Community Trust Bank(CTBI) - 2025 Q1 - Quarterly Report

FORM 10-Q Cover Page Information This section provides the basic identification details for Community Trust Bancorp, Inc. (CTBI) as a registrant with the SEC, including its address, state of incorporation, and trading symbol Registrant Information This section provides the basic identification details for Community Trust Bancorp, Inc. (CTBI) as a registrant with the SEC, including its address, state of incorporation, and trading symbol - Registrant: COMMUNITY TRUST BANCORP, INC.[1] - State of Incorporation: Kentucky[1] - Trading Symbol: CTBI on The NASDAQ Global Select Market[2] Filing Status CTBI confirms its compliance with SEC filing requirements and identifies itself as a Large Accelerated Filer for the quarterly period ended March 31, 2025 - Filed all required reports and subject to filing requirements for the past 90 days: Yes[2] - Submitted interactive data files: Yes[2] Filer Status | Filer Type | Status | | :----------- | :----- | | Large Accelerated Filer | ✔ | | Accelerated Filer | ☐ | | Non-accelerated Filer | ☐ | | Smaller Reporting Company | ☐ | | Emerging Growth Company | ☐ | - Report Type: Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2025[5] Shares Outstanding As of April 30, 2025, the number of common shares outstanding for CTBI was 18,110,933 - Common stock outstanding at April 30, 2025: 18,110,933 shares[7] CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS This section warns readers that the report contains forward-looking statements, which are subject to various risks and uncertainties that could cause actual results to differ materially. CTBI explicitly states it undertakes no obligation to update these statements Forward-Looking Statements Disclosure This section warns readers that the report contains forward-looking statements, which are subject to various risks and uncertainties that could cause actual results to differ materially. CTBI explicitly states it undertakes no obligation to update these statements - Forward-looking statements are identified by words like 'believe,' 'expect,' 'anticipate,' 'intend,' 'estimate,' and future or conditional verbs such as 'will,' 'should,' 'would,' and 'could'[9] - Risks and uncertainties include economic conditions, portfolio growth, credit performance, interest rates, regulatory changes, competition, and integration difficulties from acquisitions[9] - CTBI undertakes no obligation to update any forward-looking statements[9] PART I - FINANCIAL INFORMATION This part presents Community Trust Bancorp, Inc.'s (CTBI) unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Condensed Consolidated Financial Statements This item presents CTBI's unaudited condensed consolidated financial statements, including balance sheets, income statements, statements of changes in shareholders' equity, and cash flow statements, along with detailed notes on significant accounting policies, securities, loans, fair value measurements, and segment reporting - The accompanying information has not been audited by independent registered public accountants but reflects all necessary adjustments for a fair presentation of interim results[11] - Statements are presented in accordance with Form 10-Q requirements and do not include all disclosures normally required by GAAP for complete annual financial statements; readers should refer to the Form 10-K for the year ended December 31, 2024, for further information[12] Condensed Consolidated Balance Sheets This section presents CTBI's condensed consolidated balance sheets, detailing assets, liabilities, and shareholders' equity as of March 31, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets (in thousands) | (in thousands) | March 31, 2025 | December 31, 2024 | | :--------------- | :------------- | :---------------- | | Assets: | | | | Cash and cash equivalents | $340,665 | $369,505 | | Debt securities available-for-sale | $1,008,552 | $1,055,728 | | Net loans | $4,579,575 | $4,431,669 | | Total assets | $6,276,518 | $6,193,245 | | Liabilities: | | | | Total deposits | $5,111,305 | $5,070,189 | | Total liabilities | $5,492,346 | $5,435,661 | | Shareholders' Equity: | | | | Total shareholders' equity | $784,172 | $757,584 | | Total liabilities and shareholders' equity | $6,276,518 | $6,193,245 | Condensed Consolidated Statements of Income and Comprehensive Income This section presents CTBI's condensed consolidated statements of income and comprehensive income for the three months ended March 31, 2025, and 2024 Condensed Consolidated Statements of Income (in thousands, except per share data) | (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--------------- | :-------------------------------- | :-------------------------------- | | Total interest income | $82,054 | $75,002 | | Total interest expense | $30,787 | $31,411 | | Net interest income | $51,267 | $43,591 | | Provision for credit losses | $3,568 | $2,656 | | Total noninterest income | $14,897 | $15,134 | | Total noninterest expense | $34,208 | $32,220 | | Net income | $21,972 | $18,679 | | Basic earnings per share | $1.22 | $1.04 | | Diluted earnings per share | $1.22 | $1.04 | Comprehensive Income (in thousands) | (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--------------- | :-------------------------------- | :-------------------------------- | | Net income | $21,972 | $18,679 | | Other comprehensive gain (loss), net of tax | $12,304 | $(3,546) | | Comprehensive income | $34,276 | $15,133 | Consolidated Statements of Changes in Shareholders' Equity This section details changes in CTBI's consolidated shareholders' equity for the three months ended March 31, 2025, and 2024, including net income, other comprehensive income, and dividends Changes in Shareholders' Equity (in thousands) | (in thousands) | Balance, Dec 31, 2024 | Net Income | Other Comprehensive Income (Loss) | Cash Dividends Declared | Issuance of Common Stock | Issuance of Restricted Stock | Vesting of Restricted Stock | Stock-based Compensation | Balance, Mar 31, 2025 | | :--------------- | :-------------------- | :--------- | :-------------------------------- | :---------------------- | :----------------------- | :------------------------- | :------------------------ | :----------------------- | :-------------------- | | Total | $757,584 | $21,972 | $12,304 | $(8,461) | $276 | $0 | $0 | $497 | $784,172 | Changes in Shareholders' Equity (in thousands) | (in thousands) | Balance, Dec 31, 2023 | Net Income | Other Comprehensive Income (Loss) | Cash Dividends Declared | Issuance of Common Stock | Issuance of Restricted Stock | Vesting of Restricted Stock | Forfeiture of Restricted Stock | Stock-based Compensation | Cumulative Effect of FASB Adjustment | Balance, Mar 31, 2024 | | :--------------- | :-------------------- | :--------- | :-------------------------------- | :---------------------- | :----------------------- | :------------------------- | :------------------------ | :----------------------------- | :----------------------- | :--------------------------------- | :-------------------- | | Total | $702,208 | $18,679 | $(3,546) | $(8,249) | $291 | $0 | $0 | $0 | $302 | $(1,961) | $707,724 | Condensed Consolidated Statements of Cash Flows This section presents CTBI's condensed consolidated statements of cash flows for the three months ended March 31, 2025, and 2024, categorizing cash flows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $36,582 | $26,184 | | Net cash used in investing activities | $(104,641) | $(65,293) | | Net cash provided by financing activities | $39,219 | $61,007 | | Net increase (decrease) in cash and cash equivalents | $(28,840) | $21,898 | | Cash and cash equivalents at end of period | $340,665 | $293,298 | Notes to Condensed Consolidated Financial Statements This section provides detailed notes to CTBI's condensed consolidated financial statements, covering significant accounting policies, securities, loans, fair value measurements, and segment reporting Note 1 - Summary of Significant Accounting Policies This note outlines CTBI's significant accounting policies, including principles of consolidation, new accounting standards adopted or pending, and specific policies for investments, loans, allowance for credit losses, goodwill, income taxes, and off-balance sheet credit exposures. It emphasizes the use of GAAP and management's estimates - CTBI's condensed consolidated financial statements include accounts of CTBI and its wholly-owned subsidiaries Community Trust Bank, Inc. (CTB) and Community Trust and Investment Company[24] - New accounting standard ASU No. 2023-09 (Income Tax Disclosures) became effective January 1, 2025, affecting annual financial statement disclosure only, with no impact on results or financial condition[25] - New accounting standard ASU No. 2024-03 (Income Statement Expense Disclosures) is effective for fiscal years beginning after December 15, 2026, and is not expected to have a material impact[26] - Debt securities are classified as available-for-sale (AFS) and reported at fair value, with unrealized gains/losses in shareholders' equity. No held-to-maturity (HTM) securities are currently held[30][31] - Allowance for Credit Losses (ACL) is measured on a collective basis using discounted cash flow for financial assets with similar risk characteristics, or individually for others. Forecasts include GDP, vehicle sales, and housing price index[38][39] - Goodwill is evaluated annually for impairment using fair value techniques; the balance of $65.5 million has not changed since January 1, 2015[59] Note 2 – Stock-Based Compensation This note details CTBI's stock-based compensation, primarily restricted stock. It provides expense figures for the current and prior periods, unrecognized compensation, and activity in restricted stock grants Restricted Stock Expense (in thousands) | Period | Restricted Stock Expense | | :----- | :----------------------- | | Q1 2025 | $544 | | Q1 2024 | $343 | - As of March 31, 2025, there was $3.8 million of unrecognized compensation expense related to restricted stock grants, to be recognized over a weighted average period of 3.1 years[62] Restricted Stock Activity (March 31, 2025 vs. 2024) | Activity | March 31, 2025 (Grants) | Weighted Average Fair Value at Grant (2025) | March 31, 2024 (Grants) | Weighted Average Fair Value at Grant (2024) | | :--------- | :---------------------- | :------------------------------------------ | :---------------------- | :------------------------------------------ | | Outstanding at beginning of year | 86,572 | $43.45 | 96,840 | $43.75 | | Granted | 38,538 | $53.53 | 15,000 | $41.29 | | Vested | (25,498) | $43.76 | (22,408) | $43.37 | | Forfeited | 0 | - | (2,109) | $42.80 | | Outstanding at end of period | 99,612 | $47.27 | 87,323 | $43.45 | Note 3 – Securities This note provides a detailed breakdown of CTBI's debt and equity securities, including their amortized cost, fair value, and unrealized gains/losses. It also discusses the impairment analysis for available-for-sale securities, confirming that all impairment is temporary and not credit-related Available-for-Sale Debt Securities (in thousands) | (in thousands) | March 31, 2025 Amortized Cost | March 31, 2025 Fair Value | December 31, 2024 Amortized Cost | December 31, 2024 Fair Value | | :--------------- | :------------------------------ | :------------------------ | :------------------------------- | :----------------------- | | U.S. Treasury and government agencies | $260,711 | $246,254 | $360,027 | $341,495 | | State and political subdivisions | $304,358 | $257,105 | $304,588 | $253,557 | | Agency mortgage-backed securities | $508,292 | $455,542 | $471,000 | $409,709 | | Asset-backed securities | $49,717 | $49,651 | $51,034 | $50,967 | | Total AFS securities | $1,123,078 | $1,008,552 | $1,186,649 | $1,055,728 | - Unrealized losses on debt securities are considered temporary and market/interest rate driven, not credit-related, at both March 31, 2025, and December 31, 2024[71][73] - The percentage of total debt securities with unrealized losses decreased from 95.5% at December 31, 2024, to 89.2% at March 31, 2025[71] Equity Securities at Fair Value (in thousands) | Period | Fair Value Adjustment (Gain) | | :----- | :--------------------------- | | Q1 2025 | $480 | | Q1 2024 | $371 | Note 4 – Loans This note details CTBI's loan portfolio, including major classifications, the allowance for credit losses (ACL), nonaccrual and past due loans, credit quality indicators, and loan modifications. It highlights the methodology for estimating credit losses and the impact of modifications on borrowers experiencing financial difficulty Major Classifications of Loans (in thousands) | (in thousands) | March 31, 2025 Net Loans | December 31, 2024 Net Loans | | :--------------- | :----------------------- | :------------------------ | | Commercial loans | $2,357,626 | $2,272,679 | | Residential loans | $1,239,661 | $1,210,826 | | Consumer loans | $1,039,249 | $1,003,132 | | Total Loans and lease financing | $4,636,536 | $4,486,637 | Allowance for Credit Losses (ACL) (in thousands) | (in thousands) | Beginning Balance (Q1 2025) | Provision Charged to Expense (Q1 2025) | Losses Charged Off (Q1 2025) | Recoveries (Q1 2025) | Ending Balance (Q1 2025) | | :--------------- | :-------------------------- | :----------------------------------- | :------------------- | :------------------- | :----------------------- | | Total ACL | $54,968 | $3,568 | $(2,722) | $1,147 | $56,961 | Nonperforming Loans (in thousands) | (in thousands) | March 31, 2025 Total Nonperforming Loans | December 31, 2024 Total Nonperforming Loans | | :--------------- | :--------------------------------------- | :---------------------------------------- | | Commercial loans | $17,782 | $16,187 | | Residential loans | $7,902 | $9,468 | | Consumer loans | $843 | $1,031 | | Total Loans and lease financing | $26,527 | $26,686 | - CTBI categorizes loans into risk categories (Pass, Watch, OAEM, Substandard, Doubtful) based on borrower ability to service debt, collateral value, and guarantor strength[95] Loan Modifications (Amortized Cost at March 31, 2025, in thousands) | (in thousands) | Interest Rate Reduction | Term Extension | Combination – Term Extension and Interest Rate Reduction | Payment Change | | :--------------- | :---------------------- | :------------- | :------------------------------------------------------- | :------------- | | Commercial loans | $129 | $3,543 | $861 | $1,007 | | Residential loans | $321 | $3,124 | $54 | $0 | | Consumer loans | $0 | $251 | $0 | $106 | | Total | $450 | $6,918 | $915 | $1,113 | - During Q1 2025, 8 loans to borrowers experiencing financial difficulty subsequently defaulted, totaling $668 thousand[113] Note 5 – Repurchase Agreements This note describes CTBI's repurchase agreements, which are used for customer needs and funding. It details the contractual maturities by collateral class and presents the agreements on a net basis, highlighting market risk associated with underlying securities - Repurchase agreements are recorded at the amount of cash received and are subject to market risk from underlying securities[115][116] Repurchase Agreements by Contractual Maturity (March 31, 2025, in thousands) | (in thousands) | Overnight Continuous | 30 days and Up to | 30-90 days | Greater Than 90 days | Total | | :--------------- | :------------------- | :---------------- | :--------- | :------------------- | :---- | | U.S. Treasury and government agencies | $17,546 | $0 | $0 | $4,473 | $22,019 | | State and political subdivisions | $114,378 | $0 | $0 | $13,088 | $127,466 | | Agency mortgage-backed securities | $24,266 | $0 | $22,000 | $39,556 | $85,822 | | Asset-backed securities | $4,268 | $0 | $0 | $6,981 | $11,249 | | Total repurchase agreements | $160,458 | $0 | $22,000 | $64,098 | $246,556 | Repurchase Agreements Net Basis (in thousands) | (in thousands) | Gross Amount of Recognized Liabilities | Gross Amount Not Offset in the Balance Sheet (Financial Instruments Posted as Collateral) | Net Amount | | :--------------- | :------------------------------------- | :-------------------------------------------------------------------------------------- | :--------- | | March 31, 2025 | $246,556 | $(246,556) | $0 | | December 31, 2024 | $240,166 | $(240,166) | $0 | Note 6 – Fair Value of Financial Assets and Liabilities This note outlines CTBI's fair value measurements for financial assets and liabilities, adhering to ASC 820. It defines the fair value hierarchy (Level 1, 2, 3) and provides detailed valuation methodologies and inputs for recurring and nonrecurring measurements, including available-for-sale securities, equity securities, mortgage servicing rights, collateral-dependent loans, and OREO - Fair value measurements are categorized into a three-level hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs)[119][120][121] Recurring Fair Value Measurements (March 31, 2025, in thousands) | (in thousands) | Fair Value | Level 1 | Level 2 | Level 3 | | :--------------- | :--------- | :------ | :------ | :------ | | U.S. Treasury and government agencies | $246,254 | $234,290 | $11,964 | $0 | | State and political subdivisions | $257,105 | $0 | $257,105 | $0 | | Agency mortgage-backed securities | $455,542 | $0 | $455,542 | $0 | | Asset-backed securities | $49,651 | $0 | $49,651 | $0 | | Equity securities at fair value | $4,261 | $0 | $0 | $4,261 | | Mortgage servicing rights | $7,093 | $0 | $0 | $7,093 | - Equity securities at fair value (Visa Class B Stock) and Mortgage Servicing Rights (MSRs) are valued using Level 3 inputs due to unobservable inputs like discount rates, conversion dates, prepayment speeds, and default rates[131][134][135] Level 3 Reconciliation (in thousands) | (in thousands) | Equity Securities at Fair Value (Q1 2025) | Mortgage Servicing Rights (Q1 2025) | Equity Securities at Fair Value (Q1 2024) | Mortgage Servicing Rights (Q1 2024) | | :--------------- | :---------------------------------------- | :---------------------------------- | :---------------------------------------- | :---------------------------------- | | Beginning balance | $3,781 | $7,357 | $3,158 | $7,665 | | Total unrealized gains (losses) included in net income | $480 | $(113) | $371 | $276 | | Ending balance | $4,261 | $7,093 | $3,529 | $7,792 | Nonrecurring Fair Value Measurements (December 31, 2024, in thousands) | (in thousands) | Fair Value | Level 1 | Level 2 | Level 3 | | :--------------- | :--------- | :------ | :------ | :------ | | Collateral dependent loans | $8,310 | $0 | $0 | $8,310 | | Other real estate owned | $731 | $0 | $0 | $731 | Note 7 – Segment Reporting This note clarifies that CTBI operates as one primary operating segment: community banking services. It provides a reconciliation of segment revenues, profit/loss measures, and assets to the consolidated totals, emphasizing that the Executive Committee uses net income for resource allocation and evaluation - CTBI operates as one operating segment: community banking services, offering a wide range of consumer and commercial banking and trust/wealth management services[153] - The Executive Committee uses net income to allocate resources and evaluate product offerings and pricing[153] Segment Net Income Reconciliation (in thousands) | (in thousands) | Community Banking Services (Q1 2025) | Holding Company (Q1 2025) | Eliminations (Q1 2025) | Consolidated (Q1 2025) | | :--------------- | :----------------------------------- | :------------------------ | :--------------------- | :--------------------- | | Net income | $22,262 | $21,972 | $(22,262) | $21,972 | Segment Assets Reconciliation (in thousands) | (in thousands) | March 31, 2025 | December 31, 2024 | | :--------------- | :------------- | :---------------- | | Community banking services assets | $6,268,705 | $6,186,518 | | Holding company assets | $848,173 | $822,851 | | Elimination of subsidiary and parent cash and intercompany receivables | $(2,626) | $(3,779) | | Elimination of investment in subsidiaries | $(837,734) | $(812,345) | | Consolidated total assets | $6,276,518 | $6,193,245 | Note 8 – Revenue Recognition This note details CTBI's revenue recognition policies, primarily focusing on interest income from loans and securities, and noninterest income from customer contracts. It emphasizes that most customer contracts are short-term, performance obligations are fulfilled concurrently with payment, and revenue is disaggregated by contract-type and timing - Primary revenue source: interest income from loans and investment securities, recognized over the life of the instrument[158] - Noninterest income (e.g., deposit fees, trust income, loan fees) is recognized when performance obligations are satisfied by transferring control of a product or service to a customer[159] - Most customer contracts are short-term, with performance obligations fulfilled and payment processed simultaneously, leading to no contract assets or liabilities[160] - Revenue is disaggregated by contract-type and timing of recognition to best depict the nature, amount, timing, and uncertainty of revenue and cash flows[163] Note 9 – Earnings Per Share This note provides the computation of basic and diluted earnings per share for the three months ended March 31, 2025 and 2024, including the weighted average shares outstanding and the dilutive effect of equity grants Earnings Per Share (in thousands except per share data) | (in thousands except per share data) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net income | $21,972 | $18,679 | | Weighted average shares outstanding-basic | 17,995 | 17,926 | | Dilutive effect of equity grants | 27 | 17 | | Adjusted weighted average shares outstanding-diluted | 18,022 | 17,943 | | Basic earnings per share | $1.22 | $1.04 | | Diluted earnings per share | $1.22 | $1.04 | Note 10 – Accumulated Other Comprehensive Income (Loss) This note reconciles the accumulated other comprehensive income (loss) for the quarters ended March 31, 2025 and 2024, primarily reflecting unrealized holding gains/losses on available-for-sale debt securities, net of tax Accumulated Other Comprehensive Income (Loss) Reconciliation (in thousands) | (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--------------- | :-------------------------------- | :-------------------------------- | | Beginning balance | $(98,369) | $(103,321) | | Unrealized holding gains (losses) on debt securities AFS, net of tax | $12,304 | $(3,546) | | Ending balance | $(86,065) | $(106,867) | - No amounts were reclassified to earnings during these periods[165] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on CTBI's financial performance and condition, discussing key results, balance sheet changes, asset quality, liquidity, capital resources, and critical accounting estimates. It highlights earnings, net interest income growth, and changes in loan and deposit portfolios - CTBI reported Q1 2025 earnings of $22.0 million ($1.22 per basic share), up from $18.7 million ($1.04 per basic share) in Q1 2024[170] - Net interest income for Q1 2025 was $51.3 million, a 17.6% increase from Q1 2024, with net interest margin rising 34 basis points to 3.57%[173][176][181] - Total assets at March 31, 2025, were $6.3 billion, an increase of $83.3 million (5.5% annualized) from December 31, 2024[187] - Loan portfolio increased by $149.9 million (13.5% annualized) from December 31, 2024, to $4.6 billion at March 31, 2025[187] - Deposits, including repurchase agreements, increased by $47.5 million (3.6% annualized) from December 31, 2024, to $5.4 billion at March 31, 2025[188] Overview This overview highlights that the MD&A supplements the condensed consolidated financial statements and should be read in conjunction with the annual report on Form 10-K - The MD&A supplements the condensed consolidated financial statements and notes in Part I, Item 1, and should be read in conjunction with the annual report on Form 10-K for the year ended December 31, 2024[167] Our Business This section describes CTBI as a bank holding company headquartered in Pikeville, Kentucky, providing a wide range of community banking, trust, and wealth management services across multiple states - CTBI is a bank holding company headquartered in Pikeville, Kentucky, owning Community Trust Bank, Inc. (CTB) and Community Trust and Investment Company[168] - As of March 31, 2025, CTBI had 81 banking locations and 5 trust offices across Kentucky, West Virginia, and Tennessee[168] Key Financial Figures (March 31, 2025, in thousands) | Metric | Amount | | :----- | :----- | | Total consolidated assets | $6,300,000 | | Total consolidated deposits (including repurchase agreements) | $5,400,000 | | Total shareholders' equity | $784,200 | | Trust assets under management | $3,600,000 | | CTB's investment portfolio | $1,000,000 | - Services include commercial and personal banking, trust and wealth management, secured/unsecured loans, cash management, letters of credit, and brokerage/insurance services[169] Results of Operations and Financial Condition This section summarizes CTBI's net income, EPS, and key revenue and expense trends for the current and prior quarters and years, highlighting changes in net interest revenue, noninterest income, provision for credit losses, and noninterest expense Net Income and EPS (Q1 2025 vs. Q4 2024 vs. Q1 2024) | Period | Net Income (in millions) | Basic EPS | | :----- | :----------------------- | :-------- | | Q1 2025 | $22.0 | $1.22 | | Q4 2024 | $22.5 | $1.25 | | Q1 2024 | $18.7 | $1.04 | - Total revenue for Q1 2025 was $0.5 million above prior quarter and $7.4 million above prior year same quarter[170] - Net interest revenue increased $1.7 million QoQ and $7.7 million YoY[170] - Noninterest income decreased $1.3 million QoQ and $0.2 million YoY[170] - Provision for credit losses increased $1.0 million QoQ and $0.9 million YoY[170] - Noninterest expense increased $0.4 million QoQ and $2.0 million YoY[170] Quarterly Highlights This section presents key financial highlights for the quarter, including net interest income, provision for credit losses, noninterest income and expense, net income, average earning assets, and changes in loan portfolios and shareholders' equity Key Financial Highlights (Q1 2025 vs. Q1 2024, in thousands) | Metric | 1Q 2025 | 1Q 2024 | Change (Amount) | Change (Percent) | | :----- | :------ | :------ | :-------------- | :--------------- | | Net interest income | $51,267 | $43,591 | $7,676 | 17.6% | | Provision for credit losses | $3,568 | $2,656 | $912 | 34.3% | | Noninterest income | $14,897 | $15,134 | $(237) | (1.6)% | | Noninterest expense | $34,208 | $32,220 | $1,988 | 6.2% | | Income taxes | $6,416 | $5,170 | $1,246 | 24.1% | | Net income | $21,972 | $18,679 | $3,293 | 17.6% | | Average earning assets | $5,848,092 | $5,458,075 | $390,017 | 7.1% | | Yield on average earning assets, tax equivalent* | 5.71% | 5.55% | 0.16% | 2.9% | | Cost of interest bearing funds | 3.02% | 3.35% | (0.33)% | (9.9)% | | Net interest margin, tax equivalent* | 3.57% | 3.23% | 0.34% | 10.5% | - Loan portfolio at $4.6 billion increased $149.9 million (annualized 13.5%) from December 31, 2024, and $475.4 million (11.4%) from March 31, 2024[176] - Total nonperforming loans decreased to $26.5 million at March 31, 2025, from $26.7 million at December 31, 2024, but increased $10.7 million from $15.9 million at March 31, 2024[176] - Shareholders' equity at $784.2 million increased $26.6 million (annualized 14.2%) during the quarter and $76.4 million (10.8%) from March 31, 2024[176] Income Statement Review This section reviews CTBI's income statement performance, focusing on net interest income, net interest margin, provision for credit losses, noninterest income, and noninterest expense, with comparisons to prior periods - Net interest income for Q1 2025 was $51.3 million, up 3.5% QoQ and 17.6% YoY[176] - Net interest margin (tax equivalent) increased 14 basis points QoQ and 34 basis points YoY to 3.57%[176][181] - Provision for credit losses increased $1.0 million QoQ and $0.9 million YoY to $3.6 million[176][183] - Noninterest income for Q1 2025 was $14.9 million, down 7.8% QoQ and 1.6% YoY, primarily due to decreases in deposit-related fees and loan-related fees[176][184] - Noninterest expense for Q1 2025 was $34.2 million, up 1.3% QoQ and 6.2% YoY, driven by increases in occupancy, equipment, and legal/professional fees[176][186] Consolidated Average Balance Sheets and Taxable Equivalent Income/Expense and Yields/Rates This section provides detailed average balance sheets, taxable equivalent income/expense, and yields/rates for CTBI's earning assets and interest-bearing liabilities for the three months ended March 31, 2025, and 2024 Average Balances and Rates (Three Months Ended March 31, 2025 vs. 2024, in thousands) | (in thousands) | Average Balances (2025) | Average Rate (2025) | Average Balances (2024) | Average Rate (2024) | | :--------------- | :---------------------- | :------------------ | :---------------------- | :------------------ | | Loans | $4,533,091 | 6.51% | $4,096,866 | 6.36% | | Total earning assets | $5,848,092 | 5.71% | $5,458,075 | 5.55% | | Savings and demand deposits | $2,479,835 | 2.35% | $2,213,133 | 2.79% | | Time deposits | $1,356,907 | 3.90% | $1,266,164 | 3.91% | | Total interest bearing liabilities | $4,138,451 | 3.02% | $3,773,513 | 3.35% | | Net interest spread | | 2.69% | | 2.20% | | Net interest margin | | 3.57% | | 3.23% | Net Interest Differential This section analyzes the effect of volume and rate changes on CTBI's net interest differential, breaking down the impact on total interest income, total interest expense, and net interest income Effect of Volume and Rate Changes on Net Interest Differential (Q1 2025 vs. Q1 2024, in thousands) | (in thousands) | Total Change (2025/2024) | Change Due to Volume | Change Due to Rate | | :--------------- | :----------------------- | :------------------- | :----------------- | | Total interest income | $7,030 | $113,364 | $(106,334) | | Total interest expense | $(624) | $43,828 | $(44,452) | | Net interest income | $7,654 | $69,536 | $(61,882) | Provision for Credit Losses This section discusses the provision for credit losses, its components, and key credit loss ratios, including reserve coverage and the credit loss reserve as a percentage of total loans outstanding - Provision for credit losses increased $1.0 million QoQ and $0.9 million YoY to $3.6 million in Q1 2025[183] - Of the Q1 2025 provision, $2.0 million was for loan growth, and the remainder for net losses[183] Credit Loss Ratios | Metric | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :----- | :------------- | :---------------- | :------------- | | Reserve coverage (ACL to nonperforming loans) | 214.7% | 206.0% | 319.0% | | Credit loss reserve as % of total loans outstanding | 1.23% | 1.23% | 1.22% | Noninterest Income This section provides a detailed breakdown of CTBI's noninterest income, analyzing changes quarter-over-quarter and year-over-year across various categories such as deposit-related fees, trust revenue, and loan-related fees Noninterest Income (in thousands) | ($ in thousands) | 1Q 2025 | 4Q 2024 | 1Q 2024 | % Change (1Q25 vs 4Q24) | % Change (1Q25 vs 1Q24) | | :--------------- | :------ | :------ | :------ | :---------------------- | :---------------------- | | Deposit related fees | $6,822 | $7,619 | $7,011 | (10.5)% | (2.7)% | | Trust revenue | $3,981 | $3,961 | $3,517 | 0.5% | 13.2% | | Gains on sales of loans | $47 | $50 | $45 | (5.2)% | 5.9% | | Loan related fees | $965 | $1,472 | $1,352 | (34.4)% | (28.6)% | | Bank owned life insurance revenue | $1,035 | $915 | $1,292 | 13.1% | (19.9)% | | Brokerage revenue | $494 | $536 | $490 | (7.8)% | 0.8% | | Other | $1,553 | $1,607 | $1,427 | (3.4)% | 8.8% | | Total noninterest income | $14,897 | $16,160 | $15,134 | (7.8)% | (1.6)% | - QoQ decrease primarily due to lower deposit related fees ($0.8 million) and loan related fees ($0.5 million)[184] - YoY decrease primarily due to lower loan related fees ($0.4 million), bank owned life insurance revenue ($0.3 million), and deposit related fees ($0.2 million), partially offset by higher trust revenue ($0.5 million) and securities gains ($0.1 million)[184] Noninterest Expense This section details CTBI's noninterest expenses, analyzing changes quarter-over-quarter and year-over-year across categories like salaries, employee benefits, occupancy, equipment, and legal/professional fees Noninterest Expense (in thousands) | ($ in thousands) | 1Q 2025 | 4Q 2024 | 1Q 2024 | % Change (1Q25 vs 4Q24) | % Change (1Q25 vs 1Q24) | | :--------------- | :------ | :------ | :------ | :---------------------- | :---------------------- | | Salaries | $13,269 | $13,310 | $13,036 | (0.3)% | 1.8% | | Employee benefits | $6,849 | $6,883 | $7,086 | (0.5)% | (3.3)% | | Net occupancy and equipment | $3,440 | $3,015 | $3,028 | 14.1% | 13.6% | | Data processing | $2,859 | $3,181 | $2,518 | (10.1)% | 13.5% | | Legal and professional fees | $1,225 | $1,039 | $832 | 18.0% | 47.2% | | Advertising and marketing | $673 | $821 | $577 | (18.0)% | 16.6% | | Taxes other than property and payroll | $529 | $436 | $442 | 21.3% | 19.7% | | Other | $5,364 | $5,084 | $4,701 | 5.5% | 14.1% | | Total noninterest expense | $34,208 | $33,769 | $32,220 | 1.3% | 6.2% | - QoQ increase primarily due to higher net occupancy and equipment expense ($0.4 million) and legal and professional fees ($0.2 million), partially offset by lower data processing expense ($0.3 million)[186] - YoY increase primarily due to higher net occupancy and equipment expense ($0.4 million), data processing expense ($0.3 million), legal and professional fees ($0.4 million), operating losses ($0.3 million), and loan related expenses ($0.2 million)[186] Balance Sheet Review This section reviews CTBI's balance sheet, highlighting changes in total assets, loans outstanding, investment portfolio, deposits, repurchase agreements, and shareholders' equity, with comparisons to prior periods - Total assets at March 31, 2025, were $6.3 billion, an increase of $83.3 million (5.5% annualized) from December 31, 2024, and $426.3 million (7.3%) from March 31, 2024[187] - Loans outstanding increased $149.9 million (13.5% annualized) from December 31, 2024, to $4.6 billion, with increases in commercial, residential, and indirect consumer loans[187] - Investment portfolio decreased $46.7 million (17.9% annualized) from December 31, 2024, due to reinvestment of maturities into the loan portfolio[187] - Deposits, including repurchase agreements, increased $47.5 million (3.6% annualized) from December 31, 2024, to $5.4 billion[188] - Shareholders' equity increased $26.6 million (14.2% annualized) during the quarter to $784.2 million[189] - Net unrealized losses on securities, net of deferred taxes, improved to $86.1 million at March 31, 2025, from $98.4 million at December 31, 2024[189] Loans This section provides a summary of CTBI's loan portfolio by category, including balances, year-over-year variance, net charge-offs/recoveries, nonperforming loans, and allowance for credit losses Loan Portfolio Summary (March 31, 2025, in thousands) | Loan Category | Balance | Variance from Prior Year | Net (Charge Offs)/Recoveries | Nonperforming | ACL | | :-------------- | :------ | :----------------------- | :--------------------------- | :------------ | :---- | | Commercial | $2,357,626 | 3.7% | $(335) | $17,782 | $27,521 | | Residential | $1,239,661 | 2.4% | $(57) | $7,902 | $13,631 | | Consumer | $1,039,249 | 3.6% | $(1,183) | $843 | $15,809 | | Total loans | $4,636,536 | 3.3% | $(1,575) | $26,527 | $56,961 | Total Deposits and Repurchase Agreements This section details CTBI's deposits and repurchase agreements, categorizing them by interest-bearing and noninterest-bearing, and analyzing changes quarter-over-quarter and year-over-year Deposits and Repurchase Agreements (in thousands) | (in thousands) | 1Q 2025 | YE 2024 | 1Q 2024 | % Change (1Q25 vs YE24) | % Change (1Q25 vs 1Q24) | | :--------------- | :------ | :------ | :------ | :---------------------- | :---------------------- | | Noninterest bearing deposits | $1,235,544 | $1,242,676 | $1,274,583 | (0.6)% | (3.1)% | | Interest bearing deposits | $3,875,761 | $3,827,513 | $3,509,687 | 1.3% | 10.4% | | Repurchase agreements | $246,556 | $240,166 | $234,671 | 2.7% | 5.1% | | Total deposits and repurchase agreements | $5,357,861 | $5,310,355 | $5,018,941 | 0.9% | 6.8% | - CTBI is not dependent on any one customer or group of customers for deposits; no single customer accounted for more than 3% of deposits at March 31, 2025[188] Deposit Maturities This section presents the maturities of CTBI's uninsured certificates of deposit and other time deposits, providing a breakdown of amounts maturing within various timeframes Maturities of Uninsured Certificates of Deposit and Other Time Deposits (March 31, 2025, in thousands) | (in thousands) | Total | Within 1 Year | 2 Years | 3 Years | 4 Years | 5 Years | After 5 Years | | :--------------- | :---- | :------------ | :------ | :------ | :------ | :------ | :------------ | | Uninsured certificates of deposits and other time deposits greater than $250,000 | $373,016 | $352,717 | $7,950 | $9,145 | $1,517 | $1,687 | $0 | - Approximately $1.5 million in uninsured deposits at March 31, 2025. CTBI has no brokered deposits[193] Repurchase Agreements This section provides details on CTBI's repurchase agreement borrowings, including balances outstanding at quarter-end, average balances, and maximum balances during the quarter Repurchase Agreement Borrowings (in thousands) | ($ in thousands) | Balance Outstanding as of Quarter End | Average Balance Outstanding For the Quarter End | Maximum Balance Outstanding During the Quarter Ended | | :--------------- | :------------------------------------ | :-------------------------------------------- | :--------------------------------------------------- | | March 31, 2025 | $246,556 | $233,470 | $246,556 | | December 31, 2024 | $240,166 | $233,183 | $240,166 | | March 31, 2024 | $234,671 | $225,734 | $234,671 | Asset Quality This section assesses CTBI's asset quality, focusing on trends in nonperforming loans, accruing loans past due, nonaccrual loans, and net loan charge-offs, while noting the absence of high-risk loan products - Total nonperforming loans decreased to $26.5 million at March 31, 2025, from $26.7 million at December 31, 2024, but increased from $15.9 million at March 31, 2024[195] - Accruing loans 90+ days past due increased $0.5 million QoQ to $10.8 million but decreased $0.7 million YoY[195] - Nonaccrual loans decreased $0.7 million QoQ to $15.7 million but increased $11.4 million YoY[195] - Net loan charge-offs for Q1 2025 were $1.6 million (0.14% of average loans annualized), compared to $1.0 million (0.09% annualized) in Q4 2024 and $1.6 million (0.16% annualized) in Q1 2024[196] - CTBI generally does not offer high-risk loans such as option ARM products, high LTV mortgages, interest-only loans, or loans with initial teaser rates[195] Dividends This section lists CTBI's quarterly cash dividends paid, including pay dates, record dates, and the amount per share for recent periods Quarterly Cash Dividends Paid | Pay Date | Record Date | Amount Per Share | | :--------- | :---------- | :--------------- | | April 1, 2025 | March 15, 2025 | $0.47 | | January 1, 2025 | December 15, 2024 | $0.47 | | October 1, 2024 | September 15, 2024 | $0.47 | | July 1, 2024 | June 15, 2024 | $0.46 | | April 1, 2024 | March 15, 2024 | $0.46 | | January 1, 2024 | December 15, 2023 | $0.46 | Liquidity and Market Risk This section outlines CTBI's approach to managing liquidity and market risk, detailing available cash, unpledged securities, and borrowing capacity, while emphasizing the investment portfolio's composition - CTBI aims to maintain consistent growth in net interest income by managing balance sheet composition, liquidity, and interest rate risk[198] - As of March 31, 2025, CTBI had $340.7 million in cash and cash equivalents and $111.0 million in unpledged available-for-sale securities for liquidity[198] - Available borrowing position with Federal Home Loan Bank was $508.5 million at March 31, 2025, up from $485.0 million at December 31, 2024[198] - The investment portfolio consists of investment grade short-term issues, with the majority in U.S. government and agency issuances. AFS securities comprised all of the total investment portfolio, and 91% of the pledge-eligible portfolio was pledged[199] Interest Rate Risk This section describes CTBI's management of interest rate risk, utilizing an earnings simulation model to quantify the sensitivity of net interest income to various changes in the yield curve - Interest rate risk is a significant market risk, managed to maintain consistent net interest income growth within policy limits[201] - An earnings simulation model is used to analyze net interest income sensitivity. A 200 basis point increase in the yield curve would increase net interest income by an estimated 2.56% over one year and 4.08% over two years[201][225] - A 200 basis point decrease in the yield curve would decrease net interest income by an estimated 3.08% over one year and 5.24% over two years[225] - CTBI's Asset/Liability Management Committee (ALCO) monitors and manages interest rate risk within Board-approved policy limits[202] Capital Resources This section details CTBI's capital resources, including dividend yield, retained earnings, and compliance with regulatory capital requirements, specifically the Community Bank Leverage Ratio (CBLR) framework - CTBI's annualized dividend yield to shareholders was 3.73% as of March 31, 2025[203] - Cash dividends were $0.47 per share for Q1 2025, with 61.5% of earnings retained, compared to 55.8% in Q1 2024[203] - CTBI and CTB elected to use the Community Bank Leverage Ratio (CBLR) framework. CTBI's CBLR ratio was 13.81% and CTB's was 13.32% as of March 31, 2025, both exceeding the 9% requirement[204] Impact of Inflation, Changing Prices, and Economic Conditions This section discusses the impact of inflation and changing economic conditions on CTBI's asset growth and capital requirements, highlighting the strategy to maintain a balanced position between interest rate sensitive assets and liabilities - Inflation impacts asset growth in the banking industry and the need to increase equity capital to maintain appropriate equity-to-assets ratios[206] - CTBI seeks to maintain a balanced position between interest rate sensitive assets and liabilities to mitigate the effects of wide interest rate fluctuations[207] Stock Repurchase Program This section provides an overview of CTBI's stock repurchase program, detailing the total shares repurchased and the remaining authorization under the program - CTBI's stock repurchase program, initiated in December 1998 and expanded multiple times, has resulted in 2,465,294 shares repurchased as of March 31, 2025[208] - There are 1,034,706 shares remaining under the current repurchase authorization[208] Critical Accounting Estimates This section outlines CTBI's critical accounting estimates, focusing on the Allowance for Credit Losses (ACL) and Goodwill, and the significant management judgments involved in their determination and impairment testing - The preparation of financial statements requires significant management estimates and assumptions, particularly for the Allowance for Credit Losses (ACL) and Goodwill[209][210][211] - ACL is determined through ongoing quarterly assessments, considering historical loss experience, current/forecasted economic conditions, and qualitative factors, using a discounted cash flow (DCF) model for all loan segments[212][215] - Goodwill is tested for impairment annually (October 1) or more frequently if circumstances warrant, using qualitative and quantitative assessments to compare fair value with carrying amount[220][221] - The fair value of CTBI for goodwill impairment testing is determined using an income-based approach with forecasted cash flows and estimated cost of equity, requiring significant management judgment[222] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section reiterates CTBI's approach to interest rate risk management, using an earnings simulation model to quantify the sensitivity of net interest income to changes in interest rates - Interest rate risk management aims for consistent net interest income growth within Board-approved policy limits[225] - An earnings simulation model estimates that a 200 basis point increase in the yield curve would increase net interest income by 2.56% over one year and 4.08% over two years[225] - A 200 basis point decrease in the yield curve would decrease net interest income by an estimated 3.08% over one year and 5.24% over two years[225] Item 4. Controls and Procedures This section confirms management's evaluation of CTBI's disclosure controls and procedures, concluding their effectiveness as of March 31, 2025, and reports no material changes in internal control over financial reporting during the quarter - Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of March 31, 2025, and concluded they were effective[227] - No material changes in internal control over financial reporting occurred during the three months ended March 31, 2025[228] PART II - OTHER INFORMATION This part covers other information not included in the financial statements, such as legal proceedings, risk factors, sales of equity securities, defaults, mine safety, and exhibits Item 1. Legal Proceedings This section states that there are no legal proceedings to report for the period - No legal proceedings to report[230] Item 1A. Risk Factors This section indicates that there are no new risk factors to report for the period - No risk factors to report[230] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section states that there are no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities and use of proceeds to report[230] Item 3. Defaults Upon Senior Securities This section indicates that there are no defaults upon senior securities to report for the period - No defaults upon senior securities to report[230] Item 4. Mine Safety Disclosure This section states that mine safety disclosure is not applicable to CTBI - Mine Safety Disclosure is not applicable[230] Item 5. Other Information This section confirms no information required for Form 8-K, no changes to director nomination procedures, and no Rule 10b5-1 or non-Rule 10b5-1 trading arrangements adopted or terminated by directors or officers during the quarter - No information required to be disclosed in a report on Form 8-K[230] - No changes to director nomination procedures[230] - No director or officer adopted or terminated a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the three months ended March 31, 2025[230] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications and XBRL interactive data files - Includes Certifications Pursuant to 18 U.S.C. Section 1350 (Exhibits 31.1, 31.2, 32.1, 32.2)[231] - Includes XBRL Instance Document, Taxonomy Extension Schema Document, Calculation Linkbase, Definition Linkbase, Label Linkbase, Presentation Linkbase, and Cover Page Interactive Data File (Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[231] SIGNATURES This section contains the signatures of authorized officers, Mark A. Gooch and Kevin J. Stumbo, certifying the report on behalf of Community Trust Bancorp, Inc Signatures This section contains the signatures of authorized officers, Mark A. Gooch (Chairman, President, and CEO) and Kevin J. Stumbo (Executive Vice President, CFO, and Treasurer), certifying the report on behalf of Community Trust Bancorp, Inc - Report signed on May 9, 2025[235] - Signed by Mark A. Gooch, Chairman, President, and Chief Executive Officer[235] - Signed by Kevin J. Stumbo, Executive Vice President, Chief Financial Officer, and Treasurer[235]