Report of Independent Registered Public Accounting Firm
Plan Administrator, Plan Participants
and Audit Committee
Community Trust Bancorp, Inc. Savings Plan
Pikeville, Kentucky
Opinion on the Financial Statements
We have audited the accompanying statements of net assets available for benefits of the Community Trust Bancorp, Inc.
Savings Plan (Plan) as of December 31, 2018 and 2017, the related statements of changes in net assets available for benefits for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion,
the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of
December 31, 2018 and 2017, and the changes in net assets available for benefits for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Basis of Opinion
These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) and are
required to be independent with respect to the Plan in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the Public Company Accounting Oversight Board (United
States).
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Plan is not required to have, nor were
we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the
effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Report on Supplemental Information
The supplemental information in the accompanying schedule of assets (held at year-end) at
December 31, 2018, has been subjected to audit procedures performed in conjunction with the audit of the Plan’s financial statements. The supplemental schedule is the responsibility of the Plan’s management. Our audit procedures included
determining whether the supplemental schedule reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the
supplemental schedule. In forming our opinion on the supplemental schedule, we evaluated whether the supplemental schedule, including its form and content, is presented in conformity with the Department of Labor’s Rules and Regulations for Reporting
and Disclosure under the
Employee Retirement Income Security Act of 1974
. In our opinion, the schedule of assets (held at year-end) at
December 31, 2018, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
We have served as the Plan’s auditor since 2006.
Louisville, Kentucky
June 28, 2019
Notes to Financial Statements
As of December 31, 2018 and 2017
and For the Years Ended December 31, 2018 and 2017
1. Description of Plan
The following description of the Community Trust Bancorp, Inc. Savings Plan (the “Plan”) is provided for general information
purposes only. Participants should refer to the Plan Document and Summary 401(k) Plan Description for more complete information, which are available from the Plan Administrator.
General
The Plan is a defined contribution plan covering substantially all employees of Community Trust Bancorp, Inc. (“CTBI”) and all
participating subsidiaries, which include Community Trust Bank, Inc. and Community Trust and Investment Company (“CTIC”). All amounts contributed to the Plan are held by the trustee, CTIC. The Plan is subject to certain provisions of the Employee
Retirement Income Security Act of 1974 (ERISA).
Eligibility
An employee becomes eligible to participate in the Plan on the entry date following the attainment of age twenty-one and
completion of twelve consecutive months of employment in which the employee has at least 1,000 hours of service.
Contributions
A participant may elect to make voluntary contributions, through payroll deductions, to the Plan as deferred compensation
contributions. For 2018 and 2017, the maximum limit on deferral contributions was $18,500 and $18,000, respectively. Participants age 50 and over may also make a catch-up contributions up to a limit of $6,000 to the Plan for 2018 and 2017. During
2018 and 2017, CTBI made matching contributions per payroll period equal to 50% of the first 8% of each participant’s deferred compensation contributions, not to exceed 4% of such participant’s compensation.
Participant Accounts
Each participant’s account is credited with employer discretionary contributions if any, employee deferred compensation
contributions, and the related employer matching contribution. Earnings or losses on the investments are allocated in proportion to the participant’s interest therein.
Each participant is entitled to exercise voting rights attributable to the shares of CTBI common stock allocated to the
participant’s account. The Retirement and Employee Benefits Committee is not permitted to vote any share for a participant. The trustee votes shares for which a participant has given no instructions.
Participant Investment Account Options
The Plan provides for the establishment of a variety of investment funds and a CTBI common stock fund. These investment funds
are participant directed. Participants may transfer account balances between funds, subject to certain limitations. CTBI has the sole discretion to determine or change the number and nature of investment funds.
Vesting
Participants are immediately vested in their voluntary contributions plus earnings thereon. Vesting in CTBI’s contribution
portion of their accounts is 100% in cases of normal retirement at age sixty-five, death or total disability. If a participant’s employment ceases for any other reason, the full value of his account is payable to him if he has completed at least
1,000 hours or more of vesting service for three plan years. Forfeited non vested accounts are allocated to the accounts of participants who received an allocation of matching contributions in such plan year and who are employed on the last day of
that plan year and is based on compensation.
Payment of Benefits
Distribution of funds as a result of retirement or termination from employment may be made either in a lump sum payment
(including CTBI common stock if elected) or payments in cash or CTBI common stock made in equal annual installments over a period of 5 years.
Forfeited Accounts and Excess Contributions
At December 31, 2018 and 2017, forfeited non-vested accounts totaled $7,830 and $5,997, respectively. These accounts will be
reallocated to participants in the same manner as employer contributions. Contributions made to the Plan are returned to participants when the Plan fails certain non- discrimination testing. Excess contributions payable, adjusted for earnings, were
$33,774 and $36,534 as of December 31, 2018 and 2017, respectively. The Plan distributed the 2018 excess contributions before March 15, 2019.
2. Summary of Significant Accounting Policies
Basis of Accounting
The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting
principles generally accepted in the United States of America.
Valuation of Investments and Income Recognition
Investments are reported at fair value. Common stocks and mutual funds are valued at the closing price reported on the active
market on which the individual securities are traded. Dividend income is recorded on the ex-dividend date. Purchases and sales of securities are recognized on the trade date basis. Net appreciation/depreciation includes the Plan’s gains and losses
on investments bought and sold as well as held during the year.
Market Risks and Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
The Plan invests in various mutual funds and CTBI common stock. Investment securities, in general, are exposed to various
risks, such as interest rates, credit, and overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term
and that such changes could materially affect the amounts reported in the statement of net assets available for benefits.
Administrative Expenses
Administrative expenses of the Plan are paid by the Plan’s Sponsor as provided in the Plan document.
Payment of Benefits
Distributions to participants are recorded by the Plan when payments are made.
3. Federal Income Tax Status
The Internal Revenue Service ruled on July 17, 2002 that the Plan qualifies under Section 401(a) of the Internal Revenue Code
("IRC") and, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the IRC to maintain its tax-exempt qualification.
The Plan has been amended since
receiving the initial Internal Revenue Service ruling. The most recent document was submitted and the IRS issued a favorable determination letter dated May 7, 2015. Accordingly, no
provision for income taxes has been included in the Plan's financial statements.
4. Plan Termination
Although it has not expressed any intent to do so, CTBI has the right under the Plan to discontinue its contributions at any
time and to terminate the Plan subject to the provisions of ERISA. In the event of termination, participants will become fully vested in their accounts.
5. Exempt Party-In-Interest Transactions
Parties-in-interest are defined under Department of Labor regulations as any fiduciary of the Plan, any party rendering service
to the Plan, any employer whose employees are covered by the Plan, and certain others. All amounts contributed to the Plan are held by the trustee, CTIC. Professional fees for the administration and audit of the Plan, investment of assets, and
trustee services are paid by CTBI. During the years ended December 31, 2018 and 2017, the Plan received dividend income of $557,121 and $583,824, respectively.
The Plan held the following party-in-interest investments (at fair value) at December 31:
|
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2018
|
|
|
2017
|
|
CTBI common stock
|
|
$
|
16,492,020
|
|
|
$
|
19,123,589
|
|
Shares Outstanding
|
|
|
416,360
|
|
|
|
406,021
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|
|
|
|
|
|
|
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6. Terminated Participants
Included in net assets available for benefits are amounts allocated to individuals who have withdrawn from the Plan. Amounts
distributed to these participants after December 31, 2018 and 2017 were $0 and $169,714, respectively.
7. Fair Value of Plan Assets
ASC Topic 820,
Fair Value
Measurements
, defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. In this standard, the FASB clarifies the principle that
fair value should be based on the assumptions market participants would use when pricing the asset or liability. In support of this principle, ASC Topic 820 specifies a fair value hierarchy that prioritizes the information used to develop those
assumptions. There have been no significant changes in the valuation techniques during the year ended December 31, 2018. The Plan had no liabilities measured at fair value on a recurring basis. In addition, the Plan had no assets or liabilities
measured at fair value on a nonrecurring basis. The fair value hierarchy is as follows:
Level 1 Inputs – Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access
at the measurement date.
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, quoted prices in inactive 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 pricing the assets or liabilities.
Following are descriptions of the valuation methodologies and inputs used for assets measured at fair value on a recurring basis
and recognized in the accompanying statements of net assets available for benefits, as well as the general classification of such assets pursuant to the valuation hierarchy.
Investments
Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation
hierarchy. Level 1 securities include Community Trust Bancorp, Inc. common stock, mutual funds, and money market funds. Shares of mutual funds are valued at quoted market prices. The fair values of Community Trust Bancorp, Inc. common stock are
derived from the closing price reported on the NASDAQ Stock Exchange.
The following tables present the fair value measurements of assets recognized in the accompanying statements of net assets
available for benefits measured at fair value on a recurring basis and the level within the ASC Topic 820, fair value hierarchy in which the fair value measurements fall at December 31, 2018 and December 31, 2017:
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Fair Value Measurements as of December 31, 2018 Using
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Fair Value
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Quoted Prices in Active Markets for Identical Assets
(Level 1)
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Significant Other Observable Inputs
(Level 2)
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Significant Unobservable Inputs
(Level 3)
|
|
|
|
|
|
|
|
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|
|
|
|
|
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CTBI common stock
|
|
$
|
16,492,020
|
|
|
$
|
16,492,020
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Mutual funds
|
|
|
37,309,612
|
|
|
|
37,309,612
|
|
|
|
0
|
|
|
|
0
|
|
Money market funds
|
|
|
4,702,902
|
|
|
|
4,702,902
|
|
|
|
0
|
|
|
|
0
|
|
|
|
$
|
58,504,534
|
|
|
$
|
58,504,534
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
Fair Value Measurements as of December 31, 2017 Using
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Fair Value
|
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Quoted Prices in Active Markets for Identical Assets
(Level 1)
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Significant Other Observable Inputs
(Level 2)
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Significant Unobservable Inputs
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
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CTBI common stock
|
|
$
|
19,123,589
|
|
|
$
|
19,123,589
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Mutual funds
|
|
|
41,962,757
|
|
|
|
41,962,757
|
|
|
|
0
|
|
|
|
0
|
|
Money market funds
|
|
|
6,837,244
|
|
|
|
6,837,244
|
|
|
|
0
|
|
|
|
0
|
|
|
|
$
|
67,923,590
|
|
|
$
|
67,923,590
|
|
|
$
|
0
|
|
|
$
|
0
|
|