CTBI 10-K & 10-Q changes, risk factors and insider trading

Consumer loans may carry a higher degree of repayment risk than residential mortgage loans, particularly when the consumer loan is unsecured. Repayment of a consumer loan typically depends on the borrower’s financial stability, and it is more likely to be affected adversely by job loss, illness, or personal bankruptcy. In addition, federal and state bankruptcy, insolvency, and other laws may limit the amount we can recover when a consumer client defaults. As of December 31, 2024,2025, consumer loans comprised approximately 22%21% of our total loan portfolio. AsApproximately of December 31, 2024, approximately 85%86% of our consumer loans and 19%18% of our total loan portfolio were consumer indirect loans. Consumer indirect loans are fixed rate loans secured by new and used automobiles, trucks, vans, and recreational vehicles originated at selling dealerships which are purchased by us following our review and approval of such loans. These loans generally have a greater risk of loss in the event of default than, for example, one-to-four family residential mortgage loans due to the rapid depreciation of vehicles securing the loans. We face the risk that the collateral for a defaulted loan may not provide an adequate source of repayment of the outstanding loan balance. We also assume the risk that the dealership administering the lending process does not comply with applicable consumer protection law and regulations.

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., our operations, and our present business environment. The MD&A is provided as a supplement to—and should be read in conjunction with—our consolidated financial statements and the accompanying notes thereto contained in Item 8 of this annual report. The MD&A includes the following sections:

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-one banking locations in eastern, northern, northeastern, central, and south central Kentucky, southern West Virginia, and northeastern Tennessee, four trust trust offices across Kentucky, and one trust office in northeastern Tennessee. At December 31, 2024,2025, we had total consolidated assets of $6.2$6.7 billion and total consolidated deposits, including repurchase agreements, of $5.3$5.7 billion. Total shareholders’ equity at December 31, 20242025 was $757.6$856.1 million. Trust assets under management at December 31, 20242025 were $3.7$4.1 billion, including CTB’s investment portfolio totaling $1.1 billion.

Net interest income for the year ended December 31, 20242025 of $186.0$219.0 million increased $12.9$33.0 million, or 7.4%,17.7%, from prior year with an increase in average earning assets for the year 20242025 of $325.8$507.6 million, or 6.2%.9.1%. Our yield on average earning assets for the year 20242025 increased 506 basis points from prior year, andwhile our cost of interest bearing funds increaseddecreased 5835 basis points during the same time period.points. Our net interest margin, on a fully tax equivalent basis, for the year 20242025 increased 426 basis points from the year ended December 31, 2023.2024. Average loans to deposits, including repurchase agreements, for the year ended December 31, 20242025 were 84.3%85.8% compared to 81.5% 84.3% for the year ended December 31, 2023.2024.

Provision for credit losses for the year 20242025 was $11.0$12.4 million compared to $6.8$11.0 million during the year 2023.2024. Of the provision for the year, $12.5 million was allotted to fund changes in loan volume and composition, $0.1 million was allotted based on quantitative and qualitative factors, and $0.2 million was credited against the provision for unfunded commitments. See below for discussion of our allowance for credit losses.

* Please refer to our annual report on Form 10-K for the year ended December 31, 20232024 for detailed income discussion related to the year 2022.2023.

CTBI’s total assets at $6.2$6.7 billion increased $423.5$490.9 million, or 7.3%,7.9%, from December 31, 2023.2024. Loans outstanding at December 31, 20242025 were $4.5$4.9 billion, increasing $435.7$408.3 million, or 10.8%,9.1%, year year over year. The increase in loans from prior year included a $288.9$220.6 million increase in the commercial loan portfolio, a $126.3$182.8 million increase in the residential loan portfolio, and a $26.8$12.2 million increase in the indirect loan portfolio, portfolio, partially offset by a $6.3$7.3 million decrease in the consumer direct loan portfolio. CTBI’s investment portfolio decreasedincreased $107.4$65.4 million, or 9.2%,6.2%, from December 31, 2023.2024. Deposits in other banks increased $83.9$4.3 million from December 31, 2023. 2024. Deposits, including repurchase agreements, at $5.3$5.7 billion increased $360.5$387.5 million, or 7.3%, from December 31, 2023.2024. CTBI is not dependent on any one customer or group of customers for their source of deposits. As of December 31, 2025, two customers accounted for 3% each of our $5.4 billion in deposits. Only two customer relationships accounted for more than 1% each.

CTBI’sOur total nonperforming loans were $19.2 million, or 0.39% of total loans, at December 31, 2025 compared to $26.7 million, or 0.59% of total loans, at December 31, 2024 compared to $14.0 million, or 0.34% of total loans, at December 31, 2023.2024. Accruing loans 90+ days days past due at $10.6 million increased $0.4$0.3 million from Decemberprior 31,year 2023,end. while nonaccrualNonaccrual loans increasedat $12.3$8.5 million decreased $7.8 million from Decemberprior 31,year 2023.end. Accruing loans 30-89 days past due at $16.8$20.2 million increased $1.5$3.3 million from Decemberprior 31,year 2023. Our loan portfolio management processes focus on the immediate identification, management, and resolution of problem loans to maximize recovery and minimize loss. end. 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, loan modifications for borrowers experiencing financial difficulty, 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 81%82% 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. products.For further information regarding nonperforming loans, see note 4 to the consolidated financial statements contained herein.

Our reserve coverage (allowance for credit losses to nonperforming loans) at December 31, 20242025 was 206.0%314.0% compared to 354.7%206.0% at December 31, 2023.2024. Nonaccrual loans to totaltotals loans were 0.2% at December December 31, 2024 was 0.36%2025 compared to 0.10%0.4% at December 31, 2023.2024. OurThe allowance for credit losses to nonaccrual loans at December 31, 20242025 was 335.8%704.6% compared to 1,223.9%335.8% at December 31, 2023.2024. Our credit loss reserve as a percentage of total loans outstanding at December 31, 20242025 wasremained 1.23%,at an increase1.23% from the 1.22% at December 31, 2023.2024. See note 4 to our consolidated financial statements for additional information regarding our allowance for credit losses.

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 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 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 December 31, 2024,2025, we had approximately $369.5$363.7 million in cash and cash equivalents and approximately $170.6$174.7 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$369.5 million and $157.5$170.6 millionmillion, respectively, at December 31, 2023.2024. Additional asset-driven liquidity is provided by the remainder of the securities portfolio and the repayment of loans. In addition to core 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 Bank advances were $0.3 million at December 31, 20242025 and December 31, 2023.2024. As of December 31, 2024,2025, we had a $485.0$546.9 million available borrowing position with the Federal Home Loan Bank, compared to $476.2$485.0 million at December 31, 2023.2024. We generally 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 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 December 31, 20242025 and December 31, 2023,2024, 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 December 31, 20242025 were deposits with the Federal Reserve of $289.4$288.1 million, compared to $207.6$289.4 million at December 31, 2023.2024. 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 December 31, 2024,2025, available-for-sale (“AFS”) securities comprised all99.6% of the total investment portfolio, and the AFS portfolio was approximately 139%131% of equity capital. Eighty-five percent of the pledge-eligible portfolio was pledged.

As of December 31, 2024,2025, our outstanding balance on long-term debt was $64.0$63.8 million, which includes junior subordinated debentures of $57.8 million and loan related borrowings of $6.2 $6.0 million. The interest payments on long-term debt due in one year or less is $3.7$3.2 million, and interest payments on long-term debt due in more than one year is $33.2$29.9 million. The interest on $57.8 million in junior subordinated debentures is calculated calculated based on the three-month Chicago Mercantile Exchange (“CME”) Term Secured Overnight Financing Rate (“SOFR”), plus a tenor spread adjustment of 0.26161% plus 1.59% until its maturity of June 1, 2037. The three-month CME Term SOFR rate is projected using the most likely rate forecast from assumptions incorporated in the interest rate risk model and is determined two business days prior to the interest payment date. The interest on the $6.2$6.0 million in loan related borrowings is based on a fixed rate of 3.25%. Repayment of the liability will be provided by the loan payments made by the loan customer. This principal amount is also guaranteed by the United States Department of Agriculture (the “USDA”). Interest on long-term debt assumes the liability will not be prepaid and interest is calculated to maturity. These assumptions are uncertain, and as a result, the actual payments will differ from the projection due to changes in economic conditions. Refer to note 109 to the consolidated financial statements contained herein for additional information regarding long-term debt.

Critical Accounting Policies and Estimates

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 made when facts and circumstances dictate a change. Historically, we have found our application of accounting policiesestimates to be appropriate, and actual results have not differed materially from those determined using necessary estimates.

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

Allowance for Credit Losses – 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 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.

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. Discounteddiscounted cash flow (“DCF”) modeling was usedmodel 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 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 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 forecast period, expected credit losses are estimated by reverting to historical loss information.information on an input basis. CTBI reverts to a long-run average of the modeled economic factors over four quarters to derive a long-run average probability of default/loss given default. 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.

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 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.

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 trust company, Community Trust and Investment Company. Through our subsidiaries, we have seventy-eight banking locations in eastern, northern, northeastern, central, and south central Kentucky, southern West Virginia, and northeastern Tennessee, four trust offices across Kentucky, and one trust office in northeastern Tennessee. At MarchJune 31,30, 2026, we had total consolidated assets of $6.7$7.0 billion and total consolidated deposits, including repurchase agreements, of $5.7 $6.0 billion. Total shareholders’ equity at MarchJune 31,30, 2026 was $871.2$891.8 million. Trust assets under management at MarchJune 31,30, 2026 were $4.3 billion, including CTB’s investment portfolio totaling $1.1 billion.

We reported record earnings for the firstsecond quarter 2026 of $27.2$29.6 million, or $1.51$1.64 per basic earnings per share, compared to $27.3$27.2 million, or $1.51 per basic share, earned during the fourth first quarter 2025 2026 and $22.0$24.9 million, or $1.22$1.38 per basic share, earned during the firstsecond quarter 2025. Total revenue for the quarter was $0.5$4.3 million belowabove prior quarter butand $8.0$8.3 million above prior year same quarter. Net interest income for the quarter increased $0.7$2.1 million compared to prior quarter and $7.5$6.8 million compared to prior year same quarter, and noninterest income decreasedincreased $1.2$2.2 million compared to prior quarter and but increased $0.5$1.4 million compared to prior year same quarter. Our provision for credit losses for the quarter decreasedincreased $0.6$0.5 million from prior quarter and $1.3$0.7 million from prior year same quarter. Noninterest expense increased $0.1 $0.8 million compared to prior quarter and $2.3$1.7 million compared to prior year same quarter. Earnings for the six months ended June 30, 2026 were $56.8 million, or $3.15 per basic share, compared to $46.9 million, or $2.60 per basic share, for the same period prior year.

The following tabletables illustratesillustrate the approximate effect of volume and rate changes on net interest differentials between the three months ended March 31, 2026 and March 31, 2025.differentials.

For purposes of the above table,tables, changes which are due to both rate and volume are allocated based on a percentage basis, using the absolute values of rate and volume variance as a basis for for percentages. Income is stated at a fully taxable equivalent basis, using a 24.95% tax rate.

Net interest income for the quarter of $58.8$60.9 million was $0.7$2.1 million, or 1.1%,3.6%, above prior quarter and $7.5$6.8 million, or 14.7%,12.7%, above prior year same quarter, as our net interest margin, on a fully tax equivalent basis, increased 121 basis pointspoint from prior quarter and 2216 basis points from prior year same quarter. Our quarterly average earning assets increased $5.4$137.2 million, an annualized 0.3%,2.2%, from prior quarter and $479.2 $481.4 million, or 8.2%,8.0%, from prior year same quarter. Our yield on average earning assets increased 13 basis pointpoints from prior quarter but decreased 68 basis points from prior year same quarter, while our cost of funds decreasedincreased 173 basis points from prior quarter andbut 41decreased 36 basis points from prior year same quarter. Our ratio of average loans to deposits, including repurchase agreements, wasfor the quarter remained at 87.2% forfrom theprior quarter compared to 84.9%86.6% for prior quarter and 85.9% for same quarter prior year. Net interest income for the six months ended June 30, 2026 at $119.7 million was $14.4 million, or 13.6%, above same period prior year.

Our provision for credit losses at $2.3$2.8 million for the quarter decreasedincreased $0.6$0.5 million from prior quarter and $1.3$0.7 million from prior year same quarter. quarter. Of the provision for the quarter, $2.5$2.6 million was attributable to the allowance for credit losses, with an additional expense recovery of $0.2$174 millionthousand recognized in the provision for unfunded commitments. Provision for credit losses for the six months ended June 30, 2026 at $5.1 million was $0.6 million below same period prior year.

CTBI’s total assets at $6.7$7.0 billion increased $57.0$248.2 million, or 3.5%14.8% annualized, for the quarter and $464.6$305.2 million, or 7.4%,9.2% annualized, from MarchDecember 31, 2025. Loans outstanding at $5.0 $5.1 billion increased $95.9 $134.1 million, an annualized 7.9%,10.8%, for the quarter and $354.3$230.0 million, or 7.6%,9.5% annualized, from MarchDecember 31, 2025. The increase in loans for the quarter included a $46.8$57.4 million increase in the commercial loan portfolio, a $43.3$47.5 million increase in the residential loan portfolio, anda an $11.5$29.1 million increase in the consumer indirect loan portfolio, partially offset byand a $5.7$0.1 million decreaseincrease in the consumer direct loan portfolio. CTBI’s investment portfolio at $1.1 billion decreased $33.0$35.6 million, an annualized 11.9%,13.1%, for the quarter and $69.0 million, or 12.4% annualized, from December 31, 2025 as management allocated investment maturities into the loan portfolio but increased $79.1 million, or 7.8%, from March 31, 2025.portfolio. Deposits in other banks increased decreased $33.8$183.4 million for the quarter and $5.1$149.7 million from MarchDecember 31, 2025.

Deposits, including repurchase agreements, at $5.7$6.0 billion increased $35.1$221.9 million, an annualized 2.5%,15.5%, for the quarter and $375.1$257.0 million, or 7.0%,9.1% annualized, from MarchDecember 31, 2025. CTBI is not dependent on any one customer or group of customers for their source of deposits. As of MarchJune 31,30, 2026, two customers accounted for over 3% each (3.7%3.5% and 3.2%3.1%) of our $5.4$5.7 billion in deposits. Only these two customer relationships accounted for more than 1% each of our deposits.

Shareholders’ equity at $871.2$891.8 million increased $15.2$20.6 million, an annualized 7.2%,9.5%, for the quarter and $87.1$35.8 million, or 11.1%,8.4% annualized, from MarchDecember 31, 2025. Net unrealized losses on securities, net of deferred taxes, were $68.4 million at June 30, 2026, compared to $68.0 million at March 31, 2026,2026 compared toand $64.8 million at December 31, 2025 and $86.1 million at March 31, 2025.

As of MarchJune 31,30, 2026, we had approximately $1.6$1.7 million in uninsured deposits. CTBI has no brokered deposits.

Our total nonperforming loans at $20.7$29.7 million at MarchJune 31,30, 2026 increased $1.6$9.0 million for the quarter butand decreased $5.8$10.6 million from MarchDecember 31, 2025. Nonaccrual loans at $11.1$10.8 million decreased increased $2.6$0.3 million from prior quarter but decreasedincreased $4.6$2.3 million from MarchDecember 31, 2025. Accruing loans 90+ days past due at $9.6$19.0 million decreasedincreased $1.0$9.4 million from prior quarter and $1.2$8.3 million from MarchDecember 31, 2025.2025, as a well secured $8.7 million commercial relationship in the process of collection moved from the 30-89 days past due category during the quarter. Accruing loans 30-89 days past due at $24.8 $20.3 million increaseddecreased $4.6$4.5 million from prior quarter andbut increased $10.3$0.1 million from MarchDecember 31, 2025. 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, loan modifications for borrowers experiencing financial difficulty, nonaccrual status, and adequate loan loss reserves. The Loan Review Department has annually reviewed on average 97% of the outstanding commercial 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 82% 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 3 to the condensed consolidated financial statements contained herein.

We had net loan charge-offs of $0.9 million, an annualized 0.07% of average loans, for the quarter compared to $1.3 million, an annualized 0.11% of average loans, for theprior quarter compared to $1.8and $1.4 million, an annualized 0.14% of average loans, for prior quarter and $1.6 million, an annualized 0.14%0.12% of average loans, for the firstsecond quarter 2025. Of the net charge-offs for the quarter, $0.5$0.2 million were in commercial loans, $0.2 million were in residential loans, $0.5 million were in consumer indirect loans, and $0.1 $0.2 million were in consumer direct loans. Net loan charge-offs for the six months ended June 30, 2026 were $2.2 million, or an annualized 0.09% of average loans, compared to $2.9 million, or an annualized 0.13% of average loans, for the same period prior year.

Our reserve coverage (allowance for credit losses to nonperforming loans) at MarchJune 31,30, 2026 was 295.8%211.8% compared to 314.0% at December 31, 2025 and 214.7%237.1% at MarchJune 31,30, 2025. Nonaccrual loans to totals loans were 0.2% at MarchJune 31,30, 2026 and December 31, 2025. The allowance for credit losses to nonaccrual loans were 550.9%583.7% at MarchJune 31,30, 2026 compared to 704.6% at December 31, 2025. Our loanallowance lossfor reservecredit losses as a percentage of total loans outstanding at MarchJune 31,30, 2026 remained at 1.23% from December 31, 2025 and MarchJune 31,30, 2025. The table below shows the changes in components of the allowance for credit losses during the firstthree quartermonths ended June 30, 2026:

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,June 30, 2026, we had approximately $358.7$514.3 million in cash and cash equivalents and approximately $146.8$113.0 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 $363.7 million and $174.7 million, respectively, at December 31, 2025. 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 MarchJune 31,30, 2026 and December 31, 2025. As of MarchJune 31,30, 2026, we had a $559.7$543.9 million available borrowing position with the Federal Home Loan Bank, compared to $546.9 million at December 31, 2025. 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 MarchJune 31,30, 2026 and December 31, 2025, 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 MarchJune 31,30, 2026 were deposits with the Federal Reserve of $177.9$434.4 million, compared to $288.1 million at December 31, 2025. 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 sponsored agency issuances. At MarchJune 31,30, 2026, available-for-sale (“AFS”) securities comprised 99.7%99.6% of the total investment portfolio, and the AFS portfolio was 125%118% of equity equity capital. Eighty-eightNinety percent of the pledge-eligible portfolio was pledged.

We continue to grow our shareholders’ equity while also providing an annual dividend yield to shareholders for the quarter ended MarchJune 31,30, 2026 of 3.49%.2.93%. Shareholders’ equity increased 1.8% 2.4% for the quarter and 11.1%4.2% from MarchDecember 31, 2025. Our primary source of capital growth is the retention of earnings. Cash dividends were $0.53$1.06 per share for the first quartersix months of 2026 compared to $0.47$0.94 per share for the first quartersix months of 2025. We retained 64.9% 66.3% of our earnings for the threesix months ended MarchJune 31,30, 2026 compared to 61.5%63.8% for the threesix months ended MarchJune 31,30, 2025.

Insured depository institutions are required to meet certain capital level requirements. Management elected to use the community bank leverage ratio (“CBLR”) framework for CTBI and CTB. The CBLR 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. A CBLR greater than 9% is 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. CTBI’s CBLR ratio as of MarchJune 31,30, 2026 was 13.91%.13.89%. CTB’s CBLR ratio as of MarchJune 31,30, 2026 was 13.42%.13.43%.

As of MarchJune 31,30, 2026, 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 a material adverse impact on our liquidity, capital resources, or operations.

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. As of MarchJune 31,30, 2026, a total of 2,465,294 shares have been repurchased through this program, leaving 1,034,706 shares remaining under our current repurchase authorization.

Our accounting policies are described in noteNote 1 to our consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2025. We have identified the following critical accounting estimatesestimate: