/other		369		383
Non-farm/non-residential		405		406
Total foreclosed properties	$	1,266	$	1,616

Note 6 – Repurchase Agreements

We utilize securities sold under agreements to repurchase to facilitate the needs of our customers and provide additional funding to our balance sheet. Repurchase agreements are transactions whereby we offer to sell to a counterparty an undivided interest in an eligible security at an agreed upon purchase price, and which obligates CTBI to repurchase the security on an agreed upon date at an agreed upon repurchase price plus interest at an agreed upon rate. Securities sold under agreements to repurchase are recorded at the amount of cash received in connection with the transaction and are reflected in the accompanying consolidated balance sheets.

We monitor collateral levels on a continuous basis and maintain records of each transaction specifically describing the applicable security and the counterparty’s fractional interest in that security, and we segregate the security from its general assets in accordance with regulations governing custodial holdings of securities. The primary risk with our repurchase agreements is market risk associated with the securities securing the transactions, as we may be required to provide additional collateral based on fair value changes of the underlying securities. Securities pledged as collateral under repurchase agreements are maintained with our safekeeping agents. The carrying value of investment securities available-for-sale pledged as collateral under repurchase agreements totaled $294.1 million and $296.6 million at March 31, 2024 and December 31, 2023, respectively.

The remaining contractual maturity of the securities sold under agreements to repurchase by class of collateral pledged included in the accompanying consolidated balance sheets as of March 31, 2024 and December 31, 2023 is presented in the following tables:

	March 31, 2024
	Remaining Contractual Maturity of the Agreements
(in thousands)	Overnight<br><br> <br>and<br><br> <br>Continuous		Up to<br><br> <br>30 days		30-90 days		Greater<br><br> <br>Than<br><br> <br>90 days		Total
Repurchase agreements and repurchase-to-maturity transactions:
U.S. Treasury and government agencies	$	22,889	$	0	$	22,000	$	4,673	$	49,562
State and political subdivisions		103,406		0		0		11,072		114,478
U.S. government sponsored agency mortgage-backed securities		18,425		0		0		48,209		66,634
Asset-backed securities		3,997		0		0		0		3,997
Total	$	148,717	$	0	$	22,000	$	63,954	$	234,671
	December 31, 2023
---	---	---	---	---	---	---	---	---	---	---
	Remaining Contractual Maturity of the Agreements
(in thousands)	Overnight<br><br> <br>and<br><br> <br>Continuous		Up to<br><br> <br>30 days		30-90 days		Greater<br><br> <br>Than<br><br> <br>90 days		Total
Repurchase agreements and repurchase-to-maturity transactions:
U.S. Treasury and government agencies	$	21,156	$	19	$	1,817	$	23,640	$	46,632
State and political subdivisions		98,053		481		5,962		3,219		107,715
U.S. government sponsored agency mortgage-backed securities		17,538		0		41,521		9,269		68,328
Asset-backed securities		2,570		0		0		0		2,570
Total	$	139,317	$	500	$	49,300	$	36,128	$	225,245

Note 7 – Fair Value of Financial Assets and Liabilities

Fair Value Measurements

ASC 820, Fair Value Measurements,

  defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements.  ASC 820 applies whenever other standards require \(or permit\) assets or liabilities to be measured at fair value but
  does not expand the use of fair value in any new circumstances.  Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs.  In this standard, the FASB clarifies the principle that fair value
  should be based on the exit price when pricing the asset or liability.  In support of this principle, ASC 820 establishes a fair value hierarchy that prioritizes the information used to develop those assumptions.  The fair value hierarchy is as
  follows:

Level 1 Inputs – Quoted prices in active markets for identical assets or liabilities.

Level 2 Inputs – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3 Inputs – Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in determining an exit price for the assets or liabilities.

Recurring Measurements

The following tables present the fair value measurements of assets recognized in the accompanying balance sheets measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023 and indicate the level within the fair value hierarchy of the valuation techniques.

			Fair Value Measurements at<br><br> <br>March 31, 2024 Using
(in thousands)	Fair Value		Quoted<br><br> <br>Prices in<br><br> <br>Active<br><br> <br>Markets for<br><br> <br>Identical <br><br> Assets<br><br> <br>(Level 1)		Significant<br><br> <br>Other<br><br> <br>Observable<br><br> <br>Inputs<br><br> <br>(Level 2)		Significant<br><br> <br>Unobservable<br><br> <br>Inputs<br><br> <br>(Level 3)
Assets measured – recurring basis
Available-for-sale securities:
U.S. Treasury and government agencies	$	340,501	$	323,332	$	17,169	$	0
State and political subdivisions		261,430		0		261,430		0
U.S. government sponsored agency mortgage-backed securities		436,376		0		436,376		0
Asset-backed securities		73,198		0		73,198		0
Equity securities at fair value		3,529		0		0		3,529
Mortgage servicing rights		7,792		0		0		7,792

			Fair Value Measurements at<br><br> <br>December 31, 2023<br> Using
(in thousands)	Fair Value		Quoted<br><br> <br>Prices in<br><br> <br>Active<br><br> <br>Markets for<br><br> <br>Identical<br><br> <br>Assets<br><br> <br>(Level 1)		Significant<br><br> <br>Other<br><br> <br>Observable<br><br> <br>Inputs<br><br> <br>(Level 2)		Significant<br><br> <br>Unobservable<br><br> <br>Inputs<br><br> <br>(Level 3)
Assets measured – recurring basis
Available-for-sale securities:
U.S. Treasury and government agencies	$	354,817	$	336,285	$	18,532	$	0
State and political subdivisions		264,945		0		264,945		0
U.S. government sponsored agency mortgage-backed securities		456,736		0		456,736		0
Asset-backed securities		87,226		0		87,226		0
Equity securities at fair value		3,158		0		0		3,158
Mortgage servicing rights		7,665		0		0		7,665

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a recurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy. These valuation methodologies were applied to all of CTBI’s financial assets carried at fair value. CTBI had no liabilities measured and recorded at fair value as of March 31, 2024 and December 31, 2023. There have been no significant changes in the valuation techniques during the quarter ended March 31, 2024. For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

Available-for-Sale Securities

Securities classified as AFS are reported at fair value on a recurring basis. U.S. Treasury and government agencies are classified as Level 1 of the valuation hierarchy where quoted market prices are available in the active market on which the individual securities are traded.

If quoted market prices are not available, CTBI obtains fair value measurements from an independent pricing service, such as Interactive Data, which utilizes pricing models to determine fair value measurement. CTBI reviews the pricing quarterly to verify the reasonableness of the pricing. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the bond’s terms and conditions, among other factors. U.S. Treasury and government agencies, state and political subdivisions, U.S. government sponsored agency mortgage-backed securities, and asset-backed securities are classified as Level 2 inputs.

In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. Fair value determinations for Level 3 measurements are estimated on a quarterly basis where assumptions used are reviewed to ensure the estimated fair value complies with accounting standards generally accepted in the United States.

Equity Securities at Fair Value

As of March 31, 2024 and December 31, 2023, the only securities owned by CTBI that were valued using Level 3 criteria are Visa Class B Stock (included in equity securities at fair value). Fair value for Visa Class B Stock is determined by an independent third party utilizing assumptions about factors such as quarterly common stock dividend payments, the conversion of the securities to the relevant Class A Stock shares subject to the prevailing conversion rate, and conversion date. We have concluded the third party assumptions, processes, and conclusions to be reasonable and appropriate in determining the fair value of this asset. See the table below for inputs and valuation techniques used for Level 3 equity securities.

Mortgage Servicing Rights

Mortgage servicing rights (“MSRs”) do not trade in an active, open market with readily observable prices. CTBI reports MSRs at fair value on a recurring basis with subsequent remeasurement of MSRs based on change in fair value.

In determining fair value, CTBI utilizes the expertise of an independent third party. Accordingly, fair value is determined by the independent third party by utilizing assumptions about factors such as mortgage interest rates, discount rates, mortgage loan prepayment speeds, market trends, and industry demand. Due to the nature of the valuation inputs, MSRs are classified within Level 3 of the hierarchy. Fair value determinations for Level 3 measurements of MSRs are tested for impairment on a quarterly basis where assumptions used are reviewed to ensure the estimated fair value complies with accounting standards generally accepted in the United States. We have reviewed the assumptions, processes, and conclusions of the third party provider. We have determined these assumptions, processes, and conclusions to be reasonable and appropriate in determining the fair value of this asset. See the table below for inputs and valuation techniques used for Level 3 MSRs.

Level 3 Reconciliation

Following is a reconciliation of the beginning and ending balances of recurring fair value measurements, for the periods indicated, using significant unobservable (Level 3) inputs:

	Three Months Ended<br><br> <br>March 31, 2024					Three Months Ended<br><br> <br>March 31, 2023
(in thousands)	Equity<br><br> <br>Securities<br><br> <br>at Fair<br><br> <br>Value		Mortgage<br><br> <br>Servicing<br><br> <br>Rights			Equity<br><br> <br>Securities<br><br> <br>at Fair Value		Mortgage<br><br> <br>Servicing<br><br> <br>Rights
Beginning balance	$	3,158	$	7,665		$	2,166	$	8,468
Total unrealized gains (losses)
Included in net income		371		276			214		(214	)
Issues		0		19			0		50
Settlements		0		(168	)		0		(183	)
Ending balance	$	3,529	$	7,792		$	2,380	$	8,121
Total gains (losses) for the period included in net income attributable to the change in unrealized gains or<br> losses related to assets still held at the reporting date	$	371	$	276		$	214	$	(214	)

Realized and unrealized gains and losses for items reflected in the table above are included in net income in the consolidated statements of income as follows:

Noninterest Income

	Three Months Ended
	March 31
(in thousands)	2024		2023
Total gains	$	479	$	(183	)

Nonrecurring Measurements

The following tables present the fair value measurements of assets recognized in the accompanying balance sheets measured at fair value on a nonrecurring basis as of March 31, 2024 and December 31, 2023 and indicate the level within the fair value hierarchy of the valuation techniques.

			Fair Value Measurements at<br><br> <br>March 31, 2024 Using
(in thousands)	Fair Value		Quoted<br><br> <br>Prices in<br><br> <br>Active<br><br> <br>Markets for<br><br> <br>Identical<br><br> <br>Assets<br><br> <br>(Level 1)		Significant<br><br> <br>Other<br><br> <br>Observable<br><br> <br>Inputs<br><br> <br>(Level 2)		Significant<br><br> <br>Unobservable<br><br> <br>Inputs<br><br> <br>(Level 3)
Assets measured – nonrecurring basis
Collateral dependent loans	$	8,322	$	0	$	0	$	8,322
Other real estate owned		0		0		0		0
			Fair Value Measurements at<br><br> <br>December 31, 2023 Using
---	---	---	---	---	---	---	---	---
(in thousands)	Fair Value		Quoted<br><br> Prices in<br><br> <br>Active<br><br> <br>Markets for<br><br> <br>Identical<br><br> <br>Assets<br><br> <br>(Level 1)		Significant<br><br> <br>Other<br><br> <br>Observable<br><br> <br>Inputs<br><br> <br>(Level 2)		Significant<br><br> <br>Unobservable<br><br> <br>Inputs<br><br> <br>(Level 3)
Assets measured – nonrecurring basis
Collateral dependent loans	$	8,397	$	0	$	0	$	8,397
Other real estate owned		205		0		0		205

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying balance sheet, as well as the general classification of such assets pursuant to the valuation hierarchy. For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

Collateral Dependent Loans

The estimated fair value of collateral-dependent loans is based on the appraised fair value of the collateral, less estimated cost to sell. Collateral-dependent loans are classified within Level 3 of the fair value hierarchy.

CTBI considers the appraisal or evaluation as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value. Appraisals of the collateral underlying collateral-dependent loans are obtained when the loan is determined to be collateral-dependent and subsequently as deemed necessary by the Chief Credit Officer. Appraisals are reviewed for accuracy and consistency by the Chief Credit Officer. Appraisers are selected from the list of approved appraisers maintained by management. The appraised values are reduced by discounts to consider lack of marketability and estimated cost to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral. These discounts and estimates are developed by the Chief Credit Officer by comparison to historical results.

Loans considered collateral dependent are loans 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 in accordance with ASC 326-20-35-5.  Fair value adjustments on collateral-dependent loans
    disclosed above were $0.1 million for the quarter ended March 31, 2024.  There were no
    losses reported for the quarter ended March 31, 2023, while losses for the year ended December 31, 2023 were $0.3 million.

Other Real Estate Owned

In accordance with the provisions of ASC 360, Property, Plant, and Equipment, other real estate owned (“OREO”) is carried at the lower of fair value at acquisition date or current estimated fair value, less estimated cost to sell when the real estate is

    acquired.  Estimated fair value of OREO is based on appraisals or evaluations.  OREO is classified within Level 3 of the fair value hierarchy.  Long-lived assets are subject to nonrecurring fair value adjustments to reflect subsequent partial
    write-downs that are based on the observable market price or current appraised value of the collateral.  There were no fair value
    adjustments for the quarters ended March 31, 2024 on OREO disclosed above.  Losses for the quarter ended March 31, 2023 and year ended December 31, 2023 were $0.1 million.

Our policy for determining the frequency of periodic reviews is based upon consideration of the specific properties and the known or perceived market fluctuations in a particular market and is typically between 12 and 18 months but generally not more than 24 months. Appraisers are selected from the list of approved appraisers maintained by management.

Unobservable (Level 3) Inputs

The following tables present quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements at March 31, 2024 and December 31, 2023.

	Quantitative Information about Level 3 Fair Value Measurements
(in thousands)	Fair Value at<br><br> <br>March 31,<br><br> <br>2024		Valuation<br><br> <br>Technique(s)	Unobservable Input	Range<br><br> <br>(Weighted<br><br> <br>Average)
Equity securities at fair value	$	3,529	Discount cash flows, computer pricing model	Discount rate		15.0% - 25.0%<br><br> <br>(20.0%)
				Conversion date	Dec 2028 -<br><br> <br>Dec 2032<br><br> <br>(Dec 2030)
Mortgage servicing rights	$	7,792	Discount cash flows, computer pricing model	Constant prepayment rate		0.0% - 28.7%<br><br> <br>(7.4%)
				Probability of default		0.0% - 66.7%<br><br> <br>(1.0%)
				Discount rate		9.7% - 12.0%<br><br> <br>(10.0%)
Collateral-dependent loans	$	8,322	Market comparable properties	Marketability discount		10.5% - 27.4%<br><br> <br>(13.9%)
Other real estate owned	$	0	Market comparable properties	Comparability adjustments		0%

	Quantitative Information about Level 3 Fair Value Measurements
(in thousands)	Fair Value at<br><br> <br>December 31,<br><br> <br>2023		Valuation<br><br> <br>Technique(s)	Unobservable Input	Range<br><br> <br>(Weighted<br><br> <br>Average)
Equity securities at fair value	$	3,158	Discount cash flows, computer pricing model	Discount rate		15.0% - 12.0%<br><br> <br>(10.0%)
				Conversion date	Dec 2028 - Dec 2032<br><br> <br>(Dec 2030)
Mortgage servicing rights	$	7,665	Discount cash flows, computer pricing model	Constant prepayment rate		0.0% - 77.6%<br><br> <br>(7.5%)
				Probability of default		0.0% - 66.7%<br><br> <br>(1.0%)
				Discount rate		9.5% - 12.0%<br><br> <br>(10.0%)
Collateral-dependent loans	$	8,397	Market comparable properties	Marketability discount		10.9% - 19.6%<br><br> <br>(12.2%)
Other real estate owned	$	205	Market comparable properties	Comparability adjustments		10.0% - 23.9%<br><br> <br>(17.5%)

Uncertainty of Fair Value Measurements

The following is a discussion of the uncertainty of fair value measurements, the interrelationships between those inputs and other unobservable inputs used in recurring fair value measurement, and how those inputs might magnify or mitigate the effect of changes in the unobservable inputs on the fair value measurement.

Equity Securities at Fair Value

Fair value for equity securities is derived based on unobservable inputs, such as the discount rate, quarterly dividends payable to the Visa Class B common stock, and the prevailing conversion rate at the conversion date. The most recent conversion rate of 1.5875 and the most recent dividend rate of 0.8255 were used to derive the fair value estimate. Significant increases (decreases) in either of those inputs in isolation would result in a significantly lower (higher) fair value measurement. Generally, a change in the assumption used for discount rate is accompanied by a directionally opposite change in the fair value estimate.

Mortgage Servicing Rights

Fair value for MSRs is derived based on unobservable inputs, such as prepayment speeds of the underlying loans generated using the Andrew Davidson Prepayment Model, FHLMC/FNMA guidelines, the weighted average life of the loan, the discount rate, the weighted average coupon, and the weighted average default rate. Significant increases (decreases) in either of those inputs in isolation would result in a significantly lower (higher) fair value measurement. Generally, a change in the assumption used for prepayment speeds is accompanied by a directionally opposite change in the assumption for interest rates.

Fair Value of Financial Instruments

The following table presents estimated fair value of CTBI’s financial instruments as of March 31, 2024 and indicates the level within the fair value hierarchy of the valuation techniques. In accordance with the adoption of ASU 2016-01, the fair values as of March 31, 2024 were measured using an exit price notion.

			Fair Value Measurements<br><br> <br>at March 31, 2024 Using
(in thousands)	Carrying<br><br> <br>Amount		Quoted<br><br> <br>Prices in<br><br> <br>Active<br><br> <br>Markets for<br><br> <br>Identical<br><br> <br>Assets<br><br> <br>(Level 1)		Significant<br><br> <br>Other<br><br> <br>Observable<br><br> <br>Inputs<br><br> <br>(Level 2)		Significant<br><br> <br>Unobservable<br><br> <br>Inputs<br><br> <br>(Level 3)
Financial assets:
Cash and cash equivalents	$	293,298	$	293,298	$	0	$	0
Certificates of deposit in other banks		245		0		245		0
Debt securities available-for-sale		1,111,505		323,332		788,173		0
Equity securities at fair value		3,529		0		0		3,529
Loans held for sale		57		59		0		0
Loans, net		4,110,604		0		0		3,831,409
Federal Home Loan Bank stock		4,440		0		4,440		0
Federal Reserve Bank stock		4,887		0		4,887		0
Accrued interest receivable		23,532		0		23,532		0
Financial liabilities:
Deposits	$	4,784,270	$	1,016,951	$	3,346,616	$	0
Repurchase agreements		234,671		0		0		234,671
Federal funds purchased		500		0		500		0
Advances from Federal Home Loan Bank		329		0		340		0
Long-term debt		64,185		0		0		49,200
Accrued interest payable		9,365		0		9,365		0
Unrecognized financial instruments:
Letters of credit	$	0	$	0	$	0	$	0
Commitments to extend credit		0		0		0		0
Forward sale commitments		0		0		0		0

The following table presents estimated fair value of CTBI’s financial instruments as of December 31, 2023 and indicates the level within the fair value hierarchy of the valuation techniques.

			Fair Value Measurements<br><br> <br>at December 31, 2023 Using
(in thousands)	Carrying<br><br> <br>Amount		Quoted<br><br> <br>Prices in<br><br> <br>Active<br><br> <br>Markets for<br><br> <br>Identical<br><br> <br>Assets<br><br> <br>(Level 1)		Significant<br><br> <br>Other<br><br> <br>Observable<br><br> <br>Inputs (Level 2)		Significant<br><br> <br>Unobservable<br><br> <br>Inputs<br><br> <br>(Level 3)
Financial assets:
Cash and cash equivalents	$	271,400	$	271,400	$	0	$	0
Certificates of deposit in other banks		245		0		245		0
Debt securities available-for-sale		1,163,724		336,285		827,439		0
Equity securities at fair value		3,158		0		0		3,158
Loans held for sale		152		154		0		0
Loans, net		4,001,363		0		0		3,745,477
Federal Home Loan Bank stock		4,712		0		4,712		0
Federal Reserve Bank stock		4,887		0		4,887		0
Accrued interest receivable		23,575		0		23,575		0
Financial liabilities:
Deposits	$	4,724,622	$	1,260,690	$	3,480,806	$	0
Repurchase agreements		225,245		0		0		225,187
Federal funds purchased		500		0		500		0
Advances from Federal Home Loan Bank		334		0		349		0
Long-term debt		64,241		0		0		50,326
Accrued interest payable		7,389		0		7,389		0
Unrecognized financial instruments:
Letters of credit	$	0	$	0	$	0	$	0
Commitments to extend credit		0		0		0		0
Forward sale commitments		0		0		0		0

Note 8 – Revenue Recognition

CTBI’s primary source of revenue is interest income generated from loans and investment securities. Interest income is recognized according to the terms of the financial instrument agreement over the life of the loan or investment security unless it is determined that the counterparty is unable to continue making interest payments. Interest income also includes prepaid interest fees from commercial customers, which approximates the interest foregone on the balance of the loan prepaid.

CTBI’s additional source of income, also referred to as noninterest income, includes service charges on deposit accounts, gains on sales of loans, trust and wealth management income, loan related fees, brokerage revenue, and other miscellaneous income and is largely based on contracts with customers. In these cases, CTBI recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. CTBI considers a customer to be any party to which we will provide goods or services that are an output of CTBI’s ordinary activities in exchange for consideration. There is little seasonality with regards to revenue from contracts with customers and all inter-company revenue is eliminated when CTBI’s financial statements are consolidated.

Generally, CTBI enters into contracts with customers that are short-term in nature where the performance obligations are fulfilled and payment is processed at the same time. Such examples include revenue related to merchant fees, interchange fees, and investment services income. In addition, revenue generated from existing customer relationships such as deposit accounts are also considered short-term in nature, because the relationship may be terminated at any time and payment is processed at the time performance obligations are fulfilled. As a result, CTBI does not have contract assets, contract liabilities, or related receivable accounts for contracts with customers. In cases where collectability is a concern, CTBI does not record revenue.

Generally, the pricing of transactions between CTBI and each customer is either (i) established within a legally enforceable contract between the two parties, as is the case with loan sales, or (ii) disclosed to the customer at a specific point in time, as is the case when a deposit account is opened or before a new loan is underwritten. Fees are usually fixed at a specific amount or as a percentage of a transaction amount. No judgment or estimates by management are required to record revenue related to these transactions and pricing is clearly identified within these contracts.

CTBI primarily operates in Kentucky and contiguous areas. Therefore, all significant operating decisions are based upon analysis of CTBI as one operating segment.

We disaggregate our revenue from contracts with customers by contract-type and timing of revenue recognition, as we believe it best depicts how the nature, amount, timing, and uncertainty of our revenue and cash flows are affected by economic factors. Noninterest income not generated from customers during CTBI’s ordinary activities primarily relates to MSRs, gains/losses on the sale of investment securities, gains/losses on the sale of OREO, gains/losses on the sale of property, plant and equipment, and income from bank owned life insurance.

For more information related to our components of noninterest income, see the Condensed Consolidated Statements of Income and Comprehensive Income above.

Note 9 – Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share:

	Three Months Ended
	March 31
(in thousands except per share data)	2024		2023
Numerator:
Net income	$	18,679	$	19,313
Denominator:
Basic earnings per share:
Weighted average shares		17,926		17,872
Diluted earnings per share:
Effect of dilutive stock options and restricted stock grants		17		12
Adjusted weighted average shares		17,943		17,884
Earnings per share:
Basic earnings per share	$	1.04	$	1.08
Diluted earnings per share		1.04		1.08

There were no options to purchase common shares that were excluded from the diluted calculations above for the three months ended March 31, 2024 and 2023. In addition to in-the-money stock options, unvested restricted stock grants were also used in the calculation of diluted earnings per share based on the treasury method.

Note 10 – Accumulated Other Comprehensive Income (Loss)

Unrealized gains (losses) on AFS securities

Amounts reclassified from accumulated other comprehensive income (loss) (“AOCI”) and the affected line items in the statements of income during the three months ended March 31, 2024 and 2023 were:

	Amounts Reclassified from<br><br> <br>AOCI
	Three Months Ended<br><br> <br>March 31
(in thousands)	2024		2023
Affected line item in the statements of income
Securities gains	$	0	$	4
Tax expense		0		1
Total reclassifications out of AOCI	$	0	$	3

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

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

❖	Our Business
❖	Financial Goals and Performance
---	---
❖	Results of Operations and Financial Condition
---	---
❖	Liquidity and Market Risk
---	---
❖	Interest Rate Risk
---	---
❖	Capital Resources
---	---
❖	Impact of Inflation, Changing Prices, and Economic Conditions
---	---
❖	Stock Repurchase Program
---	---
❖	Critical Accounting Policies and Estimates
---	---

Our Business

Community Trust Bancorp, Inc. (“CTBI”) is a bank holding company headquartered in Pikeville, Kentucky. Currently, we own one commercial bank, Community Trust Bank, Inc. (“CTB”) and one trust company, Community Trust and Investment Company. Through our subsidiaries, we have eighty banking locations in eastern, northeastern, central, and south central Kentucky, southern West Virginia, and northeastern Tennessee, four trust offices across Kentucky, and one trust office in northeastern Tennessee. At March 31, 2024, we had total consolidated assets of $5.9 billion and total consolidated deposits, including repurchase agreements, of $5.0 billion. Total shareholders’ equity at March 31, 2024 was $707.7 million. Trust assets under management at March 31, 2024 were $3.5 billion, including CTB’s investment portfolio totaling $1.1 billion.

Through our subsidiaries, CTBI engages in a wide range of commercial and personal banking and trust and wealth management activities, which include accepting time and demand deposits; making secured and unsecured loans to corporations, individuals, and others; providing cash management services to corporate and individual customers; issuing letters of credit; renting safe deposit boxes; and providing funds transfer services. 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. Our corporate subsidiaries act as trustees of personal trusts, as executors of estates, as trustees for employee benefit trusts, as paying agents for bond and stock issues, as investment agent, as depositories for securities, and as providers of full-service brokerage and insurance services. For further information, see Item 1 of our annual report on Form 10-K for the year ended December 31, 2023.

Results of Operations and Financial Condition

We reported earnings for the first quarter 2024 of $18.7 million, or $1.04 per basic share, compared to $18.7 million, or $1.04 per basic share, earned during the fourth quarter 2023 and $19.3 million, or $1.08 per basic share, earned during the first quarter 2023. Total revenue was $2.0 million above prior quarter and $1.1 million above prior year same quarter. Net interest revenue increased $0.6 million compared to prior quarter but decreased $0.3 million compared to prior year same quarter, and noninterest income increased $1.4 million compared to prior quarter and $1.5 million compared to prior year same quarter. Our provision for credit losses for the quarter increased $0.8 million from prior quarter and $1.5 million from prior year same quarter. Noninterest expense increased $0.6 million compared to prior quarter and $0.3 million compared to prior year same quarter. Noninterest expense and tax expense were impacted by an accounting method change (ASU No. 2023-02), which is intended to improve the accounting and disclosures for investments in tax credit structures. Historically, the amortization expense related to our tax credits has been booked to noninterest expense. Beginning in January 2024, the amortization expense is now booked to tax expense. Our total amortization expense related to tax credits was $0.8 million for the three months ended March 31, 2024.

Quarterly Highlights

❖	Net interest income for the quarter of $43.6 million was $0.6 million above prior quarter but $0.3 million below prior year same quarter, as our net interest margin increased 4 basis points from prior quarter but decreased 26 basis<br> points from prior year same quarter.
❖	Provision for credit losses at $2.7 million for the quarter increased $0.8 million from prior quarter and $1.5 million from prior year same quarter.
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❖	Our loan portfolio at $4.2 billion increased $110.3 million, an annualized 10.9%, from December 31, 2023 and $383.8 million, or 10.2%, from March 31, 2023.
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❖	We had net loan charge-offs of $1.6 million, or 0.16% of average loans annualized, for the first quarter 2024 compared to $1.0 million, or 0.10% of average loans annualized, for the fourth quarter 2023 and $0.4 million for the first<br> quarter 2023.
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❖	Our total nonperforming loans increased to $15.9 million at March 31, 2024 from $14.0 million at December 31, 2023 and $12.2 million at March 31, 2023. Nonperforming assets at $17.1 million increased $1.5 million from December 31, 2023<br> and $2.1 million from March 31, 2023.
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❖	Deposits, including repurchase agreements, at $5.0 billion increased $69.1 million, or an annualized 5.6%, from December 31, 2023 and $266.7 million, or 5.6%, from March 31, 2023.
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❖	Shareholders’ equity at $707.7 million increased $5.5 million, or an annualized 3.2%, during the quarter and $50.9 million, or 7.7%, from March 31, 2023.
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❖	Noninterest income for the quarter ended March 31, 2024 of $15.1 million was $1.4 million, or 10.3%, above prior quarter and $1.5 million, or 10.6%, above prior year same quarter.
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❖	Noninterest expense for the quarter ended March 31, 2024 of $32.2 million was $0.6 million, or 1.9%, above prior quarter and $0.3 million, or 1.0%, above prior year same quarter.
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Income Statement Review

							Change Q-O-Q
(dollars in thousands)	1Q 2024			1Q 2023			Amount			Percent
Net interest income	$	43,591		$	43,916		$	(325	)		(0.7	)%
Provision for credit losses		2,656			1,116			1,540			138.0	%
Noninterest income		15,134			13,682			1,452			10.6	%
Noninterest expense		32,220			31,890			330			1.0	%
Income taxes		5,170			5,279			(109	)		(2.1	)%
Net income	$	18,679		$	19,313		$	(634	)		(3.3	)%
Average earning assets	$	5,458,075		$	5,131,385		$	326,690			6.4	%
Yield on average earnings assets, tax equivalent*		5.55	%		4.84	%		0.71	%		14.5	%
Cost of interest bearing funds		3.35	%		2.06	%		1.29	%		62.5	%
Net interest margin, tax equivalent*		3.23	%		3.49	%		(0.26	)%		(7.5	)%

*Yield on average earning assets and net interest margin are computed on a taxable equivalent basis using a 24.95% tax rate.

Net Interest Income

										Percent Change
										1Q 2024 Compared to:
($ in thousands)	1Q<br><br> <br>2024			4Q<br><br> <br>2023			1Q<br><br> <br>2023			4Q<br><br> <br>2023			1Q<br><br> <br>2023
Components of net interest income:
Income on earning assets	$	75,002		$	73,329		$	60,995			2.3	%		23.0	%
Expense on interest bearing liabilities		31,411			30,354			17,079			3.5	%		83.9	%
Net interest income	$	43,591		$	42,975		$	43,916			1.4	%		(0.7	)%
TEQ		294			297			298			(1.0	)%		(1.3	)%
Net interest income, tax equivalent	$	43,885		$	43,272		$	44,214			1.4	%		(0.7	)%
Average yield and rates paid:
Earning assets yield		5.55	%		5.43	%		4.84	%		2.2	%		14.7	%
Rate paid on interest bearing liabilities		3.35	%		3.27	%		2.06	%		2.4	%		62.6	%
Gross interest margin		2.20	%		2.16	%		2.78	%		1.9	%		(20.9	)%
Net interest margin		3.23	%		3.19	%		3.49	%		1.3	%		(7.4	)%
Average balances:
Investment securities	$	1,148,014		$	1,144,078		$	1,251,948			0.3	%		(8.3	)%
Loans	$	4,096,866		$	4,022,547		$	3,739,443			1.8	%		9.6	%
Earning assets	$	5,458,075		$	5,377,827		$	5,131,385			1.5	%		6.4	%
Interest-bearing liabilities	$	3,773,513		$	3,687,660		$	3,362,331			2.3	%		12.2	%

Net interest income for the quarter of $43.6 million was $0.6 million above prior quarter but $0.3 million below prior year same quarter. Our net interest margin, on a fully tax equivalent basis, at 3.23% increased 4 basis points from prior quarter but decreased 26 basis points from prior year same quarter. Our average earning assets increased $80.2 million from prior quarter and $326.7 million from prior year same quarter. Our yield on average earning assets increased 12 basis points from prior quarter and 71 basis points from prior year same quarter, and our cost of funds increased 8 basis points from prior quarter and 129 basis points from prior year same quarter.

Our ratio of average loans to deposits, including repurchase agreements, was 82.7% for the quarter ended March 31, 2024 compared to 81.8% for the quarter ended December 31, 2023 and 79.8% for the quarter ended March 31, 2023.

Provision for Credit Losses

Our provision for credit losses for the quarter increased $0.8 million from prior quarter and $1.5 million from prior year same quarter. Our reserve coverage (ACL to nonperforming loans) at March 31, 2024 was 319.0% compared to 354.7% at December 31, 2023 and 382.3% at March 31, 2023. Our credit loss reserve as a percentage of total loans outstanding at March 31, 2024 remained at 1.22% from December 31, 2023, down from the 1.24% at March 31, 2023.

Noninterest Income

							Percent Change
							1Q 2024 Compared to:
($ in thousands)	1Q<br><br> <br>2024		4Q<br><br> <br>2023		1Q<br><br> <br>2023		4Q<br><br> <br>2023			1Q<br><br> <br>2023
Deposit related fees	$	7,011	$	7,312	$	7,287		(4.1	)%		(3.8	)%
Trust revenue		3,517		3,318		3,079		6.0	%		14.2	%
Gains on sales of loans		45		54		121		(16.7	)%		(62.8	)%
Loan related fees		1,352		467		845		189.5	%		60.0	%
Bank owned life insurance revenue		1,292		816		858		58.3	%		50.6	%
Brokerage revenue		490		285		348		71.9	%		40.8	%
Other		1,427		1,473		1,144		(3.1	)%		24.7	%
Total noninterest income	$	15,134	$	13,725	$	13,682		10.3	%		10.6	%

Noninterest income for the quarter ended March 31, 2024 of $15.1 million was $1.4 million, or 10.3%, above prior quarter and $1.5 million, or 10.6%, above prior year same quarter. The quarter over quarter increase included a $0.9 million increase in loan related fees, a $0.5 million increase in bank owned life insurance revenue, a $0.2 million increase in trust revenue, and a $0.2 million increase in brokerage revenue, partially offset by a $0.3 million decrease in deposit related fees. The year over year increase included a $0.5 million increase in loan related fees, a $0.4 million increase in bank owned life insurance revenue, and a $0.4 million increase in trust revenue. The increase in loan related fees resulted from the fluctuation in the fair market value of our mortgage servicing rights.

Noninterest Expense

							Percent Change
							1Q 2024 Compared to:
($ in thousands)	1Q<br><br> <br>2024		4Q<br><br> <br>2023		1Q<br><br> <br>2023		4Q<br><br> <br>2023			1Q<br><br> <br>2023
Salaries	$	13,036	$	13,163	$	12,633		(1.0	)%		3.2	%
Employee benefits		7,086		5,282		6,275		34.2	%		12.9	%
Net occupancy and equipment		3,028		3,045		3,028		(0.6	)%		0.0	%
Data processing		2,518		2,630		2,303		(4.3	)%		9.3	%
Legal and professional fees		832		900		816		(7.6	)%		2.0	%
Advertising and marketing		577		923		820		(37.5	)%		(29.6	)%
Taxes other than property and payroll		442		421		432		5.0	%		2.3	%
Other		4,701		5,264		5,583		(10.7	)%		(15.8	)%
Total noninterest expense	$	32,220	$	31,628	$	31,890		1.9	%		1.0	%

Noninterest expense for the quarter ended March 31, 2024 of $32.2 million was $0.6 million, or 1.9%, above prior quarter and $0.3 million, or 1.0%, above prior year same quarter. The increase in noninterest expense quarter over quarter included a $1.7 million increase in personnel expense, partially offset by decreases in other direct expenses ($0.7 million) and advertising expense ($0.2 million). The increase in personnel expense included a $1.0 million increase in bonuses and incentives and a $0.7 million increase in the cost of group medical and life insurance benefits. The decrease in other direct expenses was the result of the accounting change related to the amortization of tax credits discussed above. The increase year over year primarily resulted from a $1.2 million increase in personnel expense, partially offset by a $1.0 million decrease in other direct expenses related to the amortization of tax credits. The year over year increase in personnel expense included a $0.4 million increase in salaries and a $0.7 million increase in the cost of group medical and life insurance benefits.

Balance Sheet Review

CTBI’s total assets at March 31, 2024 of $5.9 billion increased $80.6 million, or 5.6% annualized, from December 31, 2023 and $320.9 million, or 10.2%, from March 31, 2023. Loans outstanding at March 31, 2024 were $4.2 billion, an increase of $110.3 million, or an annualized 10.9%, from December 31, 2023 and $383.8 million, or 10.2%, from March 31, 2023. The increase in loans from prior quarter included a $101.4 million increase in the commercial loan portfolio and a $22.6 million increase in the residential loan portfolio, partially offset by a $10.5 million decrease in the indirect consumer loan portfolio and a $3.3 million decrease in the consumer direct loan portfolio. CTBI’s investment portfolio decreased $51.8 million, or an annualized 17.9%, from December 31, 2023 and $128.4 million, or 10.3%, from March 31, 2023. Deposits in other banks increased $24.9 million from prior quarter and $62.3 million from March 31, 2023. Deposits, including repurchase agreements, at $5.0 billion increased $69.1 million, or an annualized 5.6%, from December 31, 2023 and $266.7 million, or 5.6%, from March 31, 2023. CTBI is not dependent on any one customer or group of customers for its source of deposits. As of March 31, 2024, no one customer accounted for more than 2.25% of our $5.0 billion in deposits. Only three customer relationships accounted for more than 1% each.

Shareholders’ equity at $707.7 million increased $5.5 million, or an annualized 3.2%, during the quarter and $50.9 million, or 7.7%, from March 31, 2023. Net unrealized losses on securities, net of deferred taxes, were $106.9 million at March 31, 2024, compared to $103.3 million at December 31, 2023 and $112.4 million at March 31, 2023. In addition, we had a cumulative effect impact related to the adoption of ASU No. 2023-02, discussed above, that reduced retained earnings by $2.0 million.

Loans

(dollars in thousands)	March 31, 2024
Loan Category	Balance		Variance<br><br> <br>from Prior<br><br> <br>Year			Net (Charge-Offs)/ Recoveries			Nonperforming		ACL
Commercial:
Hotel/motel	$	416,759		5.3	%	$	0		$	0	$	4,940
Commercial real estate residential		456,585		9.2			4			1,741		4,128
Commercial real estate nonresidential		813,904		4.5			3			2,768		8,178
Dealer floorplans		77,221		9.8			0			0		721
Commercial other		320,701		(0.1	)		(75	)		1,378		3,799
Total commercial		2,085,170		5.1			(68	)		5,887		21,766
Residential:
Real estate mortgage		955,616		1.9			(13	)		8,002		10,325
Home equity		151,577		3.1			2			745		1,304
Total residential		1,107,193		2.1			(11	)		8,747		11,629
Consumer:
Consumer direct		155,807		(2.1	)		(493	)		499		3,571
Consumer indirect		813,005		(1.3	)		(1,056	)		719		13,605
Total consumer		968,812		(1.4	)		(1,549	)		1,218		17,176
Total loans	$	4,161,175		2.7	%	$	(1,628	)	$	15,852	$	50,571

Total Deposits and Repurchase Agreements

							Percent Change
							1Q 2024 Compared to:
(dollars in thousands)	1Q<br><br> <br>2024		4Q<br><br> <br>2023		1Q<br><br> <br>2023		4Q<br><br> <br>2023			1Q<br><br> <br>2023
Noninterest bearing deposits	$	1,274,583	$	1,260,690	$	1,409,839		1.1	%		(9.6	)%
Interest bearing deposits
Interest checking		131,227		123,927		120,678		5.9	%		8.7	%
Money market savings		1,608,849		1,525,537		1,408,314		5.5	%		14.2	%
Savings accounts		543,338		535,063		642,232		1.5	%		(15.4	)%
Time deposits		1,226,273		1,279,405		962,361		(4.2	)%		27.4	%
Repurchase agreements		234,671		225,245		208,777		4.2	%		12.4	%
Total interest bearing deposits and repurchase agreements		3,744,358		3,689,177		3,342,362		1.5	%		12.0	%
Total deposits and repurchase agreements	$	5,018,941	$	4,949,867	$	4,752,201		1.4	%		5.6	%

Asset Quality

Our total nonperforming loans increased to $15.9 million at March 31, 2024 from $14.0 million at December 31, 2023 and $12.2 million at March 31, 2023. Accruing loans 90+ days past due at $11.6 million increased $1.6 million from prior quarter and $5.3 million from March 31, 2023. Nonaccrual loans at $4.3 million increased $0.3 million from prior quarter but decreased $1.7 million from March 31, 2023. Accruing loans 30-89 days past due at $12.2 million decreased $3.1 million from prior quarter but increased $0.5 million from March 31, 2023. Our loan portfolio management processes focus on the immediate identification, management, and resolution of problem loans to maximize recovery and minimize loss. Our loan portfolio risk management processes include weekly delinquent loan review meetings at the market levels and monthly delinquent loan review meetings involving senior corporate management to review all nonaccrual loans and loans 30 days or more past due. Any activity regarding a criticized/classified loan (i.e. problem loan) must be approved by CTB’s Watch List Asset Committee (i.e. Problem Loan Committee). CTB’s Watch List Asset Committee also meets on a quarterly basis and reviews every criticized/classified loan of $100,000 or greater. CTB’s Loan Portfolio Risk Management Committee also meets quarterly focusing on the overall asset quality and risk metrics of the loan portfolio. We also have a Loan Review Department that reviews every market within CTB annually and performs extensive testing of the loan portfolio to assure the accuracy of loan grades and classifications for delinquency, if a borrower is experiencing financial difficulty with significant payment delay, nonaccrual status, and adequate loan loss reserves. The Loan Review Department has annually reviewed, on average, 97% of the outstanding commercial loan portfolio for the past three years. The average annual review percentage of the consumer and residential loan portfolio for the past three years was 83% based on the loan production during the number of months included in the review scope. The review scope is generally four to six months of production. CTBI generally does not offer high risk loans such as option ARM products, high loan to value ratio mortgages, interest-only loans, loans with initial teaser rates, or loans with negative amortizations, and therefore, CTBI would have no significant exposure to these products.

For further information regarding nonperforming loans, see Note 4 to the condensed consolidated financial statements contained herein.

We had net loan charge-offs of $1.6 million, or 0.16% of average loans annualized, for the first quarter 2024 compared to $1.0 million, or 0.10% of average loans annualized, for the fourth quarter 2023 and $0.4 million, or 0.04% of average loans annualized for the first quarter 2023.

Dividends

The following schedule shows the quarterly cash dividends paid for the past six quarters:

Pay Date	Record Date	Amount Per Share
April 1, 2024	March 15, 2024	$	0.46
January 1, 2024	December 15, 2023	$	0.46
October 1, 2023	September 15, 2023	$	0.46
July 1, 2023	June 15, 2023	$	0.44
April 1, 2023	March 15, 2023	$	0.44
January 1, 2023	December 15, 2022	$	0.44

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. The goal of liquidity management is to provide adequate funds to meet changes in loan and lease demand or deposit withdrawals. This is accomplished by maintaining liquid assets in the form of cash and cash equivalents and investment securities, sufficient unused borrowing capacity, and growth in core deposits. As of March 31, 2024, we had approximately $293.3 million in cash and cash equivalents and approximately $133.2 million in unpledged securities valued at estimated fair value designated as available-for-sale and available to meet liquidity needs on a continuing basis compared to $271.4 million and $157.5 million at December 31, 2023. Additional asset-driven liquidity is provided by the remainder of the securities portfolio and the repayment of loans. In addition to core deposit funding, we also have a variety of other short-term and long-term funding sources available. We also rely on Federal Home Loan Bank advances for both liquidity and management of our asset/liability position. Federal Home Loan Bank advances were $0.3 million at March 31, 2024 and December 31, 2023. As of March 31, 2024, we had a $557.3 million available borrowing position with the Federal Home Loan Bank, compared to $476.2 million at December 31, 2023. We generally rely upon net inflows of cash from financing activities, supplemented by net inflows of cash from operating activities, to provide cash for our investing activities. As is typical of many financial institutions, significant financing activities include deposit gathering, use of short-term borrowing facilities such as repurchase agreements and federal funds purchased, and issuance of long-term debt. At March 31, 2024 and December 31, 2023, we had $50 million in lines of credit with various correspondent banks available to meet any future cash needs. Our primary investing activities include purchases of securities and loan originations. We do not rely on any one source of liquidity and manage availability in response to changing consolidated balance sheet needs. Included in our cash and cash equivalents at March 31, 2024 were deposits with the Federal Reserve of $231.9 million, compared to $207.6 million at December 31, 2023. Additionally, we project cash flows from our investment portfolio to generate additional liquidity over the next 90 days.

The investment portfolio consists of investment grade short-term issues suitable for bank investments. The majority of the investment portfolio is in U.S. government and government sponsored agency issuances. At March 31, 2024, available-for-sale (“AFS”) securities comprised all of the total investment portfolio, and the AFS portfolio was approximately 157% of

    equity capital.  Eighty-nine percent of the pledge-eligible portfolio was pledged.

Interest Rate Risk

We consider interest rate risk one of our most significant market risks. Interest rate risk is the exposure to adverse changes in net interest income due to changes in interest rates. Consistency of our net interest revenue is largely dependent upon the effective management of interest rate risk. We employ a variety of measurement techniques to identify and manage our interest rate risk, including the use of an earnings simulation model to analyze net interest income sensitivity to changing interest rates. The model is based on actual cash flows and repricing characteristics for on and off-balance sheet instruments and incorporates market-based assumptions regarding the effect of changing interest rates on the prepayment rates of certain assets and liabilities. Assumptions based on the historical behavior of deposit rates and balances in relation to changes in interest rates are also incorporated into the model. These assumptions are inherently uncertain, and as a result, the model cannot precisely measure net interest income or precisely predict the impact of fluctuations in interest rates on net interest income. Actual results will differ from simulated results due to timing, magnitude, and frequency of interest rate changes as well as changes in market conditions and management strategies.

CTBI’s Asset/Liability Management Committee (ALCO), which includes executive and senior management representatives and reports to the Board of Directors, monitors and manages interest rate risk within Board-approved policy limits. 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.

Capital Resources

We continue to offer a dividend to our shareholders, providing an annualized dividend yield for the quarter ended March 31, 2024 of 4.31%. Our primary source of capital growth is the retention of earnings. Cash dividends were $0.46 per share and $0.44 per share for the three months ended March 31, 2024 and 2023, respectively. We retained 55.8% of our earnings for the first three months of 2024 compared to 59.3% for the first three months of 2023.

Insured depository institutions are required to meet certain capital level requirements. On October 29, 2019, federal banking regulators adopted a final rule to simplify the regulatory capital requirements for eligible community banks and holding companies that opt-in to the community bank leverage ratio framework (the “CBLR framework”), as required by Section 201 of the Economic Growth, Relief and Consumer Protection Act of 2018. Under the final rule, which became effective as of January 1, 2020, community banks and holding companies (which includes CTB and CTBI) that satisfy certain qualifying criteria, including having less than $10 billion in average total consolidated assets and a leverage ratio (referred to as the “community bank leverage ratio”) of greater than 9%, were eligible to opt-in to the CBLR framework. The community bank leverage ratio is the ratio of a banking organization’s Tier 1 capital to its average total consolidated assets, both as reported on the banking organization’s applicable regulatory filings. Accordingly, a qualifying community banking organization that has a community bank leverage ratio greater than 9% will be considered to have met: (i) the risk-based and leverage capital requirements of the generally applicable capital rules; (ii) the capital ratio requirements in order to be considered well-capitalized under the prompt corrective action framework; and (iii) any other applicable capital or leverage requirements.

In April 2020, as directed by Section 4012 of the Coronavirus Aid, Relief, and Economic Security Act, the regulatory agencies introduced temporary changes to the CBLR. These changes, which subsequently were adopted as a final rule, temporarily reduced the CBLR requirement to 8% through the end of calendar year 2020. Beginning in calendar year 2021, the CBLR requirement 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 March 31, 2024 was 13.74%. CTB’s CBLR ratio as of March 31, 2024 was 13.26%.

As of March 31, 2024, 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.

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. However, inflation does have an important impact on the growth of assets in the banking industry and on the resulting need to increase equity capital at higher than normal rates in order to maintain an appropriate equity to assets ratio. Inflation also affects other expenses, which tend to rise during periods of general inflation.

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.

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. CTBI repurchased 32,664 shares of its common stock during the first quarter 2020, leaving 1,034,706 shares remaining under our current repurchase authorization. As of March 31, 2024, a total of 2,465,294 shares have been repurchased through this program.

Critical Accounting Policies and Estimates

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

Allowance for Credit Losses – CTBI accounts for the ACL and the reserve for unfunded commitments in accordance with 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.

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

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. Effective January 1, 2023, CTBI implemented

    ASU 2022-02, Financial Instruments-Credit Losses \(Topic 326\) Troubled Debt Restructurings and Vintage Disclosures, an amendment to ASU 2016-13, Financial
      Instruments—Credit Losses \(Topic 326\): Measurement of Credit Losses on Financial Instruments.  The amendments in this ASU eliminate the accounting guidance for troubled debt restructurings by creditors in Subtopic 310-40, Receivables—Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty
    along with requiring that disclosures be added by year of origination for gross charge-off information for financing receivables.  Accrued interest receivable on loans is presented in the consolidated financial statements as a component of other
    assets.  When accrued interest is deemed to be uncollectible \(typically when a loan is placed on nonaccrual status\), interest income is reversed.  In the event that collection of principal becomes uncertain, CTBI has policies in place to reverse
    accrued interest in a timely manner.  Therefore, CTBI elected ASU 2019-04 which allows that accrued interest would continue to be presented separately and not part of the amortized cost of the loan.  For additional information on CTBI’s accounting
    policies related to nonaccrual loans, refer to Note 1 to the condensed consolidated financial statements contained herein.

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

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.

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 considers the current value of collateral, credit quality of any guarantees, the guarantor’s liquidity and willingness to cooperate, the loan structure and other factors when determining the amount of the ACL. Other factors may include the borrower’s susceptibility to risks presented by the forecasted macroeconomic environment, the industry and geographic region of the borrower, size and financial condition of the borrower, cash flow and leverage of the borrower, and our evaluation of the borrower’s management. Significant management judgment is required when evaluating which of these factors are most relevant in individual circumstances, and when estimating the amount of expected credit losses based on those factors. When loans are individually evaluated, allowances are determined based on management’s estimate of the borrower’s ability to repay the loan given the availability of collateral and other sources of cash flow, as well as an evaluation of legal options available to CTBI. Allowances for individually evaluated loans that are collateral-dependent are typically measured based on the fair value of the underlying collateral, less expected costs to sell where applicable. For collateral-dependent financial assets, the credit loss expected may be zero if the fair value less costs to sell exceeds the amortized cost of the loan. Loans shall not be included in both collective assessments and individual assessments. Individually evaluated loans that are not collateral-dependent are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate. 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. 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. 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.

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

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

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. 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. 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. Qualitative factors may also be used to address the impacts of unforeseen events on key inputs and assumptions within CTBI’s expected credit loss models, such as the reasonable and supportable forecast period, changes to historical loss information, or changes to the reversion period or methodology. 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.

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. CTBI’s forecasts of market and economic conditions and the internal risk grades assigned to loans in the commercial portfolio segment are examples of inputs to the expected credit loss models that require significant management judgment. These inputs have the potential to drive significant variability in the resulting ACL.

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

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

Impairment exists when a reporting unit’s carrying amount of goodwill exceeds its implied fair value. In testing goodwill for impairment, U.S. GAAP permits companies to first assess qualitative factors to determine whether it is more likely than not that its fair value is less than its carrying amount. In this qualitative assessment, CTBI evaluates events and circumstances which may include, but are not limited to, the general economic environment, banking industry and market conditions, the overall financial performance of CTBI, and the performance of CTBI’s common stock, to determine if it is not more likely than not that the fair value is less than its carrying amount. If the quantitative impairment test is required or the decision to bypass the qualitative assessment is elected, CTBI performs the goodwill impairment test by comparing its fair value with its carrying amount, including goodwill. If the carrying amount exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill recorded. A recognized impairment loss cannot be reversed in future periods even if the fair value of the reporting unit subsequently recovers.

The fair value of CTBI is the price that would be received to sell the company as a whole in an orderly transaction between market participants at the measurement date. The determination of the fair value is a subjective process that involves the use of estimates and judgments, particularly related to cash flows, the appropriate discount rates and an applicable control premium. CTBI employs an income-based approach, utilizing forecasted cash flows and the estimated cost of equity as the discount rate. 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.

Fair Value Measurements – As a financial services company, the carrying value of certain financial assets and liabilities is impacted by the

    application of fair value measurements, either directly or indirectly.  In certain cases, an asset or liability is measured and reported at fair value on a recurring basis, such as available-for-sale investment securities.  In other cases,
    management must rely on estimates or judgments to determine if an asset or liability not measured at fair value warrants an impairment write-down or whether a valuation reserve should be established.  Given the inherent volatility, the use of fair
    value measurements may have a significant impact on the carrying value of assets or liabilities or result in material changes to the consolidated financial statements from period to period.  Detailed information regarding fair value measurements
    can be found in Note 7 to the condensed consolidated financial statements contained herein.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest rate risk management focuses on maintaining consistent growth in net interest income within Board-approved policy limits. CTBI uses an earnings simulation model to analyze net interest income sensitivity to movements in interest rates. Given a 200 basis point increase to the yield curve used in the simulation model, it is estimated net interest income for CTBI would increase by 1.39% over one year and 3.19% over two years. A 200 basis point decrease in the yield curve would decrease net interest income by an estimated 2.64% over one year and 6.21% over two years. For further discussion of CTBI’s market risk, see the Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Market Risk included in the annual report on Form 10-K for the year ended December 31, 2023.

Item 4. Controls and Procedures

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

CTBI’s management is responsible for establishing and maintaining effective disclosure controls and procedures, as defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. As of March 31, 2024, an evaluation was carried out by CTBI’s management, with the participation of our Chief Executive Officer and our Chief Financial Officer of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, management concluded that disclosure controls and procedures as of March 31, 2024 were effective in ensuring material information required to be disclosed in this quarterly report on Form 10-Q was recorded, processed, summarized, and reported on a timely basis.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in CTBI’s internal control over financial reporting that occurred during the three months ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, CTBI’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	None
Item 1A.	Risk Factors	None
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	None
Item 3.	Defaults Upon Senior Securities	None
Item 4.	Mine Safety Disclosure	Not applicable
Item 5.	Other Information:
	(a) Information required to be disclosed in a report on Form 8-K	None
	(b) Changes to director nomination procedures	None
	(c) Insider trading arrangements
	During the three months ended March 31, 2024, no director or officer of CTBI adopted<br> or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item<br> 408(a) of Regulation S-K.
Item 6.	Exhibits:
	(1) Certifications Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Exhibit 31.1<br><br> <br>Exhibit 31.2
	(2) Certifications Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Exhibit 32.1<br><br> <br>Exhibit 32.2
	(3) XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL	Exhibit 101.INS
	(4) XBRL Taxonomy Extension Schema Document	Exhibit 101.SCH
	(5) XBRL Taxonomy Extension Calculation Linkbase	Exhibit 101.CAL
	(6) XBRL Taxonomy Extension Definition Linkbase	Exhibit 101.DEF
	(7) XBRL Taxonomy Extension Label Linkbase	Exhibit 101.LAB
	(8) XBRL Taxonomy Extension Presentation Linkbase	Exhibit 101.PRE
	(9) Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)	Exhibit 104

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, CTBI has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	COMMUNITY TRUST BANCORP, INC.
Date: May 9, 2024	By:
	/s/ Mark A. Gooch
	Mark A. Gooch
	Chairman, President, and Chief Executive Officer
	/s/ Kevin J. Stumbo
	Kevin J. Stumbo
	Executive Vice President, Chief Financial Officer,
	and Treasurer

Exhibit 31.1

Certification of Principal Executive Officer

I, Mark A. Gooch, Chairman, President, and Chief Executive Officer of Community Trust Bancorp, Inc. (“CTBI”), certify that:

(1)	I have reviewed this quarterly report on Form 10-Q of Community Trust Bancorp, Inc.;
(2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under<br> which such statements were made, not misleading with respect to the period covered by this report;
---	---
(3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash<br> flows of CTBI as of, and for, the periods presented in this report;
---	---
(4)	CTBI’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control<br> over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for CTBI and have:
---	---
(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to CTBI, including its consolidated subsidiaries, is<br> made known to us by others within those entities, particularly during the period in which this report is being prepared;
---	---
(b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting<br> and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
---	---
(c)	evaluated the effectiveness of CTBI’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report<br> based on such evaluation; and
---	---
(d)	disclosed in this report any change in CTBI’s internal control over financial reporting that occurred during CTBI’s most recent fiscal quarter (CTBI’s fourth fiscal quarter in the case of an annual report) that has materially affected,<br> or is reasonable likely to materially affect, CTBI’s internal control over financial reporting; and
---	---
(5)	CTBI’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to CTBI’s auditors and the audit committee of CTBI’s board of<br> directors (or persons performing the equivalent functions):
---	---
(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect CTBI’s ability to record,<br> process, summarize and report financial information; and
---	---
(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in CTBI’s internal control over financial reporting.
---	---
/s/ Mark A. Gooch
---
Mark A. Gooch
Chairman, President, and Chief Executive Officer
May 9, 2024

Exhibit 31.2

Certification of Principal Financial Officer

I, Kevin J. Stumbo, Executive Vice President, Chief Financial Officer, and Treasurer of Community Trust Bancorp, Inc. (“CTBI”), certify that:

(1)	I have reviewed this quarterly report on Form 10-Q of Community Trust Bancorp, Inc.;
(2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made,<br> not misleading with respect to the period covered by this report;
---	---
(3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of CTBI as of, and for,<br> the periods presented in this report;
---	---
(4)	CTBI’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as<br> defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for CTBI and have:
---	---
(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to CTBI, including its consolidated subsidiaries, is<br> made known to us by others within those entities, particularly during the period in which this report is being prepared;
---	---
(b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting<br> and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
---	---
(c)	evaluated the effectiveness of CTBI’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report<br> based on such evaluation; and
---	---
(d)	disclosed in this report any change in CTBI’s internal control over financial reporting that occurred during CTBI’s most recent fiscal quarter (CTBI’s fourth fiscal quarter in the case of an annual report) that has materially affected,<br> or is reasonable likely to materially affect, CTBI’s internal control over financial reporting; and
---	---
(5)	CTBI’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to CTBI’s auditors and the audit committee of CTBI’s board of directors (or persons performing the<br> equivalent functions):
---	---
(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect CTBI’s ability to record,<br> process, summarize and report financial information; and
---	---
(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in CTBI’s internal control over financial reporting.
---	---
/s/ Kevin J. Stumbo
---
Kevin J. Stumbo
Executive Vice President, Chief Financial Officer, and Treasurer
May 9, 2024

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Community Trust Bancorp, Inc. (“CTBI”) on Form 10-Q for the period ended March 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark A. Gooch, Chairman, President, and Chief Executive Officer of CTBI, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of CTBI.

/s/ Mark A. Gooch
Mark A. Gooch
Chairman, President, and Chief Executive Officer
May 9, 2024

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Community Trust Bancorp, Inc. (“CTBI”) on Form 10-Q for the period ended March 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kevin J. Stumbo, Executive Vice President, Chief Financial Officer, and Treasurer of CTBI, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of CTBI.

/s/ Kevin J. Stumbo
Kevin J. Stumbo
Executive Vice President, Chief Financial Officer, and Treasurer
May 9, 2024