FOR ANNUAL REPORTS OF EMPLOYEE STOCK REPURCHASE, SAVINGS AND SIMILAR PLANS PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:
Report of Independent Registered Public Accounting Firm
Plan Administrator, Plan Participants
and Audit Committee
Community Trust Bancorp, Inc.
Employee Stock Ownership Plan
Pikeville, Kentucky
Opinion on the Financial Statements
We have audited the accompanying statements of net assets available for benefits of Community Trust Bancorp, Inc. Employee Stock Ownership Plan (Plan) as of
December 31, 2020 and 2019, 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, 2020 and 2019, 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) (PCAOB) 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 U.S. Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. 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, 2020, and schedule of reportable transactions for the year ended December 31,
2020, have been subjected to audit procedures performed in conjunction with the audit of the Plan’s financial statements. The supplemental schedules are the responsibility of the Plan’s management. Our audit procedures included determining whether
the supplemental schedules reconcile 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 schedules.
In forming our opinion on the supplemental schedules, we evaluated whether the supplemental schedules, including their form and content, are 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) and the schedule of reportable transactions are fairly stated, in all material respects, in
relation to the basic financial statements taken as a whole.
/s/ BKD, LLP
We have served as the Plan’s auditor since 2006.
Louisville Kentucky
June 28, 2021
Notes to Financial Statements
As of December 31, 2020 and 2019 and
For the Years Ended December 31, 2020 and 2019
1. Description of Plan
The following description of the Community Trust Bancorp, Inc. Employee Stock Ownership Plan (the “Plan”) is provided for general information purposes only. Participants should
refer to the Plan Document and Summary Plan Description for more complete information, which are available from the Plan Administrator.
General
The Plan is an employee stock ownership 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”). CTIC served as trustee of the Plan for the years ended December 31, 2020 and 2019. CTIC also served as custodian of the Plan for the period from January 1, 2019 through
September 11, 2020. Matrix Trust Company served as custodian of the Plan for the period from September 11, 2020 through December 31, 2020. 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
In its sole discretion, annually CTBI shall determine an amount to contribute, if any, equal to a percentage of compensation for each eligible participant. The contributions are
non-participant directed and invested directly in CTBI stock. During 2020 and 2019, the contribution percentage was 4%.
Participant Accounts
Each participant’s account is credited with employer contributions. 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 various investment funds including CTBI common stock, mutual funds and money market funds. Employer contributions are automatically
invested in CTBI common stock. Once a participant attains the age of 55 and has completed ten years of participation in the Plan, the participant may allocate a portion of their Plan balance to other investments within 90 days after the close of each
Plan year. These elections may be made for six consecutive years.
Vesting
Vesting of an employee’s interest 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 or her account is payable to him or her 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 based upon 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
and/or CTBI common stock made in equal annual installments over a period equal to five years. Notwithstanding the foregoing, if the vested interest in the ESOP Stock Fund of the Plan exceeds $1,150,000 (as adjusted per Code Section 409(o)), the
distribution period may be extended by one year for each $230,000 (as adjusted per Code) or portion thereof that the ESOP Stock Fund exceeds $1,150,000, up to a maximum of five additional years.
Forfeited Accounts
At December 31, 2020 and 2019, forfeited non-vested accounts totaled $30,170 and $18,617, respectively. These amounts will be used to
reinstate any previously forfeited balances required, if any, with the remainder reallocated to participants based upon compensation.
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 plan 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. Net Assets by Participant and Non-Participant Directed Investments
All CTBI stock is non-participant directed, while the mutual and money market funds are participant directed. Information about the net assets and the significant components of the
changes in net assets relating to the participant and non-participant directed investments is as follows:
|
|
2020
|
|
|
|
Participant Directed Funds
|
|
|
Non-Participant Directed Employer Fund
|
|
|
Total
|
|
Additions:
|
|
|
|
|
|
|
|
|
|
Investment income (loss):
|
|
|
|
|
|
|
|
|
|
Net appreciation (depreciation) in fair value of investments
|
|
$
|
111,106
|
|
|
$
|
(6,787,531
|
)
|
|
$
|
(6,676,425
|
)
|
Interest and dividends
|
|
|
20,867
|
|
|
|
1,161,302
|
|
|
|
1,182,169
|
|
Net investment income (loss)
|
|
|
131,973
|
|
|
|
(5,626,229
|
)
|
|
|
(5,494,256
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions
|
|
|
-
|
|
|
|
1,834,920
|
|
|
|
1,834,920
|
|
Transfers from non-participant directed funds to participant directed funds
|
|
|
73,225
|
|
|
|
-
|
|
|
|
73,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total additions (reductions)
|
|
|
205,198
|
|
|
|
(3,791,309
|
)
|
|
|
(3,586,111
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deductions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits paid to participants
|
|
|
(381,578
|
)
|
|
|
(1,650,633
|
)
|
|
|
(2,032,211
|
)
|
Transfers from non-participant directed funds to participant directed funds
|
|
|
-
|
|
|
|
(73,225
|
)
|
|
|
(73,225
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deductions
|
|
|
(381,578
|
)
|
|
|
(1,723,858
|
)
|
|
|
(2,105,436
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease
|
|
|
(176,380
|
)
|
|
|
(5,515,167
|
)
|
|
|
(5,691,547
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets available for benefits, beginning of year
|
|
|
1,029,179
|
|
|
|
34,708,640
|
|
|
|
35,737,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets available for benefits, end of year
|
|
$
|
852,799
|
|
|
$
|
29,193,473
|
|
|
$
|
30,046,272
|
|
|
|
2019
|
|
|
|
Participant Directed Funds
|
|
|
Non-Participant Directed Employer Fund
|
|
|
Total
|
|
Additions:
|
|
|
|
|
|
|
|
|
|
Investment income:
|
|
|
|
|
|
|
|
|
|
Net appreciation in fair value of investments
|
|
$
|
152,259
|
|
|
$
|
5,168,281
|
|
|
$
|
5,320,540
|
|
Interest and dividends
|
|
|
38,732
|
|
|
|
1,090,243
|
|
|
|
1,128,975
|
|
Net investment income
|
|
|
190,991
|
|
|
|
6,258,524
|
|
|
|
6,449,515
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions
|
|
|
-
|
|
|
|
1,657,451
|
|
|
|
1,657,451
|
|
Transfers from non-participant directed funds to participant directed funds
|
|
|
72,566
|
|
|
|
-
|
|
|
|
72,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total additions
|
|
|
263,557
|
|
|
|
7,915,975
|
|
|
|
8,179,532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deductions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits paid to participants
|
|
|
(212,967
|
)
|
|
|
(2,166,644
|
)
|
|
|
(2,379,611
|
)
|
Transfers from non-participant directed funds to participant directed funds
|
|
|
-
|
|
|
|
(72,566
|
)
|
|
|
(72,566
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deductions
|
|
|
(212,967
|
)
|
|
|
(2,239,210
|
)
|
|
|
(2,452,177
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase
|
|
|
50,590
|
|
|
|
5,676,765
|
|
|
|
5,727,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets available for benefits, beginning of year
|
|
|
978,589
|
|
|
|
29,031,875
|
|
|
|
30,010,464
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets available for benefits, end of year
|
|
$
|
1,029,179
|
|
|
$
|
34,708,640
|
|
|
$
|
35,737,819
|
|
4. Federal Income Tax Status
The Plan received a Letter of Determination from the Internal Revenue Service on August 28, 2015, stating the Plan and related trust are in compliance with the applicable
requirements of the Internal Revenue Code, and therefore, not subject to tax. The Plan has been amended since receiving the initial IRS ruling. The Plan and related trust are currently designed and being operated in compliance with the applicable
requirements of the Internal Revenue Code.
5. 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.
6. 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 received by CTIC as trustee and forwarded to the Custodian. 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, 2020 and 2019, the Plan received dividend income of $1,142,015 and $1,071,331, respectively.
The Plan held the following party-in-interest investments (at fair value) at December 31:
|
|
2020
|
|
|
2019
|
|
CTBI common stock (in dollars)
|
|
$
|
28,834,866
|
|
|
$
|
34,430,208
|
|
|
|
|
|
|
|
|
|
|
Shares outstanding
|
|
|
778,269
|
|
|
|
738,212
|
|
7. 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,
2020 and 2019 were $63,700 and $190,836, respectively.
8. 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 establishes 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,
2020. 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 statement 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 table presents 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, 2020 and December 31, 2019:
|
|
|
|
|
Fair Value Measurements at December 31, 2020 Using
|
|
|
|
Fair Value
|
|
|
Quoted Prices in Active Markets for Identical Assets
(Level 1)
|
|
|
Significant Other Observable Inputs
(Level 2)
|
|
|
Significant Unobservable Inputs
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CTBI common stock
|
|
$
|
28,834,866
|
|
|
$
|
28,834,866
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Mutual funds
|
|
|
819,312
|
|
|
|
819,312
|
|
|
|
0
|
|
|
|
0
|
|
Money market funds
|
|
|
33,487
|
|
|
|
33,487
|
|
|
|
0
|
|
|
|
0
|
|
|
|
$
|
29,687,665
|
|
|
$
|
29,687,665
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2019 Using
|
|
|
|
Fair Value
|
|
|
Quoted Prices in Active Markets for Identical Assets
(Level 1)
|
|
|
Significant Other Observable Inputs
(Level 2)
|
|
|
Significant Unobservable Inputs
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CTBI common stock
|
|
$
|
34,430,208
|
|
|
$
|
34,430,208
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Mutual funds
|
|
|
975,262
|
|
|
|
975,262
|
|
|
|
0
|
|
|
|
0
|
|
Money market funds
|
|
|
53,917
|
|
|
|
53,917
|
|
|
|
0
|
|
|
|
0
|
|
|
|
$
|
35,459,387
|
|
|
$
|
35,459,387
|
|
|
$
|
0
|
|
|
$
|
0
|
|
9. Risk and Uncertainties
Since March 13, 2020, the United States has been operating under a state of emergency in response to the spread of COVID-19. COVID-19 and related governmental responses have
affected economic and financial market conditions as well as the operations, results, and prospects of companies across many industries.
The coronavirus pandemic has caused increased volatility in financial markets and the possibility of prolonged adverse economic conditions. These changes in economic and financial
market conditions could result in decreases in the fair value of Plan investments. There is uncertainty around the duration and breadth of the COVID-19 pandemic, and as a result the ultimate impact to the fair
value of Plan investments cannot be reasonably estimated at this time.