UNITED STATES
Securities and exchange commission
washington, dc 20549
SCHEDULE 14a
(Rule 14a-101)
schedule 14A INFORMATION
proxy statement Pursuant to section 14(A) OF THESECURITIES EXCHANGE ACT OF 1934
Securities exchange act of 1934
| Filed by the Registrant | ☒ | Filed by a Party other than the Registrant | ☐ |
Check the appropriate box:
| ☐ | Preliminary Proxy Statement |
| ☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6e(2)) |
| ☒ | Definitive Proxy Statement |
| ☐ | Definitive Additional Materials |
| ☐ | Soliciting Material under Rule 14a-12 |
Community Trust Bancorp, Inc.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Payment of Filing Fee (Check the appropriate box):
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COMMUNITY TRUST BANCORP, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 24, 201823, 2024
The Annual Meeting of Shareholders of Community Trust Bancorp, Inc. (“CTBI”) will be held aton the Fourth Floor of the Community Trust Bank,Bancorp, Inc., Corporate Headquarters, 346 North Mayo Trail, Pikeville, Kentucky, on Tuesday, April 24, 201823, 2024 at 10:00 a.m. EDT for the following purposes:
| 1. | To elect a Board of |
| 2. | To consider and approve the proposed 2025 Stock Ownership Incentive Plan. |
| 3. | To ratify and approve the appointment of |
| 4. | To approve the advisory (nonbinding) resolution relating to executive compensation. |
| 5. | To transact such other business as may properly come before the meeting or any adjournment thereof. |
Only those holders of stock of record at the close of business on February 28, 201829, 2024 are entitled to notice of and to vote at the Annual Meeting and any adjournment thereof.
The Board of Directors recommends that you vote FOR each of the nominees for director, FOR the approval of the proposed 2025 Stock Ownership Incentive Plan, FOR the ratification and approval of the independent registered public accounting firm, FOR the approval of the advisory (nonbinding) resolution relating to executive compensation, and that you grant discretion on such other business as may properly come before the meeting or any adjournment.
CTBI is furnishing all proxy materials, including the Proxy Card, to our shareholders via direct mail, except for shareholders who have previously elected to receive their documents via electronic delivery. However, all of the proxy materials listed below may also be obtained over the Internet at http://materials.proxyvote.com/204149:
| ● | Notice of Annual Meeting of Shareholders |
| ● | CTBI’s Proxy Statement |
| ● | CTBI’s |
| ● | Form of Proxy |
Shareholders are cordially invited to attend the Annual Meeting of Shareholders. You may obtain directions to the meeting location by calling our Investor Relations Department toll-free at (800) 422-1090. We hope you will attend the meeting and vote your shares in person.
| By Order of the Board of Directors | ||
| /s/ Mark A. Gooch | ||
| Mark A. Gooch | ||
| Chairman of the Board, | ||
| President and Chief Executive Officer | ||
Pikeville, Kentucky
April 2, 20181, 2024
IMPORTANT
WHETHER OR NOT YOU EXPECT TO BE PRESENT ATPARTICIPATE IN THE ANNUAL MEETING, PLEASE SUBMIT A PROXY. IN THE EVENT YOU ATTEND THE MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON AT ANY TIME BEFORE YOUR PROXY IS EXERCISED.
Community Trust Bancorp, Inc.
346 North Mayo Trail
Pikeville, Kentucky 41501
PROXY STATEMENT
Annual Meeting of Shareholders
to be held April 24, 201823, 2024
INTRODUCTION
This Proxy Statement and accompanying proxy are furnished in connection with the solicitation of proxies by the Board of Directors (“Board”) of CTBI for use at the Annual Meeting of Shareholders (the “Annual Meeting”) to be held on Tuesday, April 24, 2018,23, 2024, at 10:00 a.m. (EDT), aton the Fourth Floor of the Community Trust Bank,Bancorp, Inc., Corporate Headquarters, 346 North Mayo Trail, Pikeville, Kentucky, and any adjournments thereof. A copy of CTBI’s 20172023 Annual Report to Shareholders accompanies this Proxy Statement.
In accordance with rules adopted by the U.S. Securities and Exchange Commission (“SEC”), our proxy materials may also be accessed on the Internet at http://materials.proxyvote.com/204149. The cost of solicitation of proxies will be borne by CTBI. In addition to the use of the mail, proxies may be solicited in person, by telephone, and other means of communication by directors, officers, and other employees of CTBI, none of whom will receive additional compensation for such services. CTBI will also request brokerage houses, custodians, and nominees to forward soliciting materials to the beneficial owners of stock held of record by them and will pay the reasonable expenses of such persons for forwarding such materials. This Proxy Statement and the accompanying proxy are first being mailed or given to shareholders of CTBI on or about April 2, 2018.1, 2024.
RECORD DATE AND VOTING SECURITIES
The Common Stock of CTBI (“Common Stock”) is the only class of outstanding voting securities. Only holders of Common Stock of record at the close of business on February 28, 201829, 2024 (the “Record Date”) are entitled to notice of and to vote at the Annual Meeting. At the Record Date, there were 17,710,73718,020,849 shares of Common Stock outstanding. With respect to the election of directors, shareholders have cumulative voting rights. Accordingly, each shareholder will have the right to cast as many votes in the aggregate as equals the number of shares of Common Stock held by the shareholder multiplied by the number of directors to be elected at the Annual Meeting. Each shareholder may cast all of his or her votes for one candidate or distribute such votes among two or more candidates. Shareholders will be entitled to one vote for each share of Common Stock held of record on the Record Date with regard to all proposals and other matters that properly come before the Annual Meeting or any adjournment thereof.
Each proxy, unless the shareholder otherwise specifies, will be voted in favor of the election of the seventen nominees for director named herein, for the approval of the proposed 2025 Stock Ownership Incentive Plan, for the approval of the appointment of BKD,FORVIS, LLP as CTBI’s Independent Registered Public Accounting Firm for the fiscal year ending December 31, 20182024, and for the approval of the advisory (nonbinding) resolution relating to executive compensation. Where a shareholder has appropriately specified how the proxy is to be voted, it will be voted accordingly. As to any other matter which may properly be brought before the Annual Meeting or any adjournment thereof, a vote may be cast pursuant to the accompanying proxy in accordance with the judgment of the person or persons voting the proxy. Shareholders may vote by mail, by telephone, or over the Internet by following the instructions on the Proxy Card. A shareholder may revoke his or her proxy at any time prior to its exercise. Revocation may be effected by written notice to CTBI, by a subsequently dated proxy received by CTBI, by oral revocation in person at the Annual Meeting or any adjournment thereof, or by voting in person at the Annual Meeting or any adjournment thereof.
A majority of the outstanding shares is required to be present, via participation in personthe Annual Meeting or by proxy, is required to constitute a quorum to transact business at the Annual Meeting. Abstentions will be treated as present for purposes of determining a quorum, but as unvoted shares for purposes of determining the approval of any matter submitted to the shareholders for a vote. If a broker indicates that it does not have discretionary authority as to certain shares to vote on a particular matter, such shares will not be considered as present and entitled to vote with respect to such matter. At the Annual Meeting, brokers and other nominees will not have discretionary authority with respect to election of directors, approval of the proposed 2025 Stock Ownership Incentive Plan, or approval of the advisory nonbinding(nonbinding) resolution relating to executive compensation. Therefore, if you hold shares through a broker or other nominee and do not provide voting instructions to your broker or other nominee, your shares will not be voted with respect to such proposals.
PRINCIPAL SHAREHOLDERS
The following table sets forth information as to each shareholder known by CTBI to beneficially own more than five percent of the Common Stock as of the Record Date.
Beneficial Owner Name and Address | Amount and Nature | |
of Beneficial Ownership | Percent of Class | |
| Community Trust and Investment Company | ||
| As Fiduciary | ||
| 100 East Vine St., Suite | ||
| Lexington, | ||
| BlackRock, Inc. | ||
| New York, NY | ||
| Austin, TX 78746 |
| (1) | The shares indicated are held by Community Trust and Investment Company (“CTIC”), a subsidiary of CTBI, in fiduciary capacities as trustee, executor, agent, or otherwise. Of the shares indicated, |
| (2) | This information is taken from a Schedule 13G/A filed January |
| (3) | This information is taken from a Schedule |
ELECTION OF DIRECTORS
CTBI’s directors are elected at each Annual Meeting of Shareholders and hold office until the next election of directors or until their successors are duly elected and qualify. The persons named below all of whom currently serve as directors of CTBI, have been nominated for election to serve until the next Annual Meeting of Shareholders. All of these individuals currently serve as directors of CTBI.
Charles J. Baird
Franklin H. Farris, Jr.
Mark A. Gooch
Eugenia Crittenden “Crit” Luallen
Ina Michelle Matthews
James E. McGhee II
Franky Minnifield
Jefferson F. Sandlin
Anthony W. St. Charles
Chad C. Street, DMD, MD
Lillian (Kay) Webb, PhD
Unless authority to do so is withheld, it is the intention of the persons named in the proxy to vote for the election of each of the nominees listed above. All nominees have indicated a willingness to serve and CTBI does not anticipate that any of the above nominees will decline or be unable to serve if elected as a director. However, in the event that one or more of such nominees is unable, unwilling, or unavailable to serve, the persons named in the proxy shall have authority, according to their judgment, to vote for such substitute nominees as they, after consultation with CTBI’sthe Board, of Directors, shall determine. If considered desirable, cumulative voting will be exercised by the persons named in the proxy to elect as many of such nominees as possible.
The Nominating and Corporate Governance Committee assists the Board in identifying qualified persons to serve as directors of CTBI. The Nominating and Corporate Governance Committee will evaluate proposed director nominees, including incumbent directors, prior to recommending re-nomination. The Nominating and Corporate Governance Committee selects as candidates for nomination individuals of high personal and professional integrity and ability who can contribute to the Board’s collective effectiveness in serving the interests of CTBI’s shareholders. Maturity of judgment and community leadership are considered strengths for Board members. Although the Nominating and Corporate Governance Committee does not utilize a specific or formulaic diversity policy or requirement, it does consider the make-up of the Board as a whole and favorably views Board diversity with respect to the following attributes: professional and life experience, education, skills, age, race, and gender.
Each of the above-listed nominees has been identified as possessing good judgment, strength of character, and an independent mind, as well as a reputation for integrity and the highest personal and professional ethics. Each nominee also brings a strong and varied background and set of skills to the Board, of Directors, giving the Board, as a whole, competence and experience in a range of areas.
Below is the information concerning each of the directors serving as of February 28, 2017,director nominees, including each director’snominee’s particular and specific qualifications, attributes, and skills which led the Board to conclude that he/she should serve as a director. As more fully described below, the nominees for director collectively have skills in areas considered by the Nominating and Corporate Governance Committee to be valuable to CTBI, including experience in finance, accounting, legal matters, management, operations, and business development and growth, within the financial institutions, energy, and other business sectors.
Charles J. Baird, age 68,74, was appointed to the Board in 1987. He currently serves as Chairman of the Board’s Corporate Retirement and Employee Benefit Committee, and as Vice Chairman of the Board’s Executive Committee, and as a member of the Risk and Compliance Committee. He is also a director of CTBI’s trust subsidiary, CTIC. Mr. Baird has been an attorney with Baird and Baird, PSC since 1975. He became President of Baird and Baird, PSC in 2009. In addition to his more than 40forty-eight years of legal and management experience, he has attended seminars on banking law, corporate finance, and numerous legal matters, has been involved in numerous significant acquisitions during his legal career, and has been a director of many organizations over the years. Mr. Baird has extensive legal experience in the businesses of coal, natural gas, and other natural resources, including the origination and management of such enterprises. Mr. Baird is currently Chairman of the Eastern Kentucky Exposition Center Corporation and Coal Operators and Associates, Inc. He was a member of the Workers’ Compensation Board Nominating Commission of Kentucky from 1987 until 2010, serving as Chairman for 10ten years, and resumed service as a member from 2013 to 2016. Mr. Baird also serves as a director of Community Trust and Investment Company, a subsidiary of CTBI. During his extensive professional career, Mr. Baird has developed relationships with many of our shareholders, customers, and employees.
Franklin H. Farris, Jr., age 71,73, was appointed to the Board in 2008. He currentlyon February 26, 2019. Mr. Farris serves as Chairman of the Board’s CompensationAudit and Asset Quality Committee and as a member of the AuditBoard’s Risk and Asset QualityCompliance Committee and Nominating and Corporate Governance Committee. He is also a director of CTIC and of CTBI’s banking subsidiary, Community Trust Bank, Inc. (“CTB”) and a member of CTB’s Loan Committee. Mr. CarterFarris served as managing partner of the Louisville office of KPMG LLP (“KPMG”), an international public accounting firm, from 2004 to 2009. Mr. Farris, a certified public accountant, was President and COO of Natural Resource Partners L.P. (a coal, mineral, and aggregate reserve ownership business) and its subsidiaries (NYSE:NRP)an audit partner with KPMG from 20021984 until his retirement, after thirty-seven years of service, in September 2014.2009. In addition to his capacitymanaging partner role, Mr. Farris maintained a client partner role on a number of accounting and auditing matters, including significant experience with public companies, as Presidentwell as those with international operations. Upon his retirement from KPMG, he joined Mountjoy Chilton Medley, a Kentucky-based audit and COO of NRP,advisory firm, where he served as an audit partner until 2015. In 2015, he formed Farris Advisory Services, LLC, where he continues to provide chief financial officer type services to small and medium size businesses. In addition, in 2015, he joined the Bluegrass International Fund, an EB-5 Regional Center, as its Chief Financial Officer. Mr. Carter was responsible for all operational functionsFarris is a member of the company, including accountingAmerican Institute of Certified Public Accountants and finance, andthe Kentucky Society of Certified Public Accountants.
Mark A. Gooch, age 65, was also responsible for the managementappointed as Chairman of the company’s banking relationships, including thoseBoard effective with manythe retirement of the major banking entities in the United States. For twelve years prior to joining NRP,M. Lynn Parrish on March 17, 2024. Mr. Carter managed a $120 million private coal landholding company with operations in five states. In those capacities, Mr. Carter attended and spoke at several investor conferences each year and attended numerous conferences and seminars relating to business management and legal matters. Mr. Carter is a director of Alliance Resource Partners, LP (NASDAQ:ARLP), a former director of Vigo Coal Company, a former director of the National Bank of Hustonville, and a former director and non-executive Chairman of New Birmingham Inc., a privately held frack sand producer in Tyler, Texas. Mr. Carter also serves as a director of Community Trust and Investment Company.
Eugenia Crittenden “Crit” Luallen, age 71, was appointed to the Board in 2020. Ms. Luallen was appointed Vice Chairman of the Board and lead independent director effective with the retirement of Mr. Parrish on March 17, 2024. Ms. Luallen was appointed to the Board of Directors of CTB in 2012 and served in that capacity until 2014, at which time she was appointed Lieutenant Governor of Kentucky by Governor Steve Beshear. Ms. Luallen was reappointed to CTB’s Board in 2016, and she served as a director of CTB until 2021. She currently serves as Chairman of the Board’s Compensation Committee, Vice Chairman of the Board’s Audit and Asset Quality Committee, and as a member of the Board’s Executive Committee and Risk and Compliance Committee. She is also a director of CTIC. Ms. Luallen has served seven Kentucky Governors and been elected twice to statewide office. During her long career in state government, Ms. Luallen served in a variety of positions with responsibility for financial management and oversight. Ms. Luallen was elected the state’s Auditor of Public Accounts in 2003 and reelected in 2007, serving a total of eight years. In that position, her office was responsible for auditing all state agencies and county governments. Prior to that position, Ms. Luallen served seven years as Secretary of the Governor’s Executive Cabinet, a position equivalent to chief operating officer for the Commonwealth of Kentucky. During her tenure as Secretary of the Governor’s Cabinet, she served concurrently for thirteen months as State Budget Director. Other gubernatorial appointments included Secretary of the State’s Finance and Administration Cabinet, which manages the financial resources of the Commonwealth and provides the central coordination for administrative services. Ms. Luallen was appointed by Governor Andy Beshear in November 2019 to head the State Budget Transition Team as part of the gubernatorial transition. Ms. Luallen is a member of the Board of Trustees of Centre College where she serves as Vice Chair and Chair of the Governance Committee. She also serves as Vice Chair of the Board of the James Graham Brown Foundation and is involved in numerous other civic and charitable activities.
Ina Michelle Matthews, age 53, was elected to the Board in 2021. She has served as a director of CTB since 2019. She currently serves on the Board’s Corporate Retirement and Employee Benefit Committee, Audit and Asset Quality Committee, Risk and Compliance Committee, and Compensation Committee, as well as CTB’s Loan Committee. Mrs. Matthews has served as the President of Childers Oil Company and Double Kwik Convenience Stores since 2012. Childers Oil Company was founded in 1966 and distributes petroleum products and operates convenience stores throughout Eastern Kentucky and Southwest Virginia. Mrs. Matthews serves on the boards of the National Association of Convenience Stores (NACS) and Georgetown College. She also serves as the Chairman of Letcher County Tourism and is the founder of the EKY Heritage Foundation with the sole purpose to help tourism and economic development in the Eastern Kentucky region.
James E. McGhee II, age 60,66, was appointed to the Board in 2005. He currently serves as Chairman of the Board’s Risk and Compliance Committee, as Vice Chairman of the Corporate Retirement and Employee Benefit Committee and the Nominating and Corporate Governance Committee and as a member of the Executive Committee, and the Audit and Asset Quality Committee, and the Compensation Committee. He is also a director of CTB and CTIC and serves on CTB’s Loan Committee. Mr. McGhee was an executive officer of Dyno East Kentucky (dba Mountain Valley ExplosivesExplosives) from 1995 until 2006 at which time he sold the company and formed Three JC Investments, LLC. As President of Three JC Investments, LLC, he is involved in explosives consulting, natural gas development, and commercial property. Over the years, Mr. McGhee has started several small businesses involving property and energy. He also served as Executive Director of Dyno Explosives Distributors Association. During his career, with Coal-Mac, Sandy Valley Explosives, and Dyno East Kentucky dba Mountain Valley Explosives, Mr. McGhee was responsible for sales, acquisition, distribution, personnel, and financial reporting for several locations.locations with Coal-Mac, Sandy Valley Explosives, and Mountain Valley Explosives. In addition to Mr. McGhee’s business management experience, he has attended several business related safety, sales, and management seminars, an accounting for non-accountants seminar, and continuing education classes for directors.
Franky Minnifield, age 68,64, was appointed to the Board in 1993.2020. He served as a director of CTB from 1998 until 2021. He currently serves as the lead independent director of the Board,Vice Chairman of the Board’s NominatingCorporate Retirement and Corporate GovernanceEmployee Benefit Committee Vice Chairmanand the Risk and Compliance Committee and as a member of the Audit and Asset Quality CommitteeCommittee. Mr. Minnifield is the President and founder of Minnifield Enterprize, Inc., a general contracting company, and has a long-standing contract with Toyota Motor Manufacturing providing goods and services (non-auto parts related) within the Compensation Committee,operations of North America, Canada, and Mexico. Mr. Minnifield brings over thirty years of finance, accounting, and management experience with extensive knowledge in small business startups. In 1996, he started the Kentucky Pro Football Hall of Fame organization where he currently serves as the Executive Director. Mr. Minnifield was formerly Chairman of the University of Louisville Board of Trustees and a member of the Executive Committee and the Risk and Compliance Committee. Mr. Parrish has been PresidentUniversity of Marwood Land Company,Louisville Foundation’s board. He is also a mineral development company, since 1992. He co-founded Coal-Mac, Inc., a coal marketing and production company, in 1978 and served as its president until 1992. In this capacity, Mr. Parrish oversaw all corporate functions, including accounting and finance. Coal-Mac, Inc. was sold to a public company in 1989. In 1993, he co-founded Knott Floyd Land Company, Inc., another coal marketing and production company. As its chairmanformer member of the board and president, Mr. Parrish oversaw all functions of the company, including accounting and finance. In 2006, Knott Floyd Land Company, Inc. was sold to a private equity fund. Today, Mr. Parrish is part owner of Jigsaw Enterprises, LLC, an engineering and excavating company, Bit Source LLC, a software development company, and Eastern Telephone and Technologies, Inc., an electrical and digital company. Mr. Parrish has served on several boards of directors over the years, including the KentuckyLexington Chamber of Commerce and Pikeville Medical Center, and is currently a board member of Coal Operators and Associates, Inc., CEDAR, Inc., and the University of Pikeville, among others.Commerce’s board.
Jefferson F. Sandlin, age 69,60, was appointed to the Board in 2003.January 2024. He currently serves as Chairmana member of the Board’s Audit and Asset Quality Committee and as a member of the Risk and Compliance Committee. Dr. Ramsey was PresidentMr. Sandlin worked in the mining industry from 1980 to 1994. He joined Perry Distributors, Inc., in 1994 and worked his way through every area of the Universitybusiness, including warehouse, delivery, marketing, human resources, and sales and administration. He was appointed General Manager of Louisville from 2002 until his retirementPerry Distributors, Inc. in July 2016. Prior to becoming President1999 and is currently the Chief Operating Officer. Mr. Sandlin also led the acquisition efforts of the University of Louisville, Dr. Ramsey held various positions, including State Budget Director and Interim Commissioner of the Office of the New Economy for the Commonwealth oftwo additional companies, one in Ashland, Kentucky and Vice Presidentanother in Ironton, Ohio in 2016. In addition, he is President and Co-owner of Finance and Administration of the University of North Carolina and Western Kentucky University. Dr. Ramsey has an extensive resume of financial and economic experience. Dr. Ramsey’s Ph.D. isMountain Community Pharmacy, located in economics. One of his areas of concentration during his studies included money and banking and financial markets. He had brief experience as a bank employee before serving in the U.S. Army and attending graduate school. Dr. Ramsey has also served as a consultant to a bank on cash management issues. He served as a director of Texas Roadhouse, Inc. (NASDAQGS:TXRH) from 2004 to 2017. He also served as trustee of Churchill Tax Free Fund of Kentucky from 1987 to 2013 and Narragansett Tax Free Bond Fund, Rhode Island from 2004 to 2013, and upon the merger of these funds with three other single state tax-free mutual funds—Colorado, Utah, and Arizona, he currently serves as trustee of the Aquila Municipal Trust. Dr. Ramsey served on the Audit, Compensation, and Nominating and Governance Committees of Texas Roadhouse, Inc. from 2004 until 2017. He alsoHazard, Kentucky. Mr. Sandlin is a former advisory directormember of LG&E.the CTB Hazard Market Advisory Board.
Anthony W. St. Charles, age 59,65, was appointed to the Board in 2010. He currently serves onas Chairman of the Board’s AuditRisk and Asset QualityCompliance Committee and a member of the Corporate Retirement and Employee Benefit Committee, Riskthe Audit and ComplianceAsset Quality Committee, and the Compensation Committee. Mr. St. Charles is the President and Chief Executive Officer of The St. Charles Group, LLC of Cincinnati, Ohio. Mr. St. Charles has provided consulting services and subject matter expertise to financial institutions and technology companies in the United States and Europe for the past 29more than thirty years. His company specializes in control environment reviews, finance related remedial activities, electronic banking, retail delivery channel analysis, and operations reengineering for all back office processes. This broad spectrum of financial industry expertise allows Mr. St. Charles to provide valuable insight to the Board of Directors. Board. Prior to the formation of his own company, Mr. St. Charles was involved in Salessales and Consultingconsulting with the Unisys Corporation for five years and held officer level positions with U.S. Bank for fourteen years.
Chad C. Street, DMD, MD, age 52, was elected to the Board in 2021. He has served as a director of CTB since 2017. He currently serves on the Board’s Executive Committee, Audit and Asset Quality Committee, Risk and Compliance Committee, and Nominating and Corporate Governance Committee, as well as CTB’s Loan Committee. Dr. Street received his undergraduate degree from Pikeville College (now the University of Pikeville) (“UPIKE”) in 1992. He received his Doctor of Dental Medicine (DMD) degree from the University of Kentucky College of Dentistry in May 1996, and then enrolled in the combined DMD, MD Oral & Maxillofacial Surgical residency program at the University of Kentucky Chandler Medical Center, where he completed his training in June 2003. Since then, he has been in private practice as an oral and maxillofacial surgeon in Pikeville, Kentucky. In June 2006, he opened his own practice after a three-year associateship with another practice. He is the sole owner and surgeon of the East Kentucky Oral & Maxillofacial Surgery, PSC practice, and owns his own real estate management company, Street Investments, LLC. Dr. Street has staff privileges for both inpatient and outpatient surgical procedures and consultations at the University of Kentucky Medical Center in Lexington, Kentucky and Pikeville Medical Center in Pikeville, Kentucky. He is a voluntary faculty member at the University of Kentucky Medical School and surgical departments, as well as a voluntary faculty preceptor at the University of Pikeville Osteopathic School of Medicine. Dr. Street has more than eighteen years of business management experience, with extensive financial experience and is competent in practice management. He has many years of business/financial experience and is well invested in the local medical and dental communities, serving as Past President three different terms for the Kentucky Mountain Dental Society.
Lillian (Kay) Webb, PhD, age 60, was appointed to the Board in November 2023. She currently serves as a member of the Board’s Audit and Asset Quality Committee, Risk and Compliance Committee, and Corporate Retirement and Employee Benefit Committee. Dr. Webb completed master’s degrees in music and counseling and a doctorate in counseling psychology from Ball State University in Muncie, Indiana. She has served as faculty at Indiana Wesleyan University and Northwest Nazarene University, and she is currently the Director of the Center for Career, Vocation, and Leadership at UPIKE in Pikeville, Kentucky. At UPIKE, Dr. Webb assists and advises students as they explore career paths through college and beyond. Additionally, she works with departmental teams to identify individual strengths, increase team productivity, and improve employee satisfaction. Dr. Webb volunteers as co-director of Eastern Kentucky STRONG, a Pike County organization affiliated with Belfry High School, which seeks to transform the self-image of young women from Eastern Kentucky.
The Nominating and Corporate Governance Committee will consider candidates nominated by shareholders. The Nominating and Corporate Governance Committee will evaluate candidates recommended by shareholders on the same basis as it evaluates any other properly recommended nominee. Shareholders who desire to recommend a candidate for election at the next Annual Meeting of Shareholders should submit the name of the candidate and information concerning the qualifications of the candidate by mail to the Nominating and Corporate Governance Committee at CTBI’s address on or before February 16, 2019.15, 2025.
BOARD DIVERSITY MATRIX
(As of February 29, 2024)
Total Number of Directors
| 12 | |||
| Female | Male | Non-Binary | Did Not Disclose Gender | |
Part I: Gender Identity
| ||||
Directors
| 3 | 9 | 0 | 0 |
Part II: Demographic Background
| ||||
African American or Black
| 0 | 1 | 0 | 0 |
Alaskan Native or Native American
| 0 | 0 | 0 | 0 |
Asian
| 0 | 0 | 0 | 0 |
Hispanic or Latinx
| 0 | 0 | 0 | 0 |
Native Hawaiian or Pacific Islander
| 0 | 0 | 0 | 0 |
White
| 3 | 8 | 0 | 0 |
Two or More Races or Ethnicities
| 0 | 0 | 0 | 0 |
LGBTQ+
| 0 | |||
Did Not Disclose Demographic Background
| 0 | |||
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
Directors
| Amount and | |||
| Nature of | |||
| Beneficial | Percent | ||
| Name | Ownership | (1) | of Class |
| Charles J. Baird | 210,173 | (3) | 1.2% |
| Nick Carter | 2,750 | (2) | |
| Jean R. Hale | 226,280 | (4) | 1.3% |
| James E. McGhee II | 26,792 | (2) | |
| M. Lynn Parrish | 174,242 | (5) | 1.0% |
| Dr. James R. Ramsey | 11,025 | (2) | |
| Anthony W. St. Charles | 7,889 | (2) | |
All directors and executive officers as a group (17 in number including the above named individuals) | 856,623 | (6) | 4.8% |
The following persons are the directors of Community Trust Bancorp, Inc. as of the Record Date. Their security ownership as of the Record Date is as follows:
| Name | Amount and Nature of Beneficial Ownership | (1) | Percent of Class |
| Charles J. Baird | 188,969 | (3) | 1.0% |
| Franklin H. Farris, Jr. | 2,500 | (2) | |
| Mark A. Gooch | 81,900 | (4) | (2) |
| Eugenia Crittenden “Crit” Luallen | 0 | (2) | |
| Ina Michelle Matthews | 0 | (2) | |
| James E. McGhee II | 33,718 | (2) | |
| Franky Minnifield | 18,655 | (2) | |
| M. Lynn Parrish | 189,242 | (5) | 1.1% |
| Jefferson F. Sandlin | 510 | (2) | |
| Anthony W. St. Charles | 10,061 | (2) | |
| Chad C. Street | 6,100 | (6) | (2) |
| Lillian (Kay) Webb | 0 | (2) | |
All directors and executive officers as a group (22 in number including the above named individuals) | 780,786 | (7) | 4.3% |
| (1) | Under the rules of the |
| (2) | Less than 1 percent. |
| (3) | Includes 6,213 shares held as trustee under various trust agreements established by Mr. Baird’s mother, Florane J. Baird, for her grandchildren, |
| (4) | Includes |
| (5) | Includes 113,796 shares held by Mr. Parrish’s wife, Jessica J. Parrish, as trustee of the Trust under the M. Lynn Parrish 2006 GRAT and 10,000 shares held by Mrs. Parrish as trustee of the 2006 GRAT R Trust, over which Mr. Parrish has no voting or investment power. Mr. Parrish retired from the Board on March 17, 2024. |
| (6) | Includes |
| (7) | Includes 20,000 shares which may be acquired by all directors and executive officers as a group pursuant to options exercisable within sixty days of the Record Date. |
Executive Officers
The following persons are the executive officers of Community Trust Bancorp, Inc. as of the Record Date, in addition to Jean R. Hale,Mark A. Gooch, Chairman of the Board, President, and Chief Executive Officer. They are not nominated to serve as directors. Their security ownership as of the Record Date is as follows:
| Name | Position | Amount and Nature of Beneficial Ownership | Percent of Class | Position | Amount and Nature of Beneficial Ownership | Percent
of Class | ||||
| Billie J. Dollins | Executive Vice President | 8,472 | (2) | (1) | ||||||
| James B. Draughn | Executive Vice President | 30,150 | (2) | (1) | Executive Vice President | 11,690 | (3) | (1) | ||
| James J. Gartner | Executive Vice President | 1,484 | (3) | (1) | ||||||
| Mark A. Gooch | Executive Vice President and Secretary | 56,444 | (4) | (1) | ||||||
| Charles Wayne Hancock | Executive Vice President | 5,291 | (5) | (1) | ||||||
| Charles Wayne Hancock II | Executive Vice President and Secretary | 11,255 | (4) | (1) | ||||||
| D. Andrew Jones | Executive Vice President | 15,429 | (6) | (1) | Executive Vice President | 33,799 | (5) | (1) | ||
| Larry W. Jones | Executive Vice President | 10,564 | (7) | (1) | ||||||
| Richard W. Newsom | Executive Vice President | 42,227 | (6) | (1) | ||||||
| Richard W. Newsom | Executive Vice President | 28,688 | (8) | (1) | ||||||
| Mark E. Smith | Executive Vice President | 20,270 | (7) | (1) | ||||||
| Ricky D. Sparkman | Executive Vice President | 24,172 | (9) | (1) | Executive Vice President | 39,940 | (8) | (1) | ||
| Kevin J. Stumbo | Executive Vice President, CFO and Treasurer | 20,688 | (10) | (1) | Executive Vice President, Chief Financial Officer, and Treasurer | 32,236 | (9) | (1) | ||
| David I. Tackett | Executive Vice President | 29,610 | (10) | (1) | ||||||
| Andy D. Waters | Executive Vice President | 4,562 | (11) | (1) | Executive Vice President | 19,632 | (11) | (1) | ||
(1) | Less than 1 percent. |
| (2) | Includes |
| (3) | Includes 4,162 restricted shares awarded under CTBI’s stock ownership plans, 404 shares held in the 401(k) Plan, and 1,070 shares held in the ESOP which Mr. Draughn has the power to vote. |
| (4) | Includes |
| (5) | Includes |
| (6) | Includes |
| (7) | Includes |
| (8) | Includes |
| (9) | Includes |
| (10) | Includes 5,937 restricted shares awarded under CTBI’s stock ownership plans, 11,983 shares held in the 401(k) Plan, and 9,619 shares held in the ESOP which Mr. Tackett has the power to vote. |
| (11) | Includes |
DIRECTORS’ COMPENSATION
Directors of CTBI, excluding the Chairman of the Audit Committee, the Chairman of the Risk and Compliance Committee, and the Chairman of the Compensation Committee, who are not also officers of CTBI were paid $8,750$14,375 per quarter for 2017,2023, plus $600 for any committee meeting attended the day prior to regularly scheduled quarterly Board meetings. The Chairman of the Board was paid an additional $7,500 per quarter. The Chairman of the Board’s Audit Committee was paid $11,250an additional $3,125 per quarter. The Chairman of the Compensation Committee was paid an additional $2,125 per quarter. The Chairman of the Risk and Compliance Committee and the Chairman of the CompensationNominating and Corporate Governance Committee were each paid $10,000an additional $1,875 per quarter for 2017.quarter. The Chairman of the Board’s Corporate Retirement and Employee Benefit Committee was paid an additional $1,250 per quarter. Directors are paid $100 for special committee meetings by telephone and $300 for other committee meetings held on days other than the day prior to regularly scheduled quarterly Board meetings. Directors who are also officers of CTBI did not receive additional compensation for serving as a director. No option awards, stock awards, retirement benefits, or other benefits are provided to directors of CTBI. The following table shows the total fees paid in 20172023 to each director.director serving as of December 31, 2023.
| Director | 2023 Fees Paid ($) | |
| Charles J. Baird | $ 66,100 | (1) |
| Franklin H. Farris, Jr. | 78,967 | (1)(2) |
| Mark A. Gooch | 0 | (3) |
| Eugenia Crittenden “Crit” Luallen | 71,300 | (1) |
| Ina Michelle Matthews | 63,734 | (2) |
| James E. McGhee II | 73,300 | (1)(2) |
| Franky Minnifield | 61,200 | |
| M. Lynn Parrish | 91,600 | |
| Anthony W. St. Charles | 69,400 | |
| Chad C. Street | 64,057 | (2) |
| Lillian (Kay) Webb | 0 | (4) |
| Total | $ 639,658 |
| (1) | Mr. Baird, Mr. Farris, Ms. Luallen, and Mr. McGhee each receive $300 per meeting as directors of CTIC. |
| (2) | Mr. Farris, Mrs. Matthews, Mr. McGhee, and Mr. Street currently serve as directors of both CTBI and CTB, and their payments are split between the two companies. Each also serves on CTB’s Loan Committee and receives up to $300 per month for participation in those meetings. |
| (3) | As an officer of CTBI, Mr. Gooch did not receive directors’ fees. |
| (4) | Dr. Webb was appointed to the Board in November 2023 and, therefore, did not receive payment during 2023. |
| Director | 2017 Fees Paid | ||||
| Charles J. Baird | $ | 37,100 | (1) | ||
| Nick Carter | 45,700 | (1) | |||
| Jean R. Hale | 0 | (2) | |||
| James E. McGhee II | 43,500 | ||||
| M. Lynn Parrish | 38,900 | ||||
| Dr. James R. Ramsey | 48,400 | ||||
| Anthony W. St. Charles | 38,900 | ||||
| Total | $ | 252,500 | |||
For information concerning director compensation for 2018,2024, see the Role of the Compensation Committee section of the Compensation Discussion and Analysis.
CORPORATE GOVERNANCE
The Board of Directors has determined that the following fiveeight of CTBI’s seventen directors and director nominees are “independent” as defined by applicable law and NASDAQNasdaq listing standards: Nick Carter,Franklin H. Farris, Jr., Eugenia Crittenden “Crit” Luallen, Ina Michelle Matthews, James E. McGhee II, M. Lynn Parrish, Dr. James R. Ramsey, andFranky Minnifield, Jefferson F. Sandlin, Anthony W. St. Charles.Charles, Chad C. Street, and Lillian (Kay) Webb. The independent directors have no relationships with CTBI or its independent auditors other than immaterial relationships which were therefore not considered by the Board in confirming independence. Mr. ParrishMs. Luallen has been selected by the Board of Directors as the “lead independent director.”
The lead independent director presides over executive sessions of the Board and acts as the liaison between independent directors and the Chairman of the Board. The lead independent director also provides input to the Chairman of the Board concerning the agendas for Board meetings and performs other duties as assigned by the Board from time to time.
The leadership structure of the Board consists of a combined Chairman and Chief Executive Officer position, which has been held by Ms. Hale since 2004.effective with Mr. Gooch’s appointment on March 17, 2024. The Board believes that a unified Chief Executive Officer and Chairman is appropriate and in the best interests of CTBI and its shareholders. The Board believes that combining these roles provides the following advantages:
| ● | The Chief Executive Officer is the director most familiar with CTBI’s business and is best suited to lead discussions on important matters affecting CTBI’s business; |
| ● | The combination of the roles creates a firm link between management and the Board and facilitates the development and implementation of corporate strategy; and |
| ● | The combination of the positions contributes to a more effective and efficient Board, and the Board believes it does not undermine the Board’s independence, particularly in light of the role played by the Board’s lead independent director. |
The lead independent director serves an important corporate governance function by providing separate leadership for the non-management and independent directors. The Board makes the determination of the appropriate leadership structure based on current circumstances. The Board also believes that the solid and profitable performance of CTBI under Ms. Hale’sMr. Gooch’s direction demonstrates the effectiveness of CTBI’s leadership structure. Ms. HaleMr. Gooch is the direct link between executive management and the Board, and as a banking professional with more than 45over 40 years of industry experience, shehe provides critical insight and perception to the Board, as well as feedback to executive management, through herhis understanding of the issues at hand.
During 2017,2023, the Board held four executive sessions, under the guidelines for executive sessions prescribed in the Corporate Governance Guidelines, which included only non-management directors.
Corporate Governance Guidelines and the Code of Business Conduct and Ethics adopted by the Board may be found on CTBI’s website at www.ctbi.com. The Code of Business Conduct and Ethics governs the actions of CTBI’s directors, officers, and employees. The Code of Business Conduct and Ethics is reviewed by the Nominating and Corporate Governance Committee and approved by the Board.
The Board of Directors has adopted a policy, included in CTBI’s insider trading policy, which prohibits directors, executive officers, and their designees from engaging, directly or indirectly, in hedging with respect to any CTBI equity securities or pledging a significant amount of CTBI’s equity securities. For these purposes, “significant” means the lesser of 1% of CTBI’s outstanding equity securities or 50% of the CTBI equity securities owned by the director or executive officer. Under the policy, “hedging” includes any instrument or transaction such as put options, collars, equity swaps, short sales, stock futures, and forward-sale contracts related to CTBI equity securities which offsets or reduces (or is designed to offset or reduce) the risk of price fluctuations of CTBI’s equity securities granted to, or held directly or indirectly by, a director or executive officer, but excludes portfolio diversification transactions and transactions related to broad-based investment vehicles.
Shareholders may communicate directly with the Board of Directors by sending a written communication addressed to the Chairman of the Board of Directors at CTBI’s address.
The Board of Directors held sixfive meetings during the 20172023 fiscal year, including the annual organizational meeting. Each director serving in 2023 attended at least 75% of the aggregate number of Board meetings and meetings of Board committees on which such director served in 2017.2023 (held during the period that such director served as director). It is the Board’s policy that directors should attend each Annual Meeting of Shareholders subject to a substantial personal or business conflict. All of CTBI’s directors holding office at the time attended the 20172023 Annual Meeting of Shareholders. The Board has the following committees: Audit and Asset Quality Committee, Compensation Committee, Executive Committee, Nominating and Corporate Governance Committee, Risk and Compliance Committee, and Corporate Retirement and Employee Benefit Committee.
The Audit and Asset Quality Committee (the “Audit Committee”) Charter, which is subject to annual review, was last reviewed and approved in January 20182024 and may be found on CTBI’s website at www.ctbi.com. The Audit Committee consists of Dr. James R. RamseyFranklin H. Farris, Jr. (Chairman), M. Lynn ParrishEugenia Crittenden “Crit” Luallen (Vice Chairman), Nick Carter,Ina Michelle Matthews, James E. McGhee II, andFranky Minnifield, Jefferson F. Sandlin, Anthony W. St. Charles, Chad C. Street, and Lillian (Kay) Webb, all of whom meet the independence standards of Rule 5605(a)(2) and the audit committee qualifications of Rule 5605(c)(2) of the NASDAQNasdaq listing standards. The Board of Directors has determined that none of the Audit Committee members has a relationship to CTBI that may interfere with his or her independence from CTBI and its management. The Board has determined that Dr. James R. RamseyMr. Farris is an audit committee financial expert for CTBI and is independent as described above. For further information regarding the Audit Committee, please see the Report of the Audit and Asset Quality Committee below.
The Compensation Committee consists of Nick CarterEugenia Crittenden “Crit” Luallen (Chairman), M. Lynn Parrish (Vice Chairman),Ina Michelle Matthews, James E. McGhee II, and Anthony W. St. Charles, all of whom meet the applicable independence standards. The Compensation Committee Charter can be found on CTBI’s website at www.ctbi.com. The Compensation Committee met five times during 2017.2023. See the Role of the Compensation Committee section of the Compensation Discussion and Analysis for more information.
The Nominating and Corporate Governance Committee consists of M. Lynn Parrish (Chairman) and James E. McGhee II (Vice Chairman); both(Chairman), Franklin H. Farris, Jr, and Chad C. Street, all of whom meet the applicable independence standards. The Nominating and Corporate Governance Committee Charter can alsomay be found on CTBI’s website at www.ctbi.com. The Nominating and Corporate Governance Committee: (i) evaluates and recommends nominee directors for election to the Board and appointment to committee membership and (ii) develops and recommends to the Board policies and guidelines relating to corporate governance and the identification and nomination of directors and committee members. This committee is also responsible for the annual review of the Board’s performance as a whole, each committee’s performance as a whole, each individual director’s performance, and the annual review of CTBI’s succession plans for its Chief Executive Officer and other executive officers. Each of our directors is evaluated annually on the basis of personal characteristics, financial literacy, mature confidence, high performance standards, and core competencies. The Nominating and Corporate Governance Committee met three timesonce in 2017.2023. See Election of Directors for more information.
The Risk and Compliance Committee consists of James E. McGhee II (Chairman), M. Lynn Parrish, Dr. James R. Ramsey, and Anthony W. St. Charles (Chairman), Franky Minnifield (Vice Chairman), Charles Baird, Franklin H. Farris, Jr., Eugenia Crittenden “Crit” Luallen, Ina Michelle Matthews, Jefferson F. Sandlin, Chad C. Street, and Lillian (Kay) Webb, all of whom meet the applicable independence standards.standards except Mr. Baird. The Risk and Compliance Committee Charter may be found on CTBI’s website at www.ctbi.com. The Risk and Compliance Committee: (i) oversees management’s compliance with all of CTBI’s regulatory obligations arising under applicable federal and state banking and financial institutions laws, rules, and regulations and (ii) oversees management’s implementation and enforcement of CTBI’s risk management policies and procedures. On a quarterly basis, CTBI’s Chief Internal Audit/Risk Officer provides a comprehensive risk report to the Risk and Compliance Committee. The Risk and Compliance Committee met four times during 2017.2023.
Under our Corporate Governance Guidelines, the Board is charged with providing oversight of our risk management processes. The Audit Committee and the Risk and Compliance Committee are primarily responsible for overseeing our risk management function on behalf of the Board. In carrying out its responsibilities, the Audit and Risk and Compliance Committees work closely with our Chief Risk Officer and other members of our enterprise-wide risk management team. Risk is inherent with every business, and how well a business manages risk can ultimately determine its success. We face a number of risks, including general economic risks, credit risks, regulatory risks, audit risks, reputational risks, and others, such as the impact of competition. Management is responsible for the day-to-day management of risks CTBI faces, while the Board, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, the Board has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning as designed.
While the full Board of Directors is charged with ultimate oversight responsibility for risk management, various committees of the Board and members of management also have responsibilities with respect to our risk oversight. The Audit Committee plays a large role in monitoring and assessing our financial, legal, and organizational risks. CTBI utilizes an enterprise-wide risk management (“EWRM”) process designed to provide the Board and management with the capabilities needed to identify, assess, and manage the full spectrum of risks inherent to our industry. While business unit managers are primarily responsible for managing risk inherent in their areas of responsibility, CTBI has established a risk management governance structure to establish policies, monitor adherence to the policies, and manage the overall risk profile of CTBI. CTBI’s EWRM program is not intended to replace normal risk management activities conducted by the business unit managers. The EWRM program is designed to provide a portfolio view of risks across the entire enterprise.
As an integral part of the risk management process, management has established various committees consisting of senior executives and others within CTBI. The purpose of these committees is to closely monitor risks and ensure that adequate risk management practices exist within their respective areas of authority. Some of the principal committees include the Asset/Liability Management (ALCO) Committee, the Loan Portfolio Risk Management Committee, the Senior Credit Committee, the Information Technology Steering Committee, and various compliance-related committees. Overlapping membership of these committees by senior executives and others helps provide a unified view of risk on an enterprise-wide basis. To facilitate an enterprise-wide view of CTBI’s risk profile and coordinate the enterprise risk management governance process, a Chief Risk Officer has been appointed, who oversees the process and reports on CTBI’s risk profile. Additionally, risk champions are assigned for various areas. The risk champions facilitate implementation of the enterprise risk management and governance process across CTBI. The Risk and Compliance Committee oversees and supports the EWRM process. The Board, of Directors, through its Risk and Compliance Committee, has overall responsibility for oversight of CTBI’s enterprise risk management governance process. The Risk and Compliance Committee monitors and assesses regular reports from the management team’s EWRM Committee regarding comprehensive organizational risk as well as particular areas of concern. In addition, the Nominating and Corporate Governance Committee considers risks related to succession planning. The Compensation Committee considers risks related to the attraction and retention of critical employees and risks relating to CTBI’s compensation programs and contractual employee arrangements and oversees incentives that encourage a level of risk-taking consistent with our overall strategy. The Compensation Committee reviews compensation and benefit plans affecting employees in addition to those applicable to executive officers.
Report of the Audit and asset quality Committee
The Audit and Asset Quality Committee (the “Audit Committee”) oversees the financial reporting process of CTBI on behalf of the Board of Directors. All directors who serve on the Audit Committee meet the independence standards of Rule 5605(a)(2) and the audit committee qualifications of Rule 5605(c)(2) of the NASDAQNasdaq listing standards. The Audit Committee monitors the integrity of CTBI’s financial statements, the qualifications and independence of CTBI’s independent registered public accounting firm (“independent auditor”), the performance of CTBI’s internal audit function, CTBI’s system of internal controls, financial reporting and disclosure controls, and compliance with the Corporate Governance Guidelines and Code of Business Conduct and Ethics. The Audit Committee has established procedures for the confidential, anonymous submission of concerns about accounting matters, internal controls, and auditing matters. Management has the responsibility for the preparation of CTBI’s consolidated financial statements and management’s assertion on the design and effectiveness of CTBI’s internal control over financial reporting. The independent auditor has the responsibility for the examination of those consolidated financial statements.
The Audit Committee reviewed with the independent auditor, which is responsible for expressing an opinion on the conformity of the audited financial statements with accounting principles generally accepted in the United States of America, its judgments as to the quality, not just the acceptability, of CTBI’s accounting policies and practices. Additionally, the Audit Committee’s review included discussion with CTBI’s independent auditor of matters required to be discussed pursuant to the Public Company Accounting Oversight Board (“PCAOB”) Auditing Standard No. 161301 (“AS 16”1301”). AS 161301 requires CTBI’s independent auditor to provide the Audit Committee with additional information regarding the scope and results of its audit of CTBI’s financial statements, including with respect to: (i) its responsibility under audit standards performed in accordance with standards of the PCAOB (United States), (ii) qualitative aspects of significant accounting policies and practices, (iii) management judgments and critical estimates, (iv) significant unusual transactions, (v) related party relationships and transactions, (vi) audit adjustments, (vii) evaluation of the quality of financial reporting, (viii) other information in documents containing audited financial statements, (ix) any disagreements with management, (x) significant issues discussed with management, and (xi) any difficulties encountered in performing the audit.
The Audit Committee received from BKD,FORVIS, LLP a letter providing the disclosures required by applicable requirements of the PCAOB, with respect to any relationships between BKD,FORVIS, LLP and CTBI that, in its professional judgment, may reasonably be thought to bear on independence. BKDFORVIS, LLP has discussed its independence with the Audit Committee and has confirmed in such letter that, in its professional judgment, it is independent of CTBI within the meaning of the federal securities laws.
The Audit Committee pre-approves all audit and non-audit services performed by the independent auditor. The Audit Committee will periodically grant general pre-approval of certain audit and non-audit services. Any other services must be specifically approved by the Audit Committee, and any proposed services exceeding the pre-approved cost levels must be specifically pre-approved by the Audit Committee. In periods between Audit Committee meetings, the Chairman of the Audit Committee has the delegated authority from the Audit Committee to pre-approve additional services, and such pre-approvals are then communicated to the full Audit Committee.
The Audit Committee discussed with CTBI’s internal auditor and independent auditor the overall scope and plans for their respective audits. The Audit Committee met with its internal auditor and independent auditor, with and without management present, to discuss the results of their examinations, their evaluations of CTBI’s internal controls, and the overall quality of CTBI’s financial reporting. The Audit Committee held twelve meetings during fiscal year 2017.2023.
In fulfilling its oversight responsibilities, the Audit Committee reviewed with management and the independent auditor the audited consolidated financial statements of CTBI as of and for the year ended December 31, 20172023 and management’s assertion on the design and effectiveness of CTBI’s internal control over financial reporting as of December 31, 2017.2023.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 20172023 for filing with the Securities and Exchange Commission.SEC. The Audit Committee has also recommended, subject to shareholder ratification, the selection of BKD,FORVIS, LLP as CTBI’s independent registered public accounting firm.
| Franklin H. Farris, Jr., Chairman | Eugenia “Crit” Luallen, Vice Chairman |
| Ina Michelle Matthews, Member | James E. McGhee II, Member |
| Franky Minnifield, Member | M. Lynn Parrish, Member |
| Jefferson F. Sandlin, Member | Anthony W. St. Charles, Member |
| Chad C. Street, Member | Lillian (Kay) Webb, Member |
February 22, 2024
PROPOSED 2025 STOCK OWNERSHIP INCENTIVE PLAN
Plan Category (shares in thousands) | Number of securities to be issued upon exercise of outstanding options, warrants, and rights | Weighted-average exercise price of outstanding options, warrants, and rights | Number of securities remaining available for future issuance under equity compensation plan |
Equity compensation plans approved by shareholders | 20 | $32.27 | 335 |
Equity compensation plans not approved by shareholders | — | — | — |
| Total | 20 | $32.27 | 335 |
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board of Directors of CTBI engaged BKD,FORVIS, LLP (“BKD”) to serve as its independent registered certified public accounting firm for the year ended December 31, 2017.2023.
Aggregate fees billed topaid by CTBI forduring the fiscal years ending December 31, 20172023 and 2016 by2022 to CTBI’s principal accounting firm, BKD,FORVIS, LLP, were as follows:
| 2017 | 2016 | 2023 | 2022 | |||||||||
| Audit fees | $ | 384,100 | $ | 419,870 | $388,799 | $296,500 | ||||||
| Audit related fees | 48,049 | 59,476 | 50,782 | 56,103 | ||||||||
| Subtotal | 432,149 | 479,346 | 439,581 | 352,603 | ||||||||
| Tax fees | 71,500 | 50,460 | 59,275 | 57,250 | ||||||||
| Total | $ | 503,649 | $ | 529,806 | $498,856 | $409,853 | ||||||
Audit related fees included payments for audits of CTBI’s ESOP and 401(k) Plan and out-of-pocket expenses related to the audit of the consolidated financial statements, as well as services normally provided by an independent auditor in connection with statutory or regulatory filings or engagements. Tax fees include payments for preparation of the federal and state corporate income tax returns and the preparation of the Form 5500s for the CTBI sponsored benefit plans.
RATIFICATION OF THE SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee requests that shareholders ratify its selection of BKDFORVIS, LLP to examine the consolidated financial statements of CTBI for the fiscal year ending December 31, 2018.2024. Although action by the shareholders on this matter is not required, the Board believes that it is appropriate to seek shareholder ratification of this appointment in light of the critical role played by independent auditors in maintaining the integrity of CTBI’s financial controls and reporting. Even if shareholders vote on an advisory basis in favor of the appointment, the Audit Committee may, in its discretion, direct the appointment of different auditors at any time during the year if it determines that such a change would be in the best interest of CTBI and its shareholders. BKDFORVIS, LLP is not expected to have a representative present at the Annual Meeting. THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE SELECTION OF BKD,FORVIS, LLP AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM OF CTBI.
ADVISORY VOTE ON EXECUTIVE COMPENSATION
The compensation of our Chief Executive Officer, Chief Financial Officer, and
other three most highly compensated executive officersIn accordance with Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and the changes to Section 14A of the Securities Exchange Act of 1934 (the “Exchange Act”), we are providing CTBI’s shareholders the opportunity to vote on an advisory (nonbinding) resolution to approve the compensation of our Named Executive Officers. At our 20172023 Annual Meeting of Shareholders, shareholders approved the annual submission of our Named Executive Officer compensation to shareholders for approval on an advisory (nonbinding) basis. Accordingly, the following resolution will be submitted for a shareholder vote at the Annual Meeting to be held on April 24, 2018:23, 2024:
“RESOLVED, that the shareholders of Community Trust Bancorp, Inc. (“CTBI”) approve, on an advisory basis, the overall compensation of CTBI’s Named Executive Officers, as described in the Compensation Discussion and Analysis and Executive Compensation sections set forth in the Proxy Statement for this Annual Meeting.”
This advisory vote, commonly referred to as a “say-on-pay” advisory vote, is nonbinding on CTBI and the Board. However, the Board values constructive dialogue on executive compensation and other important governance topics with CTBI’s shareholders and encourages all shareholders to vote their shares on this matter.
Approval of this resolution requires the affirmative vote of a majority of the votes cast at the Annual Meeting. While this vote is required by law, it will neither be binding on CTBI or the Board, nor will it create or imply any change in the fiduciary duties of, or impose any additional fiduciary duty on, CTBI or the Board. However, the Compensation Committee will take into account the outcome of the vote when considering future executive compensation decisions.
Brokers and other nominees do not have discretionary voting power over the advisory vote on executive compensation. Therefore, if you hold shares through a broker or other nominee and do not provide voting instructions to your broker or other nominee, your shares will not be voted with respect to this proposal.| Median employee total annual compensation | $ | 32,601 | ||
| Ms. Hale (PEO) total annual compensation | $ | 1,107,976 | ||
| Ratio of PEO to median employee compensation | 34.0:1.0 | |||
29
INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
In the ordinary course of business, CTBI, through its wholly-owned commercial bank subsidiary, Community Trust Bank, Inc. (the “Bank”),CTB, has had in the past and expects to have in the future banking transactions, including lending to its directors, officers, principal shareholders, and their associates. When these banking transactions are credit transactions, they are made in the ordinary course of business, on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with others. None of the credits are disclosed as nonaccrual, past due, restructured, or potential problem credits. In the opinion of CTBI’s Board, of Directors, such transactions do not involve more than the normal risk of collectability or present any other unfavorable features.
Mr. Charles J. Baird, a director of CTBI, is a shareholder in Baird and Baird, P.S.C., a law firm that provided services to CTBI and its subsidiaries during 20172023 and is being retained by CTBI and its subsidiaries during the fiscal year 2018.2024. Approximately $1.1$0.4 million in legal fees and $0.1 million in expenses, paid on behalf of CTBI, $1.2$0.5 million in total, were paid to Baird and Baird, P.S.C. during 2017.2023.
The Board of Directors has determined that the Compensation Committee of the Board should review and approve related party transactions. Accordingly, management recommends to the Compensation Committee related party transactions to be entered into by CTBI, including the proposed aggregate value of such transactions if applicable. After review, the Compensation Committee recommends approval or disapproval of such transactions and at each subsequently scheduled meeting, management updates the Compensation Committee as to any material change to those proposed transactions. The Compensation Committee provides a report to the Board of Directors at each regularly scheduled meeting of the related party transactions approved by the Compensation Committee since the date of its previous report to the Board.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the “Act”) requires CTBI’s executive officers and directors and persons who own more than ten percent (10%) of the Common Stock to file initial reports of ownership and changes in ownership with the Securities and Exchange Commission (“SEC”),SEC, as well as to furnish CTBI with a copy of such report. Additionally, SEC regulations require CTBI to identify in its Proxy Statement those individuals for whom one of the referenced reports was not filed on a timely basis during the most recent fiscal year. Based upon a review of Forms 3, 4, and 5 furnished to CTBI, there were no late filings induring the year 2017.2023.
COMPENSATION DISCUSSION AND ANALYSIS
Introduction
This Compensation Discussion and Analysis is intended to provide shareholders with an understanding of our executive compensation philosophy, our decision makingdecision-making process, the key compensation-related decisions made by the Compensation Committee (“Committee”) in 2017,2023, and any changes approved for 2018.2024. It also describes the key components of compensation provided to CTBI’s executive officers, including our Chief Executive Officer, Chief Financial Officer, and the next three most highly compensated executive officers (“Named Executive Officers” or “NEOs”). Ourofficers. The Named Executive Officers consist of Jean R. Hale (Chairman, President, andduring 2023 were Mark A. Gooch (Vice Chairman, Chief Executive Officer)Officer, and President), Kevin J. Stumbo (Executive Vice President, Chief Financial Officer, and Treasurer), Mark A. Gooch (Executive Vice President and Secretary), Larry W. Jones (Executive Vice President), and James B. Draughn (Executive Vice President), Richard W. Newsom (Executive Vice President), and Ricky D. Sparkman (Executive Vice President).
Executive Summary
During 2017,2023, the Committee continued its ongoing reviewCommittee’s oversight of the executive compensation programprograms for executive officers and monitoredof CTBI ensured achievement of the impact of certain changes implemented from 2012 through 2016, especially in regard tofollowing objectives, previously adopted by the executive incentive plans. As described below, the changes made from 2012 through 2016 were intended to increase the portion of total pay that is performance-based and accomplish four significant objectives:Committee: (i) improve thecontinued alignment of executive pay with CTBI performance; (ii) provide executives a pay opportunity that is competitive with industry practices; (iii) attract and retain qualified management; and (iv) maintain enterprise wideenterprise-wide risk management.
The Committee has consistently followed the Committee adopted, and the Board of Directors approved afollowing compensation strategy for managing executive compensation over(approved by the next several years. The following summarizes the adopted strategy:Board of Directors):
| ● | Manage executive officer salaries toward the median of market values (i.e., the middle of the range of competitive practices), contingent on the executives meeting or exceeding performance standards. |
| ● |
| ● |
During 2017,2023, the Committee reviewed the executive compensation strategy described above, originally adopted in 2012, and continued the actions taken to implement it since 2012.it. The Committee concluded that the implementation of the newthis strategy had improvedhas continued to improve the competitiveness of the compensation opportunity provided to executive officers as well as the alignment of executive pay with CTBI performance. As a result, theThe Committee determined it would be appropriate to continue themanaging pay in accordance with this executive compensation strategy throughstrategy.
In January 2023, the remainder of 2017 and into 2018.
In addition to the incentive payments earned for paymentperformance through the end of an incentive, unlike2023, the previous year when CTBI’s cumulative net income for the three years ended December 31, 2016 did not reach the minimum performance level. See “2017 Annual Incentive Plan” and “Long-Term Incentive Plan” below for additional information, including the specific performance targets. Named Executive Officers receivedCommittee approved base salary increases for 2017 rangingeach of the NEOs in January 2024; the base salary increases ranged from 3.62%3.85% to 5.15%4.60% over 20162023 base salariessalaries. The Committee determined these salary increases were in keeping with the executive compensation strategy designed, among other things, to provide a pay opportunity competitive with industry practices.and the philosophy of managing executive base salaries toward the median market value for each executive position. See “Base Salaries” below for additional information about executive salary increases.
Role of the Compensation Committee
The principal duties of the Committee are to establish the executive compensation strategy of CTBI; approve compensation plans that support the implementation of the strategy; assess and monitor the potential risks associated with various compensation arrangements, especially incentive compensation plans; approve the compensation of the CEO; review the recommendations of the CEO and approve the compensation of the other executive officers of CTBI; and make recommendations to the Board of Directors concerning executive officer and outside director compensation. The Committee is responsible for establishing, implementing, and continually monitoring adherence with CTBI’s executive compensation philosophy.
To accomplish these responsibilities, the Committee reviews and approves corporate goals and objectives relevant to the compensation of CTBI’s CEO, and it evaluates the performance of the CEO relative to the approved goals and objectives. The Committee considers this evaluation of performance when it determines and approves the CEO’s compensation considering this evaluation of performance.compensation. Additionally, the Committee reviews compensation levels for CTBI’s other executive officers relative to goals and objectives relevant to their responsibilities, considers the CEO’s evaluation of their achievements, and approves their compensation based on this evaluation.
The Committee strives to establish and maintain compensation plans that are: (i) focused on rewarding performance; (ii) aligned with the interests of shareholders; (iii) competitive with the practices of peer companies; (iv) sufficient to enable CTBI to attract and retain a strong management team; and
The Committee has followed certain guiding principles to ensure the effectiveness of CTBI’s executive compensation strategy. The Committee recognizes the importance of perceived fairness of compensation practices, both internally and externally, and believes that the long-term success of CTBI and its ability to create value for shareholders is dependent on attracting, motivating, rewarding, and retaining skilled executives. Significant time is devoted by the Committee to monitoring the relationship between executive pay and CTBI performance, and adjusting compensation plans and practices as needed from year to year to maintain an appropriate alignment of pay with performance. The Committee recognizes that the competition for talented executives among financial institutions similar to CTBI is intense, and it considers compensation data and other labor market indicators as it reviews CTBI’s compensation plans. Current economic and industry environments are considered when reviewing executive compensation. Full disclosure is made to the independent members of the Board of Directors of CTBI’s executive compensation policies, practices, and issues to ensure that all directors understand the implications of the Committee’s decisions. Likewise, the Committee works with management to ensure that public filings related to executive compensation are transparent and comply with applicable regulations.
The Committee has established various processes to assist it in ensuring CTBI’s executive compensation program is achieving its objectives. Among these are:
| ● | Assessment of Company Performance – The Committee considers various measures of company and industry performance, including but not limited to asset growth, asset quality, earnings per share, return on assets, return on equity, total shareholder return, and execution of CTBI’s growth strategy and annual business plan. In addition, the Committee considers general economic conditions within |
| ● | Assessment of Individual Performance – Individual performance assessments impact the compensation of all CTBI employees, including the CEO and other |
| ● | Total Compensation Review – The Committee annually reviews each executive’s base salary, annual incentive compensation, and stock-based incentives. In addition to these primary compensation elements, the Committee reviews other executive compensation arrangements, including, for example, payments that could be required under various severance and change in control scenarios. This “holistic” review process ensures that the Committee considers the executive’s total compensation prior to changing any single component. |
| ● | Risk Management – The Committee reviews all incentive plans and compensation programs to insure the plans do not create any risks that are reasonably likely to have a material adverse impact on CTBI. |
The Committee meets in executive session without management or guests present when making decisions about the compensation arrangements for Named Executive OfficersNEOs and at other times as needed.
In addition to its responsibilities for executive compensation, the Committee periodically reviews the compensation provided to the CTBI Board of Directors to ensure that the compensation provided for service on the Board and its committees is commensurate to the amount of work required from the individual directors as well as from the Board in aggregate. The Committee periodically compares the pay arrangements for the Board and the actual amounts earned by individual directors to amounts paid to outside directors of banking companies in the Peer Group (as defined below)a custom peer group and to survey data for director compensation. In late 2014,2022, the Committee reviewedengaged Pearl Meyer Partners, LLC (“Pearl Meyer” or “Consultant”), the existingCommittee’s independent compensation programconsultant, to review the compensation paid to the CTBI Board of Directors compared to the custom peer group described below. The 2022 director compensation analysis prepared by Pearl Meyer revealed that CTBI’s director compensation was significantly below the market median pay for outside directors of its peers. To maintain competitive compensation of our outside directors, in January of 2023, CTBI and determined it would be appropriate to adjust the annual retainer for service onincreased the Board from $30,000 to $35,000. The incremental retainer provided toof Director annual compensation by $15,000 over the next two years (2023 and 2024), with an increase of $7,500 per year for each director, and set the following levels of pay for the Board Chair and Committee chairs:
| ● | Chairman of the Board - $30,000 |
| ● | Joint Audit and Asset Committee - $12,500 |
| ● | Compensation Committee - $8,500 |
| ● | Joint Risk and Compliance Committee - $7,500 |
| ● | Nominating and Corporate Governance Committee - $7,500 |
| ● | Corporate Retirement and Employee Benefit Committee - $5,000 |
Chairman of the Audit Committee was maintainedBoard, M. Lynn Parrish, retired from the Board on March 17, 2024, at $10,000, resulting in a total retainer of $45,000. The retainers for thewhich time former Vice Chairman, Mark A. Gooch, became Chairman of the Risk and Compliance Committee and the Chairman of the Compensation Committee were maintained at $5,000, in each case resulting in a total retainer of $40,000. These adjustments were deemed necessary to provide theBoard. Mr. Gooch will not receive any additional pay for his Board of Directors with compensation that is comparable to amounts paid to outside directors at similar publicly traded financial institutions. These adjustments to Board compensation were approved by the Board of Directors and became effective in January 2015 and remained in effect through 2017. No action has been taken to adjust the compensation of the Board of Directors for 2018. For additional information, see “Directors’ Compensation.”service.
Executive Compensation Philosophy
The Committee believes that executive officer compensation is an integral component of CTBI’s business and human resources strategies. It is important to CTBI’s success that highly talented and experienced individuals serve as executive officers. The Committee strives to provide compensation which is sufficient to attract and retain such executives. The Committee seeks to establish executive compensation at fair, reasonable, and competitive levels. The Committee also believes that executive compensation should be strategy-focused and recognize individual achievements as well as group contributions and CTBI results. Therefore, the Committee desires to offer a competitive, market-driven executive officer compensation package which provides for a meaningful portion of compensation to be based upon performance. As a result, CTBI’s executive compensation package includes incentive-based cash and equity compensation in addition to base salary and employee benefits.
The goal of the Committee is to offer market competitive compensation, without being the highest or lowest provider. Total compensation packages, including base salaries plus cash- and stock-based incentives, are set at levels the Committee believes are sufficient to attract and retain qualified executives whose performance and success should contribute to shareholder value. The compensation of Named Executive OfficersNEOs is based on the same criteria and performance factors used for all other executive officers.
Compensation Consultant
The Committee mayhas authority to engage outside advisors as necessary to assist with its oversight of executive compensation. In 2023, Pearl Meyer & Partners (“Pearl Meyer” or “Consultant”) has beenwas retained annually since 2012 to review CTBI’s executive compensation plans. The role of the Consultant is to provide analyses, information, and advice to assist the Committee in making decisions related to compensation of executive officers. The Committee believes that the Consultant is independent, and no conflicts of interest are raised by the work of the Consultant under the criteria specified in SEC rules.
During December 2017,2023, Pearl Meyer performed a total executive compensation reviewassessment which included: (i) evaluating the competitiveness of pay for twelve executive officers, including each of the Named Executive Officers,NEOs and (ii) developing recommendations for managing executive pay in 2018.2024. Pearl Meyer’s analysis revealed that the competitiveness ofdetermined CTBI’s executive total compensation in 2023 was approximatelycompetitively positioned relative to the same as in 2016.peer median market value and was consistent with CTBI’s compensation philosophy targeting the median of peers. The analysis revealed that thean appropriate mix of base salary and incentive compensation in 2017 was similar2023, with more weight on variable pay than practices of peer community banks, consistent with CTBI’s compensation philosophy. While it may be necessary to occasionally provide certain executives with larger than average salary increases to position their salaries closer to the market practices due to CTBI’s increased emphasis on incentive compensation, includingmedian, the introduction of a new performance-based long-term incentive planCommittee’s actions in 2012. Compensation competitiveness had improved significantly fromrecent years have consistently shifted the 2011 – 2012 period but remained slightly below median market values for comparable executives in similar banks. Additionally, based on separate analyses of banking industry performance prepared by Pearl Meyer for the one-year and three-year periods ending December 31, 2016 (the last full year for which both pay and performance data were available for CTBI and the Peer Group) and the one-year and three-year periods ending September 30, 2017 (the most recent quarter for which financial results were available for both CTBI and the Peer Group), CTBI’s performance on a variety of metrics (such as EPS growth, ROE and ROA) was somewhat below the median results of the Peer Group, resulting in CTBI’s executive pay and business performance being relatively well aligned versus its peers. These results were similar to the outcome of its 2016 analysis of CTBI’s executive pay; therefore, Pearl Meyer recommended the Committee continue to refine and implement the executive compensation strategy it had adopted in early 2012. As described previously in the Executive Summary, the thrust of the executive compensation strategy and the changes made since 2012 has been to increase the portion of executive pay that is contingent on performance and provide a total compensation opportunity that is more competitively positioned with current practices in the banking industry. In early 2018, the Committee considered the impact of changes made in prior years and determined it would be appropriate to continue the current executive compensation strategy. As a part of this strategy, the Committee examined the compensation components in light of current industry practice. Accordingly, in January 2018, the Committee approved certain changes to the compensation of the Named Executive Officers, including base salary increases and adjustments to their annual and long-term incentive potentials, as further described below.mix toward variable, performance-based pay.
Peer Group and median values reported in survey data for comparable banks. Pearl Meyer developed several alternatives for gradually adjusting the compensation of the Board of Directors. After review of the alternatives for Board Compensation, the Committee agreed to gradually increase Board compensation by adjusting the annual retainers for Board members as well as the retainers provided to chairs of Board committees over a multi-year period. No changes were made to Board compensation arrangements during 2017, nor were any changes approved for 2018. See “Directors’ Compensation” for additional details.
CTBI periodically compares its executive pay and business performance, as well as the compensation of the Board of Directors, to a group of comparable, publicly traded financial institutions (“Peer Group”). In establishing a Peer Group, CTBI seeks to include regional bank holding companies that are similar to CTBI in terms of assets, business lines, and geographic footprint.markets. During 2017,2023, the Committee worked with Pearl Meyer to review the Peer Group to ensure it continued to include organizations that were comparable to CTBI. Based on this review, the Committee approved the following adjustmentsdetermined that it would be appropriate to add Wilson Bank Holding Company to the Peer Group: (1) removed UnionGroup and remove the following peers: American National Bankshares, Inc. and First Financial Bancorp and MainSource Financial due to completed or pending acquisitions, and (2) added State Bank Financial Corporation and Home Trust Bancshares, which had assets ranging from $3.2 to $5.1 billion.Bancorp. These adjustmentschanges resulted in the Peer Group of fifteentwenty companies listed below. The Committee believes the Peer Group provides a reasonable basis of comparison for CTBI due to their similar business lines and geographic locations, as well as their comparable size, as reflected in theirby total assets. Following the Committee’s review and adjustment of the Peer Group, the median assets of the Peer Group were about $4.45$5.88 billion, as compared to CTBI’s assets of approximately $4.1$5.52 billion. The companies included in the Peer Group ranged in asset size from $2.3$3.1 billion to $9.0 billion.$8.1 billion at the time of the review.
| Bank | Ticker | Bank | Ticker | ||
| CSTR | Lakeland Financial Corporation | ||||
| Carter Bancshares, Inc. | CARE | Mercantile Bank Corporation | MBWM | ||
| City Holding Company | CHCO | ||||
| First Community Bancshares, Inc. | FCBC | ||||
| First Financial Corp | THFF | Republic Bancorp, Inc. | RBCAA | ||
| German American Bancorp, Inc. | GABC | SmartFinancial, Inc. | SMBK | ||
| Great Southern Bancorp, Inc. | GSBC | Stock Yards Bancorp, Inc. | SYBT | ||
| Home Trust Bancshares, Inc. | HTBI | UVSP | |||
| Horizon Bancorp, Inc. | |||||
| WBHC |
Executive Compensation Components
CTBI’s executive compensation program includes the following major components, each of which areis described further below.
| ● | Base Salaries |
| ● | Annual Incentive Plan |
| ● | Long-Term Incentive Plan |
| ● | Benefits and Perquisites |
| ● | Employment Contracts, Termination of Employment, and Change in Control Arrangements |
Base Salaries
Salaries for CTBI’s executives are established based upon the scope of their responsibilities, taking into accountconsidering competitive market compensation paid by other similarly situated companies for comparable positions. The Committee sets the CEO’s base salary, subject to approval of the Board of Directors. Any salary increase for the CEO is determined based on the Committee’s review of the CEO’s leadership and contributions to the achievement of performance objectives for CTBI, which for 20172023 included asset and revenue growth, asset quality, core earnings performance, identification of strategic opportunities, and execution of the current business strategy and operating plan. The Committee also considers how the CEO’s salary compares to salaries of CEO’sCEOs within the Peer Group. Base salaries for other executive officers, including the other Named Executive Officers,NEOs, are approved by the Committee after considering recommendations from the CEO. In approving any salary increases for Named Executive Officers,NEOs, the Committee considers performance for the prior year, responsibilities for the upcoming year, how the current salaries compare to those paid by peer companies to executives with similar responsibilities, and CTBI’s budget for salary increases for employees other than executive officers. The Committee’s objective is to pay base salaries which will be sufficient to attract, retain, motivate, and reward management for successful performance while maintaining affordability within CTBI’s business plan.
The Committee has established a policy of managing executive officer salaries to the market median, recognizing that a series of increases over several years may be required to adjust salaries to the desired level for any executive whose current salary is significantly below the market (contingent upon the executive sustaining the required level of performance). After considering the performance of both CTBI and individual performance,each executive, as well as how individual officer salaries compared to the market median, the Committee determined that it was appropriate to increase executive salaries for 2018.2024. The salary increases for 20182024 reflect the Committee’s desire to balance (i) the need to compensate our Named Executive OfficersNEOs at levels that are competitive with the market and recognize their performance and value to CTBI with (ii) the need to control expenses in an economic and regulatory environment that continues to be challenging for CTBI and other financial institutions. The salary increases approved for the Named Executive OfficersNEOs for 20182024 ranged from 3.70%3.85% to 9.80%4.58%. The following table shows the 20172023 and 20182024 base salary for each Named Executive Officer and the percentage increase over 2017. The 9.8% increase for Kevin Stumbo included a 3.9% merit increase and a 5.9% market adjustment intended to provide a base salary more in line with market salaries for Chief Financial Officers.2023.
| Base Salary | Base Salary | % Increase | ||||||||||
| 2017 | 2018 | 2017 to 2018 | ||||||||||
Jean R. Hale Chairman, President, and Chief Executive Officer | $ | 600,000 | $ | 625,000 | 4.17 | % | ||||||
Kevin J. Stumbo Executive Vice President, Chief Financial Officer and Treasurer | $ | 255,000 | $ | 280,000 | 9.80 | % | ||||||
Mark A. Gooch Executive Vice President and Secretary | $ | 429,000 | $ | 445,000 | 3.70 | % | ||||||
Larry W. Jones Executive Vice President | $ | 270,000 | $ | 280,000 | 3.70 | % | ||||||
James B. Draughn Executive Vice President | $ | 265,000 | $ | 277,500 | 4.70 | % | ||||||
| Base Salary | Base Salary | % Increase | |
| 2023 | 2024 | 2023 to 2024 | |
Mark A. Gooch Chairman, President and Chief Executive Officer
| $655,500
| $685,500 | 4.58% |
Kevin J. Stumbo Executive Vice President, Chief Financial Officer and Treasurer | $353,500
| $368,000
| 4.10%
|
James B. Draughn Executive Vice President | $343,000 | $357,000 | 4.08% |
Richard W. Newsom Executive Vice President | $364,000 | $378,000 | 3.85% |
Ricky D. Sparkman Executive Vice President | $317,000 | $330,000 | 4.10% |
Annual Incentive Plan
The Named Executive Officers,NEOs, other executive officers, and other members of senior management may earn annual cash incentive bonuses as well as stock-based awards under the Senior Management Incentive Compensation Plan. Bonuses and stock awards are earned for achieving targets set for earnings per share (“EPS”) and return on average assets (“ROAA”) of CTBI. The Incentive Plan is designed to reward participants for meeting or exceeding annual profit goals, and it is intended to achieve the following objectives:
| ● | Increase the profitability and growth of CTBI in a manner which is consistent with other goals of the |
| ● |
| ● | Provide an incentive opportunity which is competitive with other financial institutions in the Peer |
| ● | Attract and retain executive officers and other key employees and encourage excellence in the performance of individual |
| ● | Motivate and appropriately reward those members of senior management who contribute to the success of |
At the beginning of each year, the Committee establishes a target (base) level of performance for EPS and ROAA. The Committee also establishes a performance range relative to the base level and an associated payment scale which defines the percentpercentage of salary that participants may earn as a cash bonus for a given level of performance. In addition, the Committee establishes a separate payment scale which defines the percentage of salary that participants may receive as a stock award for a given level of performance. Stock awards under the Incentive Plan may be granted as either restricted shares or stock options.
2023 Annual Cash Incentive Plan
Prior to setting the terms of the Incentive Plan for 2018,2023, the Committee considered the outcomes for 2017, the adjustments made to the Incentive Plan since 2012,2022 and the executive compensation strategy and philosophy previously adopted in January 2012.
by the Compensation Committee.
As a result of these discussions, the Committee recommended, and the Board approved, maintaining the Annual Cash Incentive Plan for 2018 in substantially the same form as 2017, except for updating the performance targets to reflect the 2018 business plan and the expected positive impact of the Tax Cuts and Jobs Act passed by Congress in December, 2017. Key2023. The key features of the 20182023 Incentive Plan are listed below:
| ● | Maintain the cash incentives payable at the same levels as |
| ● | Maintain the stock-based incentives payable to |
| ● | Maintain the continued service period of four years for executive officers to fully vest in stock awards made under the Incentive Plan, which vest in 25% increments each year. |
| ● | Continue to allow executives to earn modest cash and stock incentives if results are slightly below the target (base) level, so long as performance meets or exceeds minimum levels of performance approved by the Committee; |
| ● | Continue to allow executives to earn target (base) level incentives if the goal for net income ($79.2 million) is achieved. |
| ● |
This approach is consistent with the Committee’s strategy of shifting the mix of executive compensation so that a larger portion of executive pay is contingent upon performance while controlling the cost of the plan.
The following table shows the target (base) level of ROAA performance and the cash incentive awards that maycould be earned by the CTBI CEO and the CTB CEO, and other Group I – Named Executive Officers (“Other NEOs”) for various levels of performance in 2018:2023:
| Target/ROAA* | % of Target Award Earned | Cash Incentive Award as a % of Salary | |||
| CTBI CEO | CTB CEO | Other NEOs | |||
| 1.35% | 50% | 25% | 20.0% | 15% | |
| Base | 1.42% | 100% | 50% | 40.0% | 30% |
| 1.45% | 150% | 75% | 60.0% | 45% | |
| 1.48% | 200% | 100% | 80.0% | 60% | |
Target | Award as a % of Target Award | Award as a % of Salary | |||
ROAA | EPS | CTBI CEO | Group I | ||
| 1.48% | $4.52 | 25% | 25% | 15% | |
| Base | 1.53% | $4.66 | 50% | 50% | 30% |
| 1.58% | $4.80 | 75% | 75% | 45% | |
| 1.62% | $4.94 | 100% | 100% | 60% | |
*These results are after accrual of the incentive.
The CTB officers responsible for various consolidated functions, the market presidents, and the CTIC officers responsible for various departments as selected by the CTIC CEO (“Group II Participants”), as well as Group III Participants, consisting of senior vice presidents of consolidated functions and others selected for participation by the Compensation Committee, could receive awards for the year ended December 31, 2023 based on the same performance measures and targets applicable to the NEOs. Potential cash incentive awards for Group II Participants expressed as a percentage of salary ranged from a minimum award of 3.5% of salary to a maximum award of 8.75% of salary and awards for Group III Participants ranged from a minimum award of 2.75% of salary to a maximum award of 6.71% of salary.
As shown in the table above, executives would earn no incentives for performance below the minimum required level.levels of ROAA and EPS. To ensure that executive pay varies with company performance, executives earn less than target for results above the minimum required level but below the target (base) level, and they maycould earn larger incentives if results exceedexceeded the target (base) level. Payments arewere “capped” at a maximum level to preclude overpayment and control the cost of the plan. The maximum payment provided under the 20182023 plan as well as prior versions of the plan covering 2015, 2016, and 2017, is 200%was 100% of the target (base) opportunity, which was reduced from the maximum 450% of target applicable to the 2014 plan, in recognition of actions taken in prior years, including salary adjustments and increases to the target (base) amounts.opportunity.
| ● | Cash Incentive Compensation Awards for the Year(s) Ended December 31, 2023. CTBI’s NEOs were participants in CTBI’s Senior Management Incentive Compensation Plan for the year ended December 31, 2023. The Committee previously established the performance measures under the 2023 Plan and the required minimum level of performance was not achieved by CTBI under the Plan. However, the Committee authorized a discretionary payment to our executive officers and other members of senior management. Accordingly, the NEOs received payments (paid in January 2024) as follows: |
| 2023 Cash Payments Awarded Under the Senior Management Incentive Compensation Plan ($) | |
Mark A. Gooch – Vice Chairman, President, and Chief Executive Officer | 81,398 |
Kevin J. Stumbo – Executive Vice President, Chief Financial Officer, and Treasurer | 26,513 |
| James B. Draughn – Executive Vice President | 25,725 |
| Richard W. Newsom – Executive Vice President | 27,300 |
| Ricky D. Sparkman – Executive Vice President | 23,775 |
| Target/ROAA* | % of Target Award Earned | Stock Award as a % of Salary | |||
| CTBI CEO | CTB CEO | Other NEOs | |||
| 1.35% | 50% | 10% | 8.757% | 7.50% | |
| Base | 1.42% | 100% | 20% | 17.515% | 15.00% |
| 1.45% | 105% | 21% | 18.375% | 15.75% | |
| 1.48% | 115% | 23% | 20.125% | 17.25% | |
The Committee may adjust the cash and stock incentive percentages of salary in future years as it continues to implement theCTBI’s executive compensation strategy it adopted in 2012.strategy. During the last several years, by gradually increasing the cash portion of the Incentive Plan and the total annual incentive opportunity, the Committee has brought CTBI’s planIncentive Plan more in line with typical market practices and increased the portion of total pay that is earned for performance.
2024 Annual Incentive Plan
Prior to setting the terms of the Incentive Plan for 2024, the Committee considered the outcomes for 2023, and the executive compensation strategy previously adopted by the Committee.
The Committee recommended and the Board of Directors approved the Senior Management Incentive Compensation Plan for the year ending December 31, 2024. The participation groups under the Plan are: (i) Group I, consisting of the CEO of CTBI has structuredand other members of the Executive Committee (“Other Executive Officers”); (ii) Group II, consisting of CTB officers responsible for the various consolidated functions as selected by the CEO, the presidents of each market, and the CTIC officers responsible for various departments as selected by the CTIC CEO; and (iii) Group III, consisting of Senior Vice Presidents of consolidated functions selected for participation by the Compensation Committee. Individuals below the Senior Vice President level may be selected by the Compensation Committee for special option awards for extraordinary performance. This Plan may be amended, modified, or terminated by the Board of Directors at any time at its incentive compensation planssole discretion, except that after the 90th day of the year the performance standards may not be changed in a manner which is designed to permit a large percentagethat would increase the amount of the total potential incentive compensation topayable for such year.
| ● | Participants will be eligible for a cash award determined by EPS and ROAA. The minimum and maximum awards as a percentage of salary for each group will be: (i) Group I – CTBI CEO minimum award of 25% of salary and maximum award of 100% of salary; (ii) Group I – Other Executive Officers minimum award of 15% of salary and maximum award of 60% of salary; (iii) Group II – minimum award of 3.5% of salary and maximum award of 8.75% of salary; and (iv) Group III – minimum award of 2.75% of salary and maximum award of 6.71% of salary. If the ROAA or EPS are not attained but the target net income is attained, then the amount of the award under the 2024 Plan shall be paid |
| ● | Participants will be eligible to receive stock options (pursuant to CTBI’s 2015 Stock Ownership Incentive Plan) with a face value equal to certain percentages of salary or restricted stock (or a combination of options and restricted stock) of an amount recommended by the Compensation Committee and approved by the Board of Directors of CTBI subject to any limitations of the 2015 Stock Ownership Incentive Plan. The minimum and maximum stock option awards as a percentage of salary for each group will be: (i) Group I – CTBI CEO minimum award of 10% of salary and maximum award of 23% of salary; (ii) Group I – Other Executive Officers minimum award of 7.5% of salary and maximum award of 17.25% of salary; (iii) Group II – minimum award of 5% of salary and maximum award of 11.5% of salary; and (iv) Group III – minimum award of 2.25% of salary and maximum award of 5% of salary. If the ROAA or EPS are not attained but the target net income is attained, then the amount of stock options and/or restricted stock awarded under the 2024 Plan shall be granted at the base level of target performance. There shall be a minimum acceptable performance beneath which awards will not be granted and a maximum above which there is no additional award in the event of windfall profits. |
The following tables show the target (base) level participants other thanof ROAA and EPS performance required to earn the Namedcash incentive awards and stock equity awards by the CTBI CEO and Other NEOs for various levels of performance in 2024:
TABLE I
2024 ANNUAL CASH INCENTIVE COMPENSATION AWARD
INITIAL CALCULATION
Group I - Executive Committee of Community Trust Bancorp, Inc.
Target | Award as a % of Target Award | Award as a % of Salary | |||
ROAA | EPS | CTBI CEO | Group I | ||
| 1.32% | $4.27 | 25% | 25% | 15% | |
| Base | 1.36% | $4.40 | 50% | 50% | 30% |
| 1.40% | $4.53 | 75% | 75% | 45% | |
| 1.44% | $4.66 | 100% | 100% | 60% | |
| ● | For 2024, the targeted (base) ROAA is established as follows: ROAA of 1.36% and EPS of $4.40. |
| ● | For 2024, net income target is $79,195,000. |
| ● | These results are after accrual of the incentive. |
TABLE II
2024 ANNUAL CASH INCENTIVE COMPENSATION AWARD
INITIAL CALCULATION
Group II – Consolidated Division Officers will receive 82%of CTBI and Market Presidents
Target | Award as a % of Target Award
| Award as a % of Salary | ||
ROAA | EPS | Group II | ||
| 1.32% | $4.27 | 50% | 3.50% | |
| Base | 1.36% | $4.40 | 100% | 7.00% |
| 1.40% | $4.53 | 112% | 7.84% | |
| 1.44% | $4.66 | 125% | 8.75% | |
| ● | For 2024, the targeted (base) ROAA is established as follows: ROAA of 1.36% and EPS of $4.40. |
| ● | For 2024, net income target is $79,195,000. |
| ● | These results are after accrual of the incentive. |
TABLE III
2024 ANNUAL CASH INCENTIVE COMPENSATION AWARD
INITIAL CALCULATION
Group III - Senior Vice Presidents of Consolidated Functions
Target | Award as a % of Target Award | Award as a % of Salary | ||
ROAA | EPS | Group III | ||
| 1.32% | $4.27 | 50% | 2.75% | |
| Base | 1.36% | $4.40 | 100% | 5.50% |
| 1.40% | $4.53 | 106% | 5.83% | |
| 1.44% | $4.66 | 122% | 6.71% | |
| ● | For 2024, the targeted (base) ROAA is established as follows: ROAA of 1.36% and EPS of $4.40. |
| ● | For 2024, net income target is $79,195,000. |
| ● | The results are after accrual of the incentive. |
TABLE IV
2024 SENIOR MANAGEMENT INCENTIVE COMPENSATION PLAN
STOCK OPTION AWARDS
Target |
Stock Option Award as a % of Salary | |||||
ROAA | EPS | CTBI CEO | Group I | Group II | Group III | |
| 1.32% | $4.27 | 10.00% | 7.50% | 5.00% | 2.25% | |
| Base | 1.36% | $4.40 | 20.00% | 15.00% | 10.00% | 4.50% |
| 1.40% | $4.53 | 21.00% | 15.75% | 10.50% | 4.75% | |
| 1.44% | $4.66 | 23.00% | 17.25% | 11.50% | 5.00% | |
| ● | For 2024, the targeted (base) ROAA is established as follows: ROAA of 1.36% and EPS of $4.40. |
| ● | For 2024, net income target is $79,195,000. |
| ● | These results are after accrual of the incentive. |
Long-Term Incentive Plan
A significant component of the total amount paid under all company-sponsored incentive compensation plans.
Performance units are long-term incentives which are earned for achieving one or more financial performance goals over a multi-year period.period and paid in cash rather than shares. Awards of performance units are permitted under CTBI’s shareholder-approved 2015 Stock Ownership Incentive Plan. Only executive officers of CTBI (including the CEO and the otherOther NEOs) will participate in the performance unit plan, as thesethey are the executives who areindividuals held accountable for creating shareholder value. As it reviewed the executive compensation program in late 2017 andIn early 2018, the Committee determined it would be appropriate to continue granting performance units. Accordingly, in early 2018,2024, the Committee approved long-term awards to the CEO and otherOther NEOs, as further described below.
The Committee believes that earnings growth, when sustained over a period of time, will create value for CTBI shareholders. For this reason, the Committee approved awards of performance units that require executives to achieve a target for cumulative net income over a three-year period. In early 2018,2024, the Committee approved grants for a three-year period covering 2018, 2019,2024, 2025, and 2020.2026. The Committee believes the cumulative net income performance requirement is achievable but challenging, given the gradual improvementcurrent growth rate in the U.S. economy, but notwithstanding the regulatory environment of the banking industry and the challenges to the local economy in some of the markets served by CTBI. Targets for cumulative net income growth were set after giving consideration toconsidering CTBI’s results in prior years, CTBI’s forecasts of future results within its strategic plan, local economic conditions, and industry performance.
The Committee believes the continued use of performance units will further: (i) focus the executive officers on creating shareholder value through sustained growth in earnings; (ii)earnings, improve the alignment of pay with performance for all executive officers;officers, and (iii) create a more balanced incentive compensation program. To the extent thatThe use of cash-based performance units are utilized,avoids any potential dilution to existing shareholders (as might occur if awards were stock-based) is avoided. In keeping with its plan for gradual adjustments to executive incentive potentials under the annual Incentive Plan, the Committee adjusted the target incentive percentages of salary associated with the awards of performance units in 2012, 2013, and 2014. This approach enabled the Committee to gradually change the mix of executive compensation, ultimately resulting in a greater portion of executive compensation being contingent on performance..
The table below shows the percentage of salary that may be earned by the CTBI CEO the CTB CEO, and other executive officers, including the Other NEOs, based on achievement of the cumulative net income goal for 20182024 through 2020.2026. Any earned performance units will be paid in early 2021,2027, after the Committee evaluates actual results for 20182024 through 20202026 versus the cumulative net income goal.
| Performance Unit Award as a % of Salary | |||
| Cumulative Net Income vs. Target | CTBI CEO | CTB CEO | Other NEOs |
90% of Target (Minimum) | 10.0% | 7.5% | 5.0% |
| 93% of Target | 20.0% | 15.0% | 10.0% |
| 96% of Target | 30.0% | 22.5% | 15.0% |
| 100% of Target Cumulative Net Income (Target) | 40.0% | 30.0% | 20.0% |
| 103% of Target | 48.0% | 36.0% | 24.0% |
| 107% of Target | 54.0% | 40.5% | 27.0% |
110% of Target (Maximum) | 60.0% | 45.0% | 30.0% |
2024 PERFORMANCE GOALS
| Cumulative Net Income | Award as a % of Target Award | Award as a % of CTBI Chief Executive Officer Salary | Award as a % of Salary of All Other NEOs |
90% of Target Cumulative Net Income (Minimum) | 25% | 10.0% | 5.0% |
93% of Target Cumulative Net Income | 50% | 20.0% | 10.0% |
96% of Target Cumulative Net Income | 75% | 30.0% | 15.0% |
Target Cumulative Net Income (Per Schedule 1) | 100% | 40.0% | 20.0% |
103% of Target Cumulative Net Income | 120% | 48.0% | 24.0% |
107% of Target Cumulative Net Income | 135% | 54.0% | 27.0% |
110.0% of Target Cumulative Net Income (Maximum) | 150% | 60.0% | 30.0% |
The cumulative net income target for the 20182024 Long-Term Incentive Plan is $184.0$250 million. In addition, for 2018, the Committee established the minimum potential payment for the Other NEOs at 5.0%, which reflected an increase from 2.50% in the 2017 plan, in order to provide a payment at minimum levels of performance that is consistent with the minimum payments that may be earned by the CTBI CEO and the CTB CEO.
Voluntary or involuntary termination of employment prior to the end of the performance period and/or prior to the payment of any earned performance units will result in forfeiture of any outstanding performance units, except as noted below. In the case of termination of employment by reason of death, disability, or retirement prior to the expiration of the performance period, any outstanding performance units will be deemed to have been earned in an amount equal to the amount payable at the maximum amount payable under the performance unit at the target (base) level multiplied by the percentage that would have been earned, assuming that the rate at which the performance goal has been achieved as of the date of such termination of employment would have continued until the end of the performance period. Upon the occurrence of certain termination events within the 24 month24-month period beginning on the date of a change in control, any outstanding performance units granted under the 2015 Stock Ownership Incentive Plan will become fully vested and payable in an amount which is equal to the greater of (a) the maximum amount payable under the performance unit at the target level multiplied by the percentage that would have been earned, assuming that the rate at which the performance goal has been achieved as of the date of such change in control termination event would have continued until the end of the performance period or (b) the maximum amount payable under the performance unit at target level multiplied by the percentage of the performance period completed at the time of the change in control termination event.
Long-Term Incentive Plan – Incentives Earned for 2015 – 20172021-2023 Performance Period
In early 2018,2024, the Committee reviewed performance for the three-year period ended December 31, 2017.2023. The cumulative net income goal for 2015 – 20172021-2023 of $216 million, was $148.0 million, andexceeded; the actual cumulative net income for the period was $145.3$247.7 million. The Committee determined it would be appropriate to adjust results forpreviously established the final year (2017) ofperformance measures under the 3-year period in order to exclude the windfall benefits from the Tax Cuts and Jobs Act2021 Plan and the additional one-time bonuses, paid only to non-executive employees, announced as a result of the Act. The adjusted cumulative net income for the 2015 – 2017 period was $143.2 million. Adjusted results were above the minimum required performance level of $133.0 million, but below the target of $148.0 million. As a result, the CEO and other Named Executive Officers earned incentives equal to 75% of their target incentive potentialsperformance was achieved by CTBI under the Long-Term Incentive Compensation Plan forPlan. Accordingly, the 2015 - 2017 performance period. Amounts earned underNEOs were entitled to the following maximum plan and paid to executivescash incentive awards (paid in early 2018January 2024), which are shownincluded in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table.
2023 Cash Incentive Awarded Under the Long-Term Incentive Compensation Plan ($) | |
Mark A. Gooch – Vice Chairman, President, and Chief Executive Officer | 220,500 |
Kevin J. Stumbo – Executive Vice President, Chief Financial Officer, and Treasurer | 97,500 |
| James B. Draughn – Executive Vice President | 93,600 |
| Richard W. Newsom – Executive Vice President | 87,150 |
| Ricky D. Sparkman – Executive Vice President | 87,150 |
Benefits and Perquisites
CTBI’s policy is to minimize the use of executive benefits and perquisites. The Named Executive OfficersNEOs participate in the same benefit plans as other CTBI employees, with the few exceptions described below. During 2017,2023, there were no changes to the benefits and perquisites provided to Named Executive Officers,NEOs, and none have been approved for 2018.2024.
To align the interests of all employees, including Named Executive Officers,NEOs, with those of shareholders, CTBI has implemented an Employee Stock Ownership Plan (“ESOP”), which provides awards of CTBI stock subject to vesting requirements. Participation in the ESOP is available to any employee of CTBI or its subsidiaries who has been employed for one year, completed 1,000 hours of service, and attained the age of 21. CTBI currently contributes 4.0% of covered employees’ gross wages to the ESOP. ESOP contributions are used to acquire shares of CTBI stock on the open market.
CTBI has established a 401(k) Plan under which employees can contribute from 1.0% to 20.0% of their annual salary, up to applicable limits. CTBI provides a matching contribution equal to 50% of the first 8.0% of salary contributed by the employee. CTBI also provides health insurance, life insurance, and other benefit programs that are usual and customary within the banking industry in order to attract and retain employees. Named Executive OfficersNEOs are eligible to participate in these plans on the same basis as other employees, subject to IRS limits.
CTBI provides supplemental life insurance to its Named Executive Officers,NEOs, as well as other senior and key management. The plan provides a split-dollar share of death benefits at an amount necessary to provide the Named Executive OfficersNEOs with a total company-provided death benefit of three times their annual salary. This amount is consistent with the death benefit provided to other eligible employees. Additionally, each Named Executive Officer and other senior and key employees are provided a post-retirement death benefit equal to one times his or her annual salary at the time of retirement. The benefits are funded with bank-owned life insurance policies. CTBI will recover its plan costs upon the death of the covered individual, and the executive’s beneficiary will receive a portion of the insurance proceeds. The Committee believes the supplemental life insurance program is common within the banking industry and provides an incentive for long-term employment with CTBI.
CTBI does not provide significant perquisites or personal benefits to executive officers. The Named Executive Officers,NEOs, as well as other executive officers, members of senior management, and key employees, are provided country club memberships and other perquisites with an aggregate individual annual value of less than $10,000.
Unlike some other banks in its Peer Group, CTBI does not provide any supplemental executive retirement plan. CTBI allows executives to voluntarily defer receipt of any cash bonuses earned under the annual Incentive Plan.
Employment Contracts, Termination of Employment, and Change in Control Arrangements
CTBI does not provide employment agreements to executives. Due to ongoing industry consolidation, CTBI has established termination of employment and change in control agreements (“Severance Agreements”) with each of its Named Executive Officers,NEOs, other executive officers, and certain other senior officers. Severance Agreements are provided in order to attract and retain key executives by protecting them in the event of a change in control. The Severance Agreements are effective for a term equal to the longer of three years or the covered period should a change in control of CTBI occur during such three-year period. These agreements are automatically renewable for additional one-year periods. The covered period during which the terms and conditions of the Severance Agreements are effective is the period of time following a change in control equal to: (i) two years following the occurrence of the change in control in the event of an involuntary termination or a voluntary termination following a change in duties or (ii) the thirteenth month following the change in control in the event of a voluntary termination not preceded by a change in duties.
The Severance Agreements require the payment to a Named Executive Officer, other executive officer, or senior officer of a severance amount in the event of an involuntary or voluntary termination of employment after a change in control of CTBI during the covered period. The severance amount payable under the Severance Agreements is equal to: (i) 2.99 times the Named Executive Officer’s or other executive officer’s base annual salary in the event of involuntary termination or in the event of a voluntary termination of employment preceded by a change in duties subsequent to a change in control of CTBI, or (ii) 2.00 times the Named Executive Officer’s or other executive officer’s annual base salary in the event of a voluntary termination of employment not preceded by a change in duties subsequent to a change in control of CTBI.
For purposes of the Severance Agreements, a change in control occurs when: (i) any person, including a group under Section 13(d)(3) of the Securities Exchange Act of 1934, is or becomes the owner of 30% or more of the combined voting power of CTBI’s outstanding securities; (ii) as a result of, or in connection with, any tender offer, exchange offer, merger or other combination, sale of assets, or contested election, the persons who were directors of CTBI before such transaction(s) cease to constitute a majority of the Board of Directors of CTBI or successor of CTBI; (iii) a tender or exchange offer is made and consummated for the ownership of 30% or more of the combined voting power of CTBI’s outstanding voting securities; or (iv) CTBI transfers substantially all of its assets to another corporation that is not a wholly-owned subsidiary of CTBI.
The Committee believes the use and structure of the Severance Agreements are consistent with CTBI’s compensation objectives to attract, motivate, and retain highly qualified executives. The Committee also believes that the Severance Agreements promote job stability, provide a measure of financial security, preserve morale and productivity, and encourage retention during the period of uncertainty that accompanies an actual or potential change in control. The Committee periodically reviews the terms of the Severance Agreements in the context of CTBI’s other executive compensation arrangements, changes in government regulations and trends in competitive practices.
No termination of employment or change in control payments were made under the Severance Agreements in 2017,2023, and there were no changes made to the terms of the Severance Agreements during 20172023 or to date in 2018.2024.
Compensation Governance and Oversight
The Committee is responsible for the oversight of compensation risk. The Committee annually reviews the Senior Management Incentive Compensation Plan, the Long-Term Incentive Compensation Plan, and the Employee Incentive Compensation Plan, as well as other compensation arrangements, to evaluate their potential for creating or increasing risk to CTBI. During 2017,2023, the Committee reviewed the compensation risk assessment performed by management and concluded that CTBI’s compensation plans do not motivate or reward management for taking inappropriate risks and do not create any risks that are reasonably likely to have a material adverse impact on CTBI.
The Committee has adopted a recoupment policy applicable to members of CTBI’s Executive Committee. The policy provides, in general, that in the event any such person’s fraud, dishonesty, or recklessness substantially contributes to CTBI’s material noncompliance with financial reporting requirements under securities laws resulting in CTBI’s obligation to prepare an accounting restatement, the Committee will direct CTBI to use prompt and reasonable efforts to recover from such person the amount of specified performance-based compensation determined by the Committee to have been materially affected by the restatement that is in excess of the amount of performance-based compensation which would have otherwise been received by such person, assuming the financial statements had originally been prepared as restated. The Committee may approve amendments to the recoupment policy at any time, including amendments to conform to regulations adopted by the Securities and Exchange Commission or applicable listing requirements.
Tax Deductibility
Federal income tax law caps at $1,000,000 the deductible compensation per year for each of the NEOs, subject to certain exceptions. In developing and implementing executive compensation policies and programs, the Committee considers whether particular payments and awards are deductible for federal income tax purposes, along with other relevant factors. The Committee has taken what it believes to be appropriate steps to maximize the deductibility of executive compensation. It is the general intention of the Committee to meet the requirements for deductibility whenever possible. However, considering the recent repeal of the performance-based compensation exception under Tax Code Section 162(m), the Compensation Committee expects in the future to approve compensation that is not deductible for income tax purposes. The Committee will continue to review and monitor the deductibility of compensation.
Say-on-Pay Resolutions
In 2017,2023, we submitted our executive compensation program to an advisory, nonbinding vote of shareholders (i.e., “say on pay”“say-on-pay”). At the 20172023 annual shareholders meeting, approximately 97%94% of votes cast were voted in favor of a resolution approving our executive compensation program. Based on these results, the Committee concluded that shareholders supported CTBI’s approach to executive compensation. In addition, at the 20172023 annual shareholders meeting, more than 80%approximately 88% of votes castcase were in favor of having an annual say-on-pay vote. Under applicable law, shareholders must be asked at least every six years on the frequency of future shareholder advisory votes with respect to executive compensation. Accordingly, the next advisory vote regarding the frequency of say-on-pay votes is required to occur no later than the 2029 annual shareholders meeting. As CTBI shareholders favor an annual frequency for say on pay vote. Accordingly,votes, at the 20182024 annual meeting, shareholders are being asked to approve an advisory, nonbinding resolution in favor of CTBI’s executive compensation arrangements. Although the results of annual say on pay resolutions are not binding on CTBI, the Committee welcomes feedback from shareholders, and it will consider the outcome of each year’s say on pay vote as part of its ongoing review of the executive compensation program.
Compensation Committee Interlocks and Insider Participation
Report of the Compensation Committee
The Compensation Committee of CTBI has reviewed and discussed the Compensation Discussion and Analysis with management. Based on that review and discussion, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
Eugenia “Crit” Luallen, Chairman
M. Lynn Parrish Vice Chairman
Anthony W. St. Charles
James E. McGhee II
February 29, 2024
EXECUTIVE COMPENSATION
The following table sets forth the total annual compensation paid or accrued by CTBI to or for the account of the Chief Executive Officer, the Chief Financial Officer, and each of the other three most highly compensated executive officers of CTBI (“Named Executive Officers” or “NEOs”) for the fiscal years ended December 31, 2017, 2016,2023, 2022, and 2015.2021, except Mr. Newsom and Mr. Sparkman who became NEOs at the end of 2022, and therefore, whose compensation is listed only for the two fiscal years ended December 31, 2023 and 2022.
SUMMARY COMPENSATION TABLE
Name and Principal Position | Year | Salary ($) | Stock Awards (1) ($) | Non-Equity Incentive Plan Compensation (2) ($) | All Other Compensation (3) ($) | Total Compensation (4) ($) |
| Jean R. Hale, | 2017 | 598,077 | 77,618 | 315,000 | 32,402 | 1,023,097 |
| Chairman, President and | 2016 | 573,077 | 54,988 | 258,750 | 32,281 | 919,096 |
| Chief Executive Officer | 2015 | 548,077 | 30,721 | 350,750 | 43,802 | 973,350 |
| Kevin J. Stumbo, | 2017 | 254,231 | 24,804 | 73,125 | 20,991 | 373,151 |
| Executive Vice President, | 2016 | 244,039 | 17,446 | 66,150 | 21,049 | 348,684 |
| Chief Financial Officer | 2015 | 231,539 | 9,649 | 90,750 | 24,339 | 356,277 |
| and Treasurer | ||||||
| Mark A. Gooch, | 2017 | 427,846 | 48,912 | 175,350 | 23,979 | 676,087 |
| Executive Vice | 2016 | 412,769 | 34,825 | 149,040 | 24,257 | 620,891 |
| President and Secretary | 2015 | 397,000 | 19,717 | 205,700 | 30,446 | 652,863 |
| Larry W. Jones, | 2017 | 269,231 | 26,337 | 78,000 | 22,721 | 396,289 |
| Executive Vice | 2016 | 259,231 | 18,754 | 70,200 | 22,512 | 370,697 |
| President | 2015 | 249,231 | 10,520 | 98,000 | 25,103 | 382,854 |
| James B. Draughn, | 2017 | 264,000 | 257,751 | 76,050 | 26,948 | 624,749 |
| Executive Vice | 2016 | 251,231 | 18,151 | 68,040 | 22,205 | 359,627 |
| President | 2015 | 241,231 | 10,165 | 94,700 | 25,678 | 371,774 |
Name and Principal Position | Year | Salary ($) | Stock Awards (1) ($) | Non-Equity Incentive Plan Compensation (2) ($) | All Other Compensation (3) ($) | Total Compensation (4) ($) |
| Mark A. Gooch, | 2023 | 653,538 | 144,912 | 302,438 | 36,120 | 1,137,008 |
| Vice Chairman, President, | 2022 | 619,231 | 98,622 | 843,750 | 30,143 | 1,591,746 |
| and Chief Executive Officer | 2021 | 489,423 | 17,454 | 599,000 | 27,343 | 1,133,220 |
| Kevin J. Stumbo, | 2023 | 352,461 | 58,642 | 124,012 | 30,436 | 565,551 |
| Executive Vice President, | 2022 | 338,846 | 56,043 | 298,500 | 26,328 | 719,717 |
| Chief Financial Officer, | 2021 | 324,615 | 9,598 | 283,500 | 23,670 | 641,383 |
| and Treasurer | ||||||
| James B. Draughn, | 2023 | 342,000 | 56,907 | 119,325 | 36,540 | 554,772 |
| Executive Vice President | 2022 | 328,615 | 53,815 | 288,600 | 33,862 | 704,892 |
| 2021 | 312,244 | 9,443 | 274,200 | 36,418 | 632,305 | |
| Richard W. Newsom | 2023 | 362,923 | 60,376 | 114,450 | 34,683 | 572,432 |
| Executive Vice President | 2022 | 345,423 | 50,130 | 294,600 | 26,373 | 716,526 |
| Ricky D. Sparkman | 2023 | 316,077 | 52,634 | 110,925 | 31,822 | 511,458 |
| Executive Vice President | 2022 | 303,885 | 50,130 | 267,600 | 22,069 | 643,684 |
| (1) | The amounts in this column reflect the grant date fair value of all restricted stock awards granted during the years ended December 31, |
| (2) | Non-Equity Incentive Plan Compensation includes amounts paid under the Senior Management Incentive Compensation Plan, |
| (3) | The compensation represented by the amounts for |
| Name | Year | Company Contributions to ESOP ($) | Company Contributions to 401(k) ($) | Perquisites ($) | Company Paid Life Insurance Premiums ($) | Dividends Received on Restricted Stock ($) | Total All Other Compensation ($) | Year | Company Contributions to ESOP ($) | Company Contributions to 401(k) ($) | Perquisites ($) | Company Paid Life Insurance Premiums ($) | Dividends Received on Restricted Stock ($) | Total All Other Compensation ($) |
| (a) | (a) | (b) | (a) | (b) | ||||||||||
| Jean R. Hale | 2017 | 10,800 | 12,000 | - | 5,322 | 4,280 | 32,402 | |||||||
| Mark A. Gooch | 2023 | 13,200 | 11,250 | - | 2,786 | 8,884 | 36,120 | |||||||
| 2016 | 10,600 | 12,000 | - | 4,771 | 4,910 | 32,281 | 2022 | 12,200 | 10,250 | - | 2,531 | 5,162 | 30,143 | |
| 2015 | 10,600 | 12,000 | - | 9,417 | 11,785 | 43,802 | 2021 | 11,600 | 9,750 | - | 2,198 | 3,795 | 27,343 | |
| Kevin J. Stumbo | 2017 | 10,800 | 8,036 | - | 789 | 1,366 | 20,991 | 2023 | 13,200 | 11,250 | - | 1,713 | 4,273 | 30,436 |
| 2016 | 10,600 | 8,033 | - | 706 | 1,710 | 21,049 | 2022 | 12,200 | 9,745 | - | 1,508 | 2,875 | 26,328 | |
| 2015 | 10,600 | 8,028 | - | 1,388 | 4,323 | 24,339 | 2021 | 11,600 | 8,673 | - | 1,348 | 2,049 | 23,670 | |
| Mark A. Gooch | 2017 | 10,800 | 9,000 | - | 1,457 | 2,722 | 23,979 | |||||||
| James B. Draughn | 2023 | 13,200 | 12,933 | - | 1,818 | 8,589 | 36,540 | |||||||
| 2016 | 10,600 | 9,000 | - | 1,317 | 3,340 | 24,257 | 2022 | 12,200 | 11,179 | - | 1,586 | 8,897 | 33,862 | |
| 2015 | 10,600 | 9,000 | - | 2,506 | 8,340 | 30,446 | 2021 | 11,600 | 9,750 | - | 1,371 | 13,697 | 36,418 | |
| Larry W. Jones | 2017 | 10,800 | 7,267 | - | 3,185 | 1,469 | 22,721 | |||||||
| Richard W. Newsom | 2023 | 13,200 | 13,760 | - | 3,637 | 4,086 | 34,683 | |||||||
| 2016 | 10,600 | 7,228 | - | 2,759 | 1,925 | 22,512 | 2022 | 12,200 | 8,432 | - | 3,142 | 2,599 | 26,373 | |
| 2015 | 10,600 | 7,261 | - | 2,379 | 4,863 | 25,103 | ||||||||
| Ricky D. Sparkman | 2023 | 13,200 | 13,269 | - | 1,510 | 3,843 | 31,822 | |||||||
| 2022 | 12,200 | 5,930 | - | 1,340 | 2,599 | 22,069 | ||||||||
| James B. Draughn | 2017 | 10,800 | 9,000 | - | 878 | 6,270 | 26,948 | |||||||
| 2016 | 10,600 | 9,000 | - | 780 | 1,825 | 22,205 | ||||||||
| 2015 | 10,600 | 9,000 | - | 1,480 | 4,598 | 25,678 | ||||||||
| (a) | For further information regarding the ESOP and 401(k) Plans, see the Compensation Discussion and Analysis. |
| (b) | This column includes excess premiums reported as taxable compensation on the NEO’s W-2 for life insurance at three times salary. A similar insurance benefit, at three times salary, is provided to all full-time employees on a |
The following table sets forth the information regarding plan based awards granted to NEOs in 2017.2023.
GRANTS OF PLAN BASED AWARDS
| Name | Grant Date | Payouts Under Non-Equity Incentive Plan Awards (1) ($) | All Other Awards: Number of Securities Underlying Options Granted (2) (#) | Exercise or Base Price ($/share) | Grant Date Fair Value of Equity Awards (3) ($) |
| Jean R. Hale | - | 258,750 | - | - | - |
| Restricted Stock Grant | 01/24/17 | - | 1,671 | 46.45 | 77,618 |
| Kevin J. Stumbo | - | 66,150 | - | - | - |
| Restricted Stock Grant | 01/24/17 | - | 534 | 46.45 | 24,804 |
| Mark A. Gooch | - | 149,040 | - | - | - |
| Restricted Stock Grant | 01/24/17 | - | 1,053 | 46.45 | 48,912 |
| Larry W. Jones | - | 70,200 | - | - | - |
| Restricted Stock Grant | 01/24/17 | - | 567 | 46.45 | 26,337 |
| James B. Draughn | - | 68,040 | - | - | - |
| Restricted Stock Grant | 01/24/17 | - | 549 | 46.45 | 25,501 |
| Management Retention Restricted Stock Grant | 01/24/17 | - | 5,000 | 46.45 | 232,250 |
| Name | Grant Date | Payouts Under Non-Equity Incentive Plan Awards (1) ($) | All Other Awards: Number of Securities Underlying Options Granted (2) (#) | Exercise or Base Price ($/share) | Grant Date Fair Value of Equity Awards (3) ($) |
| Mark A. Gooch | |||||
2021 Long-Term Incentive Plan | - | 220,500 | - | - | - |
| Restricted Stock Grant | 01/24/2023 | - | 3,425 | 42.31 | 144,912 |
| Kevin J. Stumbo | |||||
2021 Long-Term Incentive Plan | - | 97,500 | - | - | - |
| Restricted Stock Grant | 01/24/2023 | - | 1,386 | 42.31 | 58,642 |
| James B. Draughn | |||||
2021 Long-Term Incentive Plan | - | 93,600 | - | - | - |
| Restricted Stock Grant | 01/24/2023 | - | 1,345 | 42.31 | 56,907 |
| Richard W. Newsom | |||||
2021 Long-Term Incentive Plan | - | 87,150 | - | - | - |
| Restricted Stock Grant | 01/24/2023 | - | 1,427 | 42.31 | 60,376 |
| Ricky D. Sparkman | |||||
2021 Long-Term Incentive Plan | - | 87,150 | - | - | - |
| Restricted Stock Grant | 01/24/2023 | - | 1,244 | 42.31 | 52,634 |
| (1) | This column shows the payouts
50 The following table sets forth the estimated payouts of non-equity incentive plan awards that may result from the performance units ESTIMATED FUTURE PAYOUTS UNDER NON-EQUITY INCENTIVE PLAN AWARDS
There were no stock option exercises by NEOs in 2023. The following tables set forth information concerning OPTION EXERCISES AND RESTRICTED STOCK VESTED
51 OUTSTANDING EQUITY AWARDS AT DECEMBER 31,
52 Change in control and Termination Benefits CTBI provides additional benefits, not included in the previous tables, to the NEOs in the event of a change in control. The following table provides an estimate of the value of such benefits, assuming the change in control had occurred on December 31,
See the Employment Contracts, Termination of Employment, and Change in Control Agreements section of the Compensation Discussion and Analysis for further information. 53 PAY RATIO DISCLOSURE RULE The annual disclosure of the ratio of the median employee’s annual total compensation to the total annual compensation of the principal executive officer (“PEO”) is provided below. CTBI’s PEO is Mark A. Gooch. The purpose of the required disclosure is to provide a measure of the equitability of pay within the organization. CTBI believes its compensation philosophy and process yield an equitable result and is presenting such information as follows:
In determining the median employee, a listing was prepared of all employees (other than the PEO) as of December 31, 2023, ordered based on total compensation. Wages and salaries were annualized for those employees who were not employed for the full year of 2023, other than temporary or seasonal employees. The median employee was selected from the annualized list. Included in the calculation of total compensation were the employee earnings paid by CTBI, cash bonuses received, the grant date fair value of any equity grants by the employer, employer paid ESOP contributions, employer matching of 401(k) contributions, employer paid life insurance premiums, and dividends paid on restricted stock held by the employee. PAY VERSUS PERFORMANCE The table below shows the following information for the past three fiscal years: (i) total compensation for our NEOs as set forth in the Summary Compensation Table (“SCT”), (ii) the “compensation actually paid” (“CAP”) to our PEOs and, on an average basis, our non-PEO NEOs (in each case, as determined under SEC rules), (iii) our total shareholder return (“TSR”), (iv) the TSR of our peer group (as set forth in our Compensation Discussion and Analysis), (v) our net income, and (vi) our financial performance measure for compensatory purposes, earnings per share (“EPS”). Pay Versus Performance Table
54
55
The Peer Group used to establish executive compensation for 2022 consisted of seventeen companies with median assets of $5.35 billion, compared to CTBI’s then assets of approximately $5.4 billion. The companies included in the Peer Group ranged in asset size from $3.2 billion to $8.2 billion and are listed below:
56 Below is a comparison of our TSR for 2023 to the current Peer Group as well as the prior Peer Group for 2022 :
Tabular List of Financial Performance Measures Pursuant to the requirements of Item 402(v) of the SEC’s Regulation S-K, we provide the following list of the three most important financial performance measures used to link CAP (as calculated in accordance with the SEC rules) to our NEOs to CTBI’s performance in 2023. Please refer to the section entitled “Annual Incentive Plan” in our Compensation Discussion and Analysis (“CD&A”) for more information. Pay Versus
57 Performance: Graphical Description Pursuant to the requirements of Item 402(v) of the SEC’s Regulation S-K, the following graphs reflect the relationships between the CAP and CTBI’s cumulative TSR and the peer group’s cumulative TSR, CTBI’s net income, and CTBI’s earnings per share. For a more thorough discussion of how the Committee reviews and assesses the relationship between executive compensation and CTBI performance, please refer to our CD&A. CAP and Cumulative TSR / Cumulative TSR of the Peer Group
58 CAP and CTBI Net Income
CAP and Earnings Per Share
59 SHAREHOLDER PROPOSALS It is currently contemplated that next year’s Annual Meeting of Shareholders will be held on or about April MISCELLANEOUS The Board
Pikeville, Kentucky April 1, 2024 60 Addendum A COMMUNITY TRUST BANCORP, INC. ARTICLE 1 The purpose of the 2025 Stock Ownership Incentive Plan (the “Plan”) is to enhance the ability of Community Trust Bancorp, Inc., a Kentucky corporation (the “Company”), and its subsidiaries to secure and retain the services of persons eligible to participate in the Plan and to provide incentives for such persons to exert maximum efforts for the success of the Company. ARTICLE 2 2.1 Definitions. As used in the Plan, terms defined parenthetically immediately after their use shall have the respective meanings provided by such definitions, and the terms set forth below shall have the following meanings (in either case, such meanings shall apply equally to both the singular and plural forms of the terms defined):
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Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (“Subject Person”) acquired Beneficial Ownership of more than the permitted amount of the outstanding Voting Securities as a result of the acquisition of Voting Securities by the Company which, by reducing the number of Voting Securities outstanding, increases the proportional amount of shares Beneficially Owned by the Subject Person; provided, however, that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of Voting Securities by the Company, and after such share acquisition by the Company, the Subject Person becomes the beneficial Owner of any additional Voting Securities which increases the number of the then outstanding Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur.
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2.2 Gender and Number. Unless otherwise indicated by the context, reference to the masculine gender shall include the feminine gender, the plural shall include the singular and the singular shall include the plural. 2.3 Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included. ARTICLE 3 3.1 The Committee. The Plan shall be administered by the Compensation Committee of the Board, or by any other committee (the “Committee”) appointed by the Board consisting of 3.2 Authority of the Committee. Subject to the provisions of the Plan, the Committee shall have full authority to:
3.3 Delegation. The Committee shall have sole discretion to make all other determinations which may be necessary or advisable for the administration of the Plan. To the extent permitted by law and Rule 16b-3 promulgated under the Exchange Act, the Committee may delegate its authority. Notwithstanding the foregoing, the Committee may not delegate its responsibilities hereunder if such delegation would violate any rules or regulations of NASDAQ or other stock exchange on which the Company’s Common Stock is listed. 3.4 Certain Additional Forfeiture Events. Without limiting the generality of the authority granted to the Committee to specify the terms and conditions of an Award, the Committee may specify in an agreement representing any Award that the Participant’s rights, payments and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture and recoupment upon the occurrence of specified events. Such events may include, but are not limited to, violation of material Company policies, breach of noncompetition or confidentiality agreements that may apply to the Participant, or other conduct of the Participant that is detrimental to the business or reputation of the Company. All Awards (including Awards that have vested or with regard to which restrictions have lapsed) shall be subject to the terms and conditions of the Company’s recoupment policy, as in effect or as may be adopted, restated and/or modified from time to time by the Company in its discretion, and any and all recoupment requirements imposed under applicable laws, rules or regulations or any applicable securities exchange listing standards. Any right of recoupment under the Company’s recoupment policy is in addition to, and not in lieu of, any other legal remedies available to the Company. 3.5 Decisions Binding. All determinations and decisions made by the Committee pursuant to the provisions of the Plan, and all related orders or resolutions of the Board, shall be final, conclusive and binding upon all Persons, including the Company, its shareholders, Employees, Participants, holders of Awards and estates, representatives and beneficiaries of such Persons. 3.6 Section 16 Compliance; Bifurcation of Plan. It is the intention of the Company that the Plan and the administration of the Plan comply in all respects with Section 16(b) of the Exchange Act and the rules and regulations promulgated thereunder. If any Plan provision, or any aspect of the administration of the Plan, is found not to be in compliance with Section 16(b) of the Exchange Act, the provision or administration shall be deemed null and void, and in all events the Plan shall be construed in favor of its meeting the requirements of Rule 16b-3 promulgated under the Exchange Act. Notwithstanding anything in the Plan to the contrary, the Board or the Committee, in its discretion, may bifurcate the Plan so as to restrict, limit or condition the use of any provision of the Plan to Participants who are subject to Section 16 of the Exchange Act without so restricting, limiting or conditioning the Plan with respect to other Participants. A-7 ARTICLE 4 4.1 Number of Shares. Subject to adjustment as provided in Section 4.3, the number of shares of Common Stock reserved for issuance under the Plan is 550,000 shares. The Plan becomes effective on the Effective Date. Shares as to which Options or other Awards granted under the Plan lapse, expire, terminate, are forfeited or are canceled shall again become available for Awards under the Plan. The Company’s 1998 Stock Option Plan and 2006 Stock Ownership Incentive Plan previously expired and the 2015 Stock Ownership Incentive Plan will be terminated on the Effective Date (the 1998 Stock Option Plan, 2006 Stock Ownership Incentive Plan and the 2015 Stock Ownership Incentive Plan are collectively referred to as the “Prior Plans”). Shares issuable pursuant to awards which were granted under the Prior Plans on or before their respective expiration or termination dates will be issued from the remaining shares reserved for issuance under the Prior Plans. The shares of Common Stock reserved for issuance under the Prior Plans in excess of the number of shares as to which options or other benefits are awarded thereunder, and any shares as to which options or other benefits granted under the Prior Plans may lapse, expire, terminate or be canceled, will not be reserved and available for issuance or reissuance under the Plan. In addition, shares of Common Stock delivered or tendered to the Company by a Participant to purchase shares of Common Stock upon the exercise or settlement of an Award or to satisfy tax withholding obligations with respect to the exercise or settlement of an Award (including, without limitation, shares retained from an Award creating the tax obligation) shall not be added back to the number of shares available for the future grant of Awards under the Plan. 4.2 Shares of Restricted Stock Available Under the Plan. Subject to adjustment as provided in Section 4.3, the number of shares of Common Stock which may be the subject of Awards granted in the form of Restricted Stock is limited to 550,000 shares. 4.3 Adjustments in Authorized Shares and Outstanding Awards. In the event of any change in the corporate structure of the Company affecting the Common Stock, including a merger, reorganization, consolidation, recapitalization, reclassification, split-up, spin-off, separation, liquidation, stock dividend, stock split, reverse stock split, extraordinary dividend, share repurchase, share combination, exchange of securities, dividend in kind or any similar corporate event or transaction, the Committee shall substitute or adjust the total number and class of shares of Common Stock or other stock or securities which may be issued under the Plan, and the number, class and price of shares subject to outstanding Awards, as it, in its discretion, determines to be appropriate and equitable to prevent dilution or enlargement of the rights of Participants and to preserve, without exceeding, the value of any outstanding Awards; provided, however, that the number of shares subject to any Award shall always be a whole number. In the case of ISOs, such adjustment shall be made so as not to result in a “modification” within the meaning of Section 424(h) of the Code. ARTICLE 5 All Employees of the Company and its Subsidiaries are eligible to receive Awards under the Plan. In selecting Employees to receive Awards under the Plan, as well as in determining the number of shares subject to, and the other terms and conditions applicable to, each Award, the Committee shall take into consideration such factors as it deems relevant in promoting the purposes of the Plan, including the duties and responsibilities of such persons, their present and potential contribution to the success of the Company and their anticipated number of years of active service or contribution remaining with the Company or a Subsidiary. A-8 ARTICLE 6 6.1 Grant of Options. Subject to the terms and provisions of the Plan, the Committee may grant Options to Participants at any time and from time to time, in the form of options which are intended to qualify as incentive stock options within the meaning of Section 422 of the Code (“ISOs”), Options which are not intended to so qualify (“NQSOs”) or a combination thereof. Notwithstanding the foregoing, ISOs may only be granted to Employees of the Company and its subsidiaries (within the meaning of Section 424(f) of the Code). The maximum number of shares in respect of which Options may be granted to a Participant during any calendar year shall be 100,000 shares (subject to adjustment as provided in Section 4.3). 6.2 Option Agreement. Each Option shall be evidenced by an Option Agreement that shall specify the Option Exercise Price, the duration of the Option, the number of shares to which the Option relates, forfeiture provisions as deemed appropriate by the Committee and such other provisions as the Committee may determine or which are required by the Plan. The Option Agreement shall also specify whether the Option is intended to be an ISO or a NQSO and shall include provisions applicable to the particular type of Option granted. To the extent that the aggregate Fair Market Value of shares of Common Stock with respect to which ISOs are exercisable for the first time by a Participant during any calendar year under the Plan and any other stock option plan of the Company (or any “subsidiary” of the Company within the meaning of Section 424 of the Code) shall exceed $100,000, or such higher value as may be permitted under Section 422 of the Code, such Options shall be treated as NQSOs. For purposes of the foregoing calculation, Fair Market Value shall be determined as of the date on which each such ISO is granted. 6.3 Duration of Options. Subject to the provisions of Section 6.7, each Option shall expire at such time as is determined by the Committee at the time of grant; provided, however, that no Option shall at the time of grant be exercisable later than the tenth anniversary of its grant (the fifth anniversary in the case of an ISO granted to a Ten Percent Shareholder). 6.4 Exercise of Options. Options shall be exercisable at such times and be subject to such restrictions and conditions, including forfeiture provisions, as the Committee shall approve at the time of grant, which need not be the same for each grant or for each Participant; provided, however, that no Option shall be exercisable prior to one year from the date of grant (except as otherwise provided in Sections 6.6, 6.7 and 10.5). Options shall be exercised by delivery to the Company of a written notice of exercise, setting forth the number of shares with respect to which the Option is to be exercised and accompanied by full payment of the Option Exercise Price and all applicable withholding taxes. A-9 6.5 Payment of Option Exercise Price. The Option Exercise Price for shares of Common Stock as to which an Option is exercised shall be paid to the Company in full at the time of exercise either (a) in cash in the form of currency or other cash equivalent acceptable to the Company, (b) by tendering previously acquired Common Stock having a Fair Market Value (at the close of business on the date the Company receives the notice of exercise) equal to the Option Exercise Price, (c) any other reasonable consideration that the Committee may deem appropriate or (d) by a combination of the forms of consideration described in (a), (b) and (c) of this Section. The Committee may permit the cashless exercise of Options as described in Regulation T promulgated by the Federal Reserve Board, subject to applicable securities law restrictions, or by any other means which the Committee determines to be consistent with the Plan’s purpose and applicable law. 6.6 Consequences of a Change in Control. The exercisability of Options outstanding at the time of a Change in Control shall be determined in accordance with Section 10.5 below. 6.7 Termination of Employment. If the Participant’s status as an Employee is terminated for Cause, all then outstanding Options of such Participant, whether or not exercisable, shall terminate immediately. If the Participant’s status as an Employee is terminated for any reason other than for Cause, death, Disability or Retirement, to the extent then outstanding Options of such Participant are exercisable and subject to the provisions of the relevant Option Agreement, such Options may be exercised by such Participant or such Participant’s personal representative at any time prior to the earlier of (a) the expiration date of the Options or (b) the date which is 60 days after the date of such termination of employment. In the event of the Retirement of a Participant, to the extent then outstanding Options of such Participant are exercisable, such Options may be exercised by the Participant (a) in the case of NQSOs, within one year after the date of Retirement and (b) in the case of ISOs, within 90 days after Retirement; provided, however, that no such Options may be exercised on a date subsequent to their expiration. In the event of the death or Disability of a Participant while employed by the Company or a Subsidiary, all then outstanding Options of such Participant shall become fully vested and immediately exercisable, and may be exercised at any time within one year after the date of death or determination of Disability; provided however that no such Options may be exercised on a date subsequent to their expiration. Options may be exercised as provided in this Section (a) in the event of the death of a Participant, by the person or persons to whom rights pass by will or by the laws of descent and distribution, or if appropriate, the legal representative of the decedent’s estate and (b) in the event of the Disability of a Participant, by the Participant, or if the Participant is incapacitated, by the Participant’s legal representative. ARTICLE 7 7.1 Grant of Restricted Stock. Subject to the terms and provisions of the Plan, the Committee may grant shares of Restricted Stock to Participants at any time and from time to time and upon such terms and conditions as it may determine. In its discretion, the Committee may impose (but shall not be required to impose) in the related Restricted Stock Agreement, a requirement that a Participant pay a specified purchase price for each share of Restricted Stock). The maximum number of shares of Restricted Stock that may be granted to a Participant during any calendar year shall be 75,000 shares (subject to adjustment as provided in Section 4.3). A-10 7.2 Restricted Stock Agreement. Each Restricted Stock grant shall be evidenced by a Restricted Stock Agreement which shall specify: (i) the Restriction Period, which shall not be shorter than one year (subject to adjustment or lapse as provided in the Restricted Stock Agreement in the event of termination, except for Cause, and as provided in Section 10.5 hereof); (ii) the number of shares of Restricted Stock granted; and (iii) such other provisions as the Committee may determine or which are required by the Plan. 7.3 Non-Transferability of Restricted Stock. Except as provided in this Article 7 or the applicable Restricted Stock Agreement, shares of Restricted Stock may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated until the end of the applicable Restriction Period as specified in the Restricted Stock Agreement and the satisfaction of any other conditions determined at the time of grant specified in the Restricted Stock Agreement. Except as provided in Section 7.9, however, in no event may any Restricted Stock become vested in a Participant subject to Section 16(b) of the Exchange Act prior to six months following the date of its grant. 7.4 Other Restrictions. The Committee may impose such other restrictions on shares of Restricted Stock as it may deem advisable, including, without limitation, restrictions based upon the achievement of specific performance goals (relating to the Company, a Subsidiary or regional or other business unit of the Company), years of service and/or restrictions under applicable Federal or state securities laws. The Committee may provide that any share of Restricted Stock shall be held (together with a stock power executed in blank by the Participant) in custody by the Company until any or all restrictions thereon shall have lapsed. 7.5 Forfeiture; Early Lapse of Restrictions. The Committee shall determine and set forth in a Participant’s Restricted Stock Agreement such events upon which a Participant’s shares of Restricted Stock (or the proceeds of a sale thereof) shall be forfeitable, which may include, without limitation, the termination of a Participant’s employment, provided that such terms of forfeiture are consistent with this Section 7.5. Upon the death of a Participant, all restrictions shall lapse with respect to all shares of Restricted Stock held by the Participant, provided that the Participant has continued to serve as an employee of the Company on such date of death. In the event of the Disability of the Participant prior to the expiration of the restriction period, the restrictions shall lapse and such shares shall become vested and nonforfeitable on a pro rata basis, with respect to each grant of Restricted Stock, in an amount equal to: (a) the total number of shares of Restricted Stock granted to the Participant, multiplied by (b) a fraction, the numerator of which is the number of full months the Participant is employed by the Company during the restriction period, and the denominator of which is the full restriction period. The remaining shares of Restricted Stock held by a Participant with a Disability shall be forfeited by the Participant. In the event of the Retirement of a Participant, the Committee shall have discretion to review and revise the restrictions applicable to the Participant’s Restricted Stock if the Committee determines such action is appropriate based on the Participant’s service to the Company, performance and other factors deemed relevant by the Committee 7.6 Certificate Legend. In addition to any legends placed on certificates pursuant to Section 7.4, each certificate representing shares of Restricted Stock shall bear the following legend: “The sale or other transfer of the shares represented by this Certificate, whether voluntary, involuntary or by operation of law, is subject to certain restrictions on transfer as set forth in the Community Trust Bancorp, Inc. 2025 Stock Ownership Incentive Plan, and in the related Restricted Stock Agreement. A copy of the Plan and such Restricted Stock Agreement may be obtained from the Secretary of Community Trust Bancorp, Inc.” A-11  7.7 Removal of Restrictions. Except as otherwise provided in this Article 7 or the Restricted Stock Agreement, shares of Restricted Stock shall become freely transferable by the Participant and no longer subject to forfeiture after the last day of the Restriction Period. Once the shares of Restricted Stock are released from their restrictions (including forfeiture provisions), the Participant shall be entitled to have the legend required by Section 7.6 removed from the Participant’s share certificate, which certificate shall thereafter represent freely transferable and nonforfeitable shares of Common Stock free from any and all restrictions under the Plan, subject to the requirements of applicable securities laws and regulations. 7.8 Voting Rights; Dividends and Other Distributions. Unless the Committee exercises its discretion as provided in Section 7.10, during the Restriction Period, Participants holding shares of Restricted Stock may exercise full voting rights, and shall be entitled to receive all dividends and other distributions paid with respect to such Restricted Stock. If any dividends or distributions are paid in Common Stock, such Common Stock shall be subject to the same restrictions as the shares of Restricted Stock with respect to which they were paid. 7.9 Consequences of a Change in Control. The consequences of a Change in Control with respect to outstanding shares of Restricted Stock held by Participants shall be determined in accordance with Section 10.5 hereof. 7.10 Treatment of Dividends. At the time shares of Restricted Stock are granted to a Participant, the Committee may, in its discretion, determine that the payment of dividends, or a specified portion thereof, declared or paid on such shares shall be deferred until the lapse of the restrictions with respect to such shares, such deferred dividends to be held by the Company for the account of the Participant. Deferred dividends shall be (a) paid to the Participant upon the lapse of restrictions on the shares of Restricted Stock as to which the dividends related as soon as practicable following the lapse of restrictions, but no later than 74 days following such lapse of restrictions or (b) forfeited to the Company upon the forfeiture of such shares by the Participant. ARTICLE 8 8.1 Grant of Performance Units. The Committee may, from time to time and upon such terms and conditions as it may determine, grant Performance Units which will become payable to a Participant upon achievement of specified Performance Goals. The maximum payment in cash and in the form of shares that can be made pursuant to Performance Units granted to any one Participant in any calendar year shall be $1.0 million (with shares being valued at Fair Market Value on the date on which the Performance Units are granted). 8.2 Performance Unit Agreement. Each Performance Unit grant shall be evidenced by a Performance Unit Agreement that shall specify the Performance Goals, the Performance Period, the number of Performance Units to which it pertains and whether the Performance Unit will be payable in the form of cash or shares of the Company’s Common Stock. A-12 8.3 Performance Period. The period of performance (“Performance Period”) with respect to each Performance Unit shall be such period of time, which shall not be less than one year, nor more than five years, as determined by the Committee, for the measurement of the extent to which Performance Goals are attained. The Performance Period may commence prior to the date of grant of the Performance Unit to which it relates, provided that at such time the attainment of the Performance Goal is substantially uncertain and not more than 25% of the Performance Period has expired. 8.4 Performance Goals. The goals (“Performance Goals”) that are to be achieved with respect to each Performance Unit shall be those objectives established by the Committee as it deems appropriate, and which shall be based on one or more of the following criteria, which may be expressed in terms of Company-wide objectives or in terms of objectives that relate to the performance of the Participant, or a division, region, department or function within the Company or a Subsidiary on an absolute or relative basis or in comparison to a peer group: net income, growth in net income, earnings per share, growth of earnings per share, total shareholder return, return on equity or return on capital, production of loans, deposits and non-interest income, growth in loans, deposits and non-interest income and loan portfolio performance. Each Performance Unit Agreement shall specify a minimum acceptable level of achievement with respect to the Performance Goals below which no payment will be made and shall set forth a formula for determining the payment to be made if performance is at or above such minimum based upon a range of performance levels relating to the Performance Goals. The Committee shall certify that the Performance Goals for Awards of Performance Units under the Plan have been satisfied prior to the determination and payment of any such incentive in accordance with the Plan. 8.5 Adjustment of Performance Goals. The Committee may adjust Performance Goals and the related minimum acceptable level of achievement if, in the sole judgment of the Committee, events or transactions occur subsequent to the date of grant which are unrelated to the performance of the Participant and which the Committee expects to have a substantial effect on the ability of the Participant to attain the Performance Goals. If a Participant is promoted, demoted or transferred to a Subsidiary or different operating unit of the Company during a Performance Period, then, to the extent that the Committee determines the Performance Goals or Performance Period are no longer appropriate, the Committee may, but shall not be required to, adjust, change or eliminate the Performance Goals or the applicable Performance Period as it deems appropriate in order to make them appropriate and comparable to the initial Performance Goals or Performance Period. 8.6 Termination of Employment. If the employment of a Participant shall terminate prior to the expiration of the Performance Period for any reason other than for death, Disability or Retirement, the Performance Units then held by the Participant shall terminate immediately without payment. In the case of termination of employment by reason of death, Disability or Retirement of a Participant prior to the expiration of the Performance Period, any then outstanding Performance Units of such Participant shall be payable in an amount equal to the maximum amount payable under the Performance Unit multiplied by a percentage equal to the percentage that would have been earned under the terms of the Performance Unit Agreement assuming that the rate at which the Performance Goals have been achieved as of the date of such termination of employment would have continued until the end of the Performance Period; provided, however, that if no maximum amount payable is specified in the Performance Unit Agreement, the amount payable shall be such amount as the Committee shall determine is reasonable. A-13 8.7 Consequences of a Change in Control. The consequences of a Change in Control with respect to any then outstanding Performance Units shall be determined in accordance with Section 10.5. 8.8 Payment of Performance Units. Subject to such terms and conditions as the Committee may impose, and subject to Section 10.5 and the limitations set forth in Section 8.1, Performance Units shall be payable within 74 days following the end of the Performance Period during which the Participant attained at least the minimum acceptable level of achievement under the Performance Goals. ARTICLE 9 9.1 Grant of SARs. Subject to the terms and conditions of the Plan, SARs may be granted to Participants at any time and from time to time upon such terms as shall be determined by the Committee in its discretion. The SAR grant price (“SAR Grant Price”) shall be determined by the Committee and shall be specified in the agreement awarding the SARs. The SAR Grant Price shall equal one hundred percent (100%) of the Fair Market Value of a share of Common Stock on the date of grant. The maximum number of shares with respect to which SARs may be granted to a Participant during any calendar year shall be 100,000 shares (subject to adjustment as provided in Section 4.3). 9.2 SAR Agreement. Each SAR shall be evidenced by an SAR Agreement that shall specify the SAR Grant Price, the term of the SAR and any such other provisions as the Committee shall determine. 9.3 Term of SAR. The term of the SAR granted under the Plan shall be determined by the Committee, in its sole discretion, and except as determined otherwise by the Committee and specified in the SAR Agreement, no SAR shall be exercisable later than the tenth anniversary date of its grant. 9.4 Exercise of SAR. SARs may be exercised upon whatever terms and conditions the Committee, in its sole discretion, shall impose. Unless the applicable SAR Agreement provides otherwise, an SAR shall become cumulatively exercisable as to 25% of the shares of Common Stock covered thereby on each of the first, second, third and fourth anniversaries of the date of grant; provided, however, that an SAR may not be exercisable prior to one year from the date of grant (except as provided in Sections 9.6 and 10.5 hereof). An SAR may be exercised for all or any portion of the shares as to which it is exercisable. The partial exercise of the SAR shall not cause the expiration, termination or cancellation of the remaining portion of the SAR. 9.5 Payment of SAR Amount. Upon the exercise of an SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying: (a) the difference between the Fair Market Value of a share of Common Stock on the date of exercise and the SAR Grant Price; by (b) the number of shares of Common Stock with respect to which the SAR is exercised. At the discretion of the Committee, the payment upon SAR exercise may be made in the form of cash, shares of Common Stock of equivalent value (based on the Fair Market Value on the date of exercise of the SAR), or in some combination thereof. The Committee’s determination regarding the form of SAR payout shall be set forth or reserved for later determination in the SAR Agreement pertaining to the grant of the SAR. A-14 9.6 Termination of Employment. If the Participant’s status as an Employee is terminated for Cause, all then outstanding SARs of such Participant, whether or not exercisable, shall terminate immediately. If the Participant’s status as an Employee is terminated for any reason other than for Cause, death, Disability or Retirement, to the extent then outstanding SARs of such Participant are exercisable and subject to the provisions of the relevant SAR Agreement, such SARs may be exercised by such Participant at any time prior to the earlier of (a) the expiration date of the SARs or (b) the date which is 60 days after the date of such termination of employment. In the event of the Retirement of a Participant, to the extent then outstanding SARs of such Participant are exercisable, such SARs may be exercised by the Participant within one year after the date of Retirement; provided, however, that no such SARs may be exercised on a date subsequent to their expiration. In the event of the death or Disability of a Participant while employed by the Company or a Subsidiary, all then outstanding SARs of such Participant shall become fully vested and immediately exercisable, and may be exercised at any time within one year after the date of death or determination of Disability; provided, however, that no such SARs may be exercised on a date subsequent to their expiration. SARs may be exercised as provided in this Section 9.6 in the event of the death of a Participant, by the person or persons to whom rights pass by will or by the laws of descent and distribution, or if appropriate, the legal representative of the decedent’s estate and in the event of the Disability of a Participant, by the Participant, or if the Participant is incapacitated, by the Participant’s legal representative. 9.7 Consequences of a Change in Control. The consequences of a Change in Control with respect to any SAR outstanding on such date shall be governed by Section 10.5 below. ARTICLE 10 10.1 Termination Date. The Plan shall terminate on the earliest to occur of (a) the tenth anniversary of the Effective Date, (b) the date when all shares of Common Stock available under the Plan shall have been acquired and the payment of all benefits in connection with Awards has been made or (c) such other date as the Board may determine in accordance with Section 10.2. 10.2 Amendment, Modification and Termination. The Board may, at any time, amend, suspend, modify or terminate the Plan provided that (a) no amendment shall be made without shareholder approval if such approval is necessary to satisfy any applicable tax or regulatory law or regulation and the Board determines it is appropriate to seek shareholder approval, and (b) upon or following the occurrence of a Change in Control, no amendment may adversely affect the rights of any Person in connection with an Award previously granted. The Committee may amend the terms of any Award, prospectively or retroactively, but no such amendment shall impair the rights of any Participant without such Participant’s consent. 10.3 Awards Previously Granted. No amendment, modification or termination of the Plan shall in any manner adversely affect any outstanding Award without the written consent of the Participant holding such Award. A-15 10.4 No Repricing. Without shareholder approval, neither the Committee nor the Board shall have any authority, with or without the consent of the affected holders of Awards, to “reprice” an Award after the date of its initial grant with a lower exercise price in substitution for the original exercise price, whether through amendment, cancellation or other means. This paragraph may not be amended, altered or repealed by the Board or the Committee without approval of the shareholders of the Company. 10.5 Effect of a Change in Control. In order to preserve a Participant’s rights under an Award in the event of a Change in Control, the Committee, in its discretion, may, at any time following the date of grant of the Award, take one or both of the following actions: (i) adjust the terms of the Award in a manner determined by the Committee to equitably reflect the Change in Control; or (ii) cause the Award to be assumed, or new rights substituted for the Award, by another entity. If, within the 24-month period beginning on the date of a Change in Control, a Participant’s employment is terminated by the Company (or a successor to the Company) other than for Cause, or the Participant terminates employment with the Company (or a successor of the Company) for Good Reason (“Change in Control Termination Event”) then, notwithstanding other provisions of the Plan: (i) all outstanding Options and SARs shall immediately vest and become fully exercisable and all restrictions related to outstanding Restricted Stock shall fully lapse; and (ii) all Performance Units shall become fully vested and payable as soon as reasonably practicable, but no later than 74 days following the Change in Control Termination Event, in an amount which is equal to the greater of (a) the maximum amount payable under the Performance Unit multiplied by a percentage equal to the percentage that would have been earned under the terms of the Performance Unit Agreement assuming that the rate at which the Performance Goals have been achieved as of the date of such Change in Control Termination Event would have continued until the end of the Performance Period; or (b) the maximum amount payable under the Performance Unit multiplied by the percentage of the Performance Period completed by the Participant at the time of the Change in Control Termination Event; provided, however, that if no maximum amount payable is specified in the Performance Unit Agreement, the amount payable shall be computed based on the foregoing clause (a). To the extent that this provision causes Incentive Stock Options to exceed the dollar limitations set forth in Code Section 422(d), the excess Options shall be deemed to be Non-Qualified Stock Options. “Good Reason” for purposes of this Section 10.5 shall mean any of the following occurs without Participant’s prior written consent: (a) a material diminution in the total annual compensation that Participant is entitled to receive or a material diminution in the benefits the Participant is eligible to receive; or (b) a material change in the geographic location at which the Participant must perform services for the Company. A-16 ARTICLE 11 11.1 Non-Transferability. A Participant’s rights under this Plan may not be assigned, pledged or otherwise transferred other than by will or the laws of descent and distribution, except that upon a Participant’s death, the Participant’s rights to payment pursuant to an Award may be transferred to a beneficiary designated in accordance with Section 11.2. Notwithstanding anything herein to the contrary, in the case of NQSOs, the Committee may, in its sole discretion, by appropriate provisions in the Participant’s Option Agreement, permit the Participant to transfer all or a portion of the Option, without consideration, to (a) the Participant’s spouse or lineal descendants (“Family Members”), (b) a trust for the exclusive benefit of Family Members, (c) a charitable remainder trust of which the Participant and/or Family Members are the exclusive beneficiaries (other than the charitable beneficiary), or (d) a partnership or a limited liability company in which the Participant and Family Members are the sole partners or members, as applicable. In the event that any Option is transferred by a Participant in accordance with the provisions of the immediately preceding sentence, then subsequent transfers of the Option by the transferee shall be prohibited. For purposes of the Option Agreement and the Plan, the term “Optionee” shall be deemed to refer to the transferee wherever applicable, and the provisions of Section 6.7 regarding termination of employment shall refer to the Participant, not the transferee, but the transferee shall be permitted to exercise the Option during the period provided for in Section 6.7 and the Participant’s Option Agreement following the Participant’s termination of employment. 11.2 Designation of Beneficiary. A Participant’s “beneficiary” is the person or persons entitled to receive payments or other benefits or exercise rights that are available under the Plan in the event of the Participant’s death. A Participant may designate a beneficiary or change a previously named beneficiary designation at such times as are prescribed by the Committee by using forms and following procedures approved or accepted by the Committee for that purpose. If no beneficiary is designated by the Participant, at the Participant’s death the beneficiary shall be the Participant’s estate. From time to time, the Committee may in its discretion modify the requirements for beneficiary designations or institute additional requirements for beneficiary designation. ARTICLE 12 12.1 No Employment Rights. Neither the Plan, nor any action taken under the Plan, shall be construed as giving any person the right to become a Participant, nor shall participation in, or any grant of an Award under, the Plan be construed as giving a Participant any right with respect to continuance of employment with the Company. The Company expressly reserves the right to terminate, whether by dismissal, discharge or otherwise, a Participant’s employment at any time, with or without Cause, except as may otherwise be expressly provided by any written agreement between the Company and the Participant. 12.2 Unfunded Plan. Participants shall have no right, title or interest whatsoever in or to any investments that the Company may make to aid it in meeting its obligations under the Plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Participant, beneficiary, legal representative or any other Person. Awards shall be general, unsecured obligations of the Company. All payments to be made hereunder shall be paid from the general funds of the Company and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as expressly set forth in the Plan. The Plan is not intended to be subject to ERISA. A-17 ARTICLE 13 13.1 Tax Withholding. A Participant shall remit to the Company an amount sufficient to satisfy Federal, state and local taxes (including the Participant’s FICA obligation) required by law to be withheld with respect to any grant, exercise, payment or lapse of restrictions made under, or occurring as a result of, the Plan. 13.2 Share Withholding. If the Company has a withholding obligation upon the issuance of Common Stock under the Plan, a Participant may elect to satisfy the withholding requirement, in whole or in part, by having the Company withhold, or transferring to the Company, shares of Common Stock having a Fair Market Value on the date the withholding tax is to be determined equal to the amount required to be withheld under applicable law. Notwithstanding the foregoing, the Committee may, by the adoption of rules or otherwise, modify the provisions of this Section 13.2 or impose such other restrictions or limitations on such elections as may be necessary to insure that such elections will be exempt transactions under Section 16(b) of the Exchange Act. 13.3 Special Provisions Related to Code Section 409A. (a) General. It is intended that the payments and benefits provided under the Plan and any Award shall either be exempt from the application of, or comply with, the requirements of Code Section 409A. The Plan and agreements evidencing Awards shall be construed in a manner that effects such intent. Nevertheless, the tax treatment of the benefits provided under the Plan or any Award is not warranted or guaranteed. Neither the Company, its affiliates, nor their respective directors, officers or employees (other than in the capacity as a Participant) shall be liable for any taxes, interest, penalties or other monetary amounts owed by any Participant or other taxpayer as a result of the Plan or any Award. (b) Definitional Restrictions. Notwithstanding anything in the Plan or in any agreement evidencing an Award to the contrary, to the extent that any amount or benefit that would constitute nonexempt “deferred compensation” for purposes of Code Section 409A would otherwise be payable or distributable, or a different form of payment (e.g., lump sum or installment) would be effected under the Plan or an Award by reason of the occurrence of a Change in Control, or the Participant’s disability or separation from service, such amount or benefit will not be payable or distributable to the Participant, and/or such different form of payment will not be effected, by reason of such circumstance unless the circumstances giving rise to such Change in Control, disability or separation from service meet any description or definition of “change in control”, “disability” or “separation from service” as the case may be, in Code Section 409A and applicable regulations (without giving effect to any elective provisions that may be available under such definition). This provision does not prohibit the vesting of any Award upon a Change in Control, disability or separation from service, however defined. If this provision prevents the payment or distribution of any amount or benefit, such payment or distribution shall be made on the next earliest payment or distribution date or event specified in the agreement evidencing the Award that is permissible under Code Section 409A. If this provision prevents the application of a different form of payment of any amount or benefit, such payment shall be made in the same form as would have applied absent such designated event or circumstance. A-18 (c) Six-Month Delay in Certain Circumstances. Notwithstanding anything in the Plan or in any Award to the contrary, if any amount or benefit that would constitute nonexempt “deferred compensation” for purposes of Code Section 409A would otherwise be payable or distributable under the Plan or any Award by reason of a Participant’s separation from service during a period in which the Participant is a Specified Employee (as defined below), then, subject to any permissible acceleration of payment by the Committee under Treasury Regulation Section 1.409A-3(j)(4)(ii) (domestic relations order), (j)(4)(iii) (conflicts of interest) or (j)(4)(vi) (payment of employment taxes), as amended from time to time or under regulations adopted in substitution therefor: (i) the amount of such nonexempt deferred compensation that would otherwise be payable during the six-month period immediately following the Participant’s separation from service will be accumulated through and paid or provided on the first day of the seventh month following the Participant’s separation from service (or, if the Participant dies during such period, within 30 days after the Participant’s death) (in either case, the “Required Delay Period”); and (ii) the normal payment or distribution schedule for any remaining payments or distributions will resume at the end of the Required Delay Period. For purposes of this Plan, the term “Specified Employee” has the meaning given such term in Code Section 409A and the regulations thereunder, provided, however, that as permitted in such regulations, the Company’s Specified Employees and its application of the six-month delay rule of Code Section 409A(a)(2)(B)(i) shall be determined in accordance with rules adopted by the Board or any committee of the Board, which shall be applied consistently with respect to any nonqualified deferred compensation arrangements of the Company, including the Plan. ARTICLE 14 No member of the Board or the Committee, nor any officer, Employee or agent acting on behalf of the Board or the Committee, shall be personally liable for any action, omission, determination or interpretation taken or made with respect to the Plan, and all members of the Board, the Committee and each officer, Employee and agent of the Company acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action, omission, determination or interpretation against any cost, expense (including counsel fees) or liability (including any sum paid in settlement of a claim with the approval of the Committee). A-19 ARTICLE 15 All obligations of the Company with respect to Awards granted under the Plan shall be binding on any successor to the Company, whether the existence of such successor is a result of a direct or indirect merger, consolidation, purchase of all or substantially all of the business or assets of the Company, or otherwise. ARTICLE 16 16.1 Governing Law. The Plan shall be governed by, and construed in accordance with, the laws of the Commonwealth of Kentucky without regard to its conflict of laws rules; provided, however, that with respect to ISOs, the Plan and all agreements under the Plan shall be construed so that they qualify as incentive stock options within the meaning of Section 422 of the Code. 16.2 Requirements of Law. The granting of Awards and the issuance of shares of Common Stock under the Plan shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or exchanges as may be required. The Company shall receive the consideration required by law for the issuance of Awards under the Plan. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance of shares of Common Stock hereunder, shall relieve the Company of any liability in respect of the failure to issue such shares of Common Stock as to which the requisite authority shall not have been obtained. The certificates of shares of Common Stock issued under the Plan may include any legend that the Committee deems appropriate to reflect any restrictions on transfer under the terms of the Plan or applicable laws and regulations. A-20 Attachment A
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