COMMUNITY TRUST BANCORP INC /KY/CTBI
COMMUNITY TRUST BANCORP INC /KY/ Income Taxes Disclosure
17. Income Taxes
The components of the provision for income taxes are as follows:
|
(in thousands)
|
2025
|
2024
|
2023
|
|||||||||
|
Current federal income tax expense
|
$
|
24,800
|
$
|
19,746
|
$
|
14,954
|
||||||
|
Current state income tax expense
|
7,178
|
5,859
|
4,901
|
|||||||||
|
Deferred federal income tax expense (benefit)
|
(1,725
|
)
|
(1,452
|
)
|
382
|
|||||||
|
Deferred state income tax expense (benefit)
|
(1,219 | ) | (280 | ) | 327 | |||||||
|
Total income tax expense
|
$
|
29,034
|
$
|
23,873
|
$
|
20,564
|
||||||
A reconciliation of income tax expense at the statutory rate to
our actual income tax expense for 2025 is shown below:
|
(in thousands)
|
2025
|
|||||||
|
Computed at the statutory rate
|
$
|
26,689
|
21.00
|
%
|
||||
|
State income taxes, net of federal benefit (1)
|
4,840
|
3.81
|
|
|||||
|
Low-income housing and historic tax credits
|
(1,074
|
)
|
(0.85
|
)
|
||||
|
Work opportunity tax credits
|
(88
|
)
|
(0.07
|
)
|
||||
|
State tax credits (1)
|
(132
|
)
|
(0.10
|
)
|
||||
|
Nontaxable and nondeductible items
|
(592
|
)
|
(0.47
|
)
|
||||
|
Other
|
(609
|
)
|
(0.48
|
)
|
||||
|
Total
|
$
|
29,034
|
22.84
|
%
|
||||
|
(1)
|
Commonwealth of Kentucky makes up the majority (more than 50%) of total state taxes and state tax credits.
|
The following table presents income taxes paid (net of
refunds received):
|
(in thousands)
|
2025
|
|||
|
Federal
|
$
|
22,000
|
||
|
State and local
|
||||
|
Kentucky
|
5,225
|
|||
|
Other
|
1,281
|
|||
|
Income taxes paid
|
$
|
28,506
|
||
A
reconciliation of income tax expense at the statutory rate to our actual income tax expense for the years 2024 and 2023 is shown below:
|
(in thousands)
|
2024
|
2023
|
||||||||||||||
|
Computed at the statutory rate
|
$
|
22,404
|
21.00
|
%
|
$
|
20,699
|
21.00
|
%
|
||||||||
|
Adjustments resulting from:
|
||||||||||||||||
|
Tax-exempt interest
|
(353
|
)
|
(0.33
|
)
|
(637
|
)
|
(0.65
|
)
|
||||||||
|
Housing and new markets credits
|
(1,292
|
)
|
(1.21
|
)
|
(3,205
|
)
|
(3.25
|
)
|
||||||||
|
Bank owned life insurance
|
(831
|
)
|
(0.78
|
)
|
(496
|
)
|
(0.50
|
)
|
||||||||
|
ESOP dividend deduction
|
(276
|
)
|
(0.26
|
)
|
(259
|
)
|
(0.26
|
)
|
||||||||
|
Stock option exercises and
restricted stock vesting
|
(73
|
)
|
(0.07
|
)
|
(8
|
)
|
(0.01
|
)
|
||||||||
|
State income taxes
|
4,407
|
4.13
|
4,131
|
4.19
|
||||||||||||
|
Split dollar life insurance
|
58
|
0.06
|
126
|
0.13
|
||||||||||||
|
Other
|
(171
|
)
|
(0.16
|
)
|
213
|
0.21
|
||||||||||
|
Total
|
$
|
23,873
|
22.38
|
%
|
$
|
20,564
|
20.86
|
%
|
||||||||
The components of the net deferred tax asset as of December 31,
2025 and 2024 are as follows:
|
(in thousands)
|
December 31
2025
|
December 31
2024
|
||||||
|
Deferred tax assets:
|
||||||||
|
Allowance for credit losses
|
$
|
15,003
|
$
|
13,715
|
||||
|
Interest on nonaccrual loans
|
450
|
451
|
||||||
|
Accrued expenses
|
2,995
|
2,150
|
||||||
|
Unrealized losses on AFS securities
|
21,512 | 32,665 | ||||||
|
Allowance for other real estate owned
|
22
|
22
|
||||||
|
Lease liabilities
|
4,093
|
3,790
|
||||||
| Limited partnership investments |
4 | 78 | ||||||
|
Other
|
1,425
|
937
|
||||||
|
Total deferred tax assets
|
45,504
|
53,808
|
||||||
|
Deferred tax liabilities:
|
||||||||
|
Depreciation and amortization
|
(15,166
|
)
|
(15,207
|
)
|
||||
|
FHLB stock dividends
|
(1
|
)
|
(12
|
)
|
||||
|
Loan fee income
|
(1,813
|
)
|
(1,888
|
)
|
||||
|
Mortgage servicing rights
|
(1,683
|
)
|
(1,836
|
)
|
||||
|
Right of use assets
|
(3,848
|
)
|
(3,589
|
)
|
||||
|
Other
|
(2,137
|
)
|
(2,211
|
)
|
||||
|
Total deferred tax liabilities
|
(24,648
|
)
|
(24,743
|
)
|
||||
|
Net deferred tax asset
|
$
|
20,856
|
$
|
29,065
|
||||
Current income tax expense reflects taxes to be paid or refunded
for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. CTBI determines deferred income taxes using the asset and liability (or balance sheet) method. Under this method,
the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur. Deferred
income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or
all of a deferred tax asset will not be realized.
On January 1, 2024, CTBI adopted ASU No. 2023-02, Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax
Credit Structures Using the Proportional Amortization Method, which is intended to improve the accounting and disclosures for investments in tax credit structures.
As a result of the implementation of this ASU, we recorded a cumulative effect impact that reduced retained earnings by $2.0 million at January 1, 2024. Additionally, we had a decrease in amortization expense, recognized in , that totaled $2.6 million for the year ended December 31, 2023. The amortization expense included in was $2.9 million and $3.0 million for the years ended December 31, 2025 and 2024, respectively. The amount of income tax
credits and other tax benefits recognized was $4.0 million and $4.3 million for the years ended December 31, 2025 and 2024, respectively. The amortization, income tax credits, and other tax benefits recognized were included in on the consolidated statement of income and in net income on the consolidated statement of cash flows. We had $19.8 million and $16.1
million in tax investments at December 31, 2025 and 2024, respectively, included in on the consolidated balance sheet.
There were no non-income tax related activities or other returns received that were recognized outside of income tax expense and the consolidated statement of income and the consolidated statement of cash flows. There were also no significant
modifications or events that resulted in a change in the nature of the investment or change in the relationship with the underlying projects. No
investment income or loss was included in pre-tax income, and no impairment was recognized during the quarter or year to date resulting
from the forfeiture or ineligibility of income tax credits or other circumstances. At December 31, 2025, there was $6.1 million in
unfunded commitments. Of the amount outstanding, the contribution schedule was as follows:
|
(in thousands)
Amount due in:
|
Unfunded Commitments
|
|||
|
2026
|
$
|
1,008
|
||
|
2027
|
2,405
|
|||
|
2028
|
1,610
|
|||
|
2029
|
369
|
|||
|
2030
|
186
|
|||
|
After
|
537
|
|||
Uncertain
tax positions are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms
examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of
tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the
more-likely-than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment. CTBI has no uncertain tax positions.
With
a few exceptions, CTBI is no longer subject to U.S. federal tax examinations by tax authorities for years before 2022, and state and local income tax examinations by tax authorities for years before 2021. For federal tax purposes, CTBI recognizes
interest and penalties on income taxes as a component of income tax expense. CTBI files consolidated income tax returns with our subsidiaries.
The One Big Beautiful Bill Act, enacted July 4, 2025, introduces new regulatory, compliance, and tax provisions affecting financial institutions. CTBI has assessed these changes and determined that they will not have a material impact on our
operations, products, or financial statements.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Feb 28, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Feb 28, 2020 | |
| 2018 | Feb 28, 2019 | |
| 2017 | Feb 28, 2018 | |
| 2016 | Mar 15, 2017 | |
| 2015 | Mar 14, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.