AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 26, 1997
REGISTRATION STATEMENT NO. 333-As filed with the Securities and Exchange Commission on , 2002
Registration No.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CMMUNITYOTRUST BANCORP, INC. KENTUCKY 61-0979818
CTBI PREFERRED CAPITAL DELAWARE 31-1512911
TRUST (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
(EXACT NAME OFREGISTRANT AS SPECIFIED IN ITS CHARTER)
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
P.O. BOX 2947
208 NORTH MAYO TRAIL
PIKEVILLE, KENTUCKY-----------------
COMMUNITY TRUST BANCORP, INC. CTBI PREFERRED CAPITAL TRUST II
(Exact name of Co-Registrant as specified in its charter) (Exact name of Co-Registrant as specified in its charter)
Kentucky Delaware
(State or other jurisdiction of incorporation or organization) (State or other jurisdiction of incorporation or organization)
61-0979818 51-6523259
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
346 North Mayo Trail, Pikeville, Kentucky 41501, (606) 432-1414
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------
BURLIN COLEMAN COPY TO: COPY TO:
208 NORTH MAYO TRAIL NICHOLAS(Address, including zip code, and telephone number, including area code, of
Co-Registrants' principal executive offices)
-----------------
Jean R. GLANCY, ESQ. STEPHEN M. WISEMAN,
PIKEVILLE, KENTUCKYHale
Vice Chairman, President and Chief Executive Officer
346 North Mayo Trail, Pikeville, Kentucky 41501, ESQ.
GREENEBAUM DOLL & MCDONALD PLLC (606) 432-1414
1400 VINE CENTER TOWER KING(Name, Address, including zip code, and telephone number, including area code,
of agent for service for Co-Registrants)
-----------------
Copies to:
Ivan M. Diamond, Esq. Fred A. Summer, Esq.
Greenebaum Doll & SPALDING
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE 120 WEST 45TH STREET
LEXINGTON, KENTUCKY
NUMBER, INCLUDING AREA 40507 NEW YORK, NY 10036-
CODE, OF AGENT FOR (606) 231-8500 4003
SERVICE) (212) 556-2100
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:McDonald PLLC Squire, Sanders & Dempsey L.L.P.
3300 National City Tower 41 South High Street
Louisville, Kentucky 40202 Columbus, Ohio 43215
(502) 589-4200 (614) 365-2743
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
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If the only securities being registered on this formForm are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this formForm are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this formForm is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this formForm is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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PROPOSED
MAXIMUM PROPOSED
AMOUNT AGGREGATE MAXIMUM AMOUNT OF
TO BE PRICE AGGREGATE REGISTRATION
TITLE OF SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE (2)Amount to Proposed maximum Proposed maximum Amount of
Title of each class of be offering price aggregate registration
securities to be registered registered per unit offering price fee (1)
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% Cumulative Trust Preferred Securities of
CTBI Preferred Capital Trust Preferred
Securities (1)................................. 1,380,000II................ 1,000,000 $25.00 $34,500,000 $10,454.55$25,000,000 $5,975
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% Subordinated Debentures due 2032 of
Community Trust Bancorp, Inc. Securities (2)(3) None
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Guarantee of Preferred Securities (2)(3).. (2) -- -- --(4)....... None
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Community Trust Bancorp, Inc. Subordinated
Debentures (2)(3).............................. (2) -- -- --
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(1) Includes 180,000 sharesThe registration fee is calculated in accordance with Rule 457(a), (i) and
(n) of the Securities Act of 1933.
(2) This Registration Statement is deemed to cover the % Subordinated
Debentures due 2032 of Community Trust Bancorp, Inc., the rights of holders
of the % Subordinated Debentures of Community Trust Bancorp, Inc. under
the Indenture, and the rights of holders of the Preferred Securities which may be issuedunder
the Trust Agreement, the Guarantee and the Expense Agreement entered into
by CTBI Preferred CapitalCommunity Trust to cover underwriters' over-allotments.
(2)Bancorp, Inc.
(3) The % Subordinated Debentures will be purchased by CTBI Preferred Capital
Trust II with the proceeds offrom the sale of the Preferred Securities. Such
securities may later be distributed for no additional consideration to the
holders of the Preferred Securities of CTBI Preferred Capital Trust II upon
its dissolution and the distribution of its assets.
(4) No separate consideration will be received for the issuanceGuarantee.
-----------------
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Subordinated DebenturesSecurities Act of 1933 or until the Guarantee. In accordance with Rule 457 no
separate fee is payable for the Community Trust Bancorp, Inc. Subordinated
Debentures or Guarantee.
(3) This Registration Statement is deemedshall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to cover the Subordinated Debentures
and the Guarantee.
------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SECTION 8(A) MAY DETERMINE.said Section 8(a), may determine.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS
SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THISCOMPLETION. DATED JANUARY 11, 2002
PROSPECTUS
SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 26, 1997
PROSPECTUS
1,200,000 PREFERRED SECURITIES1,000,000 Preferred Securities
CTBI PREFERRED CAPITAL TRUST % CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
LOGO
---------
TheII
% Cumulative Trust Preferred Securities
("(Liquidation Amount $25 Per Preferred Securities")
offered hereby represent preferred undivided beneficial interestsSecurity)
Fully, irrevocably and unconditionally guaranteed
on a subordinated basis, as described in this prospectus, by
[LOGO] Community Trust Bancorp, Inc.
CTBI Preferred Capital Trust a trust created under the lawsII is offering 1,000,000 preferred securities
at $25 per security. CTBI Preferred Capital Trust II will purchase %
subordinated debentures of the State of
Delaware ("CTBI Trust"). Community Trust Bancorp, Inc., a Kentucky corporation
("Company"), will own all using the proceeds
from its offering of the beneficial interests represented by commonpreferred securities. The subordinated debentures have
the same payment terms as the preferred securities.
We have applied to have the preferred securities approved for listing on the
American Stock Exchange under the symbol "BPF". Trading is expected to commence
on or prior to delivery of CTBI Trust ("Common Securities"). State Street Bank and Trust
Company is the Property Trustee of CTBI Trust. CTBI Trust exists forpreferred securities.
-----------------
Investing in the sole
purpose of issuingpreferred securities involves risks. See "Risk Factors"
beginning on page 10.
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Neither the Preferred Securities and Common SecuritiesExchange Commission nor any state securities
commission has approved or disapproved of those securities or determined that
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
The preferred securities are not savings accounts, deposits or obligations
of any bank and investing
the proceeds thereof in an equivalent amount of % Subordinated Debentures
("Subordinated Debentures") to be issuedare not insured by the Company.
(Continued on Next Page)
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR CERTAIN INFORMATION RELEVANT TO AN
INVESTMENT IN THE PREFERRED SECURITIES, INCLUDING THE PERIOD AND CIRCUMSTANCES
DURING AND UNDER WHICH PAYMENTS OF DISTRIBUTIONS ON THE PREFERRED SECURITIES
MAY BE DEFERRED AND THE RELATED UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
OF SUCH DEFERRAL.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, OR ANY STATE SECURITY COMMISSION, NOR HAS THE SECURITIES
EXCHANGE COMMISSION, OR ANY STATE SECURITY COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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THESE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS OR SAVINGS ACCOUNTS AND
ARE NOT INSURED BY THE FEDERAL GOVERNMENT OR ANY OTHER GOVERNMENTAL
AGENCY OR INSTRUMENTALITY.
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- --------------------------------------------------------------------------------Bank Insurance Fund of the Federal
Deposit Insurance Corporation or any other governmental agency.
UNDERWRITING
DISCOUNTS
PRICE TO AND COMMISSIONS PROCEEDS TO
THE PUBLIC (1)(2)(3) TRUST (1)(2)
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Security Total
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PerPublic offering price.................................................. $25.00 $25,000,000
Underwriting commission to be paid by Community Trust Bancorp, Inc. (1) $ $
Proceeds, before expenses, to CTBI Preferred Security................Capital Trust II.......... $25.00 (2) $25.00
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Total (4)............................. $30,000,000 (2) $30,000,000$25,000,000
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(1) The Company and CTBI Trust have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(2)This is a firm commitment underwriting. Because the proceeds of the sale of
the Preferred Securitiespreferred securities will be invested in the Subordinated Debentures, the Company hassubordinated debentures,
we have agreed to pay the Underwriters,underwriters as compensation (the "Underwriters' Compensation") for arranging the
investment therein of suchthe proceeds of this offering in the debentures, $ per
Preferred
Securitypreferred security (or, in the aggregate, $ ).
See "Underwriting."
(3) Expenses ofThe underwriters expect to deliver the offering to be paid by the Company are estimated to be
approximately $175,000.
(4) CTBI Trust has granted the underwriters an option for 30 days to purchase
up to an additional 180,000 shares of Preferred Securities on the same
terms set forth above solely to cover over-allotments, if any. If such
option is exercised in full, the total Price to the Public and Proceeds to
CTBI Trust will be $34,500,000 and the aggregate underwriters compensation
will be $ . See "Underwriting."
---------
The Preferred Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that the Preferred Securities will be ready for deliverypreferred securities in book-entry
form only through the facilities of The Depository Trust Company on or about , 1997, against payment therefor2002.
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J.J.B. Hilliard, W.L. Lyons, Inc. Ferris, Baker Watts
Incorporated
The date of this Prospectus is , 2002
The information in immediately-available funds.
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MORGAN KEEGANthis prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
[LOGO] COMMUNITY TRUST(R)
BANCORP, INC.
[MAP]
Tug Valley Market
South Williamson
Williamson, W.Va.
Ashland Market
Ashland Mt. Sterling Market Versailles Market
Russell Hamlin Market Mt. Sterling Frankfort
Alum Creek, W.Va. Versailles
Campbellsville Market Ft. Gay, W.Va. Pikeville Market
Campbellsville Hamlin, W.Va. Elkhorn City Whitesburg Market
Columbia Marrowbone Isom
Greensburg Harrodsburg Market Mouthcard Jenkins
Jamestown Harrodsburg Phelps Neon
Lebanon Pikeville Whitesburg
Somerset Hazard Market Virgie
Hazard Williamsburg Market
Flemingsburg Market Richmond Market Corbin
Ewing Lexington Market Berea London
Flemingsburg Lexington Richmond Williamsburg
Floyd/Knott Co. Market Middlesboro Market Summersville Market Winchester Market
Hindman Middlesboro Summersbille, W.Va. Winchester
Prestonsburg Pineville
building communities . . . built on trust(R)
TABLE OF CONTENTS
Page
----
Summary...................................................................... 1
Risk Factors................................................................. 10
Special Note Regarding Forward-Looking Statements............................ 17
Use of Proceeds.............................................................. 18
Capitalization............................................................... 18
Accounting Treatment......................................................... 19
Regulatory Treatment......................................................... 20
Management................................................................... 20
Description of the Trust..................................................... 22
Description of the Preferred Securities...................................... 23
Description of the Debentures................................................ 36
Book-Entry Issuance.......................................................... 44
Description of the Guarantee................................................. 45
Relationship Among the Preferred Securities, the Debentures and the Guarantee 48
Federal Income Tax Consequences.............................................. 49
ERISA Considerations......................................................... 53
Underwriting................................................................. 54
Legal Matters................................................................ 56
Experts...................................................................... 56
Where You Can Find More Information.......................................... 56
Documents Incorporated by Reference.......................................... 57
About this Prospectus:
. You should only rely on the information contained or incorporated by
reference in this prospectus. We have not, and the underwriters have not,
authorized any person to provide you with different information. If anyone
provides you with different or inconsistent information, you should not
rely on it.
. We are not, and our underwriters are not, making an offer to sell these
securities in any jurisdiction where the offer or sale is not permitted.
. You should assume that the information appearing in this prospectus is
accurate as of the date on the front cover of this prospectus only.
. This prospectus does not constitute an offer to sell, or the solicitation
of any offer to buy, any securities other than the securities to which it
relates.
SUMMARY
This summary highlights information contained elsewhere in, or incorporated
by reference into, this prospectus. Because this is a summary, it may not
contain all of the information that is important to you. Therefore, you should
also read the more detailed information set forth in this prospectus, our
financial statements and the other information that is incorporated by
reference in this prospectus, before making a decision to invest in the
preferred securities. The words "we," "our," and "us" refer to Community Trust
Bancorp, Inc. and its wholly-owned subsidiaries, unless we indicate otherwise.
Community Trust Bancorp, Inc.
Overview:
We are a bank holding company headquartered in Pikeville, Kentucky that
provides commercial and retail banking services in eastern, central and south
central Kentucky and southern West Virginia. Our principal bank operating
subsidiary is Community Trust Bank, N.A, which, along with recently acquired
Citizens National Bank & COMPANY, INC. J.J.B. HILLIARD, W.L. LYONS, INC.
Trust of Hazard, operates a total of 74 banking
locations in 29 counties. Trust Company of Kentucky, N.A. is our other
principal operating subsidiary, which is headquartered in Lexington, Kentucky
and offers a wide range of trust and investment services, including brokerage
services. At September 30, 2001, we had total assets of $2.4 billion, total
deposits of $2.1 billion and total shareholders' equity of $190.8 million, and
Trust Company of Kentucky had approximately $822 million of total assets under
management. We will become the largest bank holding company headquartered in
Kentucky assuming the completion of the recently announced BB&T Corporation's
acquisition of Area Bancshares Corporation. Our common stock is listed on the
Nasdaq National Market under the symbol "CTBI."
We attribute our successful operations, growth and profitability to the
following:
. We began operations in 1903 in Pikeville, Kentucky as Pikeville National
Bank. In 1987, we began an acquisition program to diversify away from the
local area's reliance on the coal industry. We have since acquired 14
banks and 17 branches operating in 5 independent markets throughout the
region and changed the name of our primary bank subsidiary to Community
Trust Bank to properly reflect the different communities we serve. These
acquisitions have been consistent with our plan to expand our footprint by
adding banking locations within contiguous markets to increase in-market
synergies and operational efficiencies.
. We emphasize customer service and pursue long-term relationships with both
our commercial and retail customers. With a solid reputation and broad
range of financial products, we continue to capitalize on our tradition of
attention to customer service. We believe this attention positively
differentiates us from our larger regional bank competitors.
. One of the core strengths of our company is our experienced management
team. Combined, our seven member executive management team has over 180
years of banking experience, with 104 of those years being with Community
Trust Bank.
. As a result of internal growth and acquisitions, from 1996 through 2000,
our average annual loan growth rate was 8.8% and our average annual
deposit growth rate was 6.5%.
. From 1996 through 2000, our average annual book value growth rate was 7.2%
and our average annual dividends per share growth rate was 8.5%.
1
Our Business Strategy:
Organizational structure promoting decentralized-decision making and
"community bank" philosophy. We believe that our "community bank" operating
philosophy provides us with a competitive advantage in the communities we
serve. We divide our operations into four geographic regions headed by regional
presidents and divide the regions into markets headed by market presidents.
Subject to standardized policies and procedures with centralized monitoring and
established controls, we delegate to our local market presidents
decision-making authority with regard to each of the following functions:
. loan and deposit pricing;
. loan approval;
. staff employment;
. sales leadership roles;
. marketing budget and charitable contributions; and
. customer service.
Centralized operational and support functions to improve customer service,
increase efficiency and effectively manage credit risk. Unlike many community
banks, we have the asset size and employee depth required to provide products
and services that are competitive with the regional and super regional
financial service providers. Technology has enabled us to consolidate and
centralize our operations, improve our consolidated credit risk management
capabilities and offer a wider range of products and services. Most
importantly, we have improved our ability to provide superior, personal
service, the trademark of independent community banks, by significantly
decreasing local market operational responsibilities.
Commercial banking strategic focus on small and medium-sized, locally-owned
and operated businesses. Our target commercial customers are typically
locally-owned and operated businesses with borrowing needs of less than $1
million. However, with a legal lending limit in excess of $19 million at
September 30, 2001, we are often able to compete effectively for larger credits
with our regional bank peers. Our product line includes:
. secured and unsecured lending;
. cash management services;
. letters of credit; and
. specialized lending products, such as asset based financing, USDA and SBA
programs, and equipment lease financing.
At September 30, 2001, the total outstanding principal balance of our
commercial loan portfolio was $862 million, representing approximately 50% of
our total loan portfolio.
Full service branch network and consumer banking. We have 74 banking
locations in 29 counties. Consistent with our "community bank" philosophy, we
are accessible to our customers via the branch network. In addition to normal
banking transaction services, our branch network provides customer access to
consumer lenders, mortgage lenders, commercial lenders, trust and investment
services and safe deposit boxes. To meet the demand for alternative delivery
channels, we also offer:
. internet banking;
. an ATM network;
. debit cards; and
. 24-hour voice response telephone bank.
2
Efficient and professional management of trust and investment services. Our
trust subsidiary provides trust and investment management services to clients
throughout the bank's footprint. As a result of our significant growth through
acquisitions, in 1995 we began implementing a program to reorganize,
consolidate and standardize our trust and investment services operations. This
program was successfully completed in 1997. At September 30, 2001, assets under
management were $822 million. This subsidiary focuses primarily on investment
management through personal trust and retirement accounts, placing an emphasis
on internal investment expertise and high levels of customer contact. Much of
our business development opportunities are the result of branch referrals.
During the second quarter of 2001, we completed the transition of our joint
venture brokerage operations to an in-house line of business.
Our Growth Strategy:
We believe that we will continue to have opportunities to grow profitably.
Our growth strategy is to maximize the profitability of our existing branches
through the employment of our "community bank" operating philosophy and our
centralized operational support and management. We also feel that it is
important to grow and expand our financial products, services and delivery
channels to meet changing customer needs. In addition, we have developed, and
expect to continue developing, a sales culture within Community Trust Bank
designed to reward our employees for referring business through various
incentive programs. As a result of the consolidation of our banks into our lead
bank, Community Trust Bank, and our existing ample operational capacity for
growth, we believe we are well-positioned to further improve our operating
efficiencies.
We believe that Kentucky's recent legislation permitting statewide branching
increases our opportunities for geographic expansion and growth. Our plan is to
expand our footprint by adding banking locations within contiguous markets to
increase in-market synergies and operational efficiencies. Opportunities to
enter new markets within and contiguous to our geographical footprint include:
. de novo branching;
. branch acquisitions; and
. bank acquisitions.
We believe that we are well-positioned within our markets to offer acquisition
targets the opportunity to partner with a bank that shares their community bank
philosophy and has an operational platform that includes:
. a more diverse selection of financial products and services; and
. more efficient and sophisticated back office operational support.
We believe that these qualities have contributed to our prior growth and
will be instrumental to the successful implementation of our business and
growth strategies in the future.
In January 2001, we acquired deposits, loans and fixed assets from The Bank
of Mt. Vernon, Inc., 1997adding offices in Mt. Vernon, Richmond, Somerset and
Berea, Kentucky. In January 2002, we completed our acquisition of Citizens
National Bank & Trust of Hazard, adding offices in Perry County, Kentucky.
During the first quarter of 2002, we plan to merge Citizens' operations into
Community Trust Bank, subject to regulatory approval.
3
(continuedCTBI Preferred Capital Trust II
CTBI Preferred Capital Trust II is a newly created Delaware business trust.
We created the trust to offer the preferred securities and to purchase the
debentures. The trust has a term of 30 years but may be dissolved earlier as
provided in the trust agreement. Upon issuance of the preferred securities
offered by this prospectus, the purchasers in this offering will own all of the
issued and outstanding preferred securities of the trust. We will own all of
the common securities of the trust.
Our principal executive offices, as well as those of the trust, are located
at 346 North Mayo Trail, Pikeville, Kentucky 41501. The main telephone number
for us and the trust is (606) 432-1414.
The Offering
The issuer.................. CTBI Preferred Capital Trust II
Securities being offered.... 1,000,000 preferred securities, which represent
preferred undivided interests in the assets of
the trust. Those assets will consist solely of
the debentures and payments received on the
debentures. The trust will sell the preferred
securities to the public for cash. The trust will
use that cash to buy the debentures from previous page)
The Subordinated Debenturesus.
Offering price.............. $25.00 per preferred security.
When the trust will maturepay
distributions to you...... Your purchase of the preferred securities
entitles you to receive cumulative cash
distributions at a % annual rate. Distributions
will accumulate from the date the trust issues
the preferred securities and are to be paid
quarterly on March 31, 2027, whichJune 30, September 30 and
December 31 of each year, beginning June 30,
2002. As long as the preferred securities are
represented by a global security, the record date
for distributions on the preferred securities
will be the business day prior to the
distribution date. We may be
(1) shorteneddefer the payment of
cash distributions, as described below.
When the trust must redeem
the preferred securities.. The debentures will mature and we must redeem the
preferred securities on March 31, 2032. We have
the option, however, to shorten the maturity date
to a date not earlier than March 31, 2007, or (2) extended to a2007. We
will not shorten the maturity date not later than March 31, 2036, in each case if certain conditions are met
(including, inunless we have
received the case of shortening the Stated Maturity (as defined herein),
the Company having received prior approval of the Board of
Governors of the Federal Reserve System, ("Federal Reserve")if
required by law or regulation.
Redemption of the preferred
securities before March
31, 2032 is possible...... The trust must redeem the preferred securities
when the debentures are paid at maturity or upon
any earlier redemption of the debentures to do so if then required under
applicablethe
extent the debentures are redeemed. We may redeem
all or part of the debentures at any time on or
after March 31, 2007. In addition, we may redeem,
at any time, all of the debentures if:
. existing laws or regulations, or the
interpretation or application of these laws or
regulations, change, causing the interest we
pay on the debentures to no longer be
deductible by us for federal income tax
purposes; or causing the trust to become
subject to federal income tax or to certain
other taxes or governmental charges;
4
. existing laws or regulations change, requiring
the trust to register as an investment
company; or
. the capital adequacy guidelines or policies of the Federal
Reserve). The
Subordinated DebenturesReserve change so that the preferred
securities no longer qualify as Tier 1 capital.
If your preferred securities are redeemed by the
trust, you will bereceive the unsecured obligationsliquidation amount of
the Company$25.00 per preferred security, plus any accrued
and will be subordinate and junior in right of paymentunpaid distributions to Senior Debt,
Subordinated Debt and, under certain circumstances, Additional Senior
Obligations of the Company, as described herein. See "Description of the
Subordinated Debentures--Subordination" in this Prospectus.
The Preferred Securities will have a preference under certain circumstances
with respect to cash distributions and amounts payable on liquidation,
redemption or otherwise over the Common Securities. See "Description of the
Preferred Securities--Subordination of Common Securities." Holders of
Preferred Securities will be entitled to receive preferential cumulative cash
distributions ("Distributions") accruing from the date of
original issuance
and payable quarterly in arrears on the last day of March, June, September and
December of each year (each, a "Distribution Date"), commencing on June 30,
1997, at the annual rate of % ("Securities Rate") of the Liquidation Amount
of $25 per Preferred Security. The Company has the right to defer payment of
interest on the Subordinated Debentures at any time or from time to time for a
period not to exceed 20 consecutive quarters with respect to each deferral
period (each, an "Extension Period"), provided that no Extension Period may
extend beyond the Stated Maturity of the Subordinated Debentures.redemption.
Upon the
termination of any such Extension Period and the payment of all amounts then
due, the Company may elect to begin a new Extension Period subject to the
requirements set forth herein. If interest payments on the Subordinated
Debentures are so deferred, Distributions on the Preferred Securities will
also be deferred, and the Company will not be permitted, subject to certain
exceptions described herein, to declare or pay any cash distributions with
respect to its capital stock or debt securities that rank pari passu with or
junior to the Subordinated Debentures. DURING AN EXTENSION PERIOD, INTEREST ON
THE SUBORDINATED DEBENTURES WILL CONTINUE TO ACCRUE (AND THE AMOUNT OF
DISTRIBUTIONS TO WHICH HOLDERS OF THE PREFERRED SECURITIES ARE ENTITLED WILL
ACCUMULATE) AT THE RATE OF % PER ANNUM, COMPOUNDED QUARTERLY, AND HOLDERS
OF THE PREFERRED SECURITIES WILL BE REQUIRED TO INCLUDE INTEREST INCOME (IN
THE FORM OF ORIGINAL ISSUE DISCOUNT) IN THEIR GROSS INCOME FOR UNITED STATES
FEDERAL INCOME TAX PURPOSES IN ADVANCE OF RECEIPT OF THE CASH DISTRIBUTIONS
WITH RESPECT TO SUCH DEFERRED INTEREST PAYMENTS. See "Description of
Subordinated Debentures--Option to Extend Interest Payment Period" and
"Certain Federal Income Tax Consequences--Potential Extension of Interest
Payment Period and Original Issue Discount."
The Company has, through the Guarantee, CTBI Trust Agreement, Subordinated
Debentures, Indenture and other documents (each as defined herein), taken
together, fully, irrevocably and unconditionally guaranteed, on a subordinated
basis, all of CTBI Trust's obligations under the Preferred Securities. See
"Relationship Among the Preferred Securities, the Subordinated Debentures and
the Guarantee--Full and Unconditional Guarantee." The Guarantee of the Company
guarantees the payments of Distributions and payments on liquidation or
redemption of the Preferred Securities, but only in each case to the extent of
funds held by CTBI Trust, as described herein. See "Description of Guarantee."
If the Company does not make interest payments on the Subordinated Debentures
held by CTBI Trust, CTBI Trust will have insufficient funds to pay
Distributions on the Preferred Securities. The Guarantee does not cover
payments of Distributions when CTBI Trust does not have sufficient funds to
pay such Distributions. The obligations of the Company under the Guarantee and
the Preferred Securities are subordinate and junior in right and payment to
all Senior Debt, Subordinated Debt and, under certain circumstances,
Additional Senior Obligations. The Subordinated Debentures will be pari passu
with preferred stock issued by the Company, if any, and senior to the
Company's common stock (each as defined in "Description of Subordinated
Debentures--Subordination").
The Preferred Securities are subject to mandatory redemption, in whole or in
part, upon repayment of the Subordinated Debentures at maturity or their
earlier redemption. Subject to Federal Reserve approval, if then required, the
Subordinated Debentures are redeemable prior to maturity at the option of the
Company (1) on or
ii
after March 31, 2007, in whole at any time or in part from time to time, or (2)
at any time, in whole (but not in part), upon the occurrence and during the
continuance of a Tax Event, an Investment Company Event or a Capital Event (as
described herein), in each case at a redemption price equal to the accrued and
unpaid interest on the Subordinated Debentures so redeemed to the date fixed
for redemption, plus 100% of the principal amount thereof. See "Description of
the Preferred Securities--Redemption."
The Company will have the right at any time to terminate the Preferred
Securities and cause the Subordinated Debentures to be distributed to holders
of Preferred Securities in liquidation of the CTBI Trust, subject to the
Company having received prior approval of the Federal Reserve, to do so if
then
required, under applicable capital guidelines or policies ofwe may also redeem the Federal
Reserve. See "Description of the Preferred Securities--Redemption." The
Subordinated Debentures are unsecured and subordinated to all Senior Debt,
Subordinated Debt and, under certain circumstances, Additional Senior
Obligations.
In the event of the termination of CTBI Trust, after satisfaction of
liabilities to creditors of CTBI Trust as required by applicable law, the
holders of Preferred Securities will be entitled to receive a Liquidation
Amount of $25 per Preferred Security, plus accumulated and unpaid Distributions
thereon to the date of payment, which may be in the form of a distribution of a
like amount of Subordinated Debentures, subject to certain exceptions. See
"Description of the Preferred Securities--Liquidation Distribution Upon
Termination."
The Company and CTBI Trust have applied for quotation of the Preferred
Securities, and expect the Preferred Securities to be traded, on The Nasdaq
Stock Market's National Market within 30 days of the date of this Prospectus
under the symbol "CTBIP."
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE PREFERRED
SECURITIES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON NASDAQ OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT
ANY TIME.
iii
[MAP OF BANK TERRITORY APPEARS HERE]
Ashland
Main Office
1544 Winchester Ave.
Ashland, KY 41101
Express Center (ATM)
344 16th Street
Ashland, KY 41101
South Ashland Branch (ATM)
2101 29th Street
Ashland, KY 41101
Westwood Branch
721 Wheatley Road
Ashland, KY 41101
Summit Branch (ATM)
7100 U.S. Route 60
Ashland, KY 41101
Ashland Town Center (ATM)
500 Winchester Ave.
Ashland, KY 41101
Russell Office
ATM location at Russell Road Supermarket
Campbellsville
Corporate Headquarters & Annex
1218 East Broadway
Campbellsville, KY 42718
Columbia Office
710 Russell Road
Columbia, KY 42728
Greensburg Office
205 South Main St.
P.O. Box 370
Greensburg, KY 42743
First Street Office (ATM)
315 E. First St.
Campbellsville, KY 42719
Somerset Office (ATM)
3809 S. Highway 27
Somerset, KY 42502
Winn Dixie #1602 (ATM)
181 South Highway 27
Somerset, KY 42502
Jamestown Office
U.S. Highway 127N
Jamestown, KY 42629
Lebanon Office (ATM)
507 W. Main St.
Lebanon, KY 40033
Additiional ATM Locations:
Wal-Mart: Berea, Corbin, Georgetown, London, Paintsville, Paris, Somerset,
Winchester
Flemingsburg
Main Office
101 N. Main Cross St.
Flemingsberg, KY 41041
South Ridge Plaza
100 Clark Street
Flemingsberg, KY 41041
By-Pass Branch (ATM)
200 Ashbrook Drive
Flemingsberg, KY 41041
Ewing Branch
Ewing, KY 41039
Lexington
Main Street Branch
155 East Main Street
Lexington, KY 40507
4
Beaumont Centre Branch (ATM)
901 Beaumont Centre Parkway
Lexington, KY 40513
Winn Dixie Richmond Road
Mist Lake Plaza
Lexington, KY 40517
Winn Dixie Saron Drive
Tales Creek South Shopping Center
Lexington, KY 40515
London
London Banking Office (ATM)
1706 West Highway 192
London, KY 40741
Middlesboro
Main Office
1918 Cumberland Avenue
Middlesboro, KY 40965
West Branch
West Camberland Avenue & 38th St.
Middlesboro, KY 40965
East Branch (ATM)
1206 East Cumberland Avenue
Middlesboro, KY 40965
Pineville Branch (ATM)
US 25 East
Pineville, KY 40977
Mt. Sterling
Main Office
P.O. Box 306
Corner of High & Maysville Streets
Mt. Sterling, KY 40353
North Branch
Evans Drive
Mt. Sterling, KY 40353
Mt. Sterling Plaza - (ATM location only)
Maysville Road
Mt. Sterling, KY 40353
Wal-Mart Superstore Branch (ATM)
196 Indian Mound Drive
Mt. Sterling, KY 40353
ATM Location at Whitesburg Wal-Mart
Pikeville
Main Office (ATM)
208 North Mayo Trail
Pikeville, KY 41501-2947
Elkhorn City Branch
P.O. Box 740
Elkhorn City, KY 41522
Knott County Branch (ATM)
Main Street
Hindman, KY 41822
Floyd County Branch (ATM)
P.O. Box 636
Prestonsburg, KY 41653
Main Street Branch
317-319 Main Street
Pikeville, KY 41501
Marrowbone Branch
P.O. Box 89
Regina, KY 41599
Mouthcard Branch
P.O. Box 39
Mouthcard, KY 41540
Phelps Branch
P.O. Box 86
Phelps, KY 41553
Town and Country Branch
Town and Country Shopping Center
Pikeville, KY 41501
Tug Valley Branch (ATM)
South Williamson, KY 25661
606-237-6051
Virgie Branch
Virgie, KY 41572
Weddington Plaza Branch (ATM)
4205 North Mayo Trail
Pikeville, KY 41501
Additional ATM Locations:
Pikeville Wal-Mart
Prestonsburg Wal-Mart
Pikeville Methodist Hospital
Lexington Wal-Mart
Versailles
Main Office (ATM)
101 N. Main St.
480 Lexington Road
Versailles, KY 40383
Woodford Plaza (ATM)
P.O. Box 709
Versailles, KY 40383
West Liberty:
Commercial Bank
550 Main Street
West Liberty, KY 41472
Whitesburg
Main Branch
112 W. Main
Whitesburg, KY 41858
West Whitesburg Branch (ATM)
353 Hazard Road
Whitesburg, KY 41858
Ermine Branch
782 Jenkins Road
Whitesburg, KY 41858
Isom Branch
Jeremiah, KY 41826
Neon Branch
Neon, KY 41840
Williamsburg
Main Office (ATM)
201 N. Third St.
Williamsburg, KY 40769
Cumberland Region Shopping Center (ATM)
895 Hwy 25W South
Williamsburg, KY 40769
ATM Located in Cumberland Shopping Center Wal-Mart store.
Trust Company of Kentucky
Lexington Office:
100 Vine Street-4th Floor
Lexington, KY 40507
Ashland Office:
1544 Winchester Avenue
Ashland, KY 41105
Pikeville Office:
208 North Mayo Trail
Pikeville, KY 41502
Louisville Office:
4350 Brownsboro Road-Suite 170
Louisville, KY
v
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information included elsewhere in this Prospectus. Unless otherwise indicated,
the information contained in this Prospectus assumes that the Underwriters'
over-allotment option will not be exercised.
THE COMPANY
Community Trust Bancorp, Inc. is a bank holding company and a thrift holding
company headquartered in Pikeville, Kentucky. The Company currently owns all of
the capital stock of two commercial banks, one thrift and one trust company,
serving small and mid-sized communities in eastern, central and south-central
Kentucky. As of December 31, 1996, the Company had total consolidated assets of
$1.8 billion and total consolidated deposits of $1.5 billion, making it one of
the largest independent bank holding companies headquartered in the
Commonwealth of Kentucky. Effective January 1, 1997, the Company changed its
name from Pikeville National Corporation to Community Trust Bancorp, Inc. and
changed the name of its lead bank from Pikeville National Bank & Trust Company
to Community Trust Bank, N.A. (the "Lead Bank").
Through its subsidiaries, the Company engages in a wide range of commercial
and personal banking activities, which include accepting time and demand
deposits; making secured and unsecured loans to corporations, individuals and
others; providing cash management services to corporate and individual
customers; issuing letters of credit; renting safe deposit boxes and providing
funds transfer services. The lending activities of the Banks (as defined
herein) include making commercial, construction, mortgage, personal and
consumer loans. Also available are lease financing, lines of credit, revolving
credits, term loans and other specialized loans including asset-based
financing. Various corporate subsidiaries act as trustees of personal trusts,
as executors of estates, as trustees for employee benefit trusts, as
registrars, transfer agents and paying agents for bond and stock issues and as
depositories for securities.
The Company's long-term strategy is to grow its traditional banking
activities through both acquisition and de novo expansion. The Company is
focused on the continuing growth of its indirect and commercial lending
businesses and the introduction and promotion of enhanced financial products
for both business and individual customers.
CTBI TRUST
CTBI Trust is a Delaware business trust. State Street Bank and Trust Company,
Boston, Massachusetts will serve as the trustee under the Indenture ("Debenture
Trustee"), the property trustee under the CTBI Trust Agreement ("Property
Trustee"), and the trustee under the Guarantee ("Guarantee Trustee"). Richard
M. Levy and Jean R. Hale, both executive officers of the Company, will serve as
the Administrative Trustees of CTBI Trust ("Administrative Trustees").
Wilmington Trust Company will serve as the Delaware trustee under the CTBI
Trust Agreement ("Delaware Trustee"). CTBI Trust's sole purpose will be to
issue the Common Securities and the Preferred Securities and hold the
Subordinated Debentures. The Administrative Trustees, the Property Trustee and
the Delaware Trustee are sometimes collectively referred to herein as the
"Securities Trustees."
1
THE OFFERING
Securities Offered........ 1,200,000 shares of % Preferred Securities,
liquidation amount $25 per Preferred Security
("Liquidation Amount"), evidencing preferred
undivided beneficial interests in the assets of
CTBI Trust.
Offering Price............ $25 per Preferred Security.
Distribution Dates........ The last day of each of March, June, September and
December of each year, beginning June 30, 1997.
Stated Maturity........... March 31, 2027, unless extended or shortened as
provided herein.
Subordinated Debentures... CTBI Trust will invest the proceeds from the
issuance of the Preferred Securities and Common
Securities in an equivalent amount of %
subordinated debentures due March 31, 2027
("Subordinated Debentures"). The Subordinated
Debentures will be subordinate and junior in right
of payment to all current indebtedness for borrowed
money and other obligations of the Company included
in the definition of Senior Debt, Subordinated Debt
and, under certain circumstances, Additional Senior
Obligations. See "Description of the Subordinated
Debentures--Subordination."
Guarantee................. The payment of distributions of the Preferred
Securities is guaranteed by the Company under the
Guarantee, but only to the extent CTBI Trust has
funds legally and immediately available to make
such distributions. If the Company does not make
principal or interest payments of the Subordinated
Debentures, CTBI Trust will not have sufficient
funds to make distributions on the Preferred
Securities, in which event the Guarantee will not
apply to such distributions until CTBI Trust has
sufficient funds legally available therefor. The
obligations of the Company under the Guarantee will
be subordinate and junior in right of payment to
all other liabilities of the Company. The Company
has, through the Guarantee, the Indenture, the
Subordinated Debentures, the CTBI Trust Agreement
and the Agreement as to Expenses and Liabilities
("Agreement as to Expenses and Liabilities"), fully
and unconditionally guaranteed, subject to certain
subordination provisions, all of CTBI Trust's
obligations with respect to the Preferred
Securities. See "Risk Factors--Risk Factors
Relating to the Preferred Securities" and "--
Ranking of Subordinated Obligations Under the
Guarantee and the Subordinated Debentures" "Rights
Under the Guarantee" and "Description of
Guarantee."
Interest Deferral......... The Company has the right to defer payments of
interest on the Subordinated Debentures by
extending the interest payment period on the
Subordinated Debentures, at
any time, and from time to time, in an amount
equal to the liquidation amount of any preferred
securities we repurchase, plus a proportionate
amount of common securities, but only by
surrendering to the property trustee a like
amount of the preferred securities and common
securities that we then own. In exchange for the
trust securities surrendered by us, the property
trustee will cause to be released to us for
cancellation debentures with a principal amount
equal to the liquidation amount of trust
securities, plus accumulated but unpaid
distributions, if any, then held by the property
trustee allocable to those trust securities.
After the date of redemption involving an
exchange by us, the trust securities we surrender
will no longer be deemed outstanding and the
debentures redeemed in exchange for the trust
securities will be cancelled.
We have the option to extend
the interest payment period The trust will rely solely on payments made by us
under the debentures to pay distributions on the
preferred securities. As long as we are not in
default under the indenture relating to the
debentures, we may, at one or more times, defer
interest payments on the debentures for up to 20
consecutive quarters, (each,
an "Extension Period"). The only restrictions
arising from the Company's deferral of payments of
interest are that during the Extension Period the
Company maybut not (subject to certain allowances) (i)
pay dividends on or redeem any of its capital stock
or (ii) pay principal or interest on any debt
securities ranking pari
2
passu or subordinate to the Subordinated
Debentures. See "Description of the Preferred
Securities--Distributions--Extension Period." There
could be multiple Extension Periods of varying
lengths (none exceeding 20 consecutive calendar
quarters) throughout the term of the Subordinated
Debentures. All interest payments deferred during
an Extension Period must be paid prior to a
subsequent election by the Company to institute an
Extension Period.beyond March 31,
2032. If we defer interest payments on the
Subordinated Debentures
are deferred,debentures:
. the trust will also defer distributions on the
Preferred
Securitiespreferred securities;
. the distributions to which you are entitled
will alsoaccumulate; and
. these accumulated distributions will earn
interest at an annual rate of %, compounded
quarterly, until paid. At the end of any
deferral period, we will pay to the trust all
accrued and unpaid interest under the
debentures. The trust will then pay all
accumulated and unpaid distributions to you.
You will still be deferred. During an
Extension Period, holderstaxed if
distributions on the
preferred securities are
deferred.................. If a deferral of Preferred Securities
will continue to accruepayment occurs, you must
recognize the amount of the deferred
distributions as income for United States federal
income tax purposes in advance of receiving the
receiptactual cash distributions, even if you are a cash
basis taxpayer.
Our full and unconditional
guarantee of payment...... Our obligations described in this prospectus, in
the aggregate, constitute a full, irrevocable and
unconditional guarantee on a subordinated basis
by us of the cash
payments attributable to such deferred interest.
See "Descriptionobligations of the Subordinated Debentures--
Option to Extend Interest Payment Period" and
"Certain Federal Income Tax Considerations--
Potential Extension of Interest Payment Period and
Original Issue Discount" and "--Market Discount and
Acquisition Premium." Deferred interest will bear
interest, compounded quarterly, attrust under the
preferred securities. Under the guarantee
agreement, we guarantee on
5
a rate per annum
equal to the Securities Rate from the date of
deferral to the date of payment.
Redemption................ The Preferred Securities are subject to mandatory
redemption upon repaymentsubordinated basis by us of the Subordinated
Debentures at maturity or their earlier redemption.
The Subordinated Debentures are redeemable byobligations of
the Company (in whole or in part), from timetrust under the preferred securities. Under
the guarantee agreement, we guarantee that the
trust will use its assets to timepay the
distributions on or after March 31, 2007, orthe preferred securities and the
liquidation amount upon dissolution of the trust.
However, the guarantee does not apply when the
trust does not have sufficient funds to make the
payments. If we do not make payments on the
debentures, the trust will not have suficient
funds to make payments on the preferred
securities. In this event, your remedy is to
institute a legal proceeding directly against us
for enforcement of payments under the debentures.
We may distribute the
debentures directly to you We may, at any time, in whole
upondissolve the occurrence of a Special Event, as
described below. If a partial redemption oftrust and
distribute the Subordinated Debentures would result in the de-
listing of the Preferred Securities, the Company
may only redeem the Subordinated Debentures in
whole. Any partial redemption of the Subordinated
Debentures will be effected by the redemption of an
equivalent amount of Trust Securities,debentures to be
allocated pro rata between Preferred Securities and
the Common Securities unless an Event of Default
shall have occurred and be continuing as of the
applicable Redemption Date or Distribution Date.
See "Description of the Preferred Securities--
Redemption" and "--Tax Event Redemption, Investment
Company Event Redemption or Capital Event
Redemption."
Special Event............. A Special Event means a Tax Event, an Investment
Company Event or a Capital Event. A "Tax Event"
means the receipt by the Company of an opinion of
independent counsel experienced in such matters
(which may be counsel to the Company) to the effect
that, as a result of any amendment to, or change in
(including any announced prospective change), the
laws (or any regulations thereunder) of the United
States or any political subdivision or taxing
authority thereof or therein, or as a result of any
official administrative pronouncement or judicial
decision interpreting or applying such laws or
regulations, which amendment or change is effective
or which pronouncement or decision is announced on
or after the date of the issuance of the
Subordinated Debentures under the Indenture, there
is more than an insubstantial risk that (i) CTBI
Trust is, or will be within 90 days after the date
of such
3
opinion,you, subject to United States federal income
tax with respect to income accrued or received on
the Subordinated Debentures, (ii) interest payable
by the Company on the Subordinated Debentures is
not, or within 90 days after the date of such
opinion will not be, deductible by the Company, in
whole or in part, for United States federal income
tax purposes, or (iii) CTBI Trust is, or will be
within 90 days after the date of such opinion,
subject to more than a de minimis amount of other
taxes, duties or other governmental charges. An
"Investment Company Event" means the receipt by
CTBI Trust of an opinion of independent counsel
experienced in such matters (which may be counsel
to the Company) to the effect that, as a result of
a change in law or regulation or a change in
interpretation or application of law or regulation
by any legislative body, court, governmental agency
or regulatory authority, there is more than an
insubstantial risk that CTBI Trust is or will be
considered an "investment company" that is required
to be registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), which change
becomes effective on or after the date of original
issuance of the Preferred Securities. A "Capital
Event" means the receipt by CTBI Trust of an
opinion of independent counsel experienced in such
matters (which may be counsel to the Company) that
the Company cannot, or within 90 days after the
date of such opinion of counsel, will not be
permitted by the applicable regulatory authorities,
due to a change in law, regulation, policy or
guideline or interpretation or application of law
or regulation, policy or guideline, to account for
the Preferred Securities as Tier I Capital under
the capital guidelines or policies of the Federal
Reserve.
Redemption Price.......... In the event of the redemption of Trust Securities
or other termination of CTBI Trust without
distribution of the Subordinated Debentures, each
Preferred Security shall be entitled to receive a
liquidation amount of $25 plus accrued and unpaid
distributions thereon (including interest thereon)
to the date of payment.
Distribution of
Subordinated Debentures...
The Company has the right at any time to liquidate
CTBI Trust and cause the Subordinated Debentures to
be distributed to holders of Preferred Securities,
subject to the Company having received
prior approval of the Federal Reserve, if
required by law or regulation. If we distribute
the debentures, we will use our reasonable
efforts to do so iflist the debentures on the American
Stock Exchange or such other securities exchange
or other organization as the preferred securities
are then requiredlisted or traded.
How the securities will rank
in right of payment....... Our obligations under applicable capital guidelines or
policiesthe preferred securities,
debentures and guarantee are unsecured and will
rank as follows with regard to right of payment:
. the preferred securities will rank equally
with the common securities of the Federal Reserve. See "Descriptiontrust. The
trust will pay distributions on the preferred
securities and the common securities pro rata.
However, if we default with respect to the
debentures, then no distributions on or
redemptions of Preferred Securities--Redemption."
The Nasdaq Stock Market's
National Market Symbol....
Application hasthe common securities of the
trust or our common stock will be paid until
all accumulated and unpaid distributions on
the preferred securities have been made to have the Preferred
Securities approved for quotation under The Nasdaq
Stock Market's National Marketpaid;
. our obligations under the symbol
"CTBIP."
4debentures and the
guarantee are unsecured and generally will
rank junior in priority to our existing and
future senior and subordinated indebtedness;
and
. because we are a holding company, the
debentures and the guarantee will effectively
be subordinated to all depositors' claims, as
well as existing and future liabilities of our
subsidiaries.
Voting rights of the
preferred securities...... Except in limited circumstances, holders of the
preferred securities will have no voting rights.
Proposed American Stock
Exchange symbol........... BPF
You will not receive
certificates.............. The preferred securities will be represented by a
global preferred security certificate that will
be deposited with and registered in the name of
The Depository Trust Company, New York, New York,
or its nominee. As a result, you will not receive
a certificate for the preferred securities, and
your beneficial ownership interests will be
recorded through the DTC book-entry system.
6
COMMUNITY TRUST BANCORP, INC.
SUMMARY CONSOLIDATED FINANCIAL DATA(1)
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
SUMMARY RESULTS OF
OPERATIONS
Interest Income......... $ 144,447 $ 131,026 $ 106,560 $ 104,929 $ 109,946
Interest Expenses....... 69,092 64,992 47,370 46,616 53,746
---------- ---------- ---------- ---------- ----------
Net interest income.. 75,355 66,034 59,190 58,313 56,200
Provision for loan
losses................. 7,285 5,858 6,066 4,442 7,311
Noninterest income...... 14,439 11,116 9,653 12,069 11,427
Noninterest expense..... 55,243 55,871 52,287 45,571 42,140
---------- ---------- ---------- ---------- ----------
Income before federal
income taxes........... 27,266 15,421 10,490 20,369 18,176
Federal income tax
expense................ 8,471 4,608 2,278 5,533 5,072
---------- ---------- ---------- ---------- ----------
Net income........... $ 18,795 $ 10,813 $ 8,212 $ 14,836 $ 13,104
========== ========== ========== ========== ==========
PER COMMON SHARE:
Earnings per share...... $ 2.06 $ 1.21 $ 0.95 $ 1.80 $ 1.63
Cash dividends declared. 0.74 0.66 0.61 0.55 0.51
As a percentage of
earnings per share.... 35.92% 54.55% 64.21% 30.56% 31.29%
Book value, end of year. 15.86 14.66 13.57 13.44 12.08
Average common shares
outstanding (in
thousands)............. 9,138 8,960 8,601 8,246 8,024
AT YEAR END:
Total assets............ $1,815,660 $1,730,170 $1,499,434 $1,464,039 $1,390,910
Long-term debt.......... 19,136 27,873 24,944 35,277 36,340
Shareholders' equity.... 144,754 133,795 166,636 107,371 96,406
AVERAGES:
Assets.................. $1,762,009 $1,630,922 $1,470,630 $1,415,441 $1,354,655
Deposits................ 1,467,794 1,359,947 1,216,544 1,181,347 1,173,305
Earning assets.......... 1,632,532 1,508,539 1,365,750 1,313,064 1,253,475
Loans................... 1,215,243 1,021,637 872,045 849,202 857,532
Shareholders' equity.... 138,925 130,780 116,165 102,445 90,594
PROFITABILITY RATIOS:
Return on average
assets................. 1.07% 0.66% 0.56% 1.05% 0.97%
Return on average common
equity................. 13.53% 8.27% 7.07% 14.48% 14.46%
Net interest margin..... 4.76% 4.54% 4.51% 4.60% 4.68%
CAPITAL RATIOS:
Average equity to
average assets......... 7.88% 8.02% 7.90% 7.24% 6.69%
Risk-based capital
ratios:
Leverage ratio......... 7.05% 6.44% 7.19% 6.36% 5.89%
Tier I Capital......... 9.71% 10.24% 11.08% 10.10% 9.34%
Total capital.......... 10.96% 11.51% 12.33% 12.23% 11.53%
OTHER SIGNIFICANT
RATIOS:
Allowance to net loans,
end of year............ 1.44% 1.44% 1.43% 1.58% 1.63%
Allowance to
nonperforming loans,
end of year............ 113.50% 119.99% 106.12% 90.04% 95.96%
Nonperforming assets to
loans and foreclosed
properties, end of
year................... 1.35% 1.37% 1.83% 2.18% 2.51%
Net charge-offs to
average loans.......... 0.37% 0.47% 0.74% 0.57% 0.60%
RATIO OF EARNINGS TO
FIXED CHARGES:(2)
Excluding deposit
interest.............. 4.10x 2.77x 2.33x 3.61x 4.85x
Including deposit
interest.............. 1.39x 1.24x 1.22x 1.43x 1.34x
RATIO OF EARNINGS TO
COMBINED FIXED CHARGES
AND PREFERRED STOCK
DIVIDENDS:(2)
Excluding deposit
interest.............. 4.10x 2.77x 2.33x 3.61x 4.85x
Including deposit
interest.............. 1.39x 1.24x 1.22x 1.43x 1.34x
- --------
(1)How the proceeds of this
offering will be used... The numbers have been adjustedtrust will invest the proceeds from the sale
of the preferred securities in the debentures. We
estimate the net proceeds, before expenses, to reflect a 3us
from the sale of the debentures to the trust,
after deducting underwriting expenses and
commissions, will be approximately $ million. We
expect to use approximately $12.3 million of the
net proceeds from the sale of the debentures to
redeem our 8.25% senior notes due January 1,
2003, and $8 million to pay down our line of
credit, approximately $2.5 million of which was
used for 2 common stock split,
effective February 1, 1994 to shareholdersthe acquisition of record on January 5, 1994.
(2) Earnings consistCitizens National
Bank & Trust of income before income tax plus interest expense. Fixed
charges consist of interest expense.Hazard. The Company does not currently have
anyremaining net
proceeds will be used for general corporate
purposes.
Before purchasing the preferred stock outstanding.
5
RISK FACTORS
Prospective investorssecurities being offered, you should
carefully consider the "Risk Factors" beginning on page 10.
7
SELECTED CONSOLIDATED FINANCIAL DATA
Set forth below is our selected consolidated financial information and other
financial data. The selected balance sheet and statement of income data,
insofar as they relate to the year ended December 31, 2000 are derived from our
consolidated financial statements which have been audited by Deloitte & Touche
LLP. The selected balance sheet and statement of net income data for the years
ended December 31, 1999, 1998, 1997 and 1996 are derived from our consolidated
financial statements, which have been audited by Ernst & Young LLP. The
selected consolidated financial data as of and for the nine-month periods ended
September 30, 2001 and 2000 are derived from unaudited consolidated financial
statements. In our opinion, all adjustments, consisting solely of normal
recurring adjustments, necessary for a fair presentation of results as of and
for the nine month periods ended September 30, 2001 and 2000 have been
included. This information should be read together with the other
information contained and incorporated by reference in this Prospectus, the
following risk factors in evaluating the Company and its business and CTBI
Trust before purchasing the Preferred Securities offered hereby. This
Prospectus contains "forward-looking" statements within the meaning of the
Private Securities Litigation Reform Act of 1995 (the "Act") under the
captions "Prospectus Summary," "Use of Proceeds" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our consolidated financial statements and the related notes incorporated by
reference into this prospectus from our Annual Report on Form 10-K for the year
ended December 31, 2000 and our Quarterly Report on Form 10-Q for the quarter
ended September 30, 2001. Results for past periods are not necessarily
indicative of results that actualmay be expected for any future period, and results
could differ materiallyfor the nine-month period ended September 30, 2001 are not necessarily
indicative of results that may be expected for the entire year ended December
31, 2001.
As of or For the Nine
Months Ended
September 30, As of or For the Year Ended December 31,
--------------------- ------------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ---------- ---------- ----------
(Dollars in thousands except per share data)
Summary of income:
Interest income....................... $ 135,474 $ 129,787 $ 175,749 $ 163,516 $ 160,570 $ 150,588 $ 144,447
Interest expense...................... 74,307 66,403 91,515 79,740 83,986 74,076 69,092
Net interest income................... 61,167 63,384 84,234 83,776 76,584 76,512 75,355
Provision for loan losses............. 6,345 6,637 9,217 9,105 16,008 11,154 7,285
Noninterest income.................... 17,614 14,081 19,526 21,026 19,466 18,442 14,439
Noninterest expense................... 48,273 46,697 61,927 64,388 62,166 59,892 55,243
Income before income taxes and
extraordinary gains.................. 24,163 24,131 32,616 31,309 17,876 23,908 27,266
Extraordinary gain, net of tax........ -- -- -- -- -- 3,085 --
Income before income taxes............ 24,163 24,131 32,616 31,309 17,876 26,993 27,266
Income taxes.......................... 7,734 7,539 10,270 9,464 3,907 7,924 8,471
Net income............................ $ 16,429 $ 16,592 $ 22,346 $ 21,845 $ 13,969 $ 19,069 $ 18,795
Common share data:
Diluted earnings per share............ $ 1.42 $ 1.38 $ 1.87 $ 1.79 $ 1.14 $ 1.56 $ 1.55
Diluted earnings per share before
extraordinary gain................... 1.42 1.38 1.87 1.79 1.14 1.31 1.55
Book value per share.................. 16.72 15.10 15.55 14.19 13.54 12.98 11.91
Tangible book value per share......... 11.18 10.23 10.73 9.30 8.40 11.52 10.28
Cash dividends declared............... 0.60 0.56 0.75 0.72 0.66 0.61 0.55
Weighted average common and
common equivalent shares, diluted.... 11,594 12,032 11,955 12,198 12,257 12,246 12,168
Balance sheet data at period end:
Total assets.......................... $2,422,405 $2,221,994 $2,261,975 $2,176,090 $2,248,039 $1,852,667 $1,840,025
Loans................................. 1,724,389 1,688,541 1,694,525 1,619,480 1,502,386 1,428,429 1,309,623
Allowance for loan losses............. 24,059 25,759 25,886 25,102 26,089 20,465 18,825
Securities............................ 403,053 289,317 285,596 330,588 384,411 281,542 367,685
Deposits.............................. 2,069,585 1,909,998 1,943,916 1,877,334 1,921,141 1,465,003 1,480,822
Long-term debt........................ 47,944 48,060 48,060 48,174 48,323 53,463 19,136
Shareholders' equity.................. 190,799 177,172 181,904 172,419 164,795 158,019 144,754
8
As of or For the Nine
Months Ended
September 30, As of or For the Year Ended December 31,
---------------------- ----------------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ---------- ---------- ----------
(Dollars in thousands except per share data)
Balance sheet data, averages:
Assets............................... $2,412,124 $2,178,810 $2,195,380 $2,182,721 $2,038,680 $1,837,874 $1,762,009
Loans................................ 1,751,856 1,655,434 1,666,062 1,557,703 1,468,776 1,406,041 1,215,243
Earning assets....................... 2,227,007 1,985,000 2,004,686 1,976,679 1,871,898 1,702,290 1,632,532
Deposits............................. 2,065,315 1,872,175 1,886,198 1,882,365 1,650,801 1,459,551 1,467,794
Shareholders' equity................. 186,541 175,933 176,911 169,467 162,689 159,036 138,925
Asset quality ratios:
Nonperforming loans to total loans... 1.70% 1.32% 1.54% 1.16% 1.40% 1.49% 1.31%
Nonperforming assets to total assets. 1.30 1.20 1.34 0.95 1.00 1.27 0.96
Allowance to nonperforming loans,
end of period....................... 81.94 116.90 99.30 135.77 125.63 94.97 113.50
Allowance to net loans, end of period 1.40 1.53 1.53 1.55 1.74 1.43 1.44
Net chargeoffs to average loans...... 0.22 0.28 0.51 0.65 0.78 0.66 0.37
Profitability and performance
ratios:
Return on average assets............. 0.91% 1.02% 1.02% 1.00% 0.69% 1.05% 1.07%
Return on average common equity...... 11.78 12.60 12.63 12.89 8.59 12.31 13.53
Dividend payout ratio................ 42.25 40.58 40.11 40.10 57.77 46.54 35.29
Net interest margin (1).............. 3.76 4.37 4.33 4.37 4.21 4.66 4.76
Efficiency ratio (2)................. 60.61 59.13 58.53 60.14 63.44 61.79 60.03
Liquidity and capital ratios:
Average loans to average deposits.... 84.8% 88.4% 88.3% 82.8% 89.0% 96.3% 82.8%
Average equity to average assets..... 7.73 8.07 8.06 7.76 7.98 8.65 7.88
Tier 1 risk-based capital............ 9.06 9.06 9.26 8.92 8.50 9.97 9.71
Total risk-based capital............. 10.30 10.32 10.51 10.17 9.75 11.23 10.96
Leverage ratio....................... 6.66 7.29 7.29 7.09 6.09 7.75 7.05
Ratio of earnings to fixed
charges(3):
Including interest expenses on
deposits............................ 1.33 1.36 1.36 1.39 1.21 1.32 1.39
Excluding interest expense on
deposits............................ 4.82 4.94 4.95 5.02 2.33 3.01 4.20
- --------
(1) Net interest income divided by average interest-earning assets.
(2) Non-interest expense divided by the sum of net interest income, on a tax
equivalent basis, plus non-interest income.
(3) For purposes of computing ratios of earnings to combined fixed charges,
earnings represent net income plus applicable income taxes and fixed
charges. Fixed charges include gross interest expense, other than interest
on deposits in one case and inclusive of such interest in the other, and
the proportion deemed representative of the interest factor or rent
expense, net of income from those contemplated by such statements.
These cautionary statements are being made pursuantsubleases.
9
RISK FACTORS
An investment in the preferred securities involves a number of risks. Some
of these risks relate to the "safe harbor"
provisionspreferred securities and others relate to us and
the financial services industry, generally. We urge you to read all of the
Act. The considerations listed below represent certain
importantinformation contained in this prospectus. In addition, we urge you to consider
carefully the following factors in evaluating an investment in the Company believes could cause such resultstrust before
you purchase the preferred securities offered by this prospectus.
Because the trust will rely on the payments it receives on the debentures
from us to differ.
These considerations are not intended to represent a complete listfund all payments on the preferred securities, and because the trust
may distribute the debentures in exchange for the preferred securities,
purchasers of the preferred securities are making an investment decision that
relates to the debentures being issued by us as well as the preferred
securities. Purchasers should carefully review the information in this
prospectus about the preferred securities, the debentures and the guarantee.
Risks Related to an Investment in Community Trust Bancorp, Inc.
Our profitability depends significantly on local economic conditions.
Our success is dependent on the general or specific riskseconomic conditions of the
communities we serve. Unlike larger banks that mayare more geographically
diversified, we provide financial and banking services primarily to eastern,
central and south central Kentucky and southern West Virginia. The economies of
a majority of these markets are dependent to a significant extent on the coal
industry and coal related industries. The economic conditions in these areas
have a significant impact on loan demand, the ability of borrowers to repay
these loans and the value of the collateral securing these loans. A significant
decline in general economic conditions, and in particular the coal industry,
will affect these local economic conditions and will negatively affect the
Companyfinancial results of our banking operations. Factors influencing general
economic conditions include inflation, recession, unemployment and CTBI Trustother
factors beyond our control.
Although local economic conditions have not been greatly effected by the
events of September 11, 2001 or guaranteesthe more recent terrorist activities and
threats, these events may eventually effect economic conditions in general and
in our primary market areas. If those events and other related events cause a
decline in the economy in general and in our primary market areas in
particular, then for the reasons described in the previous paragraph, our
results of future performance. Itoperations and financial condition could be adversely effected. See
"-- Fluctuations in interest rates could reduce our profitability."
Fluctuations in interest rates could reduce our profitability.
We realize income primarily from the difference between interest earned on
loans and investments and the interest paid on deposits and borrowings. We
expect that we will periodically experience "gaps" in the interest rate
sensitivities of our assets and liabilities, meaning that either our
interest-bearing liabilities will be more sensitive to changes in market
interest rates than our interest-earning assets, or vice versa. In either
event, if market interest rates should be recognized that other risksmove contrary to our position, this
"gap" will work against us, and our earnings may be negatively affected.
We are unable to predict fluctuations of market interest rates, which are
affected by, among other factors, changes in the following:
. inflation rates;
. levels of business activity;
. unemployment levels;
10
. money supply; and
. domestic and foreign financial markets.
Our asset-liability management strategy, which is designed to mitigate our
risk from changes in market interest rates, may not be able to prevent changes
in interest rates from having a material adverse effect on our results of
operations and financial condition. This is especially true when fluctuations
in interest rates exceed general expectations such as the recent decreases in
interest rates since September 11, 2001.
If our allowance for loan losses is not sufficient to cover actual loan losses,
our earnings could decrease.
Our loan customers may not repay their loans according to the terms of these
loans, and the collateral securing the payment of these loans may be
insufficient to assure repayment. We may experience significant presentlycredit losses
which could have a material adverse effect on our operating results. We make
various assumptions and judgments about the collectibility of our loan
portfolio, including the creditworthiness of our borrowers and the value of the
real estate and other assets serving as collateral for the repayment of many of
our loans. In determining the size of the allowance for loan losses, we rely on
our experience and our evaluation of economic conditions. If our assumptions
prove to be incorrect, our current allowance for loan losses may not be
sufficient to cover loan losses inherent in our loan portfolio and adjustments
may be necessary due to unfavorable economic conditions or adverse developments
in our loan portfolio. Material additions to our allowance would materially
decrease our net income.
In addition, federal and state regulators periodically review our allowance
for loan losses and may require us to increase our provision for loan losses or
recognize further loan charge-offs. Any increase in our loan allowance or loan
charge-offs as required by these regulatory agencies could have a material
adverse effect on our results of operations and financial condition.
We rely on local businesses which may have less diverse customer bases than
their national competitors, which may make them more susceptible to changes in
the local economy.
We target our business development and marketing strategy primarily to serve
the banking and financial needs of small and medium sized, locally owned and
operated businesses. These businesses may not have as diverse customer bases as
businesses serving regional or national markets. If general economic conditions
such as inflation, recession, unemployment and other factors beyond our control
negatively impact our market area, our results of operations and financial
condition could be significantly affected.
Competition with other financial institutions could adversely affect our
profitability.
We face vigorous competition from banks and other financial institutions,
including savings and loan associations, savings banks, finance companies and
credit unions. A number of these banks and other financial institutions have
substantially greater resources and lending limits, larger branch systems and a
wider array of banking services. To a limited extent, we also compete with
other providers of financial services, such as money market mutual funds,
brokerage firms, consumer finance companies and insurance companies. This
competition may reduce or limit our margins on banking, investment management
and trust services, reduce our market share and adversely affect our results of
operations and financial condition.
The Gramm-Leach-Bliley Act of 1999 (the "Gramm Act") has expanded the
permissible activities of a bank holding company. The Gramm Act allows
qualifying bank holding companies to elect to be treated as financial holding
companies. A financial holding company may engage in activities that are
financial in nature or are incidental or complementary to financial activities.
The Gramm Act also eliminated restrictions imposed by the Glass-Steagall
Financial Services Law, adopted in the 1930s, which prevented banking,
insurance and securities firms from fully entering each other's business. While
it is uncertain what the full impact of this legislation will
11
be, it is likely to result in further consolidation in the financial services
industry. In addition, removal of these restrictions will likely increase the
number of entities providing banking services and thereby create additional
competition.
In the 2000 session, the Kentucky legislature enacted legislation that
permits statewide branching, thereby increasing the geographic expansion and
growth opportunities for banks.
We may be unable to make acquisitions or to integrate our acquisitions
successfully.
Our growth strategy is impacted by our ability to acquire other financial
institutions. We may not be able to make future acquisitions and, if completed,
we may not be able to successfully integrate the operations, management,
products and services of the entities we acquire. Following each acquisition,
we must expend managerial, operational, financial and other resources to
integrate these entities. In particular, we may be required to install and
standardize adequate operational and control systems, deploy or modify
equipment, implement marketing efforts in new as well as existing locations and
employ and maintain qualified personnel. Our failure to successfully integrate
the entities we acquire into our existing operations may adversely affect our
financial condition and results of operations.
We rely heavily on our management team, and the unexpected loss of key managers
may adversely affect our operations.
Our success to date has been strongly influenced by our ability to attract
and to retain senior management experienced in banking and financial services.
Our ability to retain executive officers and the current management teams of
each of our lines of business will continue to be important to successful
implementation of our strategies. We do not have employment or non-compete
agreements with any of these key employees. The unexpected loss of services of
any key management personnel, or the inability to recruit and retain qualified
personnel in the future, could have an adverse effect on our business and
financial results.
We operate in a highly regulated environment and may be adversely affected by
changes in federal and state laws and regulations.
We are subject to extensive regulation, supervision and examination by
federal and state banking authorities. Any change in applicable regulations or
federal or state legislation could have a substantial impact on us and our
results of operations. Additional legislation and regulations may be enacted or
adopted in the future that could significantly affect our powers, authority and
operations, which could have a material adverse effect on our financial
condition and results of operations. Further, regulators have significant
discretion and power to prevent or remedy unsafe or unsound practices or
violations of laws by banks and bank holding companies in the performance of
their supervisory and enforcement duties. The exercise of regulatory power may
have a negative impact on our results of operations and financial condition.
Risks Related to an Investment in the Preferred Securities
If we do not make interest payments under the debentures, the trust will be
unable to pay distributions and liquidation amounts. Our guarantee will not
apply because the guarantee covers payments only if the trust has funds
available.
The trust will depend solely on our payments on the debentures to pay
amounts due to you on the preferred securities. If we default on our obligation
to pay the principal or interest on the debentures, the trust will not have
sufficient funds to pay distributions or the liquidation amount on the
preferred securities. In that case, you will not be able to rely on the
guarantee for payment of these amounts because the guarantee only applies if
the trust has sufficient funds to make distributions on or to pay the
liquidation amount of the preferred securities. Instead, you or the property
trustee will have to institute a direct action against us to enforce the
property trustee's rights under the indenture relating to the debentures.
12
To the extent we must rely on dividends from our subsidiaries to make interest
payments on the debentures to the trust, our available cash flow may be
restricted and distributions may be deferred.
We are a holding company and substantially all of our assets are held by our
subsidiaries. Our ability to make payments on the debentures when due will
depend primarily on available cash resources at the bank holding company and
dividends from our subsidiaries. Dividend payments or extensions of credit from
our subsidiaries are subject to regulatory limitations, generally based on
capital levels and current and retained earnings, imposed by the various
regulatory agencies with authority over such subsidiaries. The ability of our
subsidiaries to pay dividends is also subject to its profitability, financial
condition, capital expenditures and other cash flow requirements. We cannot
assure you that our subsidiaries will be able to pay dividends in the future.
The debentures and the risks set forth below may
affect the Companyguarantee rank lower than most of our other
indebtedness, and CTBI Trustour holding company structure effectively subordinates any
claims against us to a greater extent than indicated, and that
actual results may differ materially from those in the forward-looking
statements.
RISK FACTORS RELATING TO THE PREFERRED SECURITIES
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE SUBORDINATED
DEBENTURES
Theof our subsidiaries' creditors.
Our obligations of the Company under the Guarantee issued bydebentures and the Company for
the benefit of the holders of Preferred Securities and under the Subordinated
Debenturesguarantee are unsecured and
will rank subordinate and junior in rightpriority of payment to all Senior Debtour existing and Subordinated Debtfuture senior and
subordinated indebtedness. As of September 30, 2001, we had approximately $57
million outstanding principal amount of short- and long-term senior and
subordinated debt. The issuance of the Companydebentures and in certain
circumstances relatingthe preferred securities
does not limit our ability or the ability of our subsidiaries to the dissolution, winding-up, liquidationincur
additional indebtedness, guarantees or reorganization of the Company, to all Additional Senior Obligations of the
Company. As of December 31, 1996, the aggregate outstanding Senior Debt,
Subordinated Debt and Additional Senior Obligations of the Company were
approximately $19,200,000.other liabilities. Because the Company iswe are a
holding company, the rightcreditors of the Company to participateour subsidiaries, including depositors, also
will have priority over you in any distribution of our subsidiaries' assets of any of the
Banks upon any such Bank'sin
liquidation, or reorganization or otherwise (and
thus the ability of holders of the Preferred Securities to benefit indirectly
from such distribution) is subject to the prior claims of creditors of that
Bank, except to the extent that the Company may itself be recognized as a
creditor of that Bank.otherwise. Accordingly, the Subordinated Debenturesdebentures and the
guarantee will be effectively subordinated to all existing and future
liabilities of the Banks,our direct and holders of Subordinated Debenturesindirect subsidiaries, and Preferred Securitiesyou should look only
to theour assets of the Company for payments on the Subordinated Debentures.
Nonepreferred securities and the debentures.
We may defer interest payments on the debentures for substantial periods, which
could have adverse consequences for you.
We may, at one or more times, defer interest payments on the debentures for
up to 20 consecutive quarters. If we defer interest payments on the debentures,
the trust will defer distributions on the preferred securities during any
deferral period. During a deferral period, you will be required to recognize as
income for federal income tax purposes an amount approximately equal to the
interest that accrues on your proportionate share of the Indenture,debentures held by the
Guarantee ortrust in the CTBI Trust Agreement placestax year in which that interest accrues, even though you will not
receive these amounts until a later date. Although we do not believe this to be
the case, the mere existence of the right to defer interest could result in
your being required to recognize interest income as it accrues even though we
have not exercised our deferral right.
You will also not receive the cash related to any limitation onaccrued and unpaid
interest from the trust if you sell the preferred securities before the end of
any deferral period. During a deferral period, accrued but unpaid distributions
will increase your tax basis in the preferred securities. If you sell the
preferred securities during a deferral period, your increased tax basis will
decrease the amount of securedany capital gain or unsecured debt, including Senior Debt,
Subordinated Debtincrease the amount of any capital
loss that you may have otherwise realized on the sale. A capital loss, except
in certain limited circumstances, cannot be applied to offset ordinary income.
As a result, deferral of distributions could result in ordinary income, and Additional Senior Obligations,a
related tax liability for the holder, and a capital loss that may only be used
to offset a capital gain.
We do not currently intend to exercise our right to defer interest payments
on the debentures. However, in the event of a deferral period, the market price
of the preferred securities would likely be adversely affected. The preferred
securities may trade at a price that does not fully reflect the value of
accrued but unpaid interest on the debentures. If you sell the preferred
securities during a deferral period, you may not receive the same return on
investment as someone who continues to hold the preferred securities. Due to
our right to defer interest payments, the market price of the preferred
securities may be more volatile than the market prices of other securities
without the deferral feature.
13
Regulators may preclude us from making distributions on the debentures in the
event our regulatory capital, liquidity or financial performance deteriorates.
We and our subsidiaries are subject to extensive federal and state law,
regulation and supervision. Our regulators monitor our financial condition on a
periodic basis and may impose limitations on our operations and business
activities under various circumstances. In response to any perceived
deficiencies in liquidity or regulatory capital levels, our regulators may
require us to obtain their consent prior to paying dividends on our capital
stock or interest on the debentures. In the event our regulators withheld their
consent to our payment of interest on the debentures, we would exercise our
right to defer interest payments on the debentures, and the trust would not
have funds available to make distributions on the preferred securities during
the deferral period. This action by our regulators may or may not be taken in
conjunction with similar restrictions on the ability of our subsidiaries to pay
dividends to us. See "-- To the extent we must rely on dividends from our
subsidiaries to make interest payments on the debentures to the trust, our
available cash flow may be restricted and distributions may be deferred." The
commencement of a deferral period with respect to interest on the debentures
and, accordingly, distributions on the preferred securities, would likely cause
the market price of the preferred securities to decline. See "-- We may defer
interest payments on the debentures for substantial periods, which could have
adverse consequences for you."
We have made only limited covenants in the indenture and the trust agreement,
which may not protect your investment in the event we experience significant
adverse changes in our financial condition or results of operations.
The indenture governing the debentures and the trust agreement governing the
trust do not require us to maintain any financial ratios or specified levels of
net worth, revenues, income, cash flow or liquidity, and therefore do not
protect holders of the debentures or the preferred securities in the event we
experience significant adverse changes in our financial condition or results of
operations. The indenture prevents us and any subsidiary from incurring, in
connection with the issuance of any trust preferred securities or any similar
securities, indebtedness that is senior in right of payment to the debentures.
The indenture also limits our ability and the ability of any subsidiary to
incur, in connection with the issuance of any trust preferred securities or any
similar securities, indebtedness that is equal in right of payment with the
debentures. Except as described above, neither the indenture or the trust
agreement limits our ability or the ability of any subsidiary to incur
additional indebtedness that is senior in right of payment to the debentures.
Therefore, you should not consider the provisions of these governing
instruments as a significant factor in evaluating whether we will be able to
comply with our obligations under the debentures or the guarantee.
In the event we redeem the debentures before March 31, 2032, you may not be
able to reinvest your principal at the same or a higher rate of return.
Under the following circumstances, we may redeem the debentures before their
stated maturity:
. We may redeem the debentures, in whole or in part, at any time on or after
March 31, 2007.
. We may redeem the debentures in whole, but not in part, within 180 days
after certain occurrences at any time during the life of the trust. These
occurrences may include adverse tax, investment company or bank regulatory
developments. See "Description of the Debentures -- Redemption."
You should assume that we will exercise our redemption option if we are able
to obtain capital at a lower cost than we must pay on the debentures or if it
is otherwise in our interest to redeem the debentures. If the debentures are
redeemed, the trust must redeem preferred securities having an aggregate
liquidation amount equal to the aggregate principal amount of debentures
redeemed, and you may be required to reinvest your principal at a time when you
may not be able to earn a return that is as high as you were earning on the
preferred securities.
14
We can distribute the debentures to you, which may have adverse tax
consequences for you and which may adversely affect the market price of the
preferred securities prior to such distribution.
The trust may be dissolved at any time before maturity of the debentures on
March 31, 2032. As a result, and subject to the terms of the trust agreement,
the trustees may distribute the debentures to you.
We cannot predict the market prices for the debentures that may be
incurreddistributed in exchange for preferred securities upon dissolution of the trust.
The preferred securities, or the debentures that you may receive if the trust
is liquidated, may trade at a discount to the price that you paid to purchase
the preferred securities. Because you may receive debentures, your investment
decision with regard to the preferred securities will also be an investment
decision with regard to the debentures. You should carefully review all of the
information contained in this prospectus regarding the debentures.
Under federal income tax laws supporting classification of the trust as a
grantor trust for tax purposes, a distribution of the debentures to you upon
the dissolution of the trust would not be a taxable event to you. If there is a
change in law, a distribution of debentures upon the dissolution of the trust
could be a taxable event to you.
You are subject to repayment risk because possible tax law changes could result
in a redemption of the preferred securities.
Future legislation may be enacted that could adversely affect our ability to
deduct our interest payments on the debentures for federal income tax purposes,
making redemption of the debentures likely and resulting in a redemption of the
preferred securities.
From time to time, Congress has proposed federal income tax law changes that
would, among other things, generally deny interest deductions to a corporate
issuer if the debt instrument has a term exceeding 15 years and if the debt
instrument is not reflected as indebtedness on the issuer's consolidated
balance sheet. Other proposed federal income tax law changes would have denied
interest deductions if the debt instrument had a term exceeding 20 years. These
proposals were not enacted into law. Although it is impossible to predict
whether future proposals of this nature will be introduced and enacted with
application to already issued and outstanding securities, in the future we
could be precluded from deducting interest on the debentures in this event.
Enactment of this type of proposal might in turn give rise to a Tax Event as
described under "Description of the Preferred Securities -- Redemption or
Exchange -- Redemption upon a Tax Event, Investment Company Event or Capital
Treatment Event."
Trading characteristics of the preferred securities may create adverse tax
consequences for you.
The preferred securities may trade at a price that does not reflect the
value of accrued but unpaid interest on the underlying debentures. If you
dispose of your preferred securities between record dates for payments on the
preferred securities, you may have adverse tax consequences. Under these
circumstances, you will be required to include accrued but unpaid interest on
the debentures allocable to the preferred securities through the date of
disposition in your income as ordinary income if you use the accrual method of
accounting or if this interest represents original issue discount. See "Federal
Income Tax Consequences."
If interest on the debentures is included in income under the original issue
discount provisions, you would add this amount to your adjusted tax basis in
your share of the underlying debentures deemed disposed. If your selling price
is less than your adjusted tax basis, which will include all accrued but unpaid
original issue discount interest included in your income, you could recognize a
capital loss which, subject to limited exceptions, cannot be applied to offset
ordinary income for federal income tax purposes. See "Federal Income Tax
Consequences" for more information on possible adverse tax consequences to you.
15
There is no current public market for the preferred securities, and their
market price may decline after you invest.
There is currently no public market for the preferred securities. Although
we have applied to have the preferred securities listed on the American Stock
Exchange, there is no guarantee that an active or liquid trading market will
develop for the preferred securities or that the quotation of the preferred
securities will continue to be listed on the American Stock Exchange. If an
active trading market does not develop, the market price and liquidity of the
preferred securities will be adversely affected. Even if an active public
market does develop, there is no guarantee that the market price for the
preferred securities will equal or exceed the price you pay for the preferred
securities.
Future trading prices of the preferred securities may be subject to
significant fluctuations in response to prevailing interest rates, our future
operating results and financial condition, the market for similar securities
and general economic and market conditions. The initial public offering price
of the preferred securities has been set at the liquidation amount of the
preferred securities and may be greater than the market price following the
offering.
The market price for the preferred securities, or the debentures that you
may receive in a distribution, is also likely to decline during any period that
we are deferring interest payments on the debentures.
You must rely on the property trustee to enforce your rights if there is an
event of default under the indenture.
You may not be able to directly enforce your rights against us if an event
of default under the indenture occurs. If an event of default under the
indenture occurs and is continuing, this event will also be an event of default
under the trust agreement. In that case, you must rely on the enforcement by
the Company.property trustee of its rights as holder of the debentures against us. The
holders of a majority in liquidation amount of the preferred securities will
have the right to direct the property trustee to enforce its rights. If the
property trustee does not enforce its rights following an event of default
after receipt of a request by the record holders to do so, any record holder
may, to the extent permitted by applicable law, take action directly against us
to enforce the property trustee's rights. If an event of default occurs under
the trust agreement that is attributable to our failure to pay interest or
principal on the debentures, or if we default under the guarantee, you may
proceed directly against us. You will not be able to exercise directly any
other remedies available to the holders of the debentures unless the property
trustee fails to do so.
As a holder of preferred securities you have limited voting rights, and we can
amend the trust agreement to change the terms and conditions of the
administration, operation and management of the trust without your consent.
Holders of preferred securities have limited voting rights. We can, without
your consent, make certain amendments to the trust agreement. Your voting
rights pertain primarily to certain amendments to the trust agreement and not
to the administration, operation or management of the trust. In general, only
we can replace or remove any of the trustees. However, if an event of default
under the trust agreement occurs and is continuing, the holders of at least a
majority in aggregate liquidation amount of the preferred securities may
replace the property trustee and the Delaware trustee. In certain
circumstances, with the consent of the holders of a majority in the aggregate
liquidation amount of the preferred securities, we may amend the trust
agreement to ensure that the trust remains classified for federal income tax
purposes as a grantor trust and to ensure that the trust retains its exemption
from status as an "investment company" under the Investment Company Act, even
if such amendment adversely affects your rights as a holder of preferred
securities. For more information regarding limitation on your ability to
control amendments to the trust agreement, see "Description of the Preferred
Securities -- Voting Rights; Amendment of Trust Agreement."
16
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the statements contained in this prospectus that are not
historical facts are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act. Our actual results may differ
materially from those included in the forward-looking statements.
Forward-looking statements are typically identified by words or phrases such as
"believe," "expect," "anticipate," "intend," "estimate," "may increase," "may
fluctuate," and similar expressions or future or conditional verbs such as
"will," "should," "would," and "could." These forward-looking statements
involve risks and uncertainties including, but not limited to the following:
. portfolio growth and the credit performance of the portfolios, including
bankruptcies and seasonal factors;
. changes in general economic conditions, including the performance of
financial markets, the performance of coal and coal related industries,
prevailing inflation and interest rates;
. realized gains from sales of investments, gains from asset sales, and
losses on commercial lending activities;
. results of various investment activities;
. competitors' pricing policies;
. changes in laws and regulations on competition;
. demographic changes on target market populations' savings and financial
planning needs;
. industry changes in information technology systems on which we are highly
dependent;
. failure of acquisitions to produce revenue enhancements or cost savings at
levels or within time frames originally anticipated or unforeseen
integration difficulties;
. adoption of a FFIEC policy that provides guidance on the reporting of
delinquent consumer loans and the timing of associated credit charge-offs
for financial institution subsidiaries; and
. legal proceedings and related matters.
In addition, the banking industry in general is subject to various monetary
and fiscal policies and regulations, which include those determined by the
Federal Reserve Board, the Office of the Comptroller of Currency, the Federal
Deposit Insurance Corporation, and state regulators, whose policies and
regulations could affect our results. These statements are representative only
on the date hereof, we undertake no obligation to update any forward-looking
statements made. We discuss these uncertainties and others in the sections of
this prospectus named "Risk Factors."
17
USE OF PROCEEDS
The trust will invest all of the proceeds from the sale of the trust
securities in the debentures. We anticipate that the net proceeds from the sale
of the debentures will be approximately $ million after deduction of offering
expenses estimated to be $ and underwriting commissions. We expect to use
approximately $12.3 million of the net proceeds from the sale of the debentures
to redeem our 8.25% senior notes due January 1, 2003, and $8 million to pay
down our line of credit, approximately $2.5 million of which was used for the
acquisition of Citizens National Bank & Trust of Hazard. The remaining net
proceeds will be used for general corporate purposes.
CAPITALIZATION
The following table sets forth our indebtedness and capitalization at
September 30, 2001 on an actual basis and on a pro forma as adjusted basis to
give effect to the offering and the application of the estimated net proceeds
from the corresponding sale of the debentures as described under "Use of
Proceeds," as if such sale had been consummated on September 30, 2001.
You should read this table in conjunction with our consolidated financial
statements and the related notes incorporated by reference into this prospectus
from our Annual Report on Form 10-K for the year ended December 31, 2000.
As of September 30, 2001 (Unaudited)
------------------------------------
Pro Forma Pro Forma
Actual Adjustments As Adjusted
-------- ----------- -----------
(Dollars in thousands)
Short-Term Indebtedness:
Parent company:
Revolving line of credit, expires January 31, 2002................ $ 8,000 $ (8,000) $ --
Subsidiaries:
Federal funds purchased........................................... 20,230 -- 20,230
Securities sold under agreements to repurchase.................... 50,411 -- 50,411
-------- -------- --------
Total short-term indebtedness................................. 78,461 (8,000) 70,641
Long-Term Indebtedness:
Parent company:
Senior notes, 8.25% interest, due January 1, 2003................. 12,230 (12,230) --
Subsidiaries:
Capital lease obligations......................................... 1,212 -- 1,212
Other............................................................. 2 -- 2
-------- -------- --------
Total long-term indebtedness.................................. 13,444 (12,230) 1,214
Company Obligated Trust Preferred Securities:
Trust preferred securities, 9.0% interest, due March 31, 2027........ 34,500 -- 34,500
Trust preferred securities (1)....................................... -- 25,000 25,000
Shareholders' Equity:
Preferred stock, 300,000 shares authorized and unissued Common stock,
$5 par value, shares authorized 25,000,000 shares outstanding
11,413,704......................................................... 57,068 -- 57,068
Capital surplus...................................................... 51,026 -- 51,026
Retained earnings.................................................... 77,927 -- 77,927
Accumulated other comprehensive income, net of tax................... 4,778 -- 4,778
-------- -------- --------
Total shareholders' equity.................................... $190,799 $ -- $190,799
======== ======== ========
Total capitalization (2)...................................... $238,743 $ 12,770 $251,513
======== ======== ========
18
As of September 30, 2001 (Unaudited)
-----------------------------------
Pro Forma Pro Forma
Actual Adjustments As Adjusted
------ ----------- -----------
(Dollars in thousands)
Capital Ratios (3):
Total shareholders' equity to total assets 7.88% 7.87%
Tier 1 risk-based capital ratio (4)....... 9.06 10.38
Total risk-based capital ratio (4)........ 10.30 11.61
Leverage ratio (4)(5)..................... 6.66 7.63
- --------
(1) Reflects the preferred securities at their issue price. As described
herein, the only assets of the trust, which is our subsidiary, will be
approximately $25.8 million in aggregate principal amount of subordinated
debentures, including the amount attributable to the issuance of the common
securities of the trust, which will mature on March 31, 2032. We will own
all of the common securities issued by the trust.
(2) Includes shareholders' equity and long-term indebtedness.
(3) The capital ratios, as adjusted, are computed including the estimated
proceeds from the sale of the preferred securities in a manner consistent
with Federal Reserve regulations.
(4) The preferred securities have been structured to qualify as Tier 1 capital.
However, in calculating the amount of Tier 1 qualifying capital, the
preferred securities can only be included up to the amount constituting 25%
of total Tier 1 core capital elements (including preferred securities). As
adjusted for this offering, our Tier 1 capital as of September 30, 2001
would have been approximately $182 million, of which $25.0 million would
have been attributable to the preferred securities offered by this
prospectus.
(5) The leverage ratio is Tier 1 capital divided by average quarterly assets
after deducting intangible assets and net deferred tax assets in excess of
regulatory maximum limits.
ACCOUNTING TREATMENT
The trust will be treated, for financial reporting purposes, as our finance
subsidiary and, accordingly, the accounts of the trust will be included in our
consolidated financial statements. The preferred securities will be presented
as a separate line item in our consolidated balance sheet under the caption
"Trust preferred securities," or other similar caption. In addition,
appropriate disclosures about the preferred securities, the guarantee and the
debentures will be included in the notes to our consolidated financial
statements. For financial reporting purposes, we will record distributions
payable on the preferred securities in our consolidated statements of income.
Our future reports filed under the Securities Exchange Act of 1934 will
include a footnote to the audited consolidated financial statements stating
that:
. the trust is wholly owned;
. the sole assets of the trust are the debentures, specifying the
debentures' outstanding principal amount, interest rate and maturity date;
and
. our obligations described in this prospectus, in the aggregate, constitute
a full, irrevocable and unconditional guarantee on a subordinated basis by
us of the obligations of the trust under the preferred securities.
Under accounting rules of the SEC, we are not required to include separate
financial statements of the trust in this prospectus because we will own all of
the trust's voting securities, the trust has no independent operations and we
guarantee the payments on the preferred securities to the extent described in
the prospectus.
19
REGULATORY TREATMENT
We are required by the Federal Reserve to maintain current levels of capital
for bank regulatory purposes. We expect that the preferred securities will be
treated as Tier 1 capital of Community Trust Bancorp, Inc. for these purposes.
MANAGEMENT
Our directors and executive officers and their principal position(s) with
Community Trust Bancorp, Inc. are shown in the following table.
Name Position(s)
---- -----------
Burlin Coleman........ Chairman of the Board
Jean R. Hale.......... Vice Chairman, President and Chief Executive Officer
Mark A. Gooch......... Executive Vice President and Treasurer
Ronald M. Holt........ Executive Vice President
William Hickman III... Executive Vice President and Secretary
James B. Draughn...... Executive Vice President
Michael S. Wasson..... Executive Vice President
Charles J. Baird...... Director
Nick A. Cooley........ Director
William A. Graham, Jr. Director
M. Lynn Parrish....... Director
Ernest M. Rogers...... Director
Burlin Coleman, age 72, has served Community Trust Bank and its predecessor
bank since 1949 until his retirement in 1994. He came out of retirement in 1996
to serve as President and Chief Executive Officer of Community Trust Bancorp,
Inc. until June 1999. He continues to serve as Chairman of Community Trust
Bancorp, Inc. and Community Trust Bank.
Jean R. Hale, age 54, has served as President and CEO of Community Trust
Bancorp, Inc. since July 1, 1999. Ms. Hale has served in various positions
within Community Trust Bank since 1969. Since April 2001, she has also served
as Vice Chairman of Community Trust Bancorp and Community Trust Bank. She has
been a director of Community Trust Bancorp, Inc. and Community Trust Bank since
1993. She currently serves on the board of directors of many organizations
including: Kentucky Economic Development Finance Authority of the State of
Kentucky (Chairman), Kentucky Coal and Export Council, Prestonburg Community
College (Chairman), KCTCS Foundation, East Kentucky Exposition Center and
Commonwealth Small Business Development Corporation. Ms. Hale served as a
director of the Federal Reserve Bank of Cleveland, Cincinnati branch from 1995
to 2001.
Mark A. Gooch, age 42, has been in the banking industry since 1975. He has
been with Community Trust Bank since 1987 serving in many positions. He became
President and CEO of Community Trust Bank and Executive Vice President and
Treasurer of Community Trust Bancorp, Inc. in July 1999 after holding many
positions with Community Trust Bank. He is a director of Pike County Chamber of
Commerce, Kentucky Bankers Association and P-16 Education Council.
Ronald M. Holt, age 54, joined Community Trust Bancorp, Inc. in April 1995
to supervise trust and investment activities. With 30 years of investment and
financial services sales experience, he has earned a number of professional
designations including Certified Financial Planner and Certified Trust and
Financial Advisor. Mr. Holt is a former director and regional manager of a $130
billion trust department.
20
William Hickman III, age 51, joined us in 1980 to form Community Trust
Bank's legal department. He left in 1994 to practice law and returned in 1997
to serve as Executive Vice President and Secretary of Community Trust Bancorp,
Inc. and Executive Vice President and Staff Attorney of Community Trust Bank.
James B. Draughn, age 42, has been with Community Trust Bank since May 1993
during which time he has held several positions. He became an Executive Vice
President of Community Trust Bancorp, Inc. and Executive Vice
President/Operations in July 2001. Mr. Draughn serves on the Morehead State
University Advisory Board.
Michael S. Wasson, age 50, joined Community Trust Bank on June 1, 2000 as
market president for the Lexington market. In October 2000 he was promoted to
Executive Vice President of Community Trust Bancorp, Inc. and regional
president to the central Kentucky market. Mr. Wasson has been involved in the
financial service industry since 1970. Prior to joining Community Trust, he was
senior manager for Mercantile Bancorporation. He serves as a director of
Downtown Lexington Corporation and Resources Education and for Community
Housing, Inc. He is currently serving on the access loan committee for the
Lexington, Kentucky Chamber of Commerce.
Charles J. Baird, age 51, has served as a director since 1987. Mr. Baird is
an attorney with Baird & Baird, P.S.C.
Nick A. Cooley, age 68, has served as a director since 1980. Mr. Cooley is
the President of Unit Coal Corporation.
William A. Graham, Jr., age 64, has served as a director since 1990. Mr.
Graham is the Chairman of the Advisory Board--Flemingsburg Market, Community
Trust Bank, National Association.
M. Lynn Parrish, age 52, has served as a director since 1993. Ms. Parrish is
President of Knott Floyd Land Co., Inc.
Ernest M. Rogers, age 74, has served as a director since 1980. Mr. Rogers is
President and General Manager of Rogers Petroleum Services, Inc.
- --------
Ages as of December 31, 2001.
21
DESCRIPTION OF THE TRUST
The trust is a statutory business trust formed pursuant to the Delaware
Business Trust Act under a trust agreement executed by us, as depositor, and
the trustees named in the trust agreement. A certificate of trust has been
filed with the Delaware Secretary of State. The trust agreement will be amended
and restated in its entirety in the form filed as an exhibit to the
registration statement of which this prospectus is a part, as of the date the
preferred securities are initially issued. The trust agreement will be
qualified under the Trust Indenture Act of 1939.
The following discussion contains a description of the material terms of the
trust agreement of the trust and is subject to, and is qualified in its
entirety by reference to, the amended and restated trust agreement and the
Trust Indenture Act. We urge prospective investors to read the form of amended
and restated trust agreement, which is filed as an exhibit to the registration
statement of which this prospectus forms a part.
The holders of the preferred securities issued pursuant to the offering
described in this prospectus will own all of the issued and outstanding
preferred securities of the trust which have certain prior rights over the
common securities of the trust. We will not initially own any of the preferred
securities. We will acquire common securities in an amount equal to at least 3%
of the total capital of the trust and will initially own, directly or
indirectly, all of the issued and outstanding common securities. The common
securities, together with the preferred securities, are called the trust
securities.
The trust exists exclusively for the purposes of:
. issuing and selling the preferred securities to the public for cash;
. issuing and selling its common securities to us;
. investing the proceeds from the sale of the trust securities in an
equivalent amount of debentures; and
. engaging in other activities that are incidental to those listed above,
such as receiving payments on the debentures and making distributions to
securities holders, furnishing notices and other administrative tasks.
The trust will not have any independent business operations or any assets,
revenues or cash flows other than those related to the issuance and
administration of the trust securities.
The rights of the holders of the trust securities are as set forth in the
trust agreement, the Delaware Business Trust Act and the Trust Indenture Act.
The trust agreement does not permit the trust to borrow money or make any
investment other than in the debentures. Other than with respect to the trust
securities, we have agreed to pay for all debts and obligations and all costs
and expenses of the trust, including the fees and expenses of the trustees and
any income taxes, duties and other governmental charges, and all costs and
expenses related to these charges, to which the trust may become subject,
except for United States withholding taxes that are properly withheld.
The number of trustees of the trust, pursuant to the amended and restated
trust agreement, initially will be five. Three of the trustees will be persons
who are employees or officers of or who are affiliated with us. These three are
the administrative trustees. The fourth trustee will be an entity that
maintains its principal place of business in the State of Delaware. It is the
Delaware trustee. Initially, First Union Trust Company, National Association, a
national banking association, will act as the Delaware trustee. The fifth
trustee, called the property trustee, will initially be First Union Trust
Company, National Association. The property trustee is the institutional
trustee under the trust agreement and acts as the indenture trustee called for
under the applicable provisions of the Trust Indenture Act. Also for purposes
of compliance with the Trust Indenture Act, First Union Trust Company, National
Association will act as guarantee trustee and indenture trustee under the
guarantee agreement and the indenture. See "Description of Guarantee--Status of the Guarantee"Debentures" and
"Description of Subordinated Debentures--Subordination.the Guarantee." The abilityWe, as
22
holder of CTBI Trustall of the common securities, will have the right to pay amounts due on the Preferred Securities is
solely dependent upon the Company making payments on the Subordinated
Debentures as and when required.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES
So long as no Eventappoint or
remove any trustee unless an event of Defaultdefault under the Indentureindenture has occurred
and is continuing, in which case only the holders of the preferred securities
may remove the Delaware trustee or the property trustee. The trust has a term
of approximately 30 years but may terminate earlier as provided in the trust
agreement.
The property trustee will hold the debentures for the benefit of the holders
of the trust securities and will have the power to exercise all rights, powers
and privileges under the indenture as the holder of the debentures. In
addition, the property trustee will maintain exclusive control of a segregated
non-interest-bearing "payment account" established with First Union Trust
Company, National Association to hold all payments made on the debentures for
the benefit of the holders of the trust securities. The property trustee will
make payments of distributions and payments on liquidation, redemption and
otherwise to the holders of the trust securities out of funds from the payment
account. The guarantee trustee will hold the guarantee for the benefit of the
holders of the preferred securities. We will pay all fees and expenses related
to the trust and the offering of the preferred securities, including the fees
and expenses of the trustees.
DESCRIPTION OF THE PREFERRED SECURITIES
The preferred securities will be issued pursuant to the trust agreement. For
more information about the trust agreement, see "Description of the Trust."
First Union Trust Company, National Association will act as property trustee
for the preferred securities under the trust agreement for purposes of
complying with the provisions of the Trust Indenture Act. The terms of the
preferred securities will include those stated in the trust agreement and those
made part of the trust agreement by the Trust Indenture Act.
The following discussion contains a description of the material provisions
of the preferred securities and is subject to, and is qualified in its entirety
by reference to, the trust agreement and the Trust Indenture Act. We urge
prospective investors to read the form of amended and restated trust agreement,
which is filed as an exhibit to the registration statement of which this
prospectus forms a part.
General
The trust agreement authorizes the administrative trustees, on behalf of the
trust, to issue the trust securities, which are comprised of 1,000,000
preferred securities to be sold to the public and 30,928 common securities
which we will acquire. We will own all of the common securities issued by the
trust. The trust is not permitted to issue any securities other than the trust
securities or to incur any indebtedness.
The preferred securities will represent preferred undivided beneficial
interests in the assets of the trust, and the holders of the preferred
securities will be entitled to a preference over the common securities upon an
event of default under the indenture with respect to distributions and amounts
payable on redemption or liquidation. The preferred securities will rank
equally, and payments on the preferred securities will be made proportionally,
with the common securities, except as described under "-- Subordination of
Common Securities."
The property trustee will hold legal title to the debentures in trust for
the benefit of the holders of the trust securities. We will guarantee the
payment of distributions out of money held by the trust, and payments upon
redemption of the preferred securities or liquidation of the trust, to the
extent described under "Description of the Guarantee." The guarantee agreement
does not cover the payment of any distribution or the liquidation amount when
the trust does not have sufficient funds available to make these payments.
Distributions
Source of Distributions. The funds of the trust available for distribution
to holders of the preferred securities will be limited to payments made under
the debentures, which the trust will purchase with the proceeds
23
from the sale of the trust securities. Distributions will be paid through the
property trustee, which will hold the amounts received from our interest
payments on the debentures in the payment account for the benefit of the
holders of the trust securities. If we do not make interest payments on the
debentures, the property trustee will not have funds available to pay
distributions on the preferred securities.
Payment of Distributions. Distributions on the preferred securities will be
payable at the annual rate of % of the $25 stated liquidation amount, payable
quarterly on March 31, June 30, September 30 and December 31 of each year, to
the holders of the preferred securities on the relevant record dates. So long
as the preferred securities are represented by a global security, as described
below, the record date will be the business day immediately preceding the
relevant distribution date. The first distribution date for the preferred
securities will be June 30, 2002.
Distributions will accumulate from the date of issuance, will be cumulative
and will be computed on the basis of a 360-day year of twelve 30-day months. If
the distribution date is not a business day, then payment of the distributions
will be made on the next day that is a business day, without any additional
interest or other payment for the delay. However, if the next business day is
in the next calendar year, payment of the distribution will be made on the
business day immediately preceding the scheduled distribution date. When we use
the term "business day," we mean any day other than a Saturday, a Sunday, a day
on which banking institutions in Pikeville, Kentucky, Wilmington, Delaware or
the Borough of Manhattan, New York City, New York are authorized or required by
law, regulation or executive order to remain closed or a day on which the
corporate trust office of the property trustee or the indenture trustee is
closed for business.
Extension Period. As long as no event of default under the indenture has
occurred and is continuing, we have the right under the Indenture to defer the payment of interest
on the Subordinated Debenturesdebentures at any time or from time to time for a period not exceeding 20 consecutive
quarters with respectquarters. We refer to each
Extension Period, provided that no Extension Periodthis period of deferral as an "extension period." No
extension period may extend beyond March 31, 2032 or end on a date other than
an interest payment date, which dates are the Stated Maturitysame as the distribution dates.
If we defer the payment of interest, quarterly distributions on the Subordinated Debentures. As a consequence ofpreferred
securities will also be deferred during any such deferral, quarterly Distributions onextension period. Any deferred
distributions under the Preferred Securities by CTBI Trust
will be deferred (and the amount of Distributions to which holders of the
Preferred Securities are entitledpreferred securities will accumulate additional Distributions
thereonamounts
at the annual rate of % per annum,%, compounded quarterly from the relevant payment date for such Distributions to the date of payment) during any such
Extension Period.distribution
date. The term "distributions" as used in this prospectus includes those
accumulated amounts.
During any such Extension Period, the Companyan extension period, we may not (i)not:
. declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of our capital
stock, other than stock dividends, non-cash dividends in connection with
the Company'simplementation of a shareholder rights plan, purchases of common stock
in connection with employee benefit plans or in connection with the
reclassification of any class of our capital stock into another class of
capital stock, or (ii)allow any of our direct or indirect subsidiaries to do
the same with respect to their capital stock, other than the payment of
dividends or distributions to us or to any of our direct or indirect
subsidiaries;
. make, or allow any of our direct or indirect subsidiaries to make, any
payment of principal, interest or premium if
any, on or repay, repurchase or
redeem any debt 6
securities of the Company, that rank pari passu with,equally, or are junior in
interest to, the Subordinated Debenturesdebentures;
. make, or allow any of our direct or indirect subsidiaries to make, any
guarantee payments with respect to any guarantee by the Companyus of theany debt
securities of any
subsidiary ofif the Company, if such guarantee ranks pari passuequally with or is
junior in interest to the
Subordinated Debentures (otherdebentures, other than (a) dividends
or distributions in Company common stock, (b) any declaration of a dividend in
connection with the implementation of a shareholders' rights plan, or the
issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under the Guarantee and (d) purchasesguarantee; or
. redeem, purchase or acquire less than all of common stock related to the rights underdebentures or any of the
Company's benefit plans for its directors, officers or employees). Prior
topreferred securities.
After the termination of any such Extension Period, the Company may further defer
the payment of interest, provided that no Extension Period may exceed 20
consecutive quarters or extend beyond the Stated Maturity of the Subordinated
Debentures. Upon the termination of any Extension Periodextension period and the payment of all interest then accrued and unpaid (together with interest thereon at the
annual rate of % compounded quarterly, to the extent permitted by
applicable law), the Companyamounts
due, we may elect to begin a new Extension Periodextension period, subject to the above
requirements.
There is no limitation24
We do not currently intend to exercise our right to defer distributions on
the number of times that
the Company may elect to begin an Extension Period. See "Descriptions of
Preferred Securities--General" and "Description of Subordinated Debentures--
Option to Extend Interest Payment Period."
Should an Extension Period occur, a holder of Preferred Securities will be
required to accrue and recognize income (in the form of original issue
discount) in respect of its pro rata share of the interest accruing on the
Subordinated Debentures heldpreferred securities by CTBI Trust for United States federal income
tax purposes. As a result, a holder of Preferred Securities will include such
income in gross income for United States federal income tax purposes in
advance of the receipt of cash, and will not receive the cash related to such
income from CTBI Trust if the holder disposes of the Preferred Securities
prior to the record date fordeferring the payment of the related Distributions. See
"Certain Federal Income Tax Consequences--Potential Extension of Interest
Payment Period and Original Issue Discount."
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Subordinated Debentures. However, should the Company elect to exercise such
right in the future, the market price of the Preferred Securities is likely to
be adversely affected. A holder that disposes of its Preferred Securities
during an Extension Period, therefore, might not receive the same return on
its investment as a holder that continues to hold its Preferred Securities. In
addition, as a result of the existence of the Company's right to defer
interest payments, the market price of the Preferred Securities may be more
volatile than the market prices of other securities on which original issue
discount accrues that are not subject to such optional deferrals.
TAX EVENT, INVESTMENT COMPANY EVENT, OR CAPITAL EVENT--REDEMPTION
Upon the occurrence and during the continuance of a Tax Event, Investment
Company Eventdebentures.
Redemption or Capital Event (whether occurring before or after March 31,
2007), the Company has the right to redeem the Subordinated Debentures in
whole (but not in part) within 90 days following the occurrence of such Tax
Event, Investment Company Event or Capital Event and, therefore, cause a
mandatory redemption of the Preferred Securities. The exercise of such right
is subjectExchange
General. Subject to the Company having received prior approval of the Federal Reserve, if required,
we will have the right to do so ifredeem the debentures:
. in whole at any time, or in part from time to time, on or after March 31,
2007;
. at any time, in whole, within 180 days following the occurrence of a Tax
Event, an Investment Company Event or a Capital Treatment Event, which
terms we define below; or
. at any time, to the extent of any preferred securities we repurchase, plus
a proportionate amount of the common securities we hold.
Mandatory Redemption. Upon our repayment or redemption, in whole or in part,
of any debentures, whether on March 31, 2032 or earlier, the property trustee
will apply the proceeds to redeem the same amount of the trust securities, upon
not less than 30 days nor more than 60 days notice, at the redemption price.
The redemption price will equal 100% of the aggregate liquidation amount of the
trust securities plus accumulated but unpaid distributions to the date of
redemption. If less than all of the debentures are to be repaid or redeemed on
a date of redemption, then required under applicable guidelinesthe proceeds from such repayment or policiesredemption will
be allocated to redemption of preferred securities and common securities
proportionately.
Distribution of Debentures in Exchange for Preferred Securities. Upon prior
approval of the Federal Reserve. See "Description of Subordinated Debentures--Redemption."
EXCHANGE OF PREFERRED SECURITIES FOR SUBORDINATED DEBENTURES
The CompanyReserve, if required by law or regulation, we will have
the right at any time to terminate CTBI Trustdissolve the trust and, after satisfaction of the
liabilities of creditors of the trust as provided by applicable law, including,
without limitation, amounts due and owing the trustees of the trust, cause the
Subordinated Debenturesdebentures to be distributed directly to the holders of the
Preferred Securitiestrust securities in
liquidation of CTBI Trust. The exercisethe trust. See "-- Liquidation Distribution Upon Dissolution."
After the liquidation date fixed for any distribution of such right
is subject to the Company having received prior approval of the Federal
Reserve if then required under applicable capital guidelines or policies of
the Federal Reserve. See "Description of Preferred Securities-- Redemption."
7
SHORTENING OF STATED MATURITY OF SUBORDINATED DEBENTURES
The Companydebentures in
exchange for preferred securities:
. those trust securities will have the right at any time to shorten the maturity of the
Subordinated Debentures to a date not earlier than March 31, 2007. The exercise
of such right is subject to the Company having received prior approval of the
Federal Reserve if then required under applicable capital guidelines or
policies of the Federal Reserve.
EXTENSION OF STATED MATURITY OF SUBORDINATED DEBENTURES
The Company will also have the right to extend the maturity of the
Subordinated Debentures whether or not CTBI Trust is terminated and the
Subordinated Debentures are distributed to holders of the Preferred Securities
to a date no later than the 39th anniversary of the initial issuance of the
Preferred Securities, provided that the Company can extend the maturity only if
at the time such election is made and at the time of such extension (i) the
Company is not in bankruptcy, otherwise insolvent or in liquidation, (ii) the
Company is not in default in the payment of any interest or principal on the
Subordinated Debentures, and (iii) CTBI Trust is not in arrears on payments of
Distributions on the Preferred Securities and no deferred Distributions are
accumulated.
RIGHTS UNDER THE GUARANTEE
The Guarantee guarantees to the holders of the Preferred Securities the
following payments, to the extent not paid by CTBI Trust: (i) any accumulated
and unpaid Distributions requiredlonger be deemed to be paid on the Preferred Securities, to
the extent that CTBI Trust has funds on hand legally available therefor at such
time, (ii) the redemption price with respect to any Preferred Securities called
for redemption, to the extent that CTBI Trust has funds on hand legally
available therefor at such time, and (iii) upon a voluntary or involuntary
dissolution, winding-up or liquidation of CTBI Trust (unless the Subordinated
Debentures are distributed to holders of the Preferred Securities), the lesser
of (a) the aggregate of the Liquidation Amount and all accumulated and unpaid
Distributions to the date of payment to the extent that CTBI Trust has funds on
hand available therefor at such time and (b) the amount of assets of CTBI Trust
remaining available for distribution to holders of the Preferred Securities.
The holders of not less than a majority of aggregate Liquidation Amount of the
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trusteeoutstanding;
. certificates representing debentures in
respect of the Guarantee or to direct the exercise of any trust power conferred
upon the Guarantee Trustee under the Guarantee. Any holder of the Preferred
Securities may institute a legal proceeding directly against the Company to
enforce its rights under the Guarantee without first instituting a legal
proceeding against CTBI Trust, the Guarantee Trustee or any other person or
entity. If the Company were to default on its obligation to pay amounts payable
under the Subordinated Debentures, CTBI Trust would lack funds for the payment
of Distributions or amounts payable on redemption of the Preferred Securities
or otherwise, and, in such event, holders of Preferred Securities would not be
able to rely upon the Guarantee for such amounts. Instead, in the event a
Debenture Event of Default shall have occurred and be continuing and such event
is attributable to the failure of the Company to pay interest on or principal
of the Subordinated Debentures on the payment date on which such payment is due
and payable, then a holder of Preferred Securities may institute a legal
proceeding directly against the Company for enforcement of payment to such
holder of the principal of or interest on such Subordinated Debentures having a principal amount equal to the
aggregate Liquidation Amountliquidation amount of those preferred securities will be issued in
exchange for the preferred securities certificates;
. we will use our reasonable efforts to list the debentures on the American
Stock Exchange or such other securities exchange or other organization as
the preferred securities are then listed or traded;
. any certificates representing trust securities that are not surrendered
for exchange will be deemed to represent debentures with a principal
amount equal to the liquidation amount of those preferred securities,
accruing interest at the rate provided for in the debentures from the last
distribution date on the preferred securities; and
. all rights of the Preferred
Securitiestrust security holders other than the right to receive
debentures upon surrender of such holder (a "Direct Action"). In connection with such Direct
Action, the Companya certificate representing trust securities
will have a right of set-off under the Indenture to the
extent of any payment made by the Company to such holder of Preferred
Securities in the Direct Action. Except as described herein, holders of
Preferred Securities will not be able to exercise directly any other remedy
available to the holders of the Subordinated Debentures or assert directly any
other rights in respect of the Subordinated Debentures. See "Description of
Subordinated Debentures--Debenture Events of Default," "--Enforcement of
Certain Rights by Holders of Preferred Securities" and "Description of
Guarantee."
The CTBI Trust Agreement providesterminate.
We cannot assure you that each holder of Preferred Securities by
acceptance thereof agrees to the provisions of the Guarantee and the Indenture.
8
LIMITED VOTING RIGHTS
Holders of Preferred Securities will generally have limited voting rights
relating only to the modification of the Preferred Securities and the exercise
of CTBI Trust's rights as holder of Subordinated Debentures and the Guarantee.
Holders of Preferred Securities will not be entitled to vote to appoint, remove
or replace the Property Trustee or the Delaware Trustee, and such voting rights
are vested exclusively in the holder of the Common Securities except upon the
occurrence of certain events described herein. The Property Trustee, the
Administrative Trustees and the Company may amend the CTBI Trust Agreement
without the consent of holders of Preferred Securities to ensure that CTBI
Trust will be classified for United States federal income tax purposes as a
grantor trust even if such action adversely affects the interests of such
holders. See "Description of Preferred Securities--Removal of CTBI Trust
Trustees" and "--Voting Rights; Amendment of Trust Agreement."
POSSIBLE TAX LAW CHANGES AFFECTING THE PREFERRED SECURITIES
On February 6, 1997, the revenue portion of President Clinton's 1998 budget
proposal (the "Budget Proposal") was released. The Budget Proposal would
generally deny deductions for interest on an instrument issued by a corporation
that has a maximum weighted average maturity of more than 40 years. The Budget
Proposal would also generally deny deductions for interest or original issue
discount on an instrument issued by a corporation that has a maximum term of
more than 15 years and that is not shown as indebtedness on the separate
balance sheet of the issuer filed with the Commission or, where the instrument
is issued to a related party (other than a corporation), where the holder or
some other related party issues a related instrument that is not shown as
indebtedness on the issuer's consolidated balance sheet filed with the
Commission. The above described provisions of the Budget Proposal are proposed
to be effective generally for instruments issued on or after the date of first
Congressional committee action. Since the Subordinated Debentures cannot have a
term exceeding 40 years, the first of the above described Budget Proposals
would be inapplicable. Furthermore, since the Company intends to reflect the
Preferred Securities as long-term debt in its consolidated balance sheet filed
with the Commission (although it will treat the Preferred Securities as a
minority interest for regulatory reporting), the Budget Proposal, as currently
drafted, would not appear to apply to the Subordinated Debentures. There can be
no assurance, however, that similar legislation which would apply to the
Subordinated Debentures will not be enacted, and such legislation could be
retroactive in effect. If any such legislation were enacted, the Company would
be unable to deduct interest on the Subordinated Debentures. Such a change
could give rise to a Tax Event, which would permit the Company to cause a
redemption of the Preferred Securities before March 31, 2007. See "Description
of Subordinated Debentures--Redemption" and "Description of the Preferred
Securities--Redemption--Tax Event Redemption, Investment Company Event
Redemption or Capital Event Redemption." See also "Certain Federal Income Tax
Consequences--Effect of Proposed Changes in Tax Laws."
MARKET PRICES
There can be no assurance as to the market prices for Preferred Securitiesthe preferred securities or
Subordinated Debenturesthe debentures that may be distributed in exchange for Preferred
Securities if a dissolution and liquidation of CTBI Trust occurs. Accordingly, the
Preferred
Securities,trust were to occur would be favorable. The preferred securities that an
investor may purchase, or the Subordinated Debenturesdebentures that a holder of Preferred
Securitiesan investor may receive on
dissolution and liquidation of CTBI Trust,the trust, may trade at a discount to the price
that the investor paid to purchase the Preferred Securities offered
hereby. In addition, there can be no assurance that the Company will not
exercise its option to change the maturity of the Subordinated Debentures as
permitted by the terms thereof and of the Indenture. Because holders of
Preferred Securities may receive Subordinated Debentures on liquidation of CTBI
Trust, prospective purchasers of Preferred Securities are also making an
investment decision with regard to the Subordinated Debentures and should
carefully review all the information regarding the Subordinated Debentures
contained herein. See "Description of Subordinated Debentures."
TRADING CHARACTERISTICS OF PREFERRED SECURITIES
The Preferred Securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest with respect to the underlying
Subordinated Debentures. A holder that disposes of its Preferred Securities
9
between record dates for payments of distributions thereon (and consequently
does not receive a Distribution from CTBI Trust for the period prior to such
disposition) will be required to include as ordinary income either OID (if
applicable) or accrued but unpaid interest on the Subordinated Debentures
through the date of disposition. To the extent the amount realized is less than
the holder's adjusted tax basis, a holder will generally recognize a capital
loss. Subject to certain limited exceptions, capital losses cannot be applied
to offset ordinary income for United States federal income tax purposes. See
"Certain Federal Income Tax Consequences--Disposition of Preferred Securities."
PREFERRED SECURITIES ARE NOT INSURED
The Preferred Securities are not insured by the Bank Insurance Fund or the
Savings Association Insurance Fund of the Federal Deposit Insurance Corporation
("FDIC") or by any other governmental agency.
RISK FACTORS RELATING TO THE COMPANY
STATUS OF THE COMPANY AS A BANK HOLDING COMPANY
The Company is a legal entity separate and distinct from the Banks and its
other subsidiaries, although the principal source of the Company's cash
revenues is dividends from the Banks. The right of the Company to participate
in the assets of any subsidiarypreferred securities.
Redemption upon the latter's liquidation, reorganization
or otherwise (and thus the ability of the holders of Preferred Securities to
benefit indirectly from any such distribution) will be subject to the claims of
the subsidiaries' creditors, which will take priority except to the extent that
the Company may itself be a creditor with a recognized claim.
The Company's principal source of funds is dividends received from the
subsidiary banks. Regulations limit the amount of dividends that may be paid by
the Company's banking subsidiaries without prior approval. During 1997,
approximately $3.4 million plus any 1997 net profits can be paid by the
Company's banking subsidiaries without prior regulatory approval.
The Banks are also subject to restrictions under federal law which limit the
transfer of funds by any of the Banks to the Company and its nonbanking
subsidiaries, whether in the form of loans, extensions of credit, investments,
asset purchases or otherwise. Such transfers by any Bank to the Company or any
of the Company's nonbanking subsidiaries are limited in amount to 10% of such
Bank's capital and surplus and, with respect to the Company and all such
nonbanking subsidiaries, to an aggregate of 20% of such Bank's capital and
surplus. Furthermore, such loans and extensions of credit are required to be
secured in specified amounts.
IMPACT OF INTEREST RATE CHANGES
The Company's results of operations are derived from the operations of the
Banks and are principally dependent on net interest income, calculated as the
difference between interest earned on loans and investments and the interest
expense paid on deposits and other borrowings. Like other banks and financial
institutions, the Company's interest income and interest expense are affected
by general economic conditions and by the policies of regulatory authorities,
including the monetary policies of the Federal Reserve. While management has
taken measures intended to manage the risks of operating in a changing interest
rate environment, there can be no assurance that such measures will be
effective in avoiding undue interest rate risk. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Interest Rate
Sensitivity Analysts."
CREDIT RISK AND LOAN CONCENTRATION
As a financial institution, the Company is exposed to the risk that customers
to whom the Banks have made loans will be unable to repay those loans according
to their terms and that collateral securing such loans (if any) may not be
sufficient in value to assure repayment. Credit losses could have a material
adverse effect on the Company's operating results.
10
A primary risk facing the Company, and financial institutions in general, is
credit risk, that is, the risk of losing principal and interest due to a
borrower's failure to perform according to the terms of such borrower's loan
agreement. As of December 31, 1996, the Company's total loan portfolio was
approximately $1,220 million or 67.8% of its total assets. The three largest
components of the loan portfolio are commercial loans, $539 million or 38.6% of
total loans, consumer installment loans, $257 million or 23.7% of total loans,
and real estate mortgage and construction loans, $420 million or 37.4% of total
loans. The Company's credit risk with respect to its consumer installment loan
portfolio and commercial loan portfolio relates principally to the general
creditworthiness of individuals and small- to medium-sized businesses in
eastern, central and south-central Kentucky and eastern and central Tennessee.
The Company's credit risk with respect to its real estate mortgage and
construction loan portfolio relates principally to the general creditworthiness
of individuals and the value of real estate serving as security for the
repayment of the loans.
REGULATORY RISK
The banking industry is heavily regulated. These regulations are primarily
intended to protect depositors and the FDIC, not shareholders or other
creditors. Regulations affecting the financial institutions industry are
undergoing continuous change, and the ultimate effect of such changes cannot be
predicted. Regulations and laws affecting the Company and the Banks may be
modified at any time, and new legislation affecting financial institutions may
be proposed and enacted. There is no assurance that such modifications or new
laws will not materially and adversely affect the business, condition or
operations of the Company and the Banks.
EXPOSURE TO LOCAL ECONOMIC CONDITIONS
The success of the Company and the Banks is dependent to a certain extent
upon the general economic conditions of the Commonwealth of Kentucky and the
geographic markets served by the Banks. Unlike larger banks which are
geographically diversified, the Company and the Banks provide financial and
banking services to customers in east, central and south-central Kentucky. No
assurance can be given concerning the economic conditions which will exist in
such markets.
COMPETITION
The Company's subsidiaries face substantial competition for deposit, credit
and trust relationships, as well as other sources of funding in the communities
they serve. Competing providers include other national and state banks, thrifts
and trust companies, insurance companies, mortgage banking operations, credit
unions, finance companies, money market funds and other financial and non-
financial companies which may offer products functionally equivalent to those
offered by the Company's subsidiaries. Competing providers may have greater
financial resources than the Company and offer services within and outside the
market areas served by the Company's subsidiaries.
Since July 1989, banking legislation in Kentucky has placed no limit on the
number of banks or bank holding companies which a bank holding company may
acquire. Interstate acquisitions are allowed where reciprocity exists between
the laws of Kentucky. As a result, the Company may face increased competition
from out-of-state banks. Bank holding companies are prohibited from controlling
more than 15% of deposits held by banks in the state (exclusive of inter-bank
and foreign deposits).
USE OF PROCEEDS
The CTBI Trust will use the proceeds of the sale of the Preferred Securities
to acquire Subordinated Debentures from the Company. The Company intends to
apply the net proceeds from the sale of the Subordinated Debentures to its
general funds to be used for expansion through new branches and acquisitions,
to fund growth in the Company's indirect consumer loan portfolio and for
general corporate purposes. The Company does not have any current agreements or
understandings regarding any acquisitions.
11
ACCOUNTING TREATMENT
For financial reporting purposes, CTBI Trust will be treated as a subsidiary
of the Company and, accordingly, the accounts of CTBI Trust will be included in
the consolidated financial statements of the Company. The Preferred Securities
will be presented in the consolidated balance sheet of the Company as a
component of long term debt. The Company will record distributions payable on
the Preferred Securities as interest expense in its consolidated statement of
income.
12
THE COMPANY
The Company is a bank holding company registered with the Board of Governors
of the Federal Reserve System ("Federal Reserve") as a bank holding company and
with the Office of Thrift Supervision as a thrift holding company. The Company
was incorporated August 12, 1980, under the laws of the Commonwealth of
Kentucky. The Company currently owns all of the capital stock of two commercial
banks, one thrift and one trust company, serving small and mid-sized
communities in eastern, central and south-central Kentucky. The commercial
banks are Community Trust Bank, N.A. and Commercial Bank, West Liberty. The
Company also owns all of the capital stock of Community Trust Bank, FSB, a
federal savings bank located in Campbellsville, Kentucky ("Savings Bank") and
the Trust Company of Kentucky, a state chartered trust company, with its
principal office in Ashland, Kentucky and satellite offices in Lexington,
Louisville, Middlesboro and Pikeville, Kentucky. As of December 31, 1996, the
Company had total consolidated assets of $1.8 billion and total consolidated
deposits of $1.5 billion, making it one of the largest independent bank holding
companies headquartered in the Commonwealth of Kentucky.
Effective January 1, 1997, the Company changed its name from Pikeville
National Corporation to Community Trust Bancorp, Inc., changed the name of the
Lead Bank from Pikeville National Bank & Trust Company to Community Trust Bank,
N.A. and merged seven of its other commercial bank subsidiaries into the Lead
Bank (the "Consolidation"). As a result of these transactions, the Lead Bank
has approximately $1.5 billion in assets and 42 offices in 12 Kentucky
counties. The Company's thrift and trust subsidiaries and West Liberty continue
to operate as independent subsidiaries.
The Company excluded Commercial Bank, West Liberty, Kentucky ("West Liberty")
from the Consolidation. The Company has entered into a definitive agreement,
subject to regulatory approval, to sell West Liberty to Commercial Bancshares,
Inc., of West Liberty, Kentucky for cash of $10.2 million. As of December 31,
1996, West Liberty had $73 million in assets, constituting 4% of the Company's
total consolidated assets. The Lead Bank, the Savings Bank and West Liberty are
collectively referred to herein as the "Banks."
Through its subsidiaries, the Company engages in a wide range of commercial
and personal banking activities, which include accepting time and demand
deposits; making secured and unsecured loans to corporations, individuals and
others; providing cash management services to corporate and individual
customers; issuing letters of credit; renting safe deposit boxes and providing
funds transfer services. The lending activities of the Banks include making
commercial, construction, mortgage, personal and consumer loans. Also available
are lease financing, lines of credit, revolving credits, term loans and other
specialized loans including asset-based financing. Various corporate
subsidiaries act as trustees of personal trusts, as executors of estates, as
trustees for employee benefit trusts, as registrars, transfer agents and paying
agents for bond and stock issues and as depositories for securities.
RECENT DEVELOPMENTS
From and after December 31, 1996, the following developments have occurred
with respect to Company:
1. On January 30, 1997, the Company declared a 10% stock dividend to
holders of the Company's common stock of record as of March 15, 1997. The
stock dividend will be distributed on April 15, 1997.
2. On January 17, 1997, the Company settled a dispute with a former
software vendor pursuant to which such former software vendor paid the
Company $4.9 million before taxes.
13
CAPITALIZATION
The following table sets forth (i) the consolidated capitalization of the
Company at December 31, 1996 and (ii) the consolidated capitalization of the
Company giving effect to the issuance of the Preferred Securities hereby
offered by CTBI Trust, respectively, as if such sale had been consummated on
December 31, 1996, and assuming the Underwriters' over-allotment options were
not exercised.
DECEMBER 31, 1996
---------------------
ACTUAL AS ADJUSTED
-------- -----------
(DOLLARS IN
THOUSANDS)
LONG-TERM DEBT
Notes Payable...................................... $ 19,136 $ 19,136
Guaranteed preferred beneficial interests in the
Company's Subordinated Debentures................. 0 30,000
-------- --------
Total Long-term Debt............................. $ 19,136 $ 39,136
-------- --------
SHAREHOLDERS' EQUITY
Common stock, $5 par value; 25,000,000 shares
authorized; 9,128,814 shares issued and
outstanding....................................... $ 45,644 $ 45,622
Capital Surplus.................................... 27,915 27,915
Net unrealized holding gains on investment
securities available for sale..................... (781) 356
Retained earnings.................................. 71,976 71,976
-------- --------
Total Shareholders' Equity....................... 144,754 144,754
-------- --------
Total Capitalization........................... $163,890 $193,890
======== ========
CAPITAL RATIOS
The following table sets forth certain ratios for the Company.
TO BE WELL CAPITALIZED
UNDER PROMPT
FOR CAPITAL ADEQUACY CORRECTIVE ACTION
ACTUAL PURPOSES PROVISIONS (1)
-------------- ---------------------- -----------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
-------- ----- ------------ --------- ------------ ----------
(IN THOUSANDS)
AS OF DECEMBER 31, 1996
Total Capital
(to Risk Weighted
Assets)................ $141,339 10.96% $ 103,152 8.00% $ 128,940 10.00%
Tier I Capital
(to Risk Weighted
Assets)................ 125,188 9.71% 51,576 4.00% 77,364 6.00%
Tier I Capital
(to Average Assets).... 125,188 7.05% 71,052 4.00% 88,815 5.00%
- --------
(1) The Company is not currently subject to Prompt Corrective Action
Provisions.
14
SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY(1)
The following table presents selected financial data for the Company for each
of the last five years ended December 31:
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
SUMMARY RESULTS OF
OPERATIONS
Interest Income......... $ 144,447 $ 131,026 $ 106,560 $ 104,929 $ 109,946
Interest Expenses....... 69,092 64,992 47,370 46,616 53,746
---------- ---------- ---------- ---------- ----------
Net interest income.. 75,355 66,034 59,190 58,313 56,200
Provision for loan
losses................. 7,285 5,858 6,066 4,442 7,311
Noninterest income...... 14,439 11,116 9,653 12,069 11,427
Noninterest expense..... 55,243 55,871 52,287 45,571 42,140
---------- ---------- ---------- ---------- ----------
Income before federal
income taxes........... 27,266 15,421 10,490 20,369 18,176
Federal income tax
expense................ 8,471 4,608 2,278 5,533 5,072
---------- ---------- ---------- ---------- ----------
Net income........... $ 18,795 $ 10,813 $ 8,212 $ 14,836 $ 13,104
========== ========== ========== ========== ==========
PER COMMON SHARE:
Earnings per share...... $ 2.06 $ 1.21 $ 0.95 $ 1.80 $ 1.63
Cash Dividends Declared. 0.74 0.66 0.61 0.55 0.51
As a percentage of
earnings per share.... 35.92% 54.55% 64.21% 30.56% 31.29%
Book value, end of year. 15.86 14.66 13.57 13.44 12.08
Average common shares
outstanding............ 9,138 8,960 8,601 8,246 8,024
AT YEAR END:
Total assets............ $1,815,660 $1,730,170 $1,499,434 $1,464,039 $1,390,910
Long-term debt.......... 19,136 27,873 24,944 35,277 36,340
Shareholders' equity.... 144,754 133,795 166,636 107,371 96,406
AVERAGES:
Assets.................. $1,762,009 $1,630,922 $1,470,630 $1,415,441 $1,354,655
Deposits................ 1,467,794 1,359,947 1,216,544 1,181,347 1,173,305
Earning assets.......... 1,632,532 1,508,539 1,365,750 1,313,064 1,253,475
Loans................... 1,215,243 1,021,637 872,045 849,202 857,532
Shareholders' equity.... 138,925 130,780 116,165 102,445 90,594
PROFITABILITY RATIOS:
Return on average
assets................. 1.07% 0.66% 0.56% 1.05% 0.97%
Return on average common
equity................. 13.53% 8.27% 7.07% 14.48% 14.46%
Net interest margin..... 4.76% 4.54% 4.51% 4.60% 4.68%
CAPITAL RATIOS:
Average equity to
average assets......... 7.88% 8.02% 7.90% 7.24% 6.69%
Risk-based capital
ratios:
Leverage ratio......... 7.05% 6.44% 7.19% 6.36% 5.89%
Tier I Capital......... 9.71% 10.24% 11.08% 10.10% 9.34%
Total capital.......... 10.96% 11.51% 12.33% 12.23% 11.53%
OTHER SIGNIFICANT
RATIOS:
Allowance to net loans,
end of year............ 1.44% 1.44% 1.43% 1.58% 1.63%
Allowance to
nonperforming loans,
end of year............ 113.50% 119.99% 106.12% 90.04% 95.96%
Nonperforming assets to
loans and foreclosed
properties,
end of year............ 1.35% 1.37% 1.83% 2.18% 2.51%
Net charge-offs to
average loans.......... 0.37% 0.47% 0.74% 0.57% 0.60%
RATIO OF EARNINGS TO
FIXED CHARGES:(2)
Excluding deposit
interest.............. 4.10x 2.77x 2.33x 3.61x 4.85x
Including deposit
interest.............. 1.39x 1.24x 1.22x 1.43x 1.34x
RATIO OF EARNINGS TO
COMBINED FIXED CHARGES
AND PREFERRED STOCK
DIVIDENDS:(2)
Excluding deposit
interest.............. 4.10x 2.77x 2.33x 3.61x 4.85x
Including deposit
interest.............. 1.39x 1.24x 1.22x 1.43x 1.34x
- --------
(1) The numbers have been adjusted to reflect a 3 for 2 common stock split,
effective February 1, 1994 to shareholders of record on January 5, 1994.
(2) Earnings consist of income before income tax plus interest expense. Fixed
charges consist of interest expense. The Company does not currently have
any preferred stock outstanding.
15
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company reported record earnings of $18.8 million for 1996, an increase
of 74% over the $10.8 million for 1995 and an increase of 129% over the $8.2
million for 1994. Earnings per share for 1996 increased to $2.06 per share,
compared to $1.21 for 1995 and $0.95 for 1994.
Earnings for 1996 reflected increases in net interest income and noninterest
income and decreases in noninterest expense. The Company's return on average
assets for 1996 increased to 1.07% from 0.56% and 0.66% in 1994 and 1995,
respectively, and the return on average equity for 1996 increased to 13.53% as
compared to 7.07% and 8.27% for 1994 and 1995, respectively.
Total assets as of December 31, 1996 were $1.82 billion, an increase of 5.2%
as compared to total assets of $1.73 billion as of December 31, 1995. Total
loans as of December 31, 1996 were $1.31 billion compared to $1.12 billion as
of December 31, 1995, an increase of 17.0%. Total deposits increased marginally
from $1.47 billion at December 31, 1995 to $1.48 billion at December 31, 1996.
Effective January 1, 1997, the Company changed its name from Pikeville
National Corporation to Community Trust Bancorp, Inc., changed the name of its
lead bank from Pikeville National Bank and Trust Company to Community Trust
Bank, N.A. (the "Lead Bank") and merged seven of its other commercial bank
subsidiaries into the Lead Bank. As a result of these transactions, the Lead
Bank has $1.5 billion in assets and forty-two offices in twelve Kentucky
counties. The Company's thrift and trust subsidiaries, the Savings Bank and
Trust Company of Kentucky, remain subsidiaries of the Company and will continue
to operate as independent entities.
The Company excluded West Liberty from the merger of its commercial bank
subsidiaries into the Lead Bank. The Company has entered into a definitive
agreement, subject to regulatory approval, to sell West Liberty to Commercial
Bancshares, Inc., of West Liberty, Kentucky for cash of $10.2 million. West
Liberty has $73 million in assets, constituting 4% of the Company's total
consolidated assets. Consistent with the Company's strategic plan, the funds
generated by the sale of West Liberty will provide the Company with the
opportunity to expand in existing or enter into new markets through either
internal expansion or acquisitions.
After fourteen years of service, including as President and CEO from January
1, 1995, Terry Coleman resigned effective November 1, 1996 to pursue other
interests. Burlin Coleman, the CEO from 1979 through 1994 and current chairman,
came out of retirement to take over as President and CEO. The Company intends
to continue the direction undertaken during Terry Coleman's tenure and does not
expect his departure to have significant adverse consequences on the Company.
The Company reached a settlement in a dispute with a former software vendor
in January 1997. The settlement will increase 1997 earnings by $3.2 million,
net of tax, and will be reported as an extraordinary item in the 1997
consolidated financial statements.
ACQUISITIONS
While no acquisitions were completed in 1996, the Company acquired all of the
outstanding stock of four Kentucky banks during 1995, giving the Company
additional economies of scale and new markets in which to deliver its existing
products.
On February 2, 1995, the Company acquired Community Bank of Lexington, Inc.,
Lexington, Kentucky ("Community Bank"), which had assets of $61 million. The
Company issued 366,000 shares of common stock with a market price of $24 per
share to fund the acquisition. The transaction was accounted for as a purchase,
with $6.3 million of goodwill recognized. The offices of Community Bank became
branches of the Lead Bank
16
on March 31, 1995. While the Company had already been active in lending in the
Lexington-Fayette County market through its loan production office, this
acquisition has given the Company offices in which to provide deposit products
and other financial services in one of Kentucky's fastest growing markets.
On May 31, 1995, the Company acquired Woodford Bancorp, Inc., Versailles,
Kentucky ("Woodford"), which had assets of $103 million for 967,000 shares of
its common stock. The transaction was accounted for as a pooling-of-interests,
and all prior period financial information was restated to give effect to the
transaction. This acquisition gives the Company another presence in the central
Kentucky area, which has one of the highest per capita incomes and lowest
unemployment rates in Kentucky.
On June 30, 1995, the Company acquired Commercial Bank, Middlesboro, Kentucky
("Middlesboro"), which had assets of $99 million for $14.4 million in cash. The
transaction was accounted for as a purchase, and goodwill of $4.3 million was
recognized. The Company borrowed $13.5 million to fund the acquisition.
Middlesboro is located on the Kentucky-Virginia-Tennessee border and is a
growing market with a thriving tourism industry.
On November 3, 1995, the Company acquired United Whitley Corporation,
Williamsburg, Kentucky ("Williamsburg"), and its subsidiary, Bank of
Williamsburg, which had assets of $37 million, for 172,000 shares of its common
stock. The transaction was accounted for as a pooling-of-interests, but without
restatement of prior period financial information, due to lack of materiality.
Bank of Williamsburg was merged into Farmers National Bank, Williamsburg,
Kentucky, already owned by the Company on the date of acquisition. Through the
acquisition, the Company increased the deposit base of an existing affiliate
substantially while increasing its operating costs only marginally. Through the
merger transaction, the Company was able to move the bank charter of the merged
institution to adjacent Laurel County and now has a branch in London, Kentucky,
which is among the fastest growing areas in Kentucky.
RESULTS OF OPERATIONS
1996 COMPARED TO 1995
Net income for 1995 was $10.8 million compared to $18.8 million for 1996.
Earnings per share for 1995 was $1.21 per share compared to $2.06 per share for
1996. All information has been restated due to the acquisition of Woodford on
May 31, 1995, which was accounted for as a pooling-of-interests.
Net interest income for 1996 increased 14.2% as compared to 1995, rising from
$66.0 million in 1995 to $75.4 million in 1996. Noninterest income increased
29.7% from $11.1 million in 1995 to $14.4 million in 1996 while noninterest
expense decreased 1.3% from $55.9 million in 1995 to $55.2 million in 1996.
Return on average assets increased from 0.66% in 1995 to 1.07% in 1996 and
return on average equity increased from 8.27% in 1995 to 13.53% in 1996.
Net Interest Income
Net interest income increased 14.2% from 1995 to 1996 and was a major
contributing factor to the Company's increase in net income. Net interest
income increased from $66.0 million in 1995 to $75.4 million in 1996. The
increase was primarily due to the increase in average earning assets and the
increase in loans as a percentage of total assets which allowed the Company to
increase its yield on average earning assets while its cost of interest bearing
funds declined slightly.
The Company's average earning assets increased from $1.51 billion in 1995 to
$1.63 billion in 1996. Average interest bearing liabilities also increased
during the period, from $1.32 billion in 1995 to $1.42 billion in 1996. Average
interest bearing liabilities as a percentage of average earning assets remained
fairly stable, going from 87.4% in 1995 to 87.1% in 1996.
17
The taxable equivalent yield on average interest earning assets increased
from 8.86% in 1995 to 8.99% in 1996. The cost of average interest bearing
liabilities declined from 4.93% to 4.86% during the same period. As a result of
the thirteen basis point increase in yield on average earning assets and the
seven basis point reduction in cost of interest bearing funds, the net interest
margin increased from 4.54% in 1995 to 4.76% in 1996.
The Company was able to increase its yield on average earning assets through
investing more of its assets in loans, its highest yielding asset. Loans
accounted for 63.5% of total assets as of December 31, 1995 compared to 71.1%
as of December 31, 1996. Most of the loan growth came from consumer loans
generated from the indirect consumer lending program, which began late in 1995.
As of the end of 1996, the Company's indirect consumer loan portfolio exceeded
$100 million.
The Company was also able to reduce the cost of interest bearing liabilities
during the year. This was achieved by implementation of strict adherence to
deposit pricing standards, which enabled the Company to reduce the cost of
savings and NOW accounts by thirteen basis points while the cost of time
deposits increased by only two basis points. By more closely managing its
borrowings, the company was also able to reduce its borrowing cost on Federal
Home Loan Bank advances by thirty-six basis points.
Provision for Loan Losses
The provision for loan losses increased from $5.9 million in 1995 to $7.3
million in 1996. Average loans were significantly higher in 1996 increasing
19.6% from $1.02 billion in 1995 to $1.22 billion in 1996.
Charge-offs, net of recoveries, as a percentage of average loans outstanding
declined from 0.47% in 1995 to 0.37% in 1996 as outstanding loans increased,
but net charge-offs increased by a proportionately less amount. The allowance
for loan losses increased significantly, rising from $16.1 million at December
31, 1995 to $18.8 million at December 31, 1996. The increase in the reserve is
due to a provision in excess of loan charge-offs to increase the reserve
proportionally to the increase in loans outstanding. The Company does not
believe there are currently any trends, events or uncertainties that are
reasonably likely to have a material effect on the volume of its nonperforming
loans.
Noninterest Income
Noninterest income increased 29.7% from $11.1 million in 1995 to $14.4
million in 1996. Service charges on deposit accounts was the largest component
of noninterest income and increased from $5.2 million in 1995 to $6.3 million
in 1996 as the Company introduced new policies which reduced the amount of fees
that were waived. Trust income increased from $1.3 million in 1995 to $1.6
million in 1996 as the trust assets managed increased during the year. Gains on
sale of residential mortgage loans increased from $462 thousand to $1.7 million
as increased loan demand enabled the Company to a sell larger volume of loans.
Other noninterest income increased from $4.1 million in 1995 to $4.7 million in
1996. The largest component of other noninterest income was insurance
commissions, which increased 22.2% from $1.1 million in 1995 to $1.6 million in
1996, mainly due to increases in loans. Loans accounted for 71.1% of total
assets at December 31, 1996 compared to 63.5% of total assets at December 31,
1995. Securities gains and losses were not a factor in the increase as the
Company incurred net securities gains of $88 thousand in 1996 and $12 thousand
in 1995.
Noninterest Expense
Noninterest expense decreased from $55.9 million in 1995 to $55.2 million in
1996. Salaries and employee benefits increased from $24.6 million in 1995 to
$28.2 million in 1996 as the number of full-time equivalent employees increased
due to acquisitions of new banks and opening of new branches. Occupancy expense
increased marginally from $3.9 million in 1995 to $4.0 million in 1996, and
equipment costs remained level at $3.7 million for both 1995 and 1996. Data
processing costs declined from $2.8 million in 1995 to $2.6 million in 1996 and
stationery and printing costs declined from $1.9 million in 1995 to $1.7
million in 1996. Taxes other
18
than payroll, property and income, which consists mainly of Kentucky Franchise
taxes on the equity of the affiliate banks, increased slightly from $2.0
million in 1995 to $2.1 million in 1996. FDIC Insurance declined from $3.0
million to $113 thousand as the FDIC reduced premium rates to "well-
capitalized" institutions, of which all of the Company's affiliates qualify.
Other noninterest expense declined from $13.9 million in 1995 to $12.8 million
in 1996, consistent with the Company's cost containment measures introduced
late in 1995.
1995 COMPARED TO 1994
Net income for 1995 was $10.8 million compared to $8.2 million for 1994.
Earnings per share for 1994 was $0.95 per share compared to $1.21 for 1995.
Net Interest Income
Net interest income rose from $59.2 million in 1994 to $66.0 million in 1995.
The increase in net interest income was due to a higher level of average
earning assets and rising interest rates during 1995. The yield on interest
earning assets and the cost of interest bearing liabilities both increased
during 1995 as compared to 1994. The taxable equivalent yield on average
interest earning assets increased from 7.98% in 1994 to 8.86% in 1995. The cost
of average interest bearing liabilities increased from 3.97% to 4.93% during
the same period. As a result of this the net interest margin increased from
4.51% in 1994 to 4.54% in 1995.
Noninterest Income
Noninterest income increased 15.2% from $9.7 million in 1994 to $11.1 million
in 1995. Service charges on deposit accounts, the largest component, increased
from $4.7 million in 1994 to $5.2 million in 1995. During the same period,
other noninterest income increased from $2.7 million to $4.1 million and trust
income decreased from $1.6 million to $1.3 million. Net gains from the sale of
residential mortgage loans decreased from $784 thousand in 1994 to $462
thousand in 1995, due to the rising interest rates in effect during 1995.
Securities gains and losses were minimal in both periods, as the Company
incurred net securities losses of $45 thousand in 1994 and net securities gains
of $12 thousand in 1995.
Noninterest Expense
Noninterest expense increased from $52.3 million in 1994 to $55.9 million in
1995. Except for two unusual items which decreased significantly, all other
categories increased as would be expected in a period of acquisitions. The
increases in assets, employees and operational facilities from the 1995
acquisitions all contributed to across the board increases in noninterest
expenses. Salaries and benefits increased from $23.0 million in 1994 to $24.6
million in 1995, occupancy expense increased from $3.3 million to $3.9 million,
data processing increased from $2.1 million to $2.8 million, stationery &
printing costs increased from $1.5 million to $1.9 million and other taxes
increased from $1.7 million to $2.0 million while other noninterest expense
items increased from $11.1 million in 1994 to $13.9 million in 1995. The two
items which decreased significantly were losses associated with mortgage-backed
derivative securities and restructuring and reengineering costs.
Mortgage-backed derivatives had been purchased for certain trust accounts
administered by the Company's affiliates. While these securities are guaranteed
by either the Federal Home Loan Mortgage or the Federal National Mortgage
Association, and therefore, pose very little, if any credit risk, they
exhibited an excessive volatility which led to a significant decline in their
market value in 1994 which represented the difference between the book value
carried in the customer accounts and the actual market value. The Company
purchased the securities from the trust accounts during 1994 and because of the
government guarantees. The Company sold these securities in the first quarter
of 1997.
During the latter part of 1993 and continuing through 1994, the Company
intensively examined ways to improve its performance through restructuring its
operations and reengineering its work flow processes. As a result of this, the
Company downsized its workforce by approximately 9% of total employment.
Severance and other related costs of downsizing in the amount of $0.9 million
were recognized in 1994.
19
LIQUIDITY
The Company's objectives are to ensure that funds are available at the
subsidiary banks to meet deposit withdrawals and credit demands without unduly
penalizing profitability, and to ensure that funding is available for the
parent company to meet the ongoing cash needs while maximizing profitability.
The Company continues to identify ways to provide for liquidity on both a
current and long-term basis. On a long-term basis, the Banks rely mainly on
core deposits, certificates of deposit of $100,000 or more, repayment of
principal and interest on loans and securities, as well as federal funds sold
and purchased. The subsidiary banks also rely on the sale of securities under
repurchase agreements, securities available-for-sale and Federal Home Loan Bank
borrowings.
Deposits increased marginally from $1.47 billion at December 31, 1995 to
$1.48 billion at December 31, 1996. In order to compensate for the lack of
funding from deposit growth, the Company increased its borrowings of federal
funds purchased and other short-term borrowings from $20.4 million as of
December 31, 1995 to $44.6 million at December 31, 1996 and also increased its
Federal Home Loan Bank borrowings during the same period. The Bank is also
preparing for a securitization of its automobile retail loan portfolio during
the second quarter of 1997 to provide additional funding and liquidity. The
lack of deposit funding has not affected the Company's ability to fund loans or
service its debt obligations.
Due to the nature of the markets served by the Company's lending
institutions, management believes that the majority of its certificates of
deposit of $100,000 or more are no more volatile than its core deposits. During
the periods of low interest rates, these deposit balances remained stable as a
percentage of total deposits. In addition, arrangements have been made with two
correspondent banks for the purchase of federal funds on an unsecured basis, up
to an aggregate of $98 million, if necessary, to meet the Company's liquidity
needs.
The Company owns $230 million of securities designated as available-for-sale
and valued at market which are available to meet liquidity needs on a
continuing basis. The Company also relies on Federal Home Loan Bank advances
for both liquidity and management of its asset/liability position. Often the
Company matches the maturity of these advances with pools of residential
mortgage loans which are not sold in the secondary market, some of which have
maturities of ten to fifteen years. Federal Home Loan Bank advances increased
from $63.6 million at December 31, 1995 to $111.0 million at December 31, 1996.
The Company generally relies upon net inflows of cash from financing
activities, supplemented by net inflows of cash from operating activities, to
provide cash for its investing activities. As is typical of many financial
institutions, significant financing activities include deposit gathering, use
of short-term borrowing facilities such as federal funds purchased and
securities sold under repurchase agreements, and the issuance of long-term
debt. The Company has a $17.5 million credit line available which expires June
29, 1997, in the form of a revolving line of credit of which the entire line
was available as of December 31, 1996. The Company's primary investing
activities include purchases of investment securities and loan originations.
In conjunction with maintaining a satisfactory level of liquidity, management
monitors the degree of interest rate risk assumed on the balance sheet. The
Company monitors its interest rate risk by the use of static and dynamic gap
models at the one year interval. The static gap model monitors the difference
in interest rate sensitive assets and interest rate sensitive liabilities as a
percentage of total assets that mature within the specified time frame. The
dynamic gap model goes further in that it assumes that interest rate sensitive
assets and liabilities will be reinvested. The Company uses the Sendero system
to monitor its interest rate risk. The Company desires an interest sensitivity
gap of not more than fifteen percent of total assets at the one year interval.
20
INTEREST RATE SENSITIVITY ANALYSIS
The Company's static interest rate gap position as of December 31, 1996 is
presented below:
0-3 3-12 TOTAL 1 OVER 1
MONTHS MONTHS YEAR YEAR TOTAL
December 31, 1996 -------- --------- ---------- -------- ----------
(IN THOUSANDS)
Interest earning assets
Securities and
deposits............. $ 87,951 $ 149,753 $ 237,704 $130,817 $ 368,521
Loans................. 519,047 283,094 802,141 507,482 1,309,623
-------- --------- ---------- -------- ----------
Total interest earning
assets............... $606,998 $ 432,847 $1,039,845 $638,299 $1,678,144
Interest bearing
liabilities
NOW, money market and
savings accounts..... $268,063 $ 147,651 $ 415,714 $ -- $ 415,714
Time deposits......... 236,981 442,824 679,805 185,081 864,886
Federal funds
purchased and other
short-term
borrowings........... 44,585 -- 44,585 -- 44,585
Advances from FHLB.... 61,804 5,123 66,927 44,043 110,970
Long-term debt........ 1,641 -- 1,641 17,495 19,136
-------- --------- ---------- -------- ----------
Total interest bearing
liabilities.......... $613,074 $ 595,598 $1,208,672 $246,619 $1,455,291
======== ========= ========== ======== ==========
Interest sensitivity gap
For the period........ $ (6,076) $(162,751) $ (168,827) $391,680 $ 222,853
Cumulative............ (6,076) (168,827) (168,827) 222,853 222,853
Cumulative as a percent
of earning assets...... (0.36)% (10.06)% (10.06)% 13.28% 13.28%
The Company now uses, on a limited basis, interest rate swaps as an
additional tool in managing interest rate risk. As of December 31, 1996, there
was outstanding $10 million in notional principal value of interest rate
swaps. Interest rate swaps involve an exchange of cash flows based on the
notional principal amount and agreed upon fixed and variable interest rates.
In this transaction, the Company has agreed to pay a floating interest rate
based on LIBOR and receive a fixed interest rate in return. The impact on
operations of interest rate swaps was not significant during 1996 and is not
expected to be significant during 1997.
CAPITAL RESOURCES
Total shareholders' equity increased from $133.8 million at December 31,
1995 to $144.8 million at December 31, 1996. The primary source of capital of
the Company is retained earnings. Cash dividends per share were $0.66 per
share for 1995 and $0.74 per share for 1996. The Company retained 45% of its
earnings for 1995 and 64% for 1996.
Regulatory guidelines require bank holding companies, commercial banks, and
thrifts to maintain certain minimum ratios and define companies as "well
capitalized" that sufficiently exceed the minimum ratios. The banking
regulators may alter minimum capital requirements as a result of revising
their internal policies and their ratings of individual institutions. To be
"well capitalized" banks and bank holding companies must maintain a Tier 1
leverage ratio of no less than 5.0%, a Tier 1 risk based ratio of no less than
6.0% and a total risk based ratio of no less than 10.0%. The Company's ratios
as of December 31, 1996 were 7.05%, 9.71% and 10.96%, respectively. The
Company and all banking affiliates met the criteria for "well capitalized" at
December 31, 1996.
As of December 31, 1996, management is not aware of any current
recommendations by banking regulatory authorities which, if they were to be
implemented, would have, or are reasonably likely to have, a material adverse
impact on the Company's liquidity, capital resources, or operations.
Impact of inflation and changing prices
The majority of the Company's assets and liabilities are monetary in nature.
Therefore, the Company differs greatly from most commercial and industrial
companies that have significant investments in nonmonetary assets, such as
fixed assets and inventories. However, inflation does have an important impact
on the growth of assets
21
in the banking industry and on the resulting need to increase equity capital at
higher than normal rates in order to maintain an appropriate equity to assets
ratio. Inflation also affects other expenses, which tend to rise during periods
of general inflation.
Management believes the most significant impact on financial and operating
results is the Company's ability to react to changes in interest rates.
Management seeks to maintain an essentially balanced position between interest
sensitive assets and liabilities in order to protect against the effects of
wide interest rate fluctuations.
QUARTERLY FINANCIAL DATA
THREE MONTHS ENDED DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
- ------------------ ----------- ------------ ------- --------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1996
Net interest income................. $19,945 $19,123 $18,537 $17,750
Net interest income, taxable
equivalent basis................... 20,490 19,703 19,142 18,346
Provision for loan losses........... 2,108 2,003 1,686 1,488
Noninterest income.................. 3,822 3,696 3,662 3,259
Noninterest expense................. 14,427 13,700 13,639 13,477
Net income.......................... 4,949 4,906 4,737 4,203
PER COMMON SHARE:
Net income, primary................. $ 0.54 $ 0.54 $ 0.52 $ 0.46
Net income, fully diluted........... 0.54 0.54 0.52 0.46
Dividends declared.................. 0.20 0.18 0.18 0.18
COMMON STOCK PRICE:
High................................ $ 26.00 $ 23.75 $ 23.75 $ 22.00
Low................................. 20.25 20.75 20.00 18.50
Last trade.......................... 24.50 22.25 21.75 22.00
SELECTED RATIOS:
Return on average assets,
annualized......................... 1.10% 1.09% 1.09% 0.98%
Return on average common equity,
annualized......................... 13.69% 13.92% 13.98% 12.42%
Net interest margin, annualized..... 4.89% 4.73% 4.78% 4.62%
1995
Net interest income................. $17,437 $16,894 $16,134 $15,569
Net interest income, taxable
equivalent basis................... 18,051 17,620 16,721 16,098
Provision for loan losses........... 1,850 1,615 1,322 1,071
Noninterest income.................. 3,342 2,412 2,696 2,666
Noninterest expense................. 15,869 13,755 13,070 13,177
Net income.......................... 2,266 2,734 2,840 2,973
PER COMMON SHARE:
Net income, primary................. $ 0.25 $ 0.30 $ 0.32 $ 0.34
Net income, fully diluted........... 0.25 0.30 0.32 0.34
Dividends declared.................. 0.18 0.16 0.16 0.16
COMMON STOCK PRICE:
High................................ $ 21.50 $ 23.00 $ 23.50 $ 25.25
Low................................. 19.00 19.50 19.50 22.50
Last trade.......................... 19.25 20.25 20.75 22.50
SELECTED RATIOS:
Return on average assets,
annualized......................... 0.53% 0.65% 0.72% 0.77%
Return on average common equity,
annualized......................... 6.96% 8.39% 8.78% 9.56%
Net interest margin, annualized..... 4.57% 4.47% 4.57% 4.52%
22
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below are the executive officers of the Company, their positions
with the Company and the year in which they first became an executive officer
or director.
POSITIONS AND DATE FIRST
OFFICES BECAME DIRECTOR PRESENT
NAME AND AGE CURRENTLY OR EXECUTIVE PRINCIPAL
(1) HELD OFFICER OCCUPATION
- ------------ ------------------------- --------------- -------------------------
Burlin Cole- Chairman of Board, 1980 Chairman of Board
man; 67 President CEO & Director President & CEO
Brandt Vice Chairman of Board 1980 Vice Chairman
Mullins; 69 & Director
Jean R. Executive Vice President, 1992(2) President &
Hale; 50 Secretary & Director CEO of the Lead Bank
Richard M. Executive Vice President, 1995(3) Executive Vice President,
Levy; 38 CFO & Treasurer CFO & Treasurer
Ralph Executive Vice President, 1995(4) Executive Vice President,
Weickel;39 Sales & Marketing Sales & Marketing
Ronald M. Executive Vice President, 1996(5) President and CEO
Holt; 49 Trust of Trust Company
Mark Gooch; Executive Vice President 1997(6) Executive Vice President
38 Operations Operations
John 1997(7) Executive Vice President
Shropshire; Executive Vice President & Senior Lender
48 & Senior Lender
- --------
(1) The ages listed for the Company's executive officers are as of February
28, 1997.
(2) Prior to becoming an executive officer, Ms. Hale served as Vice President
of the Company and as an executive officer of the Lead Bank since 1988.
(3) Mr. Levy served as Senior Vice President and Controller of Bank of America
Texas, N.A. prior to joining the Company.
(4) Mr. Weickel served as Vice President of the Company prior to becoming an
executive officer. Mr. Weickel served as Vice President, Manager of
Investments, for Boatmen's National Bank of Des Moines, NA, prior to
joining the Company in 1993.
(5) Mr. Holt served as Executive Vice President and Trust Manager of Bank One
Kentucky Corporation prior to joining the Company.
(6) Mr. Gooch served as President and Chief Executive Officer of First
Security Bank & Trust Co., Whitesburg, Kentucky, an affiliate of the
Company until merger with the Lead Bank prior to becoming an executive
officer.
(7) Mr. Shropshire served as President and Chief Executive Officer of Farmers-
Deposit Bank, Flemingsburg, Kentucky, an affiliate of the Company until
merger with the Lead Bank prior to becoming an executive officer.
23
DIRECTORS OF THE COMPANY
The Company's directors are elected at each annual meeting of the
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 the Company, have been nominated for
election to serve until the 1998 Annual Meeting of Shareholders. The following
table sets forth certain information respecting the persons nominated to be
directors of the Company:
AMOUNT AND
POSITIONS NATURE OF
NAME AND AND DIRECTOR PRINCIPAL BENEFICIAL PERCENT
AGE (1) OFFICES SINCE OCCUPATION (2) OWNERSHIP (3) OF CLASS
- ---------- --------------- -------- ---------------------- ------------- --------
Charles J. Director 1988 Baird, Baird, Baird & 71,593(4) *
Baird; 47 Jones, P.S.C.,
Attorneys
Burlin Chairman of 1980 Chairman of Board of 389,483(6) 4.3%
Coleman; Board of Directors, President &
67(5) Directors, CEO--Community
President & CEO Trust Bancorp, Inc.
Nick A. Director 1980 President--Unit Coal 31,645 *
Cooley; Corporation
63
William A. Director 1990 Chairman of the 100,970(7) 1.1%
Graham, Advisory Board--
Jr.; 60 Fleming County
Region--Community
Trust Bank, N.A.
Jean R. Executive VP, 1993 President & CEO-- 26,548(8) *
Hale; 50(5) Secretary & Community Trust
Director Bank, N.A.
Brandt Vice Chairman & 1980 Retired President- 71,069(9) *
Mullins; Director Community Trust
69(5) Bank, NA
M. Lynn Director 1993 President--Knott Floyd 55,091(10) *
Parrish; Land Co., Inc.
47
Ernest M. Director 1980 President and General 54,067(11) *
Rogers; Manager--Rogers
69 Petroleum Services,
Inc.
Porter P. Director 1995 Chairman of the 40,635(12) *
Welch; 71 Advisory Board--
Woodford County
Region--Community
Trust Bank, NA
All direc- 857,465(13)
tors as a
group 9.4%
(see footnotes on the next page)
24
- --------
* Less than 1 percent.
(1) The ages listed for the Directors of the Company are as of February 28,
1997.
(2) Each of the nominees has been engaged in the principal occupation
specified above for five years or more.
(3) Under the rules of the Commission, a person is deemed to beneficially own
a security if the person has or shares the power to vote or direct the
voting of such security, or the power to dispose or to direct the
disposition of such security. A person is also deemed to beneficially own
any shares which that person has the right to acquire beneficial
ownership within sixty days. Shares of common stock subject to options
exercisable within sixty days are deemed outstanding for computing the
percentage of class of the person holding such options but are not deemed
outstanding for computing the percentage of class for any other person.
Unless otherwise indicated, the named persons have sole voting and
investment power with respect to shares held by them.
(4) Includes 35,093 shares in trust for W.J. Baird's grandchildren over which
Mr. Baird is trustee with the power to vote and invest such shares.
(5) Burlin Coleman is also a director of the Lead Bank, the Savings Bank and
Trust Company of Kentucky. Jean Hale is also a director of and Trust
Company of Kentucky. Brandt Mullins is also a director of West Liberty.
(6) Includes the following shares beneficially owned by Burlin Coleman:
253,671 shares held in trust over which Mr. Coleman has sole voting and
investment power; 53,999 shares in which Mr. Coleman shares voting power
pursuant to a power of attorney; 395 shares held directly by Mr. Coleman;
and 81,418 shares held in IRA over which Mr. Coleman has sole voting and
investment power. Excludes 8,770 shares held by Mr. Coleman's wife, over
which Mr. Coleman has no voting or investment power.
(7) Includes 5,709 shares that Mr. Graham may acquire pursuant to options
exercisable within sixty days of the Record Date and 868 shares held in
the ESOP, which Mr. Graham has the power to vote.
(8) Includes 8,995 shares which Mrs. Hale may acquire pursuant to options
exercisable within sixty days of the Record Date and 2,214 shares held in
the ESOP, which Mrs. Hale has the power to vote. Excludes 4,625 shares
held by Mrs. Hale's husband, over which Mrs. Hale has no voting or
investment power.
(9) Includes 68,444 shares held in trust, which Mr. Mullins has the power to
vote. Excludes 21,375 shares held by Mr. Mullins' wife, over which Mr.
Mullins has no voting or investment power.
(10) Excludes 600 shares held by Mr. Parrish's wife as custodian for their
minor child, over which Mr. Parrish has no voting or investment power.
(11) Excludes 15,674 shares held by Mr. Rogers' wife, over which Mr. Rogers
has no voting or investment power.
(12) Excludes 40,000 shares held by Mr. Welch's wife, over which Mr. Welch has
no voting or investment power.
(13) Includes 16,364 shares which may be acquired by all directors as a group
pursuant to options exercisable within sixty days of March 15, 1997.
25
SELECTED STATISTICAL INFORMATION
The following tables set forth certain statistical information relating to
the Company and its subsidiaries on a consolidated basis and should be read
together with the consolidated financial statements of the Company.
CONSOLIDATED AVERAGE BALANCE SHEETS AND TAXABLE EQUIVALENT INCOME/EXPENSE AND
YIELDS/RATES
1996 1995 1994
---------------------------- ---------------------------- ----------------------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCES INTEREST RATE BALANCES INTEREST RATE BALANCES INTEREST RATE
---------- -------- ------- ---------- -------- ------- ---------- -------- -------
(IN THOUSANDS)
EARNING ASSETS
Loans, net of unearned
(1)(2)(3).............. $1,215,243 $119,370 9.82% $1,021,637 $101,511 9.94% $ 872,045 $ 78,911 9.05%
Securities
U.S. Treasuries and
agencies.............. 277,641 17,641 6.35 301,263 19,123 6.35 316,552 18,794 5.94
State & political
subdivisions(3)....... 57,652 4,568 7.92 55,263 4,668 8.45 52,344 4,692 8.96
Other securities....... 72,610 4,655 6.41 78,510 5,011 6.38 73,951 4,370 5.91
Federal funds sold...... 8,490 483 5.69 50,398 3,057 6.07 47,488 1,996 4.20
Interest bearing
deposits............... 896 56 6.25 1,469 112 7.62 3,370 207 6.14
---------- -------- ---- ---------- -------- ---- ---------- -------- ----
Total earning assets.... $1,632,532 $146,773 8.99% $1,508,540 $133,482 8.86% $1,365,750 $108,970 7.98%
Less:
Allowance for loan
losses................ (17,637) (15,336) (13,444)
---------- ---------- ----------
1,614,895 1,493,204 1,352,306
NON-EARNING ASSETS
Cash and due from banks. 54,120 50,846 45,173
Premises and equipment,
net.................... 46,460 43,725 38,403
Other assets............ 46,534 43,148 34,748
---------- ---------- ----------
Total assets............ $1,762,009 $1,630,923 $1,470,630
========== ========== ==========
INTEREST BEARING
LIABILITIES
Deposits
Savings and demand
deposits.............. $ 422,158 $ 12,722 3.01% $ 386,956 $ 12,166 3.14% $ 392,784 $ 11,446 2.91%
Time deposits.......... 861,566 47,854 5.55 804,884 44,507 5.53 671,863 28,443 4.23
Federal funds purchased
and securities sold
under repurchase
agreements............. 25,363 1,258 4.96 25,934 1,435 5.53 30,208 1,234 4.09
Other short-term
borrowings............. 17 1 5.88 1,443 78 5.41 2,935 90 3.07
Advances from Federal
Home Loan Bank......... 90,666 5,356 5.91 71,917 4,506 6.27 68,022 4,132 6.07
Long-term debt.......... 22,795 1,901 8.34 27,328 2,300 8.42 26,739 2,025 7.57
---------- -------- ---- ---------- -------- ---- ---------- -------- ----
Total interest bearing
liabilities............ $1,422,565 $ 69,092 4.86% $1,318,462 $ 64,992 4.93% $1,192,551 $ 47,370 3.97%
---------- -------- ---- ---------- -------- ---- ---------- -------- ----
NONINTEREST BEARING
LIABILITIES
Demand deposits......... 184,071 168,108 151,897
Other liabilities....... 16,448 13,573 10,017
Total liabilities....... 1,623,084 1,500,143 1,354,465
---------- ---------- ----------
Shareholders' equity.... 138,925 130,780 116,165
---------- ---------- ----------
Total liabilities and
shareholders' equity... $1,762,009 $1,630,923 $1,470,630
========== ========== ==========
Net interest income..... $ 77,681 $ 68,490 $ 61,600
======== ======== ========
Net interest spread..... 4.13% 3.93% 4.01%
==== ==== ====
Benefit of interest free
funding................ 0.63% 0.61% 0.50%
==== ==== ====
Net interest margin..... 4.76% 4.54% 4.51%
==== ==== ====
- -------
(1)Interest includes fees on loans of $4,289, $3,203 and $2,300 in 1996, 1995
and 1994, respectively.
(2)Loan balances include principal balances on nonaccrual loans.
(3)Tax exempt income on securities and loans is reported on a fully taxable
equivalent basis using a 35% rate.
26
NET INTEREST DIFFERENTIAL
The following table illustrates the approximate effect on net interest
differentials of volume and rate changes between 1996 and 1995 and also
between 1995 and 1994.
TOTAL CHANGE CHANGE DUE TO TOTAL CHANGE CHANGE DUE TO
------------ ---------------- ------------ ----------------
1996/1995 VOLUME RATE 1995/1994 VOLUME RATE
------------ ------- ------- ------------ ------- -------
(IN THOUSANDS)
INTEREST INCOME
Loans................. $17,859 $19,030 $(1,171) $22,600 $14,380 $ 8,220
U. S. Treasury and
federal agencies..... (1,482) (1,482) -- 329 (931) 1,260
Tax exempt state and
political
subdivisions......... (100) 197 (297) (24) 255 (279)
Other securities...... (356) (379) 23 641 278 363
Federal funds sold.... (2,574) (2,395) (179) 1,061 130 931
Interest bearing
deposits............. (56) (39) (17) (95) (137) 42
------- ------- ------- ------- ------- -------
Total interest income. 13,291 14,932 (1,641) 24,512 13,975 10,537
INTEREST EXPENSE
Savings and demand
deposits............. 556 1,075 (519) 720 (171) 891
Time deposits......... 3,347 3,146 201 16,064 6,309 9,755
Federal funds
purchased and
securities sold under
repurchase
agreements........... (177) (31) (146) 201 (192) 393
Other short-term
borrowings........... (77) (119) 42 (12) (60) 48
Advances from Federal
Home Loan Bank....... 850 1,120 (270) 374 241 133
Long-term debt........ (399) (378) (21) 275 46 229
------- ------- ------- ------- ------- -------
Total interest
expense.............. 4,100 4,813 (713) 17,622 6,173 11,449
------- ------- ------- ------- ------- -------
Net interest income..... $ 9,191 $10,119 $ (928) $ 6,890 $ 7,802 $ (912)
======= ======= ======= ======= ======= =======
For purposes of the above table, changes which are not solely due to rate or
volume are allocated based on a percentage basis, using the absolute values of
rate and volume variance as a basis for percentages. Income is stated at a
fully taxable equivalent basis, assuming a 35% tax rate.
INVESTMENT PORTFOLIO
The maturity distribution and weighted average interest rates of securities
at December 31, 1996 is as follows:
ESTIMATED MATURITY AT DECEMBER 31, 1996
--------------------------------------------------------------------------------------
AFTER 10 TOTAL FAIR
WITHIN 1 YEAR 1-5 YEARS 5-10 YEARS YEARS VALUE AMORTIZED
------------- -------------- ------------- ------------- -------------- COST
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT
------- ----- -------- ----- ------- ----- ------- ----- -------- ----- ---------
(IN THOUSANDS)
Available-for-sale
U. S. Treasury......... $16,205 6.23% $ 21,186 6.39% $ -- 0.00% $ -- 0.00% $ 37,391 6.28% $ 37,139
U. S. government
agencies and
corporations.......... 10,874 6.99 105,501 7.06 10,228 6.60 7,314 10.41 133,917 7.20 134,217
State and municipal
obligations........... -- 0.00 15 7.57 -- 0.00 -- 0.00 15 7.57 15
Other securities....... 27,656 5.97 5,561 6.62 11,968 6.44 13,444 6.73 58,629 6.30 59,562
------- ---- -------- ---- ------- ---- ------- ----- -------- ---- --------
Total................... $54,735 6.25% $132,263 6.93% $22,196 6.51% $20,758 8.03% $229,952 6.82% $230,933
------- ---- -------- ---- ------- ---- ------- ----- -------- ---- --------
27
ESTIMATED MATURITY AT DECEMBER 31, 1996
--------------------------------------------------------------------------------------
AFTER 10 TOTAL FAIR
WITHIN 1 YEAR 1-5 YEARS 5-10 YEARS YEARS VALUE AMORTIZED
------------- -------------- ------------- ------------- -------------- COST
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT
------- ----- -------- ----- ------- ----- ------- ----- -------- ----- ---------
(IN THOUSANDS)
Held-to-maturity
U. S. government
agencies and
corporations........... $ 3,414 4.67% $ 57,160 5.82% $11,498 4.53% $ -- 0.00% $ 72,072 5.56% $69,495
State and municipal
obligations........... 1,241 9.00 20,211 7.28 21,058 7.08 11,581 8.93 54,091 7.59 54,563
Other securities....... 0 0.00 11,570 5.86 -- 0.00 -- 0.00 11,570 5.86 11,325
------- ---- -------- ---- ------- ---- ------- ---- -------- ---- -------
Total................... $ 4,655 5.82% $ 88,941 6.16% $32,556 6.18% $11,581 8.93% $137,733 6.38% 135,383
------- ---- -------- ---- ------- ---- ------- ---- -------- ---- -------
Total Securities........ $59,390 6.22% $221,204 6.62% $54,752 6.32% $32,339 8.35% $367,685 6.66% --
======= ==== ======== ==== ======= ==== ======= ==== ======== ==== =======
The calculations of the weighted average interest rates for each maturity
category are based on yield weighted by the respective costs of the
securities. The weighted average rates on state and political subdivisions are
computed on a taxable equivalent basis using a 35% tax rate. For purposes of
the above presentation, maturities of mortgage-backed pass through
certificates and collateralized mortgage obligations are based on estimated
maturities.
Excluding those holdings of the investment portfolio in U.S. Treasury
securities and other agencies of the U.S. Government, there were no securities
of any one issuer which exceeded 10% of the shareholder's equity of the
Company at December 31, 1996.
LOAN PORTFOLIO
DECEMBER 31 (IN THOUSANDS)
----------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- -------- -------- --------
Commercial:
Secured by real
estate............... $ 270,315 $ 258,541 $235,611 $210,514 $221,646
Other................. 234,793 192,127 183,533 196,296 175,850
---------- ---------- -------- -------- --------
Total commercial.... 505,108 450,668 419,144 406,810 397,496
---------- ---------- -------- -------- --------
Real estate
construction........... 79,069 51,539 45,308 34,241 26,058
Real estate mortgage.... 411,067 398,288 290,998 274,017 291,318
Consumer................ 310,582 208,662 143,085 128,995 124,569
Equipment lease
financing.............. 3,797 5,911 7,919 9,872 14,130
---------- ---------- -------- -------- --------
Total loans......... $1,309,623 $1,115,068 $906,454 $853,935 $853,661
========== ========== ======== ======== ========
Percent of total year-
end loans
Commercial:
Secured by real
estate............... 20.64% 23.19% 25.99% 24.65% 25.96%
Other................. 17.93 17.23 20.25 22.99 20.60
---------- ---------- -------- -------- --------
Total commercial.... 38.57 40.42 46.24 47.64 46.56
Real estate
construction........... 6.04 4.62 5.00 4.01 3.05
Real estate mortgage.... 31.39 35.72 32.10 32.09 34.13
Consumer................ 23.71 18.71 15.79 15.10 14.60
Equipment lease
financing.............. 0.29 0.53 0.87 1.16 1.66
---------- ---------- -------- -------- --------
Total loans......... 100.00% 100.00% 100.00% 100.00% 100.00%
========== ========== ======== ======== ========
The total loans above are net of unearned income.
28
The following table shows the amounts of loans (excluding residential
mortgages of 1-4 family residences, consumer loans and lease financing) which,
based on the remaining scheduled repayments of principal are due in the
periods indicated. Also, the amounts are classified according to sensitivity
to changes in interest rates (fixed, variable).
MATURITY AT DECEMBER 31, 1996
(IN THOUSANDS)
-----------------------------------
AFTER
ONE BUT
WITHIN AFTER
WITHIN FIVE FIVE
ONE YEAR YEARS YEARS TOTAL
-------- -------- -------- --------
Commercial, financial and agricultural...... $138,073 $164,337 $202,698 $505,108
Real estate--construction................... 24,097 28,664 26,308 79,069
-------- -------- -------- --------
$162,170 $193,001 $229,006 $584,177
======== ======== ======== ========
Rate sensitivity
Predetermined rate.......................... $ 38,819 $ 59,547 $ 47,059 $145,425
Adjustable rate............................. 123,351 133,454 181,947 438,752
-------- -------- -------- --------
$162,170 $193,001 $229,006 $584,177
======== ======== ======== ========
NONPERFORMING ASSETS
DECEMBER 31 (IN THOUSANDS)
-------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
Nonaccrual loans.................. $10,156 $ 9,433 $ 8,829 $11,186 $ 5,417
Restructured loans................ 630 918 -- -- 4,022
90 days or more past due and still
accruing interest................ 5,800 3,947 3,401 3,637 4,875
------- ------- ------- ------- -------
Total nonperforming loans....... 16,586 14,298 12,230 14,823 14,314
Foreclosed properties............. 1,059 1,927 4,320 3,635 7,061
------- ------- ------- ------- -------
Total nonperforming assets...... $17,645 $16,225 $16,550 $18,458 $21,375
======= ======= ======= ======= =======
Nonperforming assets to total
loans plus foreclosed properties. 1.35% 1.45% 1.83% 2.18% 2.51%
Allowance to nonperforming loans.. 113.50 112.47 106.12 90.04 95.96
Nonaccrual, past due and restructured loans
AS A % AS A % ACCRUING AS A %
OF LOAN OF LOAN LOANS OF LOAN
BALANCES BALANCES PAST DUE BALANCES
NONACCRUAL BY RESTRUCTURED BY 90 DAYS BY
LOANS CATEGORY LOANS CATEGORY OR MORE CATEGORY BALANCES
(IN THOUSANDS) ---------- -------- ------------ -------- -------- -------- ----------
DECEMBER 31, 1996
Commercial loans--real
estate secured......... $ 4,817 1.78% $409 0.15% $1,266 0.47% $ 270,315
Commercial loans--other. 3,217 1.35 221 0.09 1,398 0.59 238,590
Consumer loans--real
estate secured......... 1,690 0.34 -- -- 2,225 0.45 490,136
Consumer loans--other... 432 0.14 -- -- 911 0.29 310,582
------- ---- ---- ---- ------ ---- ----------
Total.................. $10,156 0.78% $630 0.05% $5,800 0.44% $1,309,623
======= ==== ==== ==== ====== ==== ==========
DECEMBER 31, 1995
Commercial loans--real
estate secured......... $ 3,264 1.26% $918 0.36% $1,428 0.55% $ 258,541
Commercial loans--other. 3,048 1.54 -- -- 237 0.12 198,038
Consumer loans--real
estate secured......... 2,873 0.64 -- -- 1,335 0.30 449,827
Consumer loans--other... 248 0.12 -- -- 947 0.45 208,662
------- ---- ---- ---- ------ ---- ----------
Total.................. $ 9,433 0.85% $918 0.08% $3,947 0.35% $1,115,068
======= ==== ==== ==== ====== ==== ==========
The allowance for loan losses balance is maintained by management at a level
considered adequate to cover anticipated losses that are based on past loss
experience, general economic conditions, information about specific
29
borrower situations including their financial position and collateral values,
and other factors and estimates which are subject to change over time.
In 1996, gross interest income that would have been recorded on nonaccrual
loans had the loans been current in accordance with their original terms
amounted to $1.1 million. Interest income actually recorded and included in net
income for the period was $0.3 million, leaving $0.8 million of interest income
not recognized during the period.
Discussion of the Nonaccrual Policy
The accrual of interest income on loans is discontinued when the collection
of interest and principal in full is not expected. When interest accruals are
discontinued, interest income accrued in the current period is reversed. Any
loans past due 90 days or more must be well secured and in the process of
collection to continue accruing interest.
Potential Problem Loans
When management has serious doubts as to the ability of borrowers to comply
with repayment terms, the loans are placed on nonaccrual status.
Foreign Outstandings
None
Loan Concentrations
The Company has no concentration of loans exceeding 10% of total loans which
is not otherwise disclosed at December 31, 1996.
30
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES (IN THOUSANDS)
1996 1995 1994 1993 1992
---------- ---------- -------- -------- --------
Allowance for loan
losses, beginning of
year................... $ 16,082 $ 12,978 $ 13,346 $ 13,736 $ 11,530
Loans charged off:
Commercial, secured
by real estate...... 378 1,278 1,442 1,538 1,831
Commercial, other.... 1,136 1,646 3,902 2,140 2,210
Real Estate Mortgage. 880 514 407 598 1,005
Consumer loans....... 4,594 2,594 1,786 1,606 1,377
---------- ---------- -------- -------- --------
Total charge-offs.. 6,988 6,032 7,537 5,882 6,423
Recoveries of loans
previously charged
off:
Commercial, secured
by real estate...... 174 159 12 147 152
Commercial, other.... 609 331 395 333 503
Real Estate Mortgage. 312 44 66 58 135
Consumer loans....... 1,351 740 630 512 528
---------- ---------- -------- -------- --------
Total recoveries... 2,446 1,274 1,103 1,050 1,318
Net charge-offs:
Commercial, secured
by real estate...... 204 1,119 1,430 1,391 1,679
Commercial, other.... 527 1,315 3,507 1,807 1,707
Real Estate Mortgage. 568 470 341 540 870
Consumer loans....... 3,243 1,854 1,156 1,094 849
---------- ---------- -------- -------- --------
Total net charge-
offs.............. 4,542 4,758 6,434 4,832 5,105
Allowance of acquired
banks................ 0 2,004 0 0 0
Provisions charged
against operations... 7,285 5,858 6,066 4,442 7,311
---------- ---------- -------- -------- --------
Balance, end of year.... $ 18,825 $ 16,082 $ 12,978 $ 13,346 $ 13,736
========== ========== ======== ======== ========
Allocation of allowance,
end of year Commercial,
secured by real estate. $ 3,305 $ 3,095 $ 3,649 $ 2,650 $ 2,812
Commercial, other..... 2,870 2,300 2,349 1,921 2,130
Real Estate
Construction......... 152 135 93 57 186
Real Estate Mortgage.. 790 1,044 905 1,659 1,945
Consumer.............. 2,248 1,574 1,291 1,271 1,475
Equipment lease
financing............ 46 71 108 91 147
Unallocated........... 9,414 7,863 4,583 5,697 5,041
---------- ---------- -------- -------- --------
Balance, end of year.... $ 18,825 $ 16,082 $ 12,978 $ 13,346 $ 13,736
========== ========== ======== ======== ========
Allocation of allowance,
end of year Commercial,
secured by real estate. $ 3,305 $ 3,095 $ 3,649 $ 2,650 $ 2,812
Commercial, other..... 2,807 2,300 2,349 1,921 2,130
Real Estate
Construction......... 152 135 93 57 186
Real Estate Mortgage.. 790 1,044 905 1,659 1,945
Consumer.............. 2,248 1,574 1,291 1,271 1,457
Equipment lease
financing............ 46 71 108 91 147
Unallocated........... 9,414 7,863 4,583 5,697 5,041
---------- ---------- -------- -------- --------
Balance, end of year.... $ 18,825 $ 16,082 $ 12,978 $ 13,346 $ 13,736
========== ========== ======== ======== ========
Average loans
outstanding, net of
unearned interest...... $1,215,243 $1,021,637 $872,045 $849,202 $857,532
Loans outstanding at end
of year, net of
unearned interest...... $1,309,623 $1,115,068 $906,454 $853,935 $853,661
Net charge-offs to
average loan type
Commercial, secured by
real estate.......... 0.08% 0.39% 0.60% 0.59% 0.95%
Commercial, other..... 0.24% 0.66% 0.94% 0.96% 0.80%
Real Estate Mortgage.. 0.12% 0.13% 0.13% 0.18% 0.41%
Consumer loans........ 1.27% 1.02% 0.78% 0.62% 0.57%
Total................ 0.37% 0.47% 0.74% 0.57% 0.60%
Other ratios
Allowance to net
loans, end of year... 1.44% 1.44% 1.43% 1.56% 1.61%
Provision for loan
losses to average
loans................ 0.60% 0.57% 0.70% 0.82% 0.84%
Management uses an internal analysis to determine the adequacy of the loan
loss reserve and charges to the provision for loan losses. This analysis is
based on net charge-off experience for prior years, current delinquency levels
and risk factors based on the local economy and relative experience of the
lending staff. This analysis is completed quarterly and forms the basis for
allocation of the loan loss reserve and what charges to provision may be
required.
31
AVERAGE DEPOSITS AND OTHER BORROWED FUNDS
1996 1995 1994
---------- ---------- ----------
(IN THOUSANDS)
DEPOSITS:
Non-interest bearing deposits............... $ 184,071 $ 168,108 $ 151,897
NOW accounts................................ 170,410 151,781 132,270
Money market deposits....................... 94,653 82,733 76,053
Savings..................................... 157,094 152,442 184,461
Certificates of deposit > $100,000.......... 265,005 242,081 174,532
Certificates of deposit < $100,000 and other
time deposits.............................. 596,560 562,803 497,331
---------- ---------- ----------
Total Deposits............................ $1,467,793 $1,359,948 $1,216,544
OTHER BORROWED FUNDS:
Federal funds purchased and securities sold
under repurchase agreements................ $ 25,363 $ 25,934 $ 30,208
Other short-term borrowings................. 17 1,443 2,935
Advances from Federal Home Loan Bank........ 90,666 71,917 68,022
Long-term debt.............................. 22,795 27,328 26,739
---------- ---------- ----------
Total Other Borrowed Funds.............. 138,841 126,622 127,904
Total Deposits and Other Borrowed Funds. $1,606,634 $1,486,570 $1,344,448
========== ========== ==========
Maturities of time deposits of $100,000 or more outstanding at December 31,
1996 are summarized as follows:
CERTIFICATES TIME
OF DEPOSIT DEPOSITS TOTAL
------------ -------- --------
(IN THOUSANDS)
3 months or less................................ $ 70,360 $ 0 $ 70,360
Over 3 through 6 months......................... 65,493 4,796 70,289
Over 6 through 12 months........................ 66,390 0 66,390
Over 12 through 60 months....................... 54,451 0 54,451
Over 60 months.................................. 4,906 0 4,906
-------- ------ --------
$261,600 $4,796 $266,396
======== ====== ========
SHORT-TERM BORROWINGS
The Company did not have any category of short-term borrowings for which the
average balance outstanding during the reported periods was 30% or more of
shareholders' equity at the end of the reported periods.
32
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the CTBI
Trust Agreement. The CTBI Trust Agreement is qualified as an indenture under
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
Initially, State Street Bank and Trust Company will be the Property Trustee and
will act as trustee for the purpose of complying with the Trust Indenture Act.
The terms of the Preferred Securities will include those stated in the CTBI
Trust Agreement and those made part of the CTBI Trust Agreement by the Trust
Indenture Act. This summary of the material terms and provisions of the
Preferred Securities and the CTBI Trust Agreement does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the CTBI Trust Agreement, including the definitions
therein of certain terms, and the Trust Indenture Act. Wherever particular
defined terms of the CTBI Trust Agreement (as amended or supplemented from time
to time) are referred to herein, such defined terms are incorporated by
reference herein. The form of the CTBI Trust Agreement has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part.
GENERAL
Pursuant to the terms of the CTBI Trust Agreement, the Administrative
Trustees, on behalf of CTBI Trust, will issue the Preferred Securities and the
Common Securities (collectively, the "Trust Securities"). The Preferred
Securities will represent undivided preferred beneficial interests in CTBI
Trust and the holders thereof will be entitled to a preference in certain
circumstances with respect to Distributions and amounts payable on redemption
or liquidation over the Common Securities of CTBI Trust, as well as other
benefits as described in the CTBI Trust Agreement. The Preferred Securities
will rank pari passu, and payments will be made thereon pro rata, with the
Common Securities of CTBI Trust except as described under "--Subordination of
Common Securities."
Legal title to the Subordinated Debentures will be held by the Property
Trustee in trust for the benefit of the holders of the Preferred Securities and
Common Securities. The Guarantee executed by the Company for the benefit of the
holders of the Preferred Securities will be a guarantee on a subordinated basis
with respect to the Preferred Securities, but will not guarantee payment of
Distributions or amounts payable on redemption or liquidation of such Preferred
Securities when CTBI Trust does not have funds on hand available to make such
payments. See "Description of Guarantee."
DISTRIBUTIONS
Payment of Distributions. Distributions on each Preferred Security will be
payable at the annual rate of % of the stated Liquidation Amount of $25,
accruing from the date of original issuance and payable quarterly in arrears on
March 31, June 30, September 30 and December 31 of each year, to the holders of
the Preferred Securities on the relevant record dates (each date on which
Distributions are payable in accordance with the foregoing, a "Distribution
Date"). The record date will be, for so long as the Preferred Securities remain
in book-entry form, one Business Day prior to the relevant Distribution Date
and, in the event the Preferred Securities are not in book-entry form, the 15th
day of the month in which the relevant Distribution Date occurs. Distributions
will accumulate from the date of original issuance. The first Distribution Date
for the Preferred Securities will be June 30, 1997. The amount of Distributions
payable for any period will be computed on the basis of a 360-day year of
twelve 30-day months. In the event that any date on which Distributions are
payable on the Preferred Securities is not a Business Day, then payment of the
Distributions payable on such date will be made on the next succeeding day that
is a Business Day (and without any additional Distributions, interest or other
payment in respect of any such delay), in each case with the same force and
effect as if made on the date such payment was originally payable. As used in
this Prospectus, a "Business Day" shall mean any day other than a Saturday or a
Sunday, or a day on which banking institutions in The City of New York are
authorized or required by law or executive order to remain closed or a day on
which the corporate trust office of the Property Trustee or the Debenture
Trustee is closed for business.
33
Extension Period. So long as no Event of Default under the Indenture has
occurred and is continuing, the Company has the right under the Indenture to
defer the payment of interest on the Subordinated Debentures at any time and
from time to time for a period not exceeding 20 consecutive quarters with
respect to each such period (each, an "Extension Period"), provided that no
Extension Period may extend beyond the Stated Maturity of the Subordinated
Debentures. As a consequence of any such election, quarterly Distributions on
the Preferred Securities will be deferred by CTBI Trust during any such
Extension Period. Distributions to which holders of the Preferred Securities
are entitled will accumulate additional Distributions thereon at the rate per
annum of % thereof, compounded quarterly from the relevant Distribution
Date. The term "Distributions" as used herein shall include any such
additional Distributions. During any such Extension Period, the Company may
not, and may not permit any subsidiary of the Company to, (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Company's capital stock or
(ii) make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company that rank pari passu
with or junior in interest to the Subordinated Debentures or make any
guarantee payments with respect to any guarantee by the Company of the debt
securities of any subsidiary of the Company if such guarantee ranks pari passu
with or junior in interest to the Subordinated Debentures (other than (a)
dividends or distributions in Company common stock, (b) any declaration of a
dividend in connection with the implementation of a shareholders' rights plan,
or the issuance of stock under any such plan in the future, or the redemption
or repurchase of any such rights pursuant thereto, (c) payments under the
Guarantee and (d) purchases of common stock under any of the Company's benefit
plans for its directors, officers or employees). Prior to the termination of
any such Extension Period, the Company may defer the payment of interest,
provided that no Extension Period may exceed 20 consecutive quarters, or
extend beyond the Stated Maturity of the Subordinated Debentures. Upon the
termination of any such Extension Period and the payment of all amounts then
due, the Company may elect to begin a new Extension Period. Subject to the
foregoing, there is no limitation on the number of times that the Company may
elect to begin an Extension Period.
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the
Subordinated Debentures.
Cumulative Distributions. The funds of CTBI Trust available for distribution
to holders of its Preferred Securities will be limited to payments under the
Subordinated Debentures. See "Description of Subordinated Debentures." If the
Company does not make interest payments on the Subordinated Debentures, the
Property Trustee will not have funds available to pay Distributions on the
Preferred Securities. The payment of Distributions (if and to the extent CTBI
Trust has funds legally available for the payment of such Distributions and
cash sufficient to make such payments) is guaranteed by the Company. See
"Description of Guarantee."
REDEMPTION
The Company will have the right to redeem the Subordinated Debentures (i) on
or after March 31, 2007, in whole at any time or in part from time to time, or
(ii) at any time, in whole (but not in part), upon the occurrence of a Tax Event, an Investment Company Event or a Capital Event, in each case subject to
receipt of prior approval by the Federal Reserve if then required under
applicable capital guidelines or policies of the Federal Reserve.
Mandatory Redemption. Upon the repayment or redemption, in whole or in part,
of any Subordinated Debentures, whether at Stated Maturity or upon earlier
redemption as provided in the Indenture, the proceeds from such repayment or
redemption shall be applied by the Property Trustee to redeem a Like Amount
(as defined below) of the Trust Securities, upon not less than 30 nor more
than 60 days notice, at a redemption price (the "Redemption Price") equal to
the aggregate Liquidation Amount of such Trust Securities plus accumulated but
unpaid Distributions thereon to the date of redemption (the "Redemption
Date"). See "Description of Subordinated Debentures--Redemption." If less than
all of the Subordinated Debentures are to be repaid or redeemed on a
Redemption Date, then the proceeds from such repayment or redemption shall be
allocated to the redemption of the Preferred Securities and the Common
Securities pro rata.
34
Distribution of Subordinated Debentures. Subject to the Company having
received prior approval of the Federal Reserve if so required under applicable
capital guidelines or policies of the Federal Reserve, the Company will have
the right at any time to liquidate CTBI Trust and, after satisfaction of the
liabilities of creditors of CTBI Trust as provided by applicable law, cause
the Subordinated Debentures to be distributed to the holders of Preferred
Securities and Common Securities in the liquidation of CTBI Trust.
Tax Event Redemption, Investment Company Event Redemption or Capital Event
Redemption.Treatment
Event. If a Tax Event, an Investment Company Event or a Capital Treatment Event
in
respect of the Preferred Securities and Common Securities shall occur and be
continuing, the Company hasoccurs, we will have the right to redeem the Subordinated Debenturesdebentures in whole, (butbut not in
part)part, and thereby cause a mandatory redemption of all of the %
Preferred Securities and Common Securities in whole (but not in part)trust securities
at the Redemption Price within 90 days following the occurrenceredemption
25
price. If one of such Tax Event,
Investment Company Event or Capital Event. In the event a Tax Event,
Investment Company Event or Capital Event in respect of the Preferred
Securitiesthese events occurs and Common Securities has occurred and is continuing and the
Company doeswe do not elect to redeem the
Subordinated Debentures and thereby cause
a mandatory redemption of such Preferred Securities and Common Securitiesdebentures, or to liquidate CTBI Trustdissolve the trust and cause the Subordinated Debenturesdebentures to be distributed
to holders of such Preferred Securities and Common Securities in
liquidation of CTBI Trust as described below, such Preferred Securitiesthe trust securities, then the preferred securities will remain
outstanding and in the event of a Tax Event (but not an Investment
Company Event or a Capital Event) Additional Sums (as defined below)additional interest may be payable on the Subordinated Debentures.
"Additional Sums"debentures. See
"Description of the Debentures --Redemption."
"Tax Event" means the additional amounts as may be necessaryreceipt by the trust and us of an opinion of counsel
experienced in ordersuch matters stating that, the amount of Distributions then due and payable by CTBI Trust on the
outstanding Preferred Securities and Common Securities of CTBI Trust shall not
be reduced as a result of any additionalchange or
prospective change in the laws or regulations of the United States or any
political subdivision or taxing authority of the United States, or as a result
of any official administrative pronouncement or judicial decision interpreting
or applying the tax laws or regulations, there is more than an insubstantial
risk that:
. interest payable by us on the debentures is not, or within 90 days of the
date of the opinion will not be, deductible by us, in whole or in part,
for federal income tax purposes;
. the trust is, or will be within 90 days after the date of the opinion,
subject to federal income tax with respect to income received or accrued
on the debentures; or
. the trust is, or will be within 90 days after the date of the opinion,
subject to more than an immaterial amount of other taxes, duties,
andassessments or other governmental chargescharges.
"Investment Company Event" means the receipt by the trust and us of an
opinion of counsel experienced in such matters to which CTBI Trust has become subjectthe effect that the trust is
or will be considered an "investment company" that is required to be registered
under the Investment Company Act, as a result of a Tax Event.
"Like Amount"change in law or regulation
or a change in interpretation or application of law or regulation.
"Capital Treatment Event" means (i) with respect to a redemptionthe receipt by the trust and us of Trust Securities,
Trust Securities having a Liquidation Amount (as defined below) equal to that
portionan
opinion of the principal amount of Subordinated Debentures to be
contemporaneously redeemedcounsel experienced in accordance with the Indenture, allocatedsuch matters to the Common Securities andeffect that there is more
than an insubstantial risk of impairment of our ability to treat the Preferred Securities based upon the relative
aggregate Liquidation Amounts of such classes and the proceeds of which will
be used to pay the Redemption Price of such Trust Securities, and (ii) with
respect to a distribution of Subordinated Debentures to holders of Trust
Securities in connection with a dissolution or liquidation of CTBI Trust,
Subordinated Debentures having a principal amount equal to the Liquidation
Amount of the Trust Securities of the holder to whom such Subordinated
Debentures are distributed.
"Liquidation Amount" means the stated amount of $25 per Trust Security.
Redemption Procedures. Preferred Securities redeemed on each Redemption Date
shall be redeemed at the Redemption Price with the applicable proceeds from
the contemporaneous redemption of the Subordinated Debentures. Redemptions of
the Preferred Securities shall be made and the Redemption Price shall be
payable on each Redemption Date only to the extent that CTBI Trust has funds
on hand available for the payment of such Redemption Price. See also
"Description of Preferred Securities--Subordination of Common Securities."
If CTBI Trust gives a notice of redemption in respect of its Preferred
Securities, then, by 12:00 noon, Eastern Standard Time, on the Redemption
Date, to the extent funds are available, the Property Trustee, in its capacitypreferred
securities as paying agent, will pay the Redemption Price to the holders of such
Preferred Securities. See "Book-Entry Issuance." If such Preferred Securities
are no longer in book-entry form, the Property Trustee, to the extent funds
are available, will irrevocably deposit with the paying agent for such
Preferred Securities funds sufficient to pay the aggregate Redemption Price
and will give such paying agent irrevocable instructions and authority to pay
the Redemption Price to the holders thereof upon surrender of their
certificates evidencing such Preferred Securities. Notwithstanding the
foregoing, Distributions payable on or prior to the Redemption Date for any
Preferred Securities called for redemption shall be payable to the holders of
such Preferred Securities on the relevant record dates for the related
Distribution Dates. If notice of redemption shall have been given and funds
35
deposited as required, then upon the date of such deposit, all rights of the
holders of such Preferred Securities so called for redemption will cease,
except the right of the holders of such Preferred Securities to receive the
Redemption Price, but without interest on such Redemption Price, and such
Preferred Securities will cease to be outstanding. In the event that any date
fixed for redemption of Preferred Securities is not a Business Day, then
payment of the Redemption Price payable on such date will be made on the next
succeeding day which is a Business Day (and without any additional
Distribution, interest or other payment in respect of any such delay). In the
event that payment of the Redemption Price in respect of Preferred Securities
called for redemption is improperly withheld or refused and not paid either by
CTBI Trust or by the Company pursuant to the Guarantee, Distributions on such
Preferred Securities will continue to accrue at the then applicable rate, from
the Redemption Date originally established by CTBI Trust for such Preferred
Securities to the date such Redemption Price is actually paid, in which case
the actual payment date will be the date fixed for redemptionTier 1 capital for purposes of calculating the current capital adequacy
guidelines of the Federal Reserve, as a result of any amendment to any laws or
any regulations.
For all of the events described above, we or the trust must request and
receive an opinion with regard to the event within a reasonable period of time
after we become aware of the possible occurrence of an event of this kind.
Redemption Price. See "Description of Guarantee."
Subject to applicable law (including, without limitation, United States
federal securities law),Debentures in Exchange for Preferred Securities We Repurchase.
Upon prior approval of the Company or its subsidiaries mayFederal Reserve, if required, we will also have the
right at any time, and from time to time, purchase outstanding Preferred Securities by tender,to redeem debentures in exchange for
any preferred securities we may have repurchased in the open market ormarket. If we elect to
surrender any preferred securities beneficially owned by private agreement.
Payment of the Redemption Price on the Preferred Securities and any
distribution of Subordinated Debentures to holders of Preferred Securities
shall be made to the applicable record holders thereof as they appear on the
register for such Preferred Securities on the relevant record date, which date
shall be one Business Day prior to the relevant Redemption Date or liquidation
date, as applicable; provided, however, thatus in the event that any Preferred
Securities are not in book-entry form, the relevant record date for such
Preferred Securities shall be a date at least 15 days prior to the Redemption
Date or liquidation date, as applicable.
If less than all of the Preferred Securities and Common Securities issued by
CTBI Trust are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of such Preferred Securities and Common Securities to be
redeemed shall be allocated pro rata to the Preferred Securities and the Common
Securities based upon the relative Liquidation Amounts of such classes. The
particular Preferred Securities to be redeemed shall be selected by the
Property Trustee from the outstanding Preferred Securities not previously
called for redemption, by such method as the Property Trustee shall deem fair
and appropriate and which may provide for the selectionexchange for
redemption of portions (equala like amount of debentures, we will also surrender a
proportionate amount of common securities in exchange for debentures.
The common securities we surrender will be in the same proportion to $25 or an integral multiplethe
preferred securities we surrender as is the ratio of $25 in excess thereof)common securities
purchased by us to the preferred securities issued by the trust. In exchange
for the trust securities surrendered by us, the property trustee will cause to
be released to us for cancellation debentures with a principal amount equal to
the liquidation amount of the Liquidation Amounttrust securities, plus any accumulated but unpaid
distributions, if any, then held by the property trustee allocable to those
trust securities. After the date of Preferred Securities of a denomination larger than $25.
The Property Trustee shall promptly notifyredemption involving an exchange by us, the
trust registrarsecurities we surrender will no longer be deemed outstanding and the
debentures redeemed in writingexchange for the trust securities will be canceled.
Redemption Procedures
Preferred securities will be redeemed at the redemption price with the
applicable proceeds from our contemporaneous redemption of the Preferred Securities selected for redemption and, in the case of any
Preferred Securities selected for partial redemption, the Liquidation Amount
thereof to be redeemed. For all purposesdebentures.
Redemptions of the CTBI Trust Agreement, unlesspreferred securities will be made, and the context otherwise requires, all provisions relatingredemption price
will be payable, on each redemption date only to the redemption of
Preferred Securities shall relate toextent that the portiontrust has
funds available for the payment of the aggregate Liquidation
Amount of Preferred Securities which has been or is to be redeemed.redemption price.
26
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the Redemption Datedate of redemption to each Holderholder of Trust Securitiestrust securities to be
redeemed at its registered address. Unless the Company defaultswe default in payment of the
Redemption Priceredemption price on the Subordinated Debentures,debentures, interest will cease to accumulate on the
debentures called for redemption on and after the Redemption Datedate of redemption.
If the trust gives notice of redemption of its trust securities, then the
property trustee, to the extent funds are available, will irrevocably deposit
with the depositary for the trust securities funds sufficient to pay the
aggregate redemption price and will give the depositary for the trust
securities irrevocable instructions and authority to pay the redemption price
to the holders of the trust securities. See "Book-Entry Issuance." If the
preferred securities are no longer in book-entry only form, the property
trustee, to the extent funds are available, will deposit with the designated
paying agent for such preferred securities funds sufficient to pay the
aggregate redemption price and will give the paying agent irrevocable
instructions and authority to pay the redemption price to the holders upon
surrender of their certificates evidencing the preferred securities.
Notwithstanding the foregoing, distributions payable on or prior to the date of
redemption for any trust securities called for redemption will be payable to
the holders of the trust securities on the relevant record dates for the
related distribution dates.
If notice of redemption has been given and we have deposited funds as
required, then on the date of the deposit all rights of the holders of the
trust securities called for redemption will cease, except the right to receive
the redemption price, but without interest on such redemption price after the
date of redemption. The trust securities will also cease to be outstanding on
the date of the deposit. If any date fixed for redemption of trust securities
is not a business day, then payment of the redemption price payable on that
date will be made on the next day that is a business day without any additional
interest or other payment in respect of the delay. However, if the next
business day is in the next succeeding calendar year, payment of the interest
will cease to accrue on such Subordinated Debentures
or portions thereof (and distributions will cease to accruebe made on the related
Preferred Securities or portions thereof)immediately preceding business day.
If payment of the redemption price in respect of trust securities called for
redemption.
SUBORDINATION OF COMMON SECURITIESredemption is improperly withheld or refused and not paid by the trust, or by
us pursuant to the guarantee, distributions on the trust securities will
continue to accumulate at the applicable rate from the date of redemption
originally established by the trust for the trust securities to the date the
redemption price is actually paid. In this case, the actual payment date will
be considered the date fixed for redemption for purposes of calculating the
redemption price. See "Description of the Guarantee."
Payment of Distributionsthe redemption price on the preferred securities and any
distribution of debentures to holders of preferred securities will be made to
the applicable recordholders as they appear on the register for the preferred
securities on the relevant record date. As long as the preferred securities are
represented by a global security, the record date will be the business day
immediately preceding the date of redemption or liquidation date, as applicable.
If less than all of the trust securities are to be redeemed, then the
aggregate liquidation amount of the trust securities to be redeemed will be
allocated proportionately to those trust securities based upon the relative
liquidation amounts. The particular preferred securities to be redeemed will be
selected by the property trustee from the outstanding preferred securities not
previously called for redemption by a method the property trustee deems fair
and appropriate. This method may provide for the redemption of portions equal
to $25 or an integral multiple of $25 of the liquidation amount of the
preferred securities. The property trustee will promptly notify the registrar
for the preferred securities in writing of the preferred securities selected
for redemption and, in the case of any preferred securities selected for
partial redemption, the liquidation amount to be redeemed.
Subject to applicable law, and if we are not exercising our right to defer
interest payments on the debentures, we may, at any time, purchase outstanding
preferred securities.
27
Subordination of Common Securities
Payment of distributions on, and the Redemption Priceredemption price of, the Preferred
Securitiespreferred
securities and Common Securities, as applicable, shallcommon securities of the trust will be made pro rata based on the
Liquidation Amountliquidation amount of these securities. However, if an event of default under
the indenture has occurred and is continuing, no distributions on or redemption
of the Preferred Securities and Common Securities;
provided, however, that if on any Distribution Date or Redemption Date a
Debenture Event of Default shall have occurred and be continuing, no payment of
any Distribution on, or Redemption Price of, any of the Common Securities, and
no other payment on account of the redemption, liquidation or other acquisition
of such Common Securities, shallcommon securities may be made unless payment in full in cash of all
accumulated and unpaid Distributionsdistributions on all of the outstanding Preferred
Securitiespreferred
securities for all Distributiondistribution periods terminating on or prior thereto,before that time, or
in the
36
case of payment of the Redemption Price,redemption price, payment of the full amount of
such Redemption
Pricethe redemption price on all of the outstanding Preferred Securitiespreferred securities then called
for redemption, shall havehas been made or provided for, and allfor. All funds available to the
Property Trustee shallproperty trustee will first be applied to the payment in full in cash of all
Distributionsdistributions on, or Redemption Pricethe redemption price of, the Preferred Securitiespreferred securities then due
and payable.
In the case of the occurrence and continuance of any Eventevent of Defaultdefault under
the trust agreement resulting from a Debenture Eventan event of Default,default under the Company,indenture, we,
as holder of the Common Securities,common securities, will be deemed to have waived any right to
act with respect to any such Eventthat event of Defaultdefault under the CTBI Trust Agreementtrust agreement until the
effect of all such Eventsthe event of Default with
respect to such Preferred Securities havedefault has been cured, waived or otherwise eliminated.
Until any such Eventsthe event of Defaultdefault under the CTBI Trust Agreement
with respect to the Preferred Securities havetrust agreement has been so cured, waived
or otherwise eliminated, the Property Trustee shallproperty trustee will act solely on behalf of the
holders of the Preferred Securitiespreferred securities and not on our behalf, of the Company as holder
of the Common Securities, and only the holders
of the Preferred Securitiespreferred securities will have the right to direct the Property Trusteeproperty trustee
to act on their behalf.
LIQUIDATION DISTRIBUTION UPON TERMINATION
The amount payable on the Preferred Securities in the event of any
liquidation of CTBI Trust is $25 per Preferred Security plus accrued and unpaid
Distributions thereon to the date of payment, which may be in the form of a
distribution of such amount in Subordinated Debentures, subject to certain
exceptions. See "Description of the Preferred Securities--LiquidationLiquidation Distribution Upon Termination."
The Company, as the holder of the Common Securities,Dissolution
We will have the right at any time to terminate CTBI Trustdissolve the trust and cause the
Subordinated Debenturesdebentures to be distributed to the holders of the Preferred Securities. Suchtrust securities. This right
is subject, however, to the Company having received priorus receiving approval of the Federal Reserve, if
then
required under applicable capital guidelines or policies of the Federal
Reserve.required.
In addition, pursuant to the CTBI Trust Agreement, CTBI Trust shalltrust will automatically terminate upon expiration of its
term and shallwill terminate earlier terminate on the first to occur of:
(i) certain events of. our bankruptcy, dissolution or liquidation of the Company; (ii)liquidation;
. the distribution of a Like Amountlike amount of the Subordinated Debenturesdebentures to the holders of
its Trust Securities,trust securities, if the Company,
as Depositor, haswe have given written direction to the Property Trusteeproperty
trustee to terminate
CTBI Trust (which direction is optional and wholly withindissolve the discretion of the
Company, as Depositor); (iii)trust;
. redemption of all of the Preferred Securitiespreferred securities as described under "Description of Preferred Securities--Redemption;"--
Redemption or Exchange -- Mandatory Redemption;" and (iv)or
. the entry of ana court order for the dissolution of CTBI Trust bythe trust.
With the exception of a court of competent
jurisdiction.
Ifredemption as described under "-- Redemption or
Exchange -- Mandatory Redemption," if an early terminationdissolution of the trust occurs,
as described in clause (i), (ii) or (iv)
above, CTBI Trust shallthe trust will be liquidatedwound up by the Trusteesadministrative trustees as expeditiously as
the
Trusteesthey determine to be possible by distributing, afterpossible. After satisfaction of liabilities to creditors
of CTBI Trustthe trust as provided by applicable law, the trustees will distribute to the
holders of such Trust Securities a Like Amounttrust securities, debentures:
. in an aggregate stated principal amount equal to the aggregate stated
liquidation amount of the Subordinated Debentures,
unless suchtrust securities;
. with an interest rate identical to the distribution rate on the trust
securities; and
. with accrued and unpaid interest equal to accumulated and unpaid
distributions on the trust securities.
If the property trustee determines that the distribution of debentures is
determined bynot practical, then the Property Trustee not to be
practical, in which event such holders of trust securities will be entitled to
receive, outinstead of debentures, a proportionate amount of the assets of CTBI Trust available forliquidation
distribution. The liquidation distribution to holders, after satisfaction
of liabilities to creditors of CTBI Trust as provided by applicable law, anwill be the amount equal to in the case of holders of Preferred Securities, the
aggregate of the Liquidation Amountliquidation amount plus accruedaccumulated and unpaid Distributions thereondistributions
to the date of payment (such amount beingpayment. If the "Liquidation Distribution"). If such
Liquidation Distributionliquidation distribution can be paid only in
part because CTBI Trustthe trust has insufficient assets available to pay in full the
aggregate Liquidation
Distribution,liquidation distribution, then the amounts
28
payable directly by CTBI Trustthe trust on the Preferred
Securities shalltrust securities will be paid on a
pro rata basis. The holder(s)proportional basis, based on liquidation amounts, to us, as the holder of the
Common
Securities will be entitledcommon securities, and to receive distributions upon any such liquidation
pro rata with the holders of the Preferred Securities, except thatpreferred securities. However, if
a
Debenture Eventan event of Defaultdefault under the indenture has occurred and is continuing, the
Preferred
Securities shallpreferred securities will have a priority over the common securities. See "--
Subordination of Common Securities.
After the liquidation date fixed for any distribution of Subordinated
Debentures for Preferred Securities (i) such Preferred Securities will no
longer be deemed to be outstanding, (ii) The Depository Trust Company (the
"Depositary") or its nominee, as the record holder of the Preferred Securities,
will receive a registered global
37
certificate or certificates representing the Subordinated Debentures to be
delivered upon such distribution and (iii) any certificates representing
Preferred Securities not held by the Depositary or its nominee will be deemed
to represent the Subordinated Debentures having a principal amount equal to the
Liquidation Amount of such Preferred Securities, and bearing accrued and unpaid
interest in an amount equal to the accrued and unpaid Distributions on the
Preferred Securities until such certificates are presented to the Securities
Registrar or their agent for transfer or reissuance."
Under current United States federal income tax law and interpretations and
assuming as expected, CTBI Trustthat the trust is treated as a grantor trust, as is expected, a
distribution of the Subordinated Debenturesdebentures should not be a taxable event to holders of the
Preferred Securities.preferred securities. Should there be a change in law, a change in legal
interpretation, a Tax Event or other circumstances,another circumstance, however, the distribution
could be a taxable event to holders of the Preferred Securities.preferred securities. See "Certain
Federal"Federal
Income Tax Consequences."Consequences -- Receipt of Debentures or Cash Upon Liquidation of
the Trust" for more information regarding a taxable distribution. If the Company elects neitherwe do not
elect to redeem the Subordinated Debenturesdebentures prior to maturity noror to liquidate CTBI Trustdissolve the trust and
distribute the Subordinated Debenturesdebentures to holders of the Preferred Securities,preferred securities, the Preferred Securitiespreferred
securities will remain outstanding until the repayment of the Subordinated Debentures.debentures.
If we elect to dissolve the Company elects to liquidate CTBI Trusttrust and thereby causesthus cause the Subordinated Debenturesdebentures to be
distributed to holders of the Preferred
Securitiespreferred securities in liquidation of CTBI Trust, the Company shalltrust,
we will continue to have the right to shorten or extend the maturity of such Subordinated Debentures,
subject to certain conditions.the debentures.
See "Description of Subordinated Debentures--the Debentures -- General."
There can be no assurance asLiquidation Value
The amount of the liquidation distribution payable on the preferred
securities in the event of any liquidation of the trust is $25 per preferred
security plus accumulated and unpaid distributions to the market prices for the Preferred
Securities or the Subordinated Debentures thatdate of payment,
which may be distributed in exchange
for Preferred Securities ifthe form of a dissolutiondistribution of debentures having a liquidation
value and liquidationaccrued interest of CTBI Trust were to
occur. Accordingly, the Preferred Securities that an investor may purchase, or
the Subordinated Debentures that the investor may receive on dissolution and
liquidationequal amount. See "-- Liquidation Distribution
upon Dissolution."
Events of CTBI Trust, may trade at a discount to the price that the
investor paid to purchase the Preferred Securities offered hereby.
EVENTS OF DEFAULT AND NOTICEDefault; Notice
Any one of the following events constitutes an "Eventevent of Default"default under the
CTBI Trust Agreement (an "Event of Default")trust agreement with respect to the Preferred
Securities (whatever the reason for such Event of Default and whether it shall
be voluntary or involuntary or be effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body):
(i)preferred securities:
. the occurrence of a Debenture Eventan event of Defaultdefault under the Indenture
(seeindenture, see
"Description of Subordinated Debentures--Debenturethe Debentures -- Debenture Events of Default"); or
(ii)Default;"
. a default by the Property Trusteetrust in the payment of any Distributiondistribution when it becomes
due and payable, and continuation of suchthe default for a period of 30 days;
or
(iii). a default by the Property Trusteetrust in the payment of any Redemption
Priceredemption price of any Trust Securityof
the trust securities when it becomes due and payable;
or
(iv). a default in the performance, or breach, in any material respect, of any
covenant or warranty of the Trusteestrustees in the CTBI Trust Agreement (othertrust agreement, other than
a covenant or warranty a defaultthose defaults covered in the performance of which or the
breach of which is dealt with in clauses (ii) or (iii) above),previous two points, and continuation of suchthe
default or breach for a period of 60 days after there has been given, by
registered or certified mail, to the Trustee or Trusteestrustees by the holders of at least
25% in aggregate Liquidation Amountliquidation amount of the outstanding Preferred Securities,preferred
securities, a written notice specifying suchthe default or breach and
requiring it to be remedied and stating that suchthe notice is a "Notice of
Default" under the CTBI Trust Agreement;trust agreement; or
(v). the occurrence of certain events of bankruptcy or insolvency with respect to the
Property Trusteeproperty trustee and theour failure by the Company to appoint a successor Property Trusteeproperty trustee
within 60 days thereof.days.
Within five Business Daysbusiness days after the occurrence of any Eventevent of Defaultdefault
actually known to the Property Trustee,property trustee, the Property Trustee shallproperty trustee will transmit
notice of such Eventthe event of Defaultdefault to the holders of the Preferred Securities,preferred securities, the
Administrative Trusteesadministrative trustees and to us, unless the Company, as Depositor, unless such Eventevent of Default shall have
38
default has been cured
or waived. The Company, as Depositor,administrative trustees and the Administrative
Trusteeswe are required to file annually
with the Property Trusteeproperty trustee a certificate as to whether or not they or we are in
compliance with all the conditions and covenants applicable to them under each Trust Agreement.the
trust agreement.
29
If a Debenture Eventan event of Defaultdefault under the indenture has occurred and is continuing,
the Preferred
Securities shallpreferred securities will have a preference over the common securities upon
dissolution of the trust. See " -- Subordination of Common Securities upon termination
of CTBI Trust as described above. See "--LiquidationSecurities" and " --
Liquidation Distribution Upon Termination.Dissolution." The existence of an Eventevent of
Defaultdefault under the trust agreement does not entitle the holders of Preferred Securitiespreferred
securities to accelerate the maturity thereof.
REMOVAL OF CTBI TRUST TRUSTEES
Unless a Debenture Eventthereof, unless the event of Default shall have occurred and be continuing,
any Securities Trustee may be removed at any timedefault is
caused by the holdersoccurrence of an event of default under the Common
Securities. If a Debenture Event of Default has occurredindenture and is continuing,both
the Property Trusteeindenture trustee and the Delaware Trustee may be removed at such time by the holders of at least 25% in Liquidation Amountprincipal amount of the
debentures fail to accelerate the maturity thereof.
Removal of the Trustees
Unless an event of default under the indenture has occurred and is
continuing, we may remove any trustee at any time. If an event of default under
the indenture has occurred and is continuing, only the holders of a majority in
liquidation amount of the outstanding Preferred
Securities. In no event willpreferred securities may remove the
property trustee or the Delaware trustee. The holders of the Preferred Securitiespreferred
securities generally have theno right to vote to appoint, remove or replace the
Administrative Trustees, which
votingadministrative trustees. These rights are vested exclusively in the Companywith us as the
holder of the Common
Securities.common securities. No resignation or removal of a Securities Trusteetrustee and no
appointment of a successor trustee shallwill be effective until the acceptance of
appointment by the successor
trustee accepts the appointment in accordance with the provisions of the
applicable Trust Agreement.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEEtrust agreement.
Co-Trustees and Separate Property Trustee
Unless an Eventevent of Default shall havedefault under the indenture has occurred and beis
continuing, at any time
or times, for the purpose of meeting the legal requirements of the Trust
Indenture Act or of any jurisdiction in which any part of the Trust Property,
as defined in the Indenture,trust property
may at the time be located, we will have the Company, as the
holderpower to appoint at any time or
times, and upon written request of the Common Securities, and the Administrative Trustees shall have
power toproperty trustee will appoint, one or
more persons or entities either (a) to act as a co-trustee, jointly with the
Property Trustee,property trustee, of all or any part of such Trust Property,the trust property, or (b) to act as
separate trustee of any such property, intrust property. In either case, with suchthese persons or
entities will have the powers asthat may be provided in the instrument of
appointment, and to vestwill have vested in such person or
persons in such capacitythem any property, title, right or power
deemed necessary or desirable, subject to the provisions of the applicable Trust Agreement.trust
agreement. In case a Debenture Eventan event of Defaultdefault under the indenture has occurred and is
continuing, the Property
Trusteeproperty trustee alone shallwill have power to make suchthe appointment.
MERGER OR CONSOLIDATION OF TRUSTEES
AnyMerger or Consolidation of Trustees
Generally, any person into whichor successor to any of the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural persontrustees may be merged or converted
or with which it may be consolidated, ora successor
trustee to any personof the trustees, including a successor resulting from a merger
or consolidation. However, any merger,
conversionsuccessor trustee must meet all of the
qualifications and eligibility standards to act as a trustee.
Mergers, Consolidations, Amalgamations or consolidation to which such Trustee shall be a party, or any
person succeeding to all or substantially allReplacements of the corporateTrust
The trust business of
such Trustee, shall be the successor of such Trustee under each Trust
Agreement, provided such person shall be otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF CTBI TRUST
CTBI Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other person, except as
described below. CTBI TrustFor these purposes, if we consolidate or merge with another
entity, or transfer or sell substantially all of our assets to another entity,
in some cases that transaction may be deemed to involve a replacement of the
trust, and the conditions set forth below would apply to such transaction. The
trust may, at theour request, of the Company, with the consent of the Administrative Trusteesadministrative trustees and
without the consent of the holders of the Preferred Securities,preferred securities, the property
trustee or the Delaware trustee, merge with or into, consolidate, amalgamate or
be replaced by or convey, transfer or lease its properties and assets
substantially as an entirety to aanother trust organized as such underif the laws of any
State; provided, that (i) suchfollowing conditions are met:
. the successor entity either (a) expressly assumes all of the obligations
of CTBI Trustthe trust with respect to the Preferred Securitiespreferred securities, or (b) substitutes
for the Preferred Securitiespreferred securities other securities having substantially the
same terms as the Preferred Securities (the "Successor
Securities")preferred securities, referred to as "successor
securities," so long as the Successor Securitiessuccessor securities rank the same in priority
as the Preferred
Securities rank in prioritypreferred securities with respect to distributions and payments
upon liquidation, redemption and otherwise, (ii) the Company expressly appointsotherwise;
. we appoint a trustee of suchthe successor entity possessing substantially the
same powers and duties as the Property Trusteeproperty trustee in its capacity as the
holder of the Subordinated Debentures,
(iii)debentures;
30
. the Successor Securitiessuccessor securities are listed or any Successor Securities willtraded or shall be listed upon notification of issuance,or traded
on The Nasdaq Stock Market's National
Market or any national securities exchange or other organization in or on which
the Preferred Securitiespreferred securities are then listed, if any, (iv)
39
suchany;
. the merger, consolidation, amalgamation, replacement, conveyance, transfer
or lease does not adversely affect the rights, preferences and privileges
of the holders of the Preferred Securities (includingpreferred securities, including any Successor Securities)successor
securities, in any material respect, (v) suchrespect;
. the successor entity has a purpose substantially identical to that of CTBI Trust, (vi)the
trust;
. prior to suchthe merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, the Company haswe have received an opinion from independent counsel
to CTBI Trust experienced in such matters to the
effect that (a) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or leaseany transaction of this kind does not adversely affect the
rights, preferences and privileges of the holders of the Preferred Securities (includingpreferred
securities, including any Successor Securities)successor securities, in any material respect,
and (b) following such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease,the transaction, neither CTBI Trustthe trust nor suchthe successor
entity will be required to register as an investment company"investment company" under the
Investment Company ActAct; and
(vii) the Company or
any permitted successor or assignee owns. we own all of the Common Securitiescommon securities of suchthe successor entity and guaranteesguarantee
the obligations of suchthe successor entity under the Successor Securitiessuccessor securities at
least to the extent provided by the Guarantee.guarantee, the debentures, the trust
agreement and the expense agreement. Notwithstanding the foregoing, CTBI Trust shallthe
trust may not, except with the consent of holders of 100% in Liquidation Amountevery holder of the Preferred Securities, consolidate,
amalgamate, merge with orpreferred
securities, enter into or be replaced by or convey, transfer or lease
its properties and assets substantially as an entirety to any other entity or
permit any other entity to consolidate, amalgamate, merge with or into, or
replace ittransaction of this kind if such consolidation, amalgamation, merger, replacement,
conveyance, transfer or leasethe transaction
would cause CTBI Trustthe trust or the successor entity not to be classified as other than a
grantor trust for United States federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF TRUST AGREEMENTVoting Rights; Amendment of Trust Agreement
Except as provideddescribed below and under "Description of Guarantee--Amendments and
Assignment"the Guarantee --
Amendments" and as otherwise required by lawthe Trust Indenture Act and the CTBI Trust Agreement,trust
agreement, the holders of the Preferred Securitiespreferred securities will have no voting rights.
The CTBI Trust Agreementtrust agreement may be amended from time to time by us, as holders of
the Company, the
Property Trusteecommon securities, and the Administrative Trustees,trustees, without the consent of the holders of
the Preferred Securities (i)preferred securities, in the following circumstances:
. with respect to acceptance of appointment by a successor trustee;
. to cure any ambiguity, correct or supplement any provisions in the CTBI Trust Agreementtrust
agreement that may be inconsistent with any other provision, or to make
any other provisions with respect to matters or questions arising under
the CTBI Trust Agreement, which shalltrust agreement, as long as the amendment is not be inconsistent with the
other provisions of the CTBI Trust Agreement,trust agreement and does not have a material
adverse effect on the interests of any holder of preferred securities; or
(ii). to modify, eliminate or add to any provisions of the CTBI Trust Agreement to such
extent as shall betrust agreement if
necessary to ensure that CTBI Trustthe trust will be classified for
United States federal income
tax purposes as a grantor trust at all times that any Trust Securitiestrust securities are
outstanding or to ensure that CTBI Trustthe trust will not be required to register
as an "investment company" under the Investment Company Act; provided, however, that inAct.
With the caseconsent of clause (i), such action shall not
adversely affect in any material respect the interests of any holder of Trust
Securities, and any amendments of such CTBI Trust Agreement shall become
effective when notice thereof is given to the holders of Trust Securities. The
CTBI Trust Agreement may be amended by the Trustees and the Company with (i)
the consent of holders representing not less than a majority inof the aggregate Liquidation Amountliquidation
amount of the outstanding Trust Securities,trust securities, we and (ii) receipt by the Trustees oftrustees may amend the
trust agreement if the trustees receive an opinion of counsel to the effect
that suchthe amendment or the exercise of any power granted to the Trusteestrustees in
accordance with suchthe amendment will not affect CTBI Trust'sthe trust's status as a grantor
trust for United States
federal income tax purposes or CTBI Trust'sthe trust's exemption from status as
an "investment company" under the Investment Company Act. Notwithstanding anything
in this paragraph to the contrary,However, without the
consent of each holder of Trust
Securities, such CTBI Trust Agreementtrust securities, the trust agreement may not be
amended to (i)(a) change the amount or timing of any Distributiondistribution on the Trust Securitiestrust
securities or otherwise adversely affect the amount of any Distributiondistribution
required to be made in respect of the Trust Securitiestrust securities as of a specified date
or (ii)(b) restrict the right of a holder of Trust Securitiestrust securities to institute suit for
the enforcement of any suchthe payment on or after suchthat date.
So31
As long as the property trustee holds any Subordinated Debentures are held bydebentures, the Property Trustee,trustees will not,
without obtaining the Property Trustee shall not (i)prior approval of the holders of a majority in aggregate
liquidation amount of all outstanding preferred securities:
. direct the time, method and place of conducting any proceeding for any
remedy available to the Debenture Trustee,indenture trustee, or executing any trust or power
conferred on the Property Trusteeproperty trustee with respect to the Subordinated Debentures, (ii)debentures;
. waive any past default that is waivable under the Indenture, (iii)indenture;
. exercise any right to rescind or
40
annul a declaration that the principal of
all the Subordinated Debentures shalldebentures will be due and payablepayable; or
(iv). consent to any amendment modification or termination of the Indentureindenture or the
Subordinated Debentures,debentures, where suchthe property trustee's consent shall be required, without, in each case, obtaining the prior approval of the
holders of at least a majority in aggregate Liquidation Amount of all
outstanding Preferred Securities; provided, however, thatis required. However,
where a consent under the Indenture would requireindenture requires the consent of each holder of
Subordinated
Debenturesthe affected thereby,debentures, no such consent shallwill be given by the Property
Trusteeproperty trustee
without the prior consent of each holder of the Preferred Securities.preferred securities.
The Property Trustee shalltrustees may not revoke any action previously authorized or approved by
a vote of the holders of the Preferred Securitiespreferred securities, except by subsequent vote of
the holders of the Preferred Securities.preferred securities. The Property
Trustee shallproperty trustee will notify each
holder of Preferred Securitiespreferred securities of any notice of default with respect to the
Subordinated Debentures.debentures. In addition to obtaining the foregoing approvals of the holders of
the Preferred Securities,preferred securities, prior to taking any of the foregoing actions, the
Property Trustee shalltrustees must obtain an opinion of counsel experienced in suchthese matters to the
effect that CTBI Trustthe trust will continue to be classified as a grantor trust and
will not be classified as an association taxable as a corporation for United
States federal
income tax purposes on account of suchthe action.
Any required approval of holders of Preferred Securitiestrust securities may be given at a
meeting of holders of Preferred Securities convened for such purpose or pursuant toby written consent. The Property Trusteeproperty trustee will cause a notice of any
meeting at which holders of Preferred Securitiesthe trust securities are entitled to vote or of
any matter upon which action by written consent of such holders is to be taken, to be
given to each holder of record of Preferred Securities in the manner set
forth in the CTBI Trust Agreement.trust securities.
No vote or consent of the holders of Preferred Securitiespreferred securities will be required
for CTBI Trustthe trust to redeem and cancel its Preferred Securitiespreferred securities in accordance with
the CTBI Trust Agreement.trust agreement.
Notwithstanding the fact that holders of Preferred Securitiespreferred securities are entitled
to vote or consent under any of the circumstances described above, any of the
Preferred Securitiespreferred securities that are owned by us, the Company, the Trusteestrustees or any affiliate of
the Companyours or of any Trustee, shall,trustee, will, for purposes of suchthe vote or consent, be treated
as if they were not outstanding.
GLOBAL PREFERRED SECURITIESGlobal Preferred Securities
The Preferred Securitiespreferred securities will be represented by one or more global preferred
securities certificates registered in the name of the DepositaryThe Depository Trust Company,
New York, New York, referred to below as DTC, or its nominee ("Global
Preferred Security"). Beneficialnominee. A global
preferred security certificate is a certificate representing preferred
securities of more than one beneficial owner. Ownership of beneficial interests
in the Preferred Securitiespreferred securities represented by a global preferred securities
certificate will be reflected in DTC participant account records through DTC's
book-entry transfer and registration system. Participants are brokers, dealers,
or others having accounts with DTC. Indirect beneficial interests of other
persons investing in the preferred securities will be shown on, and transfers thereof
will be effected only through, records maintained by participants in the Depositary.DTC participants. Except
as described below, Preferred Securitiespreferred securities in certificateddefinitive form will not be issued
in exchange for the global certificates.preferred securities certificate. See "Book-Entry
Issuance."
ANo global preferred security shallcertificate may be exchangeableexchanged for Preferred Securitiesa certificate
representing preferred securities registered in the names of persons other than
the DepositaryDTC or its nominee only if (i)
the Depositaryunless:
. DTC notifies the Companyindenture trustee that it is unwilling or unable to
continue as a depositary for suchthe global securitypreferred securities and nowe are
unable to locate a qualified successor depositary shall have
been appointed,depositary;
32
. we execute and deliver to the indenture trustee a written order stating
that we elect to terminate the book-entry system through DTC; or
if at any time the Depositary ceases to be a clearing agency
registered under the Securities Exchange Act of 1934, as amended, at a time
when the Depositary is required to be so registered to act as such Depositary,
(ii) the Company in its sole discretion determines that such global security
shall be so exchangeable, or (iii). there shall have occurred and be continuing an Eventevent of Defaultdefault under the
Indenture.indenture.
Any global preferred security certificate that is exchangeable pursuant to
the preceding sentence shall be exchangeable for definitive certificates
registered in suchthe names as the DepositaryDTC shall direct. It is expected that suchthe
instructions will be based upon directions received by the DepositaryDTC with respect to
ownership of beneficial interests in suchthe preferred securities represented by a
global security. In the event that Preferred Securitiespreferred security certificate. If preferred securities certificates are
issued in definitive form, such Preferred Securitiesthe preferred securities certificates will be in
denominations of $25 and integral multiples thereofof $25 and may be transferred or
exchanged at the offices described below.
Unless and until it is exchanged in whole or in part for definitive
preferred securities certificates, a global preferred security certificate may
not be transferred, except as a whole, by DTC to a nominee of DTC, by a nominee
of DTC to DTC or another nominee of DTC or by DTC or any nominee to a successor
depositary or any nominee of the successor.
Payments on Preferred Securitiespreferred securities represented by a global securitypreferred
securities certificate will be made to the Depositary,DTC, as the depositary for the Preferred Securities. Inglobal
preferred securities. If the event Subordinated Debenturespreferred securities are issued in definitive
form, principal and
Distributionsdistributions will be payable by check mailed to the address of record of
the persons entitled to the distribution, and the transfer of the Preferred Securitiespreferred
securities will be registrable, and Preferred Securitiescertificates representing preferred
securities will be exchangeable for Preferred
Securitiescertificates representing preferred
securities of other denominations of a like aggregate 41
Liquidation Amount,liquidation amount, at
the corporate office of the Property Trustee in Boston,
Massachusetts,property trustee, or at the offices of any paying
agent or transfer agent appointed by the Administrative Trustees, provided that payment of any
Distribution may be made at the option of the Administrative Trustees by check
mailed to the address of the persons entitled thereto or by wire transfer.administrative trustees. In addition,
if the Preferred Securitiespreferred securities are issued in certificateddefinitive form, the record dates for
payment of Distributionsdistributions will be the 15th day of the month in which the
relevant Distribution Datedistribution date occurs. For a description of the terms of the depositaryDTC
arrangements relating to payments, transfers, voting rights, redemptions and
other notices and other matters, see "Book-Entry Issuance."
Upon the issuance of a Global Preferred Security,one or more global preferred securities certificates,
and the deposit of such
Global Preferred Securitythe global preferred security certificate with or on behalf
of the Depositary, the Depositary
for such Global Preferred SecurityDTC or its nominee, DTC or its nominee will credit, on its book-
entrybook-entry
registration and transfer system, the respective aggregate Liquidation
Amountsliquidation amounts
of the individual Preferred Securitiespreferred securities represented by such Global
Preferred Securitiesthe global preferred
security certificate to the designated accounts of persons havingthat participate in
the DTC system. These participant accounts with the
Depositary ("Participants"). Such accounts shallwill be designated by the dealers,
underwriters or agents with respect to such Preferred Securities.selling the preferred securities. Ownership of
beneficial interests in preferred securities represented by a Global Preferred Securityglobal preferred
security certificate will be limited to Participantspersons or persons thatentities having an account
with DTC or who may hold interests through Participants. Ownershipparticipants. With respect to
interests of any person or entity that is a DTC participant, ownership of
beneficial interests in such Global Preferred Securitypreferred securities represented by a global preferred
security certificate will be shown on, and the transfer of that ownership will
be effected only through, records maintained by the applicable DepositaryDTC or its nominee (withnominee. With
respect to interests of Participants) and the records of Participants (with respect to
interests of persons or entities who hold interests in preferred securities
represented by a global preferred security certificate through Participants).a participant,
the interest and any transfer of the interest will be shown only on the
participant's records. The laws of some states require that certain purchasers
of securities take physical delivery of such
securities in definitive form. Such limits and suchThese
laws may impair the ability to transfer beneficial interests in preferred
securities represented by a Global Preferred Security.global preferred security certificate.
So long as the Depositary for a Global Preferred Security,DTC or another depositary, or its nominee, is the registered
owner of such Global Preferred Security, such Depositarythe global preferred security certificate, the depositary or suchthe
nominee, as the case may be, will be considered the sole owner or holder of the
Preferred Securitiespreferred securities represented by such Global Preferred Securitythe global preferred security certificate
for all purposes under the Indenture governing such Preferred Securities.trust agreement. Except as provided below,described in this
prospectus, owners of beneficial interests in preferred securities represented
by a Global Preferred Securityglobal preferred security certificate will not be entitled to have any of
the individual Preferred Securitiespreferred securities represented by such Global Preferred Securitythe global preferred
security certificate registered in their names, will not receive or be entitled
to receive physical delivery of any such Preferred
Securitiespreferred securities in definitive form and
will not be considered the owners or holders thereofof the preferred securities under
the Indenture.trust agreement.
33
None of us, the Company, CTBI Trust, the Property Trustee,property trustee, any Paying Agent,paying agent or the Securities Registrarsecurities
registrar for such Preferred Securitiesthe preferred securities will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests of the Global
Preferred Securityglobal preferred security certificate
representing such Preferred Securitiesthe preferred securities or for maintaining, supervising or
reviewing any records relating to suchthe beneficial ownership interests.
The Company expectsWe expect that the Depositary for Preferred SecuritiesDTC or its nominee, upon receipt of any payment of the
Liquidation Amount, Redemption
Priceliquidation amount or Distributionsdistributions in respect of the Global Preferred Securitypreferred securities
represented by a global preferred security certificate, immediately will credit
Participants'participants' accounts with payments in amounts proportionate to their
respective beneficial interest in the aggregate Liquidation Amountliquidation amount of such Global Preferred Securitythe
preferred securities represented by global preferred security certificate as
shown on the records of such DepositaryDTC or its nominee. The CompanyWe also expectsexpect that payments by
Participantsparticipants to owners of beneficial interests in such Global Preferred Securitythe preferred securities
represented by a global preferred security certificate held through such
Participantsthe
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in "street name." SuchThe payments will be the responsibility of
such Participants.
If the Depositary for the Preferred Securities is at any time unwilling,
unable or ineligible to continue as depositaryparticipants. See "Book-Entry Issuance."
Payment and a successor depositary is
not appointed by the Company within 90 days, CTBI Trust will issue individual
Preferred Securities in exchange for the Global Preferred Security. In
addition, CTBI Trust may at any time and in its sole discretion, subject to any
limitations described herein relating to such Preferred Securities, determine
not to have any Preferred Securities represented by one or more Global
Preferred Securities and, in such event, will issue individual Preferred
Securities in exchange for the Global Preferred Security or Securities
representing the Preferred Securities. Further, if CTBI Trust so specifies with
respect to the Preferred
42
Securities, an owner of a beneficial interest in a Global Preferred Security
representing Preferred Securities may, on terms acceptable to the Company, the
Property Trustee and the Depositary for such Global Preferred Security,
receive individual Preferred Securities in exchange for such beneficial
interests, subject to any limitations described herein. In any such instance,
an owner of a beneficial interest in a Global Preferred Security will be
entitled to physical delivery of individual Preferred Securities represented
by such Global Preferred Security equal in Liquidation Amount to such
beneficial interest and to have such Preferred Securities registered in its
name. Individual Preferred Securities so issued will be issued in
denominations, unless otherwise specified by CTBI Trust, of $25 and integral
multiples thereof.
PAYMENT AND PAYING AGENCYPaying Agency
Payments in respect of the Preferred Securitiespreferred securities shall be made to the paying
agent,DTC, which
shall credit the relevant accounts at the Depositaryof participants on the applicable
Distribution Datesdistribution dates, or, if any Preferred Securitiesof the preferred securities are not held by DTC,
the Depositary, such payments shall be made by check mailed to the address of the holder entitled thereto as
such address shall appearlisted on the register of holders of Preferred Securities.the preferred securities. The paying agent
shallfor the preferred securities will initially be the Property Trustee ("Paying Agent")property trustee and any
co-paying agent chosen by the Property Trusteeproperty trustee and acceptable to us and the
Administrative Trustees.administrative trustees. The Paying
Agent shall be permitted topaying agent for the preferred securities may
resign as Paying Agentpaying agent upon 30 days'days written notice to the Property Trusteeadministrative
trustees, the property trustee and us. If the Company. In the event that the Property
Trustee shallproperty trustee no longer beis the
Paying Agent,paying agent for the Administrative Trustees shallpreferred securities, the administrative trustees will
appoint a successor (which shallto act as paying agent. The successor must be a bank or
trust company acceptable to us and the Administrative Trustees) to act as Paying Agent.
REGISTRAR AND TRANSFER AGENTproperty trustee.
Registrar and Transfer Agent
The Property Trusteeproperty trustee will act as the registrar and the transfer agent for
the Preferred Securities.preferred securities. Registration of transfers of Preferred Securitiespreferred securities
will be effected without charge by or on behalf of CTBI Trust,the trust, but upon payment
of any tax or other governmental charges that may be imposed in connection with
any transfer or exchange. CTBI TrustThe trust and its registrar and transfer agent will
not be required to register or cause to be registered the transfer of Preferred Securitiespreferred
securities after such Preferred
Securitiesthey have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
TheInformation Concerning the Property Trustee
other than upon the occurrence and during the
continuance of an Event of Default,The property trustee undertakes to perform only suchthe duties as
are specifically set forth in the
CTBI Trust Agreement and, after such Eventtrust agreement. After the occurrence of Default,an event of default that is
continuing, the property trustee must exercise the same degree of care and
skill as a prudent person would exerciseexercises or useuses in the conduct of his or herits own affairs.
Subject
to this provision, the Property TrusteeThe property trustee is under no obligation to exercise any of the powers
vested in it by the CTBI Trust Agreementtrust agreement at the request of any holder of Preferred Securitiespreferred
securities unless it is offered reasonable indemnity against the costs,
expenses and liabilities that might be incurred thereby.incurred. If no Eventevent of Defaultdefault under
the trust agreement has occurred and is continuing and the Property Trusteeproperty trustee is
required to decide between alternative causescourses of action, construe ambiguous or
inconsistent provisions in the CTBI Trust Agreementtrust agreement or is unsure of the application
of any provision of the CTBI Trust Agreement,trust agreement, and the matter is not one on which
holders of Preferred Securitiespreferred securities are entitled under the CTBI Trust Agreement to vote upon, then the Property Trustee shallproperty
trustee will take suchthe action asdirected in writing by us. If the property trustee
is directed by the
Company and if not so directed, shallthen it will take suchthe action as it deems advisable and in the
best interests of the holders of the Trust Securitiestrust securities and will have no
liability except for its own bad faith, negligence or willful misconduct.
MISCELLANEOUS34
Miscellaneous
The Administrative Trusteesadministrative trustees are authorized and directed to conduct the
affairs of and to operate CTBI Trustthe trust in such a way that CTBI Trustthat:
. the trust will not be deemed to be an "investment company" required to be
registered under the Investment Company Act orAct;
. the trust will be classified as a grantor trust and not as an association
taxable as a corporation for United States federal income tax purposespurposes; and
so that. the Subordinated Debenturesdebentures will be treated as our indebtedness of the Company for
United Stated federal income tax
purposes.
In this connection, the Companyregard, we and the Administrative Trusteesadministrative trustees are authorized to take
any action not inconsistent with applicable law, the certificate of trust of CTBI Trust or
the CTBI Trust Agreement,trust agreement, that the Companywe and the Administrative Trusteesadministrative trustees determine in their discretion to be
necessary or desirable for such purposes,
asthese purposes.
We are required to use our reasonable efforts to maintain the eligibility of
the preferred securities for listing, quotation or inclusion on or in any
national securities exchange or other self-regulatory organization on or in
which the preferred securities are then listed, quoted or included (including,
if applicable, the Nasdaq Stock Market) and to keep the preferred securities so
listed, quoted or included for so long as such action doesthe preferred securities remain
outstanding, but this requirement will not materially adversely affect the interestsprevent us from redeeming all or a
portion of the holderspreferred securities in accordance with the trust agreement and
the indenture.
Holders of the related Preferred Securities.
43preferred securities have no preemptive or similar rights.
The trust agreement and the trust securities will be governed by Delaware law.
35
DESCRIPTION OF SUBORDINATEDTHE DEBENTURES
Concurrently with the issuance of the preferred securities, the trust will
invest the proceeds from the sale of the trust securities in the debentures
issued by us. The Subordinated Debenturesdebentures will be issued as unsecured debt under the
indenture between us and First Union Trust Company, National Association, as
indenture trustee. The indenture will be qualified under the Trust Indenture
dated as of
, 1997 ("Indenture"), between the Company and the Debenture Trustee.Act. The following summary of the material terms and provisions of the Subordinated
Debentures and the Indenture does not purport to be complete anddiscussion is subject to, and is qualified in its entirety
by reference to, the indenture and to the Trust Indenture Act. We urge
prospective investors to read the form of the indenture, which has
beenis filed as an
exhibit to the Registration Statementregistration statement of which this Prospectusprospectus forms a part, and to the Trust Indenture Act.part.
General
The Indenturedebentures will be qualified underlimited in aggregate principal amount to $25,773,200.
This amount represents the Trust Indenture Act. Whenever particular defined termssum of the Indenture are referred to herein, such defined terms are incorporated
herein or therein by reference. Concurrently with the issuanceaggregate stated liquidation amounts of
the Preferred Securities, CTBI Trust will invest the proceeds thereof, together
with the consideration paid by the Company for the Common Securities, in the
Subordinated Debentures issued by the Company.trust securities. The Subordinated Debentures
will be issued as unsecured debt under the Indenture.
GENERAL
The Subordinated Debenturesdebentures will bear interest at the annual rate of
% of the principal amount thereof,amount. The interest will be payable quarterly in arrears on March 31,
June 30, September 30 and December 31 of each year, (each, an "Interest Payment
Date") beginning June 30, 1997,2002, to
the person in whose name each Subordinated
Debenturedebenture is registered subject to certain exceptions, at the close of business
on the Business Day next preceding such Interest Payment Date.
Interest will begin to accrue from the date of original issuance15th day of the Subordinated Debentures.last month of the calendar quarter. It is anticipated
that, until the liquidation, if any, of CTBI Trust, the Subordinated Debenturestrust, the debentures will be held
in the name of the Property Trusteeproperty trustee in trust for the benefit of the holders of
the Preferred
Securities.trust securities.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. In the event thatIf any date on which interest is
payable on the Subordinated Debenturesdebentures is not a Business Day,business day, then payment of the interest payable on such date will
be made on the next succeeding day that is a Business Day (andbusiness day without any additional interest
or other payment in respect of any such delay) with the same force and effect asdelay. However, if the next business day is
in the next calendar year, payment of interest will be made on the date such payment was originally payable.immediately
preceding business day. Accrued interest that is not paid on the applicable
Interest Payment Dateinterest payment date will bear additional interest on the amount thereof (to the extent permitted by law)due at the
annual rate per annum of % thereof,%, compounded quarterly.
The term "interest" as used
herein shall include quarterly interest payments, interest on quarterly
interest payments not paid on the applicable Interest Payment Date and
Additional Sums (as defined below), as applicable.
The Subordinated Debenturesdebentures will mature on March 31, 2027. Such2032 the stated maturity date. We
may shorten this date may be
shortenedonce at any time by the Company to any date not earlier thanon or after March 31, 2007,
subject to the Company having received prior approval of the Federal Reserve, if then required under applicable capital guidelinesby law or
policies of
the Federal Reserve. Such date may also be extended at any time at the
election of the Company but in no event to a date later than March 31, 2036,
provided that at the time such election is made and at the time of extension
(i) the Company is not in bankruptcy, otherwise insolvent or in liquidation,
(ii) the Company is not in default in the payment of any interest or principal
on the Subordinated Debentures, and (iii) CTBI Trust is not in arrears on
payments of Distributions on the Preferred Securities and no deferred
Distributions are accumulated. In the event that the Company elects to shorten
or extend the Stated Maturity of the Subordinated Debentures, it shallregulation.
We will give notice to the Debenture Trustee,indenture trustee and the Debenture Trustee shall give notice
of such shortening or extension to the holders of the
Subordinated Debenturesdebentures, no more than 180 days and no less than 9030 days prior to the
effectiveness thereof.of any change in the stated maturity date. We will not have the
right to redeem the debentures from the trust until on or after March 31, 2007,
except if (a) a Tax Event, an Investment Company Event or a Capital Treatment
Event, which terms are defined under redemption of "Preferred Securities --
Redemption or Exchange" has occurred, or (b) we repurchase preferred securities
in the market, in which case we can elect to redeem debentures specifically in
exchange for a like amount of preferred securities owned by us plus a
proportionate amount of common securities.
The Subordinated Debenturesdebentures will be unsecured and will rank junior and be
subordinate in right of payment to all Senior Debtof our senior
and Subordinated Debt ofsubordinated debt, including indebtedness we may incur in the Company and, in certain circumstances relating to the dissolution,
winding-up, liquidation or reorganization of the Company, to all Additional
Senior Obligations of the Company. See "--Subordination."future.
Because the Company
iswe are a holding company, theour right of the Company to participate in any distribution
of assets of any of the Banks,our subsidiaries, upon any such Bank'ssubsidiary's liquidation or
reorganization or otherwise, (andand thus the ability of holders of the Preferred Securitiesdebentures
to benefit indirectly from such distribution),any distribution by a subsidiary, is subject to the
prior claimsclaim of creditors of that Bank,the subsidiary, except to the extent that the
Companywe may itself be
recognized as a creditor of such Bank. Accordingly, the Subordinated Debenturessubsidiary. The debentures will, therefore, be
effectively
44
subordinated to all existing and future liabilities of the Banks,our
subsidiaries, and holders of Subordinated Debenturesdebentures should look only to theour assets of the Company for
payments on the Subordinated Debentures.payment. The Indentureindenture does not limit the
incurrenceour ability to incur or issuance of otherissue secured or
unsecured senior and junior debt, except in limited circumstances. See
"Description of the Company,
including Senior Debt, Subordinated Debt or Additional Senior Obligations,
whether underPreferred Securities -- Subordination of Common Securities"
and "Description of the Indenture or any existingPreferred Securities -- Miscellaneous."
36
The indenture or other indenture that
the Company may enter into in the future or otherwise. See "--Subordination."
The Indenture does not contain provisions that afford holders of the
Subordinated Debenturesdebentures protection in the event of a highly leveraged transaction or other
similar transaction involving us, nor does it require us to maintain or achieve
any financial performance levels or to obtain or maintain any credit rating on
the Company that may
adversely affect such holders.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
Sodebentures.
Option to Extend Interest Payment Period
As long as no Eventevent of Defaultdefault under the Indentureindenture has occurred and is
continuing, the Company haswe have the right under the Indenture at any time during
the term of the Subordinated Debenturesindenture to defer the payment of
interest on the debentures at any time or from time to time for a period not exceeding 20
consecutive quarters (each suchquarters. However, no extension period an "Extension Period"), provided that no Extension
Period may extend beyond the Stated Maturitystated
maturity of the Subordinated Debentures.debentures or end on a date other than a date interest is
normally due. At the end of such Extension Period, the Companyan extension period, we must pay all interest then
accrued and unpaid, (togethertogether with interest thereon at the annual rate of %,
compounded quarterly, to the extent permitted by applicable law).quarterly. During an Extension Period,extension period, interest will continue to
accrue and holders of Subordinated
Debentures (ordebentures, or the holders of Preferred Securities while such series is
outstanding)preferred securities if
they are then outstanding, will be required to accrue interestand recognize as income
for United States federal income tax purposes.purposes the accrued but unpaid interest amounts in the
year in which such amounts accrued. See "Certain Federal"Federal Income Tax Consequences--
Potential Extension of Interest Payment Period and Original Issue Discount.Consequences."
During an extension period, we are restricted from making certain payments.
See " -- Restrictions on Payments."
Prior to the termination of any such Extension Period,extension period, so long as no event of
default under the Companyindenture is continuing, we may further defer the payment of
interest subject to the above stated requirements. Upon the termination of any
extension period and the payment of all amounts then due, we may elect to begin
a new extension period at any time. We do not currently intend to exercise our
right to defer payments of interest on the debentures.
We must give the property trustee, the administrative trustees and may not permit
any Bankthe
indenture trustee notice of our election of an extension period at least two
business days prior to the earlier of (a) the next date on which distributions
on the trust securities would have been payable except for the election to
begin an extension period, or (b) the date we are required to give notice of
the record date, or the date the distributions are payable, to the American
Stock Exchange, or other subsidiaryexchange or self-regulatory organization, or to
holders of the Companypreferred securities, but in any event at least one business day
prior to (i)the record date.
Other than as described above, there is no limitation on the number of times
that we may elect to begin an extension period.
Restrictions on Payments
We are restricted from making certain payments, as described below, if we
have chosen to defer payment of interest on the debentures, if an event of
default has occurred and is continuing under the indenture, or if we are in
default with respect to our obligations under the guarantee.
If any of these events occur, we will not:
. declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of our capital
stock, other than stock dividends, non-cash dividends in connection with
the Company'simplementation of a shareholder rights plan, purchases of common stock
in connection with employee benefit plans or in connection with the
reclassification of any class of our capital stock into another class of
capital stock, or (ii)allow any of our direct or indirect subsidiaries to do
the same with respect to their capital stock, other than payment of
dividends or distributions to us or to any of our direct or indirect
subsidiaries;
37
. make, or allow any of our subsidiaries to make, any payment of principal,
interest or premium if any, on, or repay or repurchase or redeem any of our debt
securities of the Company (including other
Subordinated Debentures) that rank pari passuequally with or junior in interest to the Subordinated Debenturesdebentures;
. make, or allow any of our subsidiaries to make, any guarantee payments
with respect to any guarantee by the Companyus of theany debt securities of any subsidiary ofif the
Company if such
guarantee ranks pari passuequally with or junior in interest to the Subordinated Debentures (otherdebentures, other than (a) dividends or distributions in Company
common stock, (b) any declaration of a dividend in connection with the
implementation of a shareholders' rights plan, or the issuance of stock under
any such plan in the future or the redemption or repurchase of any such rights
pursuant thereto, (c)
payments under the Guarantee, and (d) purchasesguarantee relating to the preferred securities; or
. redeem, purchase or acquire less than all of common stock related to rights underthe debentures or any of the
Company's benefit plans for
its directors, officers or employees). Priorpreferred securities.
Additional Sums to be Paid as a Result of Additional Taxes
If the termination of any such
Extension Period, the Company may further extend the interest payment period,
provided that no Extension Period may exceed 20 consecutive quarters or extend
beyond the Stated Maturity of the Subordinated Debentures. Upon the
termination of any such Extension Period and the payment of all amounts then
due on any Interest Payment Date, the Company may elect to begin a new
Extension Period subject to the above requirements. No interest shall be due
and payable during an Extension Period, except at the end thereof. The Company
must give the Property Trustee, the Administrative Trustees and the Debenture
Trustee notice of its election of such Extension Period at least one Business
Day prior to the earlier of (i) the date the Distributions on the Preferred
Securities would have been payable except for the election to begin such
Extension Period or (ii) the date the Administrative Trustees are required to
give notice to the Nasdaq Stock Market National Market or other applicable
self-regulatory organization, or to holders of such Preferred Securities on
the record date for the date such Distributions are payable, but in any event
not less than one Business Day prior to such record date. The Debenture
Trustee shall give notice of the Company's election to begin a new Extension
Period to the holders of the Preferred Securities. Subject to the foregoing,
there is no limitation on the number of times that the Company may elect to
begin an Extension Period.
SHORTENING OR EXTENDING MATURITY DATE
The Subordinated Debentures will mature on March 31, 2027. Such date may be
shortened at any time by the Company to any date not earlier than March 31,
2007, subject to the Company having received prior approval of the Federal
Reserve if then required under applicable capital guidelines or policies of
the Federal Reserve.
45
Such date may also be extended at any time at the election of the Company, but
in no event to a date later than March 31, 2036, provided that at the time
such election is made and at the time of extension (i) the Company is not in
bankruptcy, otherwise insolvent or in liquidation, (ii) the Company is not in
default in the payment of any interest or principal on the Subordinated
Debentures, and (iii) CTBI Trust is not in arrears on payments of
Distributions on the Preferred Securities and no deferred Distributions are
accumulated. In the event that the Company elects to shorten or extend the
Stated Maturity of the Subordinated Debentures, it shall give notice to the
Debenture Trustee, and the Debenture Trustee shall give notice of such
shortening or extension to the holders of the Subordinated Debentures no more
than 180 days and no less than 90 days prior to the effectiveness thereof.
ADDITIONAL SUMS
If CTBI Trusttrust is required to pay any additional taxes, duties, assessments or
other governmental charges as a result of the occurrence of a Tax Event, the Companywe
will pay as additional amountsinterest on the Subordinated Debentures suchdebentures any amounts ("Additional
Sums") as shallwhich may be
required so that the Distributions payablenet amounts received and retained by CTBI Trust
shall not be reduced as a result ofthe trust after
paying any such additional taxes, duties, assessments or other governmental charges.
REDEMPTIONcharges
will not be less than the amounts the trust would have received had the
additional taxes, duties, assessments or other governmental charges not been
imposed.
Redemption
Subject to the Company having received prior approval of the Federal Reserve, if then required under applicable capital guidelinesby law or
policies ofregulation, we may redeem the Federal Reserve, the Subordinated Debentures are redeemabledebentures prior to maturity at the option of the Company (i)maturity:
. on or after March 31, 2007 in whole at any time or in part from time to
time or (ii)time;
. in whole at any time in whole (but not
in part) uponwithin 180 days following the occurrence and during the continuance of a Tax
Event, an Investment Company Event or a Capital Event, inTreatment Event; or
. at any time, to the extent of any preferred securities we purchase, plus a
proportionate amount of the common securities we hold.
In each case atwe will pay a redemption price equal to the accrued and unpaid
interest on the Subordinated Debenturesdebentures so redeemed to the date fixed for redemption, plus
100% of the principal amount thereof.
"Tax Event" means the receipt by the Company of an opinion of independent
counsel (which may be counsel to the Company) experienced in such matters to
the effect that, as a result of any amendment to, or change in (including any
announced prospective change), the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or
therein, or as a result of any official administrative pronouncement or
judicial decision interpreting or applying such laws or regulations, which
amendment or change is effective or which pronouncement or decision is
announced on or after the date of issuance of the Subordinated Debentures
under the Indenture, there is more than an insubstantial risk that (i)
interest payable by the Company on the Subordinated Debentures is not, or
within 90 days after the date of such opinion will not be, deductible by the
Company, in whole or in part, for United States federal income tax purposes,
(ii) CTBI Trust is, or will be within 90 days after the date of such opinion,
subject to United States federal income tax with respect to income received or
accrued on the Subordinated Debentures, or (iii) CTBI Trust is, or will be
within 90 days after the date of such opinion, subject to more than a de
minimis amount of other taxes, duties, assessments or other governmental
charges.
An "Investment Company Event" means the receipt by CTBI Trust of an opinion
of independent counsel (which may be counsel to the Company) experienced in
such matters to the effect that, as a result of a change in law or regulation
or a change in interpretation or application of law or regulation by any
legislative body, court, governmental agency or regulatory authority, there is
more than an insubstantial risk that CTBI Trust is or will be considered an
"investment company" that is required to be registered under the Investment
Company Act, which change becomes effective on or after the date of original
issuance of the Preferred Securities.
A "Capital Event" means that CTBI Trust has received an opinion of
independent counsel (which may be counsel to the Company) experienced in such
matters that the Company cannot, or within 90 days after the date of such
opinion, will not be permitted by the applicable regulatory authorities, due
to a change in law, regulation, policy or guideline or interpretation or
application of law or regulation, policy or guideline, to account for the
Preferred Securities as Tier I Capital under the capital guidelines or
policies of the Federal Reserve.
46
redeemed debentures.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Subordinated Debenturesdebentures to be redeemed
at its registered address. Redemption of less than all outstanding debentures
must be effected proportionately, by lot or in any other manner deemed to be
fair and appropriate by the indenture trustee. Unless the Company defaultswe default in payment of
the redemption price for the debentures, on and after the redemption date
interest ceases towill no longer accrue on such Subordinated Debenturesthe debentures or the portions thereofof the
debentures called for redemption.
The Subordinated Debenturesdebentures will not be subject to any sinking fund.
DISTRIBUTION UPON LIQUIDATIONDistribution Upon Liquidation
As described under "Description of the Preferred Securities--LiquidationSecurities -- Liquidation
Distribution Upon Termination,Dissolution," under certain circumstances involvingand with the
termination of CTBI Trust, the Subordinated DebenturesFederal Reserve's approval, debentures may be distributed to the holders of the
Preferred Securitiespreferred securities in liquidation of CTBI Trustthe trust after satisfaction of
liabilities to creditors of CTBI Trust as provided by
applicable law.the trust. If distributed to holders of Preferred Securities in
liquidation, it is anticipated that the Subordinated Debentures will initially
be issued in the form of one or more global securities and the Depositary, or
any successor depositary for the Preferred Securities, will act as depositary
for the Subordinated Debentures. It is anticipated that the depositary
arrangements for the Subordinated Debentures would be substantially identical
to those in effect for the Preferred Securities. If the Subordinated Debentures
are distributed to the holders of Preferred Securities upon the liquidation of
CTBI Trust, the Companythis distribution occurs, we will use
its bestour reasonable efforts to list the Subordinated
Debenturesdebentures on The Nasdaqthe American Stock Market's National MarketExchange or
such stock
exchanges, if any, on whichother securities exchange or other organization as the Preferred Securitiespreferred
securities are then listed.listed or traded. There can be no assurance as to the
market price of any Subordinated Debenturesdebentures that may be distributed to the holders of
Preferred Securities.
RESTRICTIONS ON CERTAIN PAYMENTSpreferred securities.
38
Subordination
The Company will covenant, as to the Subordinated Debentures, that if at such
time (i) there shall have occurred any event (a) that with the giving of notice
or the lapse of time, or both, would constitute an "Event of Default" under the
Indenture and (b) in respect of which the Company shall not have taken
reasonable steps to cure, or (ii) the Company shall have given notice of its
election of an Extension Period as provided in the Indenture with respect to
the Subordinated Debentures and shall not have rescinded such notice, or such
Extension Period, or any extension thereof, shall be continuing, it will not,
and will not permit any subsidiary of the Company to, (1) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's capital stock or (2)
make any payment of principal, interest or premium, if any, on or repay or
repurchase or redeem any debt securities of the Company that rank pari passu
with or junior in interest to the Subordinated Debentures or make any guarantee
payments with respect to any guarantee by the Company of the debt securities of
any subsidiary of the Company if such guarantee ranks pari passu or junior in
interest to the Subordinated Debentures (other than (a) dividends or
distributions in Company common stock, (b) any declaration of a dividend in
connection with the implementation of a shareholders' rights plan, or the
issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, (c) payments under the
Guarantee and (d) purchases of common stock related to rights under any of the
Company's benefit plans for its directors, officers or employees).
SUBORDINATION
In the Indenture, the Company has covenanted and agreed that any Subordinated
Debentures issued thereunder will be subordinatedebentures are subordinated and junior in right of payment to all Senior Debt, Subordinated Debtof our
senior and Additional Senior Obligations to the
extent provided in the Indenture.subordinated debt, as defined below. Upon any payment or
distribution of assets to creditors upon any liquidation, dissolution, winding-up,winding
up or reorganization assignment for the benefit of creditors, marshaling of assetsour company, whether voluntary or anyinvoluntary in
bankruptcy, insolvency, debt restructuringreceivership or similarother proceedings in connection with
any insolvency or bankruptcy proceeding of the Company,proceedings, the holders of Senior Debt, Subordinated Debtour senior and
Additional Senior Obligationssubordinated debt will first be entitled to receive payment in full of
principal of (and premium, if any) and interest if any, on such Senior Debt, Subordinated Debt and Additional Senior
Obligations before the holders of Subordinated Debenturesdebentures will be entitled to
receive or retain any payment in respect of the principal of or interest, if any, on the
Subordinated Debentures.
47
In the event of the acceleration ofdebentures.
If the maturity of any Subordinated
Debentures,debentures is accelerated, the holders of all Senior Debt, Subordinated Debtof our
senior and Additional
Senior Obligationssubordinated debt outstanding at the time of suchthe acceleration will
firstalso be entitled to first receive payment in full of all amounts due thereon (includingto them,
including any amounts due upon acceleration)acceleration, before the holders of Subordinated Debenturesthe
debentures will be entitled to receive or retain any payment in respect of the principal of or interest
if any,payments on the Subordinated Debentures; provided, however, that
holders of Subordinated Debt shall not be entitled to receive payment of any
such amounts to the extent that such Subordinated Debt is by its terms
subordinated to trade creditors.debentures.
No payments on account of principal or interest if any, in respect ofon the Subordinated Debenturesdebentures may be made if there
shall havehas occurred and beis continuing a default in any payment with respect to Senior Debt, Subordinated
Debtany of
our senior or Additional Senior Obligationssubordinated debt or an event of default with respect to any Senior Debt, Subordinated Debtof
our senior or Additional Senior Obligationssubordinated debt resulting in the acceleration of the maturity
thereof,of the senior or subordinated debt, or if any judicial proceeding shall beis pending
with respect to any such default.
"Debt"The term "debt" means, with respect to any person, whether recourse is to
all or a portion of the assets of suchthe person and whether or not contingent, (i)contingent:
. every obligation of suchthe person for money borrowed;
(ii). every obligation of suchthe person evidenced by bonds, debentures, notes or
other similar instruments, including obligations incurred in connection
with the acquisition of property, assets or businesses;
(iii). every reimbursement obligation of suchthe person with respect to letters of
credit, bankers' acceptances or similar facilities issued for the account
of suchthe person;
(iv). every obligation of suchthe person issued or assumed as the deferred purchase
price of property or services, (but excluding trade accounts payable or accrued
liabilities arising in the ordinary course of business); (v)business;
. every capital lease obligation of suchthe person; and
(vi). every obligation of the type referred to in clauses (i) through (v)the first five points of
another person and all dividends of another person the payment of which,
in either case, suchthe first person has guaranteed or is responsible or
liable, directly or indirectly, as obligor or otherwise.
"Senior Debt"The term "senior debt" means the principal of, (andand premium if any) and interest, if
any
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not such
claim for post-petition interest is allowed in such proceeding)us), on, Debt,debt, whether incurred on
or prior to the date of the Indentureindenture or thereafter
incurred unless,after the date. However,
senior debt will not be deemed to include:
. any debt where it is provided in the instrument creating or evidencing the same or pursuant
to whichdebt that the same is outstanding, it is provided that such
obligations are not superior in right of payment to the Subordinated Debenturesdebentures or to
other Debtdebt which is pari passuequal with, or subordinated to, the debentures;
. any of our debt that when incurred and without regard to any election
under the federal bankruptcy laws, was without recourse to us;
. any debt to any of our employees;
. any debt that by its terms is subordinated to trade accounts payable or
accrued liabilities arising in the ordinary course of business to the
extent that payments made to the holders of the debt by the holders of the
debentures as a result of the subordination provisions of the indenture
would be greater than they otherwise would have been as a result of any
obligation of the holders to pay amounts over to the obligees on the trade
accounts payable or accrued liabilities arising in the ordinary course of
business as a result of subordination provisions to which the debt is
subject; and
39
. debt which constitutes subordinated debt.
The term "subordinated debt" means the principal of, and premium and
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to us) on debt. Subordinated Debentures;debt
includes debt incurred on or prior to the date of the indenture or thereafter
incurred, which is by its terms expressly provided however, that Senior Debt shallto be junior and subordinate
to other debt of ours, other than the debentures. However, subordinated debt
will not be deemed to include (i)include:
. any Debt
of the Companyour debt which when incurred and without respectregard to any election
under section 1111(b) of the United States Bankruptcy Code of 1978, as amended,federal bankruptcy laws was without recourse to the Company, (ii)us;
. any Debt of the Companydebt to any of its
subsidiaries, (iii) Debt toour employees;
. any employee of the Company, (iv) Debtdebt which by its terms is subordinated to trade accounts payable or
accrued liabilities arising in the ordinary course of business to the
extent that payments made to the holders of such Debtthe debt by the holders of the
Subordinated Debenturesdebentures as a result of the subordination provisions of the Indentureindenture
would be greater than they otherwise would have been as a result of any
obligation of suchthe holders to pay amounts over to the obligees on suchthe trade
accounts payable or accrued liabilities arising in the ordinary course of
business as a result of subordination provisions to which such Debtthe debt is
subject, (v) Debtsubject;
. debt which constitutes Subordinated Debt,senior debt; and
(vi). any otherdebt of ours under debt securities, issued
pursuant to the Indenture.
"Subordinated Debt" means the principal of (and premium, if any) and interest, if any (including interest accruing on or after the filing of any
petition in Bankruptcy or for reorganization relating to the Company whether or
not such claim for post-petition interest is allowed in such proceeding), on
Debt, whether incurred on or prior to the date of the Indenture or thereafter
incurred, which is by its terms expressly provided to be junior and subordinate
to other Debt of the Company (other than the Subordinated Debentures).
"Additional Senior Obligations" means all indebtedness of the Company whether
incurred on or prior to the date of the Indenture or thereafter incurred, for
claimsguarantees in respect of derivative products such as interest and foreign exchange
rate contracts, commodity contracts and similar arrangements; provided,
however,these
debt securities, initially issued to any trust, or a trustee of a trust,
partnership or other entity affiliated with us that Additional Senior Obligations do not include claimsis, directly or
indirectly, our financing subsidiary in respect of
Senior Debt or Subordinated Debt or obligations which, by their terms, are
expressly stated to be not superior in right of payment to the Subordinated
48
Debentures or to rank pari passu in right of paymentconnection with the Subordinated
Debentures. For purposesissuance by
that entity of this definition, "claim" shall have the meaning
assigned thereto in Section 101(4) of the United States Bankruptcy Code of
1978, as amended.
The Indenture places no limitation on the amount of additional Senior Debt
that may be incurred by the Company. The Company expectspreferred securities or other securities which are intended
to qualify for "Tier 1" capital treatment.
We expect from time to time to incur additional indebtedness constituting Senior Debt, Subordinated Debt(although we
have no specific plans in this regard presently) and Additional Senior Obligations.
DENOMINATIONS, REGISTRATION AND TRANSFER
Initially,there is no limitation
under the Subordinated Debenturesindenture on the amount we may incur. We had short- and long-term
senior and subordinated debt of $57 million outstanding principal amount at
September 30, 2001.
Payment and Paying Agents
Generally, payment of principal of and interest on the debentures will be
registeredmade at the office of the indenture trustee in Wilmington, Delaware. However,
we have the option to make payment of any interest by (a) check mailed to the
address of the person entitled to payment at the address listed in the nameregister
of the
Property Trustee. If the Subordinated Debentures are distributed to the holders of the Preferred Securities upon the liquidation of CTBI Trust, it is
anticipated that the Subordinated Debentures will then be represented by global
certificates registered in the name of the Depositarydebentures or its nominee.
Beneficial interests in the Subordinated Debentures will be shown on, and
transfers thereof will be effected only through, records(b) wire transfer to an account maintained by
the Depositary. Ifperson entitled thereto as specified in the Subordinated Debentures are maintainedregister of holders of the
debentures, provided that proper transfer instructions have been received by
the Depositary, it
is anticipated that substantially the same proceduresapplicable record date. Payment of any interest on debentures will be applicablemade
to the Subordinated Debentures as are described under "Descriptionperson in whose name the debenture is registered at the close of
business on the regular record date for the interest payment, except in the
case of defaulted interest.
Any moneys deposited with the indenture trustee or any paying agent for the
debentures, or then held by us in trust, for the payment of the Preferred
Securities--Global Preferred Securities." See also "Book-Entry Issuance."principal of or
interest on the debentures and remaining unclaimed for two years after the
principal or interest has become due and payable, will be repaid to us on June
30 of each year. If we hold any of this money in trust, then it will be
discharged from the trust to us and the holder of the debenture will thereafter
look, as a general unsecured creditor, only to us for payment.
Registrar and Transfer Agent
The Companyindenture trustee will appointact as the Debenture Trustee as securities registrar underand the Indenture (the "Securities Registrar"). Subordinatedtransfer agent for
the debentures. Debentures may be
presented for exchange as provided above, and may be presented for registration of transfer, (withwith
the form of transfer endorsed thereon, or a satisfactory written instrument of
transfer, duly executed),executed, at the office of the Securities
Registrar. The Companyregistrar. Provided that we
maintain a transfer agent in Wilmington, Delaware, we may at any time rescind the
designation of any such
registrartransfer agent or approve a change in the location through
which any such registrar
acts, provided that the Company maintains a registrar in the place of payment,
as defined in the Indenture. The Companytransfer agent acts. We may at any time designate additional transfer
agents with respect to the Subordinated Debentures. Indebentures.
40
If we redeem any of the event of
any redemption,debentures, neither the Companywe nor the Debenture Trustee shallindenture trustee
will be required to (i)(a) issue, register the transfer of or exchange Subordinated Debenturesany
debentures during a period beginning at the opening of business 15 days before
the day of selection for redemptionthe mailing of Subordinated Debentures and ending at the close of business on the day of the
mailing of the relevant notice of redemption, or (ii)(b) transfer or exchange any
Subordinated Debenturesdebentures so selected for redemption, except, in the case of any Subordinated Debenturesdebentures
being redeemed in part, any portion thereof not to be redeemed.
PAYMENT AND PAYING AGENTS
PaymentModification of principal of and any interest on the Subordinated Debentures will
be made at the office of the Debenture Trustee in the City of Boston,
Massachusetts, except that at the option of the Company payment of any interest
may be made (i) except in the case of a Global Subordinated Debenture, by check
mailed to the address of the person entitled thereto as such address shall
appear in the securities register or (ii) by transfer to an account maintained
by the person entitled thereto as specified in the securities register,
provided that proper transfer instructions have been received by the record
date. Payment of any interest on Subordinated Debentures will be made to the
person in whose name such Subordinated Debentures is registered at the close of
business on the record date for such interest payment, except in the case of
Defaulted Interest. The Company may at any time designate additional Paying
Agents or rescind the designation of any paying agent; however the Company will
at all times be required to maintain a paying agent in each place of payment
for the Subordinated Debentures.
Any moneys deposited with the Debenture Trustee or any Paying Agent, or then
held by the Company in trust, for the payment of the principal of or interest
on the Subordinated Debentures and remaining unclaimed for two years after such
principal or interest has become due and payable shall, at the request of the
Company, be repaid to the CompanyIndenture
We and the holder of such Subordinated Debenture
shall thereafter look, as a general unsecured creditor, only to the Company for
payment thereof.
49
MODIFICATION OF INDENTURE
Fromindenture trustee may, from time to time the Company and the Debenture Trustee may, without the consent of
the holders of the Subordinated Debentures,debentures, amend, waive our rights under or supplement the
Indentureindenture for specified purposes including, among other things,
curing ambiguities, defects or inconsistencies (provided that any such action
doeswhich do not materially adversely affect the interestsrights of
the holders of the Subordinated Debentures or the Preferred Securities so long as they remain
outstanding) and qualifying, or maintaining the qualification of, the Indenture
under the Trust Indenture Act. The Indenture contains provisions permitting the
Companydebentures. Other changes may be made by us and the
Debenture Trustee,indenture trustee with the consent of the holders of not less
than a majority in principal
amount of the outstanding Subordinated Debentures,
to modify the Indenture in a manner affecting the rights of the holders of the
Subordinated Debentures; provided, that no such modification may,debentures. However, without the consent of the
holder of each outstanding Subordinated Debenture, ordebenture affected by the proposed modification, no
modification may:
. extend the maturity date of the debentures;
. reduce the principal amount thereof, or reduce the rate or extend the time of payment of
interest thereon,interest; or
. reduce the percentage of principal amount of Subordinated
Debentures, the holders of which aredebentures required to consent to any such
modification ofamend
the Indenture, provided that soindenture.
As long as any of the Preferred
Securitiespreferred securities remain outstanding, no
such modification of the indenture may be made that adversely
affectsrequires the consent of the
holders of such Preferred Securities in any material respect, andthe debentures, no termination of the Indentureindenture may occur, and no
waiver of any Debenture Eventevent of Default or compliance with any covenantdefault under the Indentureindenture may be effective, without
the prior consent of the holders of at least a majority of the aggregate Liquidation Amountliquidation
amount of the Preferred Securities unless and until
the principalpreferred securities.
Debenture Events of the Subordinated Debentures and all accrued and unpaid
interest thereon have been paid in full and certain other conditions are
satisfied.
DEBENTURE EVENTS OF DEFAULTDefault
The Indentureindenture provides that any one or more of the following described events with
respect to the Subordinated Debenturesdebentures that has occurred and is continuing constitutes an
event of default ("Debenture Event of Default") with respect tounder the Subordinated Debentures:
(i)indenture:
. our failure for 30 days to pay any interest on the Subordinated
Debentures, when due (subject todebentures for 30 days after the deferral of any
due date, inexcept where we have properly deferred the case
of an extension Period); or
(ii)interest payment;
. our failure to pay any principal on the Subordinated Debenturesdebentures when due whether at
maturity, upon redemption by declaration or otherwise;
or
(iii). our failure to observe or perform in any material respect certain other covenants or agreements
contained in the Indentureindenture for 90 days after written notice to the Companyus from the
Debenture Trusteeindenture trustee or the holders of at least 25% in aggregate outstanding
principal amount of the Subordinated Debentures;debentures; or
(iv) certain events in. our bankruptcy, insolvency or reorganization or dissolution of the Company.trust,
except for certain transactions specifically permitted by the trust
agreement.
The holders of a majority inof the aggregate outstanding principal amount of
the Subordinated Debenturesdebentures have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee.indenture trustee.
The Debenture Trusteeindenture trustee, or the holders of not less thanat least 25% in aggregate outstanding
principal amount of the Subordinated Debenturesdebentures, may declare the principal due and payable
immediately upon a Debenture Eventan event of Default.default under the indenture. The holders of a
majority in aggregateof the outstanding principal amount of the Subordinated Debenturesdebentures may rescind and
annul suchthe declaration and waive the default if the default (other than the non-payment of the principal of the Subordinated
Debentures which has become due solely by such acceleration) has been cured and a
sum sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Debenture Trustee.indenture trustee.
In the event the debentures are held by the trust, this waiver will not be
effective without the consent of a majority in liquidation preference of the
trust securities. Should the holders of the Subordinated Debenturesdebentures fail to annul suchthe
declaration and waive suchthe default, the holders of at least a majority in
aggregate Liquidation Amountliquidation amount of the Preferred Securities shallpreferred securities will have suchthis right.
The Company is required to file annually with the Debenture Trustee a
certificate as to whether or not the Company is in compliance with all the
conditions and covenants applicable to it41
If an event of default under the Indenture.
In case a Debenture Event of Default shall occurindenture has occurred and beis continuing,
the Property Trusteeproperty trustee will have the right to declare the principal of and the
interest on such Subordinated Debentures,the debentures, and any other amounts payable under the Indenture,indenture,
to be forthwithimmediately due and payable and to enforce its other rights as a creditor
with respect to such Subordinated Debentures.
50
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIESthe debentures.
We are required to file annually with the indenture trustee a certificate as
to whether or not we are in compliance with all of the conditions and covenants
applicable to us under the indenture.
Enforcement of Certain Rights by Holders of the Preferred Securities
If a Debenture Eventan event of Defaultdefault under the indenture has occurred and is continuing
and suchthe event is attributable to the failure of the Companyby us to pay interest on or
principal onof the Subordinated Debenturesdebentures on the date such interest or principalon which the payment is otherwisedue and
payable, then a holder of Preferred Securitiespreferred securities may institute a legal proceeding
directlydirect action
against us to compel us to make the Company for enforcement of payment to such holder of the
principal of or interest on such Subordinated Debentures having a principal
amount equal to the aggregate Liquidation Amount of the Preferred Securities of
such holder ("Direct Action"). The Companypayment. We may not amend the Indentureindenture to
remove the foregoing right to bring a Direct Actiondirect action without the prior written
consent of all of the holders of all of the Preferred Securities. The Company shall
havepreferred securities. If the right to
bring a direct action is removed, the trust may become subject to the reporting
obligations under the Indenture to set-off any payment made to such holderSecurities Exchange Act of Preferred Securities by the Company in connection with a Direct Action.1934.
The holders of the Preferred Securities wouldpreferred securities will not be able to exercise
directly any remedies, other than those set forth in the preceding paragraph,
available to the holders of the Subordinated Debenturesdebentures unless there shall havehas been an Eventevent of
Defaultdefault under the CTBI Trust Agreement. Seetrust agreement. "Description of the Preferred Securities--EventsSecurities --
Events of Default andDefault; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Company shallConsolidation, Merger, Sale of Assets and Other Transactions
We may not consolidate with or merge into any other Personentity or convey or
transfer our properties and assets substantially as an entirety to any entity,
and no entity may be consolidated with or merged into us or sell, convey,
transfer or leaseotherwise dispose of its properties and assets substantially as an
entirety to any Person, and no Person shallus, unless:
. if we consolidate with or merge into the Companyanother person or convey or transfer
or lease its properties and
assets substantially as an entirety to the Company, unless (i) in case the
Company consolidates with or merges into another Person or conveys or transfers
itsour properties and assets substantially as an entirety to any Person,person, the
successor Personperson is organized under the laws of the United States or any
state or the District of Columbia, and suchthe successor Personperson expressly
assumes the
Company'sby supplemental indenture our obligations on the Subordinated Debentures issueddebentures, and
the ultimate parent entity of the successor entity expressly assumes our
obligations under the Indenture; (ii)guarantee, to the extent the preferred securities
are then outstanding;
. immediately after giving effect thereto,the transaction, no Debenture Eventevent of Default,default under the
indenture, and no event which, after notice or lapse of time, or both,
would become a Debenture Eventan event of Default, shall havedefault under the indenture, has occurred and beis
continuing; and
(iii) certain. other conditions as prescribed in the Indentureindenture are met.
The generalUnder certain circumstances, if we consolidate or merge with another entity,
or transfer or sell substantially all of our assets to another entity, such
transaction may be considered to involve a replacement of the trust, and the
provisions of the Indenture do not afford holderstrust agreement relating to a replacement of the Subordinated Debentures protection in the event of a highly leveraged or other
transaction involving the Company that may adversely affect holderstrust would
apply to such transaction. See "Description of the Subordinated Debentures.
SATISFACTION AND DISCHARGEPreferred Securities --
Mergers, Consolidations, Amalgamations or Replacements of the Trust."
Satisfaction and Discharge
The Indenture provides thatindenture will cease to be of further effect and we will be deemed to
have satisfied and discharged our obligations under the indenture when among other things, all
Subordinated
Debenturesdebentures not previously delivered to the Debenture Trusteeindenture trustee for cancellation
(i)cancellation:
. have become due and payablepayable; or
(ii)42
. will become due and payable at their Stated Maturitystated maturity within one year or
are to be called for redemption within one year, and the Company depositswe deposit or causescause
to be deposited with the Debenture Trusteeindenture trustee funds, in trust, for the purpose and in an amount in the currency or currencies in which the Subordinated Debentures are
payable
sufficient to pay and discharge the entire indebtedness on the Subordinated Debenturesdebentures
not previously delivered to the Debenture Trusteeindenture trustee for cancellation, for
the principal and interest todue on the date of the depositstated maturity or to
the Stated Maturity,redemption date,
as the case may be.
We may still be then the Indenture will cease to be of
further effect (except as to the Company's obligations to pay all other sums
due pursuant to the Indenture andrequired to provide the officers' certificates, and opinions of
counsel described therein),and pay fees and expenses due after these events occur.
Governing Law
The indenture and the Company will be deemed to have
satisfied and discharged the Indenture.
GOVERNING LAW
The Indenture and the Subordinated Debenturesdebentures will be governed by and construed in
accordance with Kentucky law.
Information Concerning the laws of the Commonwealth of Kentucky.
INFORMATION CONCERNING THE DEBENTURE TRUSTEEIndenture Trustee
The Debenture Trustee shall have and beindenture trustee is subject to all the duties and responsibilities
specified with respect to an indenture trustee under the Trust Indenture Act.
Subject to suchthese provisions, the Debenture Trusteeindenture trustee is under no obligation to
exercise any of the powers vested in it by the Indentureindenture at the request of any
holder of 51
Subordinated Debentures,debentures, unless offered reasonable security or indemnity by suchthe
holder against the costs, expenses and liabilities which might be incurred thereby.incurred. The
Debenture Trusteeindenture trustee is not required to expend or risk its own funds or otherwise
incur personal financial liability in the performance of its duties if the
Debenture Trusteeindenture trustee reasonably believes that repayment or adequate indemnity is
not reasonably assured to it.
The Company will covenant in the Indenture, asMiscellaneous
We have agreed, pursuant to the Subordinated
Debentures, that if andindenture, for so long as (i) CTBI Trust is the holder of all such
Subordinated Debentures, (ii) a Tax Event in respect of CTBI Trust has
occurred and is continuing and (iii) the Company has elected, and has not
revoked such election, to pay Additional Sums (as defined under "Description
of the Preferred Securities--Redemption") in respect of the Preferred
Securities, the Company will pay to CTBI Trust such Additional Sums. The
Company will also covenant, as to the Subordinated Debentures, (i)preferred
securities remain outstanding:
. to maintain directly or indirectly 100% ownership of the Common Securitiescommon securities
of CTBI Trust
to which Subordinated Debentures have been issued, providedthe trust, except that certain successors whichthat are permitted pursuant
to the Indentureindenture may succeed to the
Company'sour ownership of the Common Securities, (ii)common securities;
. not to voluntarily terminate, wind-updissolve, wind up or liquidate CTBI Trust, except uponthe trust without prior
approval of the Federal Reserve, if then so required under applicable capital guidelinesby law or policies ofregulation;
. to use our reasonable efforts to cause the Federal Reserve,trust (a) to remain a business
trust and (a)to avoid involuntary dissolution, winding up or liquidation,
except in connection with a distribution of Subordinated Debentures todebentures, the holdersredemption of
all of the Preferred Securities in
liquidationtrust securities of CTBI Trust,the trust or (b) in connection with certain mergers, consolidations or
amalgamations, each as permitted by the CTBI Trust Agreementtrust agreement; and (iii)(b) to
use its reasonable efforts, consistent with the terms and provisions
of the CTBI Trust Agreement,otherwise continue not to cause CTBI Trust to remain classified as a
grantor trust and notbe treated as an association taxable as a
corporation or partnership for United
States federal income tax purposes.purposes;
. to use our reasonable efforts to cause each holder of trust securities to
be treated as owning an individual beneficial interest in the debentures;
. to use our reasonable efforts to maintain the eligibility of the preferred
securities for listing, quotation or inclusion on or in any national
securities exchange or other self-regulatory organization on or in which
the preferred securities are then listed, quoted or included and to keep
the preferred securities so listed, quoted or included for so long as the
preferred securities remain outstanding; and
. not to issue or incur, directly or indirectly, additional trust preferred
securities that are senior in right of payment to the preferred securities.
43
BOOK-ENTRY ISSUANCE
The DepositaryDTC will act as securities depositary for the preferred securities and may
act as securities depositary for all of the Preferred
Securities. The Preferred Securitiesdebentures in the event of the
distribution of the debentures to the holders of preferred securities. Except
as described below, the preferred securities will be issued only as fully-registeredregistered
securities registered in the name of Cede & Co. (the Depositary's nominee)., as DTC's nominee. One or more fully-registered global
preferred securities certificates will be issued for the Preferred Securitiespreferred securities
and will be deposited with the Depositary.
The DepositaryDTC.
DTC is a limited purpose trust company organized under the New York Banking Law,banking law,
a "banking organization" within the meaning of the New York Banking Law,banking law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange Act. The DepositaryAct of 1934. DTC
holds securities that its Participantsparticipants deposit with the
Depositary. The DepositaryDTC. DTC also facilitates
the settlement among Participantsparticipants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized book-entry
changes in Participants'participants' accounts, thereby eliminating the need for physical
movement of securities certificates. "Direct Participants"Direct participants include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations. The DepositaryDTC is owned by a number of its Direct Participantsdirect participants and by
the New York Stock Exchange, Inc., the American Stock Exchange Inc. and the National
Association of Securities Dealers, Inc. Access to the DepositaryDTC system is also
available to othersindirect participants, such as securities brokers and dealers,
banks and trust companies that clear through or maintain custodial
relationships with Direct Participants,direct participants, either directly or indirectly ("Indirect Participants").indirectly. The
rules applicable to the DepositaryDTC and its Participantsparticipants are on file with the Commission.SEC.
Purchases of Preferred Securitiespreferred securities within the DepositaryDTC system must be made by or
through Direct Participants,direct participants, which will receive a credit for the Preferred Securitiespreferred
securities on the Depositary'sDTC's records. The ownership interest of each actual purchaser of
each Preferred Security ("Beneficial Owner")preferred security is in turn to be recorded on the Directdirect and Indirect Participants'indirect
participants' records. Beneficial OwnersThese beneficial owners will not receive written
confirmation from the DepositaryDTC of their purchases, but Beneficial Ownersbeneficial owners are expected to
receive written confirmations providing details of the transactions, as well as
periodic statements of their holdings, from the Directdirect or Indirect Participantsindirect participants
through which the Beneficial Ownersbeneficial owners purchased Preferred Securities.preferred securities. Transfers
of ownership interests in the Preferred Securitiespreferred securities are to be accomplished by
entries made on the books of Participantsparticipants acting on behalf of beneficial
owners. Beneficial Owners. Beneficial Ownersowners will not receive certificates representing their
ownership interestsinterest in Preferred Securities,preferred securities, except in the event thatif use of the
book-entrybook-entry-only system for the Preferred Securities of CTBI Trustpreferred securities is discontinued.
52
The Depositary hasDTC will have no knowledge of the actual Beneficial Ownersbeneficial owners of the Preferred Securities; the Depositary'spreferred
securities; DTC's records reflect only the identity of the Direct Participantsdirect participants
to whose accounts such Preferred Securitiesthe preferred securities are credited, which may or may not
be the Beneficial Owners.beneficial owners. The Participantsparticipants will remain responsible for keeping
account of their holdings on behalf of their customers.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that we believe to be accurate, but we and the
trust assume no responsibility for the accuracy thereof. Neither we nor the
trust have any responsibility for the performance by DTC or its participants of
their respective obligations as described in this prospectus or under the rules
and procedures governing their respective operations.
Notices and Voting
Conveyance of notices and other communications by the DepositaryDTC to Direct
Participants,direct
participants, by Direct Participantsdirect participants to Indirect Participants,indirect participants, and by Direct
Participantsdirect
and Indirect Participantsindirect participants to Beneficial Owners and the voting
rights of Direct Participants, Indirect Participants and Beneficial Ownersbeneficial owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
44
Redemption notices will be sent to Cede & Co. as the registered holder of
the Preferred Securities.preferred securities. If less than all of the Preferred Securitiespreferred securities are
being redeemed, the Depositary will determine by lot or pro rata the amount of the
Preferred Securities of each Direct Participant to be redeemed.redeemed will be determined in accordance with
the trust agreement.
Although voting with respect to the Preferred Securitiespreferred securities is limited to the
holders of record of the Preferred Securities,preferred securities, in those instances in which a
vote is required, neither the DepositaryDTC nor Cede & Co. will itself consent or vote with
respect to Preferred Securities.preferred securities. Under its usual procedures, the DepositaryDTC would mail an
omnibus proxy (the "Omnibus Proxy") to the relevant Trusteeproperty trustee as soon as possible after the record
date. The Omnibus Proxyomnibus proxy assigns Cede & Co.'s consenting or voting rights to
those Direct Participantsdirect participants to whose accounts such
Preferred Securitiesthe preferred securities are
credited on the record date (identified in a listing
attached to the Omnibus Proxy).date.
Distribution of Funds
The property trustee will make distribution payments on the Preferred Securities will be made by the
relevant Trusteepreferred
securities to the Depositary. The Depositary'sDTC. DTC's practice is to credit Direct Participants'direct participants' accounts on
the relevant payment date in accordance with their respective holdings shown on
the Depositary'sDTC's records unless the
DepositaryDTC has reason to believe that it will not receive
payments on suchthe payment date. Payments by Participantsparticipants to Beneficial Ownersbeneficial owners
will be governed by standing instructions and customary practices and will be
the responsibility of such Participantthe participant and not of DTC, the Depositary,property trustee, the
relevant Trustee, CTBI Trusttrust or the Company,us, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of Distributionsdistributions to the DepositaryDTC is the responsibility
of the relevant Trustee,property trustee, disbursement of suchthe payments to Direct
Participantsdirect participants is
the responsibility of the Depositary,DTC, and disbursements of suchthe payments to the Beneficial Ownersbeneficial
owners is the responsibility of Directdirect and Indirect
Participants.
The Depositaryindirect participants.
Successor Depositaries and Termination of Book-Entry System
DTC may discontinue providing its services as securities
depositary with respect to any of the
Preferred Securitiespreferred securities at any time by giving reasonable notice to the relevant Trustee and the Company. In the event
that aproperty
trustee or us. If no successor securities depositary is not obtained, definitive
Preferred
Security certificates representing such Preferred Securitiesthe preferred securities are required to be printed
and delivered. The Company, at itsWe also have the option may decide to discontinue use of the system of
book-entry transfers through the Depositary (orDTC or a successor depositary).depositary. After a Debenture Eventan event of
Default,default under the indenture, the holders of a majority in liquidation preferenceamount of
Preferred Securitiespreferred securities may determine to discontinue the system of book-entry
transfers through the Depositary.DTC. In any
such event,these events, definitive certificates for such Preferred Securitiesthe
preferred securities will be printed and delivered.
The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that CTBI Trust
and the Company believe to be accurate, but CTBI Trust and the Company assume
no responsibility for the accuracy thereof. Neither CTBI Trust nor the Company
has any responsibility for the performance by the Depositary or its
Participants of their respective obligations as described herein or under the
rules and procedures governing their respective operation.
In the event that CTBI Trust is terminated and the Subordinated Debentures
are distributed to the holders of the Preferred Securities the depository
arrangements and book-entry system applicable thereto will be substantially
similar to those applicable to the Preferred Securities. See "Description of
Preferred Securities--Global Preferred Securities."
53
DESCRIPTION OF THE GUARANTEE
The Preferred Securities Guarantee Agreement (the "Guarantee")preferred securities guarantee agreement will be executed and delivered
by the Companyus concurrently with the issuance of the Preferred Securitiespreferred securities for the
benefit of the holders of the Preferred
Securities. State Street Bank andpreferred securities. The guarantee agreement
will be qualified as an indenture under the Trust Indenture Act. First Union
Trust Company, National Association, the guarantee trustee, will act as indenture trustee
under
the Guarantee for the purposes of compliancecomplying with the provisions of the Trust Indenture Act, and
will also hold the Guarantee will be qualified as an Indenture underguarantee for the Trust Indenture Act.benefit of the holders of the preferred
securities.
The following summarydiscussion contains a description of the material terms and provisions
of the Guarantee
does not purport to be completeguarantee and is subject to, and is qualified in its entirety by
reference to, all of the provisions of the Guarantee Agreement,
including the definitions therein of certain terms,guarantee agreement and the Trust Indenture Act. TheWe urge
prospective investors to read the form of the Guaranteeguarantee agreement, which has
been filed as an exhibit to the Registration Statementregistration statement of which this Prospectusprospectus
forms a part.
The Guarantee
Trustee will hold the Guarantee for the benefit of the holders of the
Preferred Securities.
GENERAL
The Guarantee will be an irrevocable guarantee on a subordinated basis of
CTBI Trust's obligations under the Preferred Securities, but will apply only
to the extent that CTBI Trust has funds sufficient to make such payments, and
is not a guarantee of collection.
The Company will irrevocablyGeneral
We agree to pay in full on a subordinated basis, to the extent set forth herein,described in
the Guarantee Payments (asguarantee agreement, the guarantee payments, as defined below)below, to the
holders of the Preferred Securities,preferred securities, as and when due, regardless of any
defense, right of set-off or counterclaim that CTBI Trustthe trust may have or assert
other than the defense of payment.
45
The following payments with respect to the Preferred Securities,preferred securities are called
the "guarantee payments" and, to the extent not paid or made by or on behalf of CTBI Trust
(the "Guarantee Payments"),the trust and
to the extent that the trust has funds available for those distributions, will
be subject to the Guarantee: (i)guarantee:
. any accumulated and unpaid Distributionsdistributions required to be paid on the
Preferred
Securities, to the extent that CTBI Trust has funds on hand available therefor
at such time, (ii) the Redemption Pricepreferred securities;
. with respect to any Preferred
Securitiespreferred securities called for redemption, to the
extent that CTBI Trust has funds on
hand available therefor at such time,redemption price; and
(iii). upon a voluntary or involuntary dissolution, winding-upwinding up or liquidationtermination of
CTBI Trust (unless the Subordinated Debentures are distributedtrust, other than in connection with the distribution of debentures to
the holders of the Preferred
Securities),preferred securities in exchange for preferred securities,
the lesser ofof:
(a) the Liquidation Distributionamount of the liquidation distribution; and
(b) the amount of assets of CTBI Trustthe trust remaining available for
distribution to holders of Preferred Securities. The Company's obligationpreferred securities in liquidation of the
trust.
We may satisfy our obligations to make a Guarantee Payment may
be satisfiedguarantee payment by making a
direct payment of the required amounts by the Company to the holders of the Preferred Securitiespreferred
securities or by causing CTBI Trustthe trust to pay suchthe amounts to suchthe holders.
Third party creditors of CTBI Trust may proceed
directly against the Company under the Agreement as to Expenses and
Liabilities (as defined below), regardless of whether such creditors had
noticeThe guarantee agreement is a guarantee, on a subordinated basis, of the
Agreement asguarantee payments, but the guarantee only applies to Expenses and Liabilities.the extent the trust has
funds available for those distributions. If the Company doeswe do not make interest payments on
the Subordinated
Debentures helddebentures purchased by CTBI Trust, CTBI Trust will not be able to pay
Distributions on the Preferred Securities andtrust, the trust will not have funds legally
available
therefor.to make the distributions and will not pay distributions on the preferred
securities.
Status of the Guarantee
The Guarantee will rankguarantee constitutes our unsecured obligation that ranks subordinate
and junior in right of payment to all of our senior and subordinated debt in
the same manner as the debentures. We expect to incur additional indebtedness
in the future, although we have no specific plans in this regard presently and,
except in certain circumstances, neither the indenture nor the trust agreement
limits the amounts of senior and subordinated debt that we may incur.
The guarantee constitutes a guarantee of payment and not of collection. If
we fail to make guarantee payments when required, holders of preferred
securities may institute a legal proceeding directly against us to enforce
their rights under the guarantee without first instituting a legal proceeding
against the trust, the guarantee trustee or any other liabilitiesperson or entity.
The guarantee will not be discharged except by payment of the Company. See "--Statusguarantee
payments in full to the extent not paid by the trust or upon distribution of
the Guarantee."debentures to the holders of the preferred securities. Because the Company iswe are a
bank holding company, theour right of the Company to participate in any distribution of assets of
any subsidiary upon suchthe subsidiary's liquidation or reorganization or otherwise
is subject to the prior claims of creditors of that subsidiary, except to the
extent the Companywe may itself be recognized as a creditor of that subsidiary. Accordingly, the
Company'sOur obligations
under the Guaranteeguarantee, therefore, will be effectively subordinated to all
existing and future liabilities of the Company'sour subsidiaries, and claimants should look
only to theour assets of the Company for payments thereunder. Except as otherwise described herein, the Guarantee does not limit
the incurrence or issuance of other secured or unsecured debt of the Company,
including Senior Debt, whether under the Indenture, any other indenture that
the Company may enter into in the future, or otherwise.
The Company has, through the Guarantee, the CTBI Trust Agreement, the
Subordinated Debentures, the Indenture and the Expense Agreement, taken
together, fully, irrevocably and unconditionally guaranteed all of CTBI
Trust's obligations under the Preferred Securities. No single document
standing alone or operating in conjunction with fewer than all of the other
documents constitutes such guarantee.
It is only the combined
54
operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of CTBI Trust's obligations under the
Preferred Securities. See "Relationship Among the Preferred Securities, the
Subordinated Debentures and the Guarantee."
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of the Company and
will rank subordinate and junior in right of payment to all other liabilities
of the Company.
The Guarantee will constitute a guarantee of payment and not of collection.
For example, the guaranteed party may institute a legal proceeding directly
against the Company to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity. The
Guarantee will be held for the benefit of the holders of the Preferred
Securities. The Guarantee will not be discharged except by payment of the
Guarantee Payments in full to the extent not paid by CTBI Trust or upon
distribution of the Subordinated Debentures to the holders of the Preferred
Securities. The Guarantee does not place a limitation on the amount of other
liabilities that may be incurred by the Company. The Company expects from time
to time to incur additional liabilities.
AMENDMENTS AND ASSIGNMENTAmendments
Except with respect to any changes whichthat do not materially adversely affect
the rights of holders of the Preferred Securities (inpreferred securities, in which case no vote will
be required),required, the Guaranteeguarantee may not be amended withoutonly with the prior approval of the
holders of not less than a majority of the aggregate Liquidation Amountliquidation amount of the outstanding
Preferred Securities.preferred securities. See "Description of the Preferred Securities--VotingSecurities -- Voting
Rights; Amendment of Trust Agreement."
All guarantees and
agreements contained in the Guarantee shall bind the successors, assigns,
receivers, trustees and representatives46
Events of the Company and shall inure to the
benefit of the holders of the Preferred Securities then outstanding.
EVENTS OF DEFAULTDefault; Remedies
An event of default under the Guaranteeguarantee agreement will occur upon theour
failure of the
Companyto make any required guarantee payments or to perform any of its payment or other
obligations thereunder.under the guarantee. The holders of not less than a majority in aggregate
Liquidation Amountliquidation amount of the Preferred Securitiespreferred securities will have the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the Guarantee Trusteeguarantee trustee in respect of the Guarantee or toguarantee and may direct
the exercise of any trust or power conferred upon the Guarantee Trusteeguarantee trustee under the
Guarantee.guarantee.
Any holder of Preferred Securitiespreferred securities may institute and prosecute a legal
proceeding directly against the Companyus to enforce its rights under the Guaranteeguarantee
without first instituting a legal proceeding against CTBI Trust, the Guarantee Trusteetrust, the guarantee
trustee or any other person or entity.
The Company, as guarantor, isWe are required to fileprovide to the guarantee trustee annually with the Guarantee
Trustee a certificate
as to whether or not the Company iswe are in compliance with all of the conditions and
covenants applicable to itus under the Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEEguarantee agreement.
Termination of the Guarantee
The guarantee will terminate and be of no further force and effect upon:
. full payment of the redemption price of the preferred securities;
. full payment of the amounts payable upon dissolution of the trust; or
. distribution of the debentures to the holders of the preferred securities.
If at any time any holder of the preferred securities must restore payment
of any sums paid under the preferred securities or the guarantee, the guarantee
will continue to be effective or will be reinstated with respect to such
amounts.
Information Concerning the Guarantee Trustee
The guarantee trustee, other than during the occurrence and continuance of
aour default by the Company in performance of the Guarantee,guarantee, undertakes to perform only suchthose
duties as are specifically set forth in the Guaranteeguarantee. When an event of default
has occurred and after
default with respect tois continuing, the Guarantee,guarantee trustee must exercise the same
degree of care and skill as a prudent person would exercise or use in the
conduct of his or her own affairs. Subject to this provision,those provisions, the Guarantee Trusteeguarantee
trustee is under no obligation to exercise any of the powers vested in it by
the Guaranteeguarantee at the request of any holder of any Preferred Securitiespreferred securities unless
it is offered reasonable indemnity against the costs, expenses and liabilities
that might be incurred thereby.
55
TERMINATION OF THE GUARANTEE
The GuaranteeExpense Agreement
We will, terminate and be of no further force and effect upon full
payment of the Redemption Price of the Preferred Securities, upon full payment
of the amounts payable upon liquidation of CTBI Trust or upon distribution of
the Subordinated Debentures to the holders of the Preferred Securities. The
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any holder of the Preferred Securities must restore payment
of any sums paid under such Preferred Securities or the Guarantee.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the laws
of the Commonwealth of Kentucky.
THE AGREEMENT AS TO EXPENSES AND LIABILITIES
Pursuantpursuant to the Agreement as to Expenses and Liabilities entered
into by us and the Company under the CTBI Trust Agreement ("Agreement as to Expenses and
Liabilities"), the Company willtrust, irrevocably and unconditionally guarantee to each
person or entity to whom CTBI Trustthe trust becomes indebted or liable, the full payment
of any costs, expenses or liabilities of CTBI Trust,the trust, other than obligations of
CTBI Trustthe trust to pay to the holders of the Preferred Securities or
other similar interests in CTBI Trust oftrust securities the amounts due suchto the
holders pursuant to the terms of the Preferred Securities or such other similar interests, astrust securities. Third party creditors of
the casetrust may be.proceed directly against us under the expense agreement,
regardless of whether they had notice of the expense agreement.
Governing Law
The guarantee will be governed by Kentucky law.
47
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE SUBORDINATED DEBENTURES AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
PaymentsFull and Unconditional Guarantee
We irrevocably guarantee, as and to the extent described in this prospectus,
payments of Distributionsdistributions and other amounts due on the Preferred Securities
(topreferred securities, to
the extent CTBI Trustthe trust has funds available for the payment of such
Distributions) are irrevocably guaranteed bythese amounts. We
and the Company as and to the extent
set forth under "Description of Guarantee." The Company and CTBI Trusttrust believe that, taken together, the Company'sour obligations under the
Subordinated
Debentures,debentures, the Indenture,indenture, the CTBI Trust Agreement,trust agreement, the Agreement as to
Expenses and Liabilities,expense agreement and the
Guaranteeguarantee agreement provide, in the aggregate, a full, irrevocable and
unconditional guarantee, on a subordinated basis, of payment of Distributionsdistributions
and other amounts due on the Preferred Securities.preferred securities. No single document standing
alone or operating in conjunction with fewer than all of the other documents
constitutes sucha guarantee. It is only the combined operation of these documents
that has the effect of providing a full, irrevocable and unconditional
guarantee of CTBI Trust'sthe obligations of the trust under the Preferred
Securities.preferred securities.
If and to the extent that the Company doeswe do not make payments on the Subordinated Debentures, CTBI Trustdebentures, the
trust will not pay Distributionsdistributions or other amounts due on the Preferred Securities.preferred
securities. The Guaranteeguarantee does not cover payment of Distributionsdistributions when CTBI Trustthe
trust does not have sufficient funds to pay such
Distributions.the distributions. In suchthis event,
the remedy of a holder of Preferred Securitiespreferred securities is to institute a legal
proceeding directly against the Companyus for enforcement of payment of such Distributionsthe distributions
to suchthe holder. TheOur obligations
of the Company under the Guaranteeguarantee are subordinatesubordinated and junior
in right of payment to all of our other liabilitiesindebtedness.
Sufficiency of the Company.
SUFFICIENCY OF PAYMENTSPayments
As long as payments of interest and other payments are made when due on the
Subordinated Debentures, suchdebentures, these payments will be sufficient to cover Distributionsdistributions and other
payments due on the Preferred Securities,preferred securities, primarily because (i)because:
. the aggregate principal amount of the Subordinated Debenturesdebentures will be equal to the sum
of the aggregate stated Liquidation Amountliquidation amount of the Preferred Securities and Common Securities; (ii)trust securities;
. the interest rate and interest and other payment dates on the Subordinated Debenturesdebentures
will match the Distributiondistribution rate and Distributiondistribution and other payment dates
for the Preferred
Securities; (iii) the Company shallpreferred securities;
. we will pay for allany and anyall costs, expenses and liabilities of CTBI Trustthe trust,
except CTBI Trust'sthe obligations of the trust to pay to holders of the Preferred Securities;trust
securities the amounts due to the holders pursuant to the terms of the
trust securities; and
(iv). the CTBI Trust Agreement further provides that
CTBI Trusttrust will not engage in any activity that is not consistent with the
limited purposes of CTBI Trust.
56
Notwithstanding anything to the contrary in the Indenture, the Company has
the right to set-off any payment it is otherwise required to make thereunder
with and to the extent the Company has theretofore made, or is concurrently on
the datetrust.
Enforcement Rights of such payment making, a payment under the Guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF PREFERRED SECURITIESHolders of Preferred Securities
A holder of any Preferred Securitypreferred security may institute a legal proceeding directly
against the Companyus to enforce its rights under the Guaranteeguarantee without first instituting
a legal proceeding against the Guarantee Trustee, CTBI Trustguarantee trustee, the trust or any other
person or entity.person. A default or event of default under any Senior Debt, Subordinated Debtof our senior or Additional Senior Obligations of the Companysubordinated
debt would not constitute a Debenture
Eventdefault or event of Default. However, indefault under the trust
agreement. In the event, however, of payment defaults under, or acceleration
of, Senior Debt, Subordinated Debtour senior or Additional Senior
Obligations of the Company,subordinated debt, the subordination provisions of the
Indentureindenture provide that no payments may be made in respect of the Subordinated Debenturesdebentures
until such Senior Debt, Subordinated Debt or Additional Senior Obligations hasthe obligations have been paid in full or any payment default thereunder has been
cured or waived. Failure to make required payments on the Subordinated Debenturesdebentures would
constitute an Eventevent of Default.
LIMITED PURPOSE OF CTBI TRUSTdefault under the trust agreement.
Limited Purpose of the Trust
The Preferred Securitiespreferred securities evidence apreferred undivided beneficial interestinterests
in CTBI Trust, and
CTBI Trustthe assets of the trust. The trust exists for the sole purposeexclusive purposes of
issuing the Preferred Securities and
Common Securities andtrust securities, investing the proceeds thereof in Subordinated
Debentures.debentures and
48
engaging in only those other activities necessary, advisable or incidental
thereto. A principal difference between the rights of a holder of a Preferred Securitypreferred
security and the rights of a holder of a Subordinated Debenturedebenture is that a holder of a
Subordinated Debenturedebenture is entitled to receive from the Companyus the principal amount of and interest
accrued on Subordinated Debenturesdebentures held, while a holder of Preferred Securitiespreferred securities is entitled
to receive Distributions from CTBI Trust
(ordistributions from the Companytrust, or from us under the Guarantee)guarantee
agreement, if and to the extent CTBI Trustthe trust has funds available for the payment
of such Distributions.
RIGHTS UPON TERMINATIONthe distributions.
Rights Upon Termination
Upon any voluntary or involuntary termination,dissolution, winding-up or liquidation of
CTBI Trustthe trust involving the liquidation of the Subordinated Debentures,debentures, the holders of the
Preferred Securitiespreferred securities will be entitled to receive, out of assets held by CTBI Trust, the
Liquidation Distributiontrust, the liquidation distribution in cash. See "Description of the Preferred
Securities--LiquidationSecurities -- Liquidation Distribution Upon Termination.Dissolution."
Upon anyour voluntary or involuntary liquidation or bankruptcy, of the Company, the Property
Trustee,property
trustee, as holder of the Subordinated Debentures,debentures, would be a subordinated creditor of ours.
Therefore, the Company,property trustee would be subordinated in right of payment to
all Senior Debt,
Subordinated Debtof our senior and Additional Senior Obligations as set forth in the
Indenture,subordinated debt, but is entitled to receive payment in
full of principal and interest before any stockholders of the Companyour shareholders receive payments
or distributions. Since the Company iswe are the guarantor under the Guaranteeguarantee and hashave
agreed to pay for all costs, expenses and liabilities of CTBI Trust (otherthe trust other than
CTBI Trust'sthe obligations of the trust to pay to holders of the trust securities the
amounts due to the holders pursuant to the terms of its Preferred Securities),the trust securities, the
positions of a holder of the Preferred Securitiespreferred securities and a holder of the
Subordinated Debenturesdebentures relative to our other creditors and to stockholders of the Companyour shareholders in the event
of liquidation or bankruptcy of the Company are expected to be substantially the same.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
This section is a summaryGeneral
The following discussion of the material United States federal income tax considerations
that may be relevant to the purchasers of Preferred Securitiespreferred securities, insofar as the
discussion relates to matters of law and legal conclusions, represents the
opinion of Greenebaum Doll & McDonald PLLC, counsel to Community Trust Bancorp,
Inc. and the Company, insofar as it relates to matters of law and legal conclusions.trust.
The conclusions expressed herein are based upon current provisions of the
Internal Revenue Code of 1986, as amended ("Code"), theTreasury regulations promulgatedissued
thereunder and current administrative rulings and court decisions, all of which
are 57
subject to change at any time, with possible retroactive effects.effect. Subsequent
changes may cause tax consequences to vary substantially from the consequences
described below. See "--Effect of Proposed Changes in Tax Laws." Furthermore, the authorities on which thisthe following summary is
based are subject to various interpretations, and it is therefore possible that
the federal income tax treatment of the purchase, ownership and disposition of
Preferred Securitiespreferred securities may differ from the treatment described below.
No attempt has been made in the following discussion to comment on all
United States federal income tax matters affecting purchasers of Preferred
Securities.preferred securities.
Moreover, the discussion generally focuses onaddresses only holders of Preferred
Securitiespreferred securities who are
individual citizens or residents of the United States and trusts and estates
whose federal taxable income is taxed in the same manner as individual citizens
or residents of the United States, and who acquire Preferred Securitiespreferred securities on
their original issue at their initial offering price and hold Preferred Securitiessuch preferred
securities as capital assets. The discussion has only
limited application to dealers in securities, corporations, estates, trusts or
nonresident aliens and does not address all the tax
consequences that may be relevant to holders who may be subject to special tax
treatment, such as, for example, banks, thrifts, real estate investment trusts,
regulated investment companies, insurance companies, dealers in securities or
currencies, tax-
exempttax-exempt investors or persons that will hold the Preferred Securitiespreferred
securities as a position in a "straddle," as part of a "synthetic security" or
"hedge," as part of a "conversion transaction" or other integrated investment,
or as other than a capital asset. This summaryThe following discussion also does not
address the tax consequences to persons that have a functional currency other
than the
49
U.S. dollar or the tax consequences to shareholders, partners or beneficiaries
of a holder of Preferred Securities.preferred securities. Further, it does not include any
description of any alternative minimum tax consequences or discuss the tax laws
of any state or local government or of any foreign government that may be
applicable to the Preferred Securities.
Eachpreferred securities. Accordingly, each prospective investor
should consult, and should rely exclusively on, the investor's own tax advisors
in analyzing the federal, state, local and foreign tax consequences of the
purchase, ownership or disposition of Preferred Securities.
CLASSIFICATION OF THE SUBORDINATED DEBENTURES
The Company intendspreferred securities with regard to the
particular tax consequences specific to that investor, which may vary for
investors in different tax situations.
Classification of the Debentures
Based on advice of counsel, we intend to take the position that the
Subordinated Debenturesdebentures will be classified for United States federal income tax purposes as our
indebtedness. Under current law, and, by acceptance of a preferred security,
you, as a holder, covenant to treat the debentures as indebtedness and the
preferred securities as evidence of an indirect beneficial ownership interest
in the Company under current law.debentures. No assurance can be given, however, that suchthis position of the Company will
not be challenged by the Internal Revenue Service ("IRS") or, if challenged,
that such athe challenge will not be successful. The remainder of this discussion
assumes that the Subordinated
Debenturesdebentures will be classified for United States federal income tax purposes
as indebtednessour indebtedness.
Classification of the Company.
CLASSIFICATION OF CTBI TRUST
With respect to the Preferred Securities,Trust
Greenebaum Doll & McDonald PLLC, counsel tofor us and the Company,trust, has rendered
its opinion generally to the effect that, under current law and assuming full compliance with the terms
of the CTBI
Trust Agreementtrust agreement and Indenture, CTBI Trustindenture, the trust will be classified for United States federal
income tax purposes as a grantor trust. Accordingly, the trust andwill not as an association
taxable as a corporation. Accordingly, for United Statesbe
subject to federal income tax, purposes, eachand you, as a holder of Preferred Securities generallypreferred securities,
will be treated for federal income tax purposes as owning an undivided
beneficial interest in the Subordinated Debentures, and
each holderdebentures. You will be required to include in its returnyour
gross income any income, gain, loss
or expenseinterest with respect to itsthe debentures at the time such
interest is accrued or is received by the trust, in accordance with your
regular method of accounting. If the debentures were determined to be subject
to the original issue discount ("OID") rules (as discussed below), you, as a
holder, would instead be required to include in your gross income any OID
accrued with respect to your allocable share of the Subordinated Debentures.
POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD AND ORIGINAL ISSUE DISCOUNT
The Company's optiondebentures, whether or not
cash was actually distributed to extendyou.
Interest Payment Period and Original Issue Discount
Under the indenture, we have the right to defer the payment of interest on
the debentures at any time or from time to time for one or more deferral
periods not exceeding 20 consecutive quarterly periods each, provided that no
deferral period shall end on a date other than an interest payment period on the
Subordinated Debentures may cause the indebtedness to be issued with original
issue discount ("OID").date or
extend beyond March 31, 2032. Under recently issuedapplicable Treasury regulations, 58
(the "Regulations"), a contingencydebt
instruments, such as the debentures, that stated interestare issued at face value will not be
timely
paidconsidered issued with OID, even if their issuer can defer payments of
interest, if the likelihood of any deferral is remote. A debt instrument will
generally be treated as issued with OID if the stated interest on the
instrument does not constitute "qualified stated interest." Qualified stated
interest is generally any one of a series of stated interest payments on an
instrument that is "remote" will be ignored inare unconditionally payable at least annually at a single fixed
rate. In determining whether such debtstated interest on an instrument is
issued with OID. As a result of the termsunconditionally payable and conditions of the
Subordinated Debentures that prohibit certain payments with respectthus constitutes qualified stated interest, remote
contingencies as to the Company's capital stock and indebtedness if the Company elects to extendtimely payment of stated interest payment periods, the Company believesare ignored.
We have concluded that the likelihood of its
exercising itsour option to defer
payments of interest on the debentures is remote. BasedThis is in part because we
pay dividends on our common stock and intend to continue to do so, and we would
be unable to continue paying these dividends, which could adversely affect the
foregoing,market for our common stock, if we deferred our payments under the Company intendsdebentures.
Accordingly, we intend to take the position that the Subordinated Debenturesdebentures will not be
considered to be issued with OID by reason of the deferral option alone, and
accordingly, stated interest on the debentures generally will be included in
your income as ordinary income at the time it is paid or accrued in accordance
with your regular method of accounting.
50
If the likelihood that we would exercise the option to defer any payment of
interest was determined not to be "remote," or if we actually exercise our
option to defer the payment of interest, the debentures would be treated as
issued with OID at the time of their original issuance. If
this position is sustained, a holderissuance or at the time of Preferred Securities should include in
gross income such holder's allocable share ofexercise, as the
case may be, and all stated interest on the Subordinated
Debentures in accordance with its own method of tax accounting.
There can be no assurance, however, that the Internal Revenue Service will
not successfully contest the Company's position. If the Internal Revenue
Service were successful in such a contention, then all of the stated interest
payments on the Subordinated Debenturesdebentures would thereafter be
treated as OID.OID as long as the debentures remained outstanding. In such case,
the holdersevent,
all of your taxable interest income in respect of the Preferred Securitiesdebentures would
constitute OID that would have to be required to include OIDincluded in income on an economic accrual
basis before the receipt of the cash attributable to such income, regardless of
whether any interest is
actually paid or theiryour method of tax accounting, but willand actual cash distributions of stated interest
would not be required to
report actual payments of interestreported as taxable income. If the Company's position that there is no OID initially is upheld, but the
Company exercises its option to defer any payment of interest, the
Subordinated Debentures would at the timeThe amount of such exerciseincludible OID
could be treatedsignificant. Consequently, you, as
issued with OID, and all stated interest thereafter payable on the
Subordinated Debentures would be treated as OID. In such event, the holders of
the Preferred Securities would be required to account for the OID as stated in
the immediately preceding paragraph. Consequently, a holder of Preferred
Securitiespreferred securities,
would be required to include such OID in gross income OID even though the
Companywe would not
make any actual interestcash payments during an Extension
Period.
MARKET DISCOUNT AND ACQUISITION PREMIUM
Holdersextension period.
The meanings of Preferred Securities other than a holder who purchased the Preferred Securities upon original issuance may be considered to have acquired
their undivided intereststerm "remote" as used in the Subordinated Debentures with "market
discount" or "acquisition premium" as such phrases are defined for United
States federal income tax purposes. Such holders are advised to consult their
tax advisors asTreasury regulations is not
clear, and it is possible that the IRS could take a position contrary to the
interpretation described in this section. There can be no assurance that the
IRS would not be successful if it took such a position.
Because income tax consequenceson the preferred securities will constitute interest,
corporate holders of preferred securities will not be entitled to a dividends
received deduction with respect to any income recognized with respect to the
preferred securities.
Receipt of Debentures or Cash Upon Liquidation of the acquisition, ownershipTrust
We will have the right at any time to liquidate the trust and disposition ofcause the
Preferred Securities.
RECEIPT OF SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF CTBI TRUST
Under certain circumstances, as described under "Description of the
Preferred Securities--Redemption," the Subordinated Debentures maydebentures to be distributed to holders of Preferred Securities upon a liquidation of CTBI
Trust.the preferred securities. Under
current United States federal income tax law, such a distribution would be treated as a
nontaxable exchangeevent to each suchthe holder and would result in suchthe holder having an
aggregate tax basis in the Subordinated Debenturesdebentures received in the liquidation equal to suchthe
holder's aggregate tax basis in the Preferred Securitiespreferred securities immediately before the
distribution. A holder's holding period in the Subordinated Debentures sodebentures received in liquidation
of CTBI Trustthe trust would include the period for which suchthe holder held the Preferred Securities.preferred
securities. If, however, as a Tax Event occurs which results in CTBI Trust beingresult of a change of law or regulation, the
trust is treated as an association taxable as a corporation, the distribution
would likely constitute a taxable event to CTBI Trust and to holders of the Preferred
Securities. Each holder of Preferred Securities would recognize gain or loss
as if such holder exchangedpreferred securities
and to the Preferred Securities for the subordinated
Debentures it received upon liquidation of CTBI Trust. Under certain
circumstances described herein, the Subordinated Debenturestrust.
The debentures may be redeemed for cash, and the proceeds of such redemptionthat prepayment
would be distributed to holders in redemption of their Preferred Securities.preferred securities.
Under current law, such a redemption would,should constitute a taxable disposition of
the redeemed preferred securities, and, for United States federal income tax purposes, constitute a taxable
disposition, and a
holder wouldshould therefore recognize gain or loss as if the holder sold such Preferred Securitiesthe
preferred securities for cash.
See "Description of Preferred Securities--
Redemption."
59
DISPOSITION OF PREFERRED SECURITIES
A holderDisposition of Preferred Securities
A holder that sells Preferred Securitiespreferred securities will recognize gain or loss equal
to the difference between its adjusted tax basis
for the Preferred Securities and the amount realized on the sale of such
Preferred Securities. Assuming that the Company's position that there is no
OID initially is upheld,preferred
securities and that the Company does not exercise its option to
defer payment of interest on the Subordinated Debentures, a Preferred Security holder's adjusted tax basis forin the Preferred Securities generally will be its
initial purchase price. If the Subordinated Debentures are deemed to have been
issued initially with OID, or OID results due to the Company's deferral of any
interest payment, a Preferred Securitypreferred securities. A
holder's adjusted tax basis forin the Preferred Securitiespreferred securities generally will be its
initial purchase price increased by OID, if any, previously included in suchthe
holder's gross income to the date of disposition, and decreased by distributions and other payments, if
any, received on the Preferred Securities sincepreferred securities in respect of OID to the date the Subordinated Debentures are deemed to
have OID. Suchof
disposition. A gain or loss of this kind will generally will be a capital gain or
loss (exceptexcept to the extent any amount realized is treated as a payment of accrued
interest with respect to such holder's pro rata share of the Subordinated Debentures)debentures and
will be a long-term capital gain or loss if the Preferred Securitiespreferred securities have been
held for more than one year.year at the time of sale.
The Preferred Securitiespreferred securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest with respect to the underlying
Subordinated Debentures.debentures. A holder that disposes of its Preferred
Securitiespreferred securities between record
dates for payments of distributions thereon will be required to include as
ordinary income either OID (if applicable) or accrued but unpaid interest on the Subordinated Debenturesdebentures through the date
of disposition. Any OID included in income will increase a holder's adjusted
tax basis as discussed above. To the extent the amount realized on the sale of
the preferred securities is less than the holder's adjusted tax basis ain the
preferred securities sold, the holder will generally recognize a
51
capital loss. Subject to certain limited exceptions, capital losses cannot be
applied to offset ordinary income for United States federal income tax purposes.
EFFECT OF PROPOSED CHANGES IN TAX LAWS
On February 6, 1997,Effect of Possible Changes in Tax Laws
Congress has considered certain proposed tax law changes in the revenue portion of President Clinton's 1998 budget
proposal (the "Budget Proposal") was released. The Budget Proposalpast that
would, among other things, generally deny deductionscorporate issuers a deduction for
interest on an instrument issued by a
corporation that has a maximum weighted average maturityin respect of more than 40
years. The Budget Proposal would also generally deny deductions for interest
on an instrument issued by a corporation that hascertain debt obligations if the debt obligations have a
maximum term in excess of more than 15 years and that is not shown as indebtedness on the separate balance sheet
of the issuer filed with the Commission or, where the instrument is issued to
a related party (other than a corporation), where the holder or some other
related party issues a related instrument that isare not shown as indebtedness on the
issuer's applicable consolidated balance sheet filed withsheet. Other proposed tax law changes
would have denied interest deductions if the Commission. The above
described provisionsterm was in excess of the Budget Proposal are20 years.
Although these proposed to be effective
generally for instruments issued on or after the date of first Congressional
committee action. Since the Subordinated Debentures cannottax law changes have a term
exceeding 40 years, the first of the above described Budget Proposals would be
inapplicable. Furthermore, since the Company intends to reflect the Preferred
Securities as long-term debt on its consolidated balance sheet filed with the
Commission (although it will treat the transaction as a minority interest for
regulatory reporting), as currently drafted, the Budget Proposal would not appear to apply to the Subordinated Debentures. Therebeen enacted into law, there
can be no assurance however, that similar legislation which would apply to the Subordinated
Debenturestax law changes will not be reintroduced into future
legislation which, if enacted and such legislation could be retroactive in
effect. If any such legislation were enacted,after the Company would be unabledate hereof, may adversely affect our
ability to deduct interest paid on the Subordinated Debentures. Such a change could give rise
todebentures. The IRS may also challenge
the deductibility of interest paid on the debentures which, if such challenge
were litigated and the IRS's position sustained, would trigger a Tax Event which would permit the Company to causeand
possibly a redemption of the Preferred Securities before March 31, 2007.
BACKUP WITHHOLDING AND INFORMATION REPORTING
The amount ofpreferred securities. Accordingly, there can be no
assurance that a Tax Event will not occur.
Backup Withholding and Information Reporting
Interest paid, or, if applicable, OID accrued, on the Preferred Securitiespreferred securities
held of record by individual citizens or residents of the United States, or
certain trusts, estates and partnerships, will be reported to the Internal Revenue ServiceIRS on Forms
1099,1099-INT, or, where applicable, Forms 1099-OID, which forms should be mailed to
suchthe holders of Preferred
Securities by January 31 following each calendar year. Payments made on, and
proceeds from the sale of, the Preferred Securitiespreferred securities may be subject to a
60
"backup" withholding tax (currently at 31%30%) unless the holder complies with
certain identification and other requirements. Any amounts withheld under the
backup withholding rules will be allowed as a refund or credit against the
holder's
United States federal income tax liability, provided the required information is
provided to the Internal Revenue Service.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON THE
PARTICULAR SITUATION OF A HOLDER OF PREFERRED SECURITIES. HOLDERS OF PREFERRED
SECURITIES SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED
STATES FEDERAL OR OTHER TAX LAWS.
PLAN OF DISTRIBUTIONIRS.
The Preferred Securitiesfederal income tax discussion set forth above is included for general
information only and may not be applicable depending upon the particular
situation of a holder of preferred securities. Holders of preferred securities
should consult their tax advisors with respect to the tax consequences to them
of the purchase, ownership and disposition of the preferred securities,
including the tax consequences under state, local, foreign and other tax laws
and the Subordinated Debenturespossible effects of changes in federal or other tax laws and
particularly with regard to the tax consequences which vary for investors in
different tax situations.
52
ERISA CONSIDERATIONS
Employee benefit plans that are subject to the Employee Retirement Income
Security Act of 1974 ("ERISA"), or Section 4975 of the Code, generally may
purchase preferred securities, subject to the investing fiduciary's
determination that the investment in preferred securities satisfies ERISA's
fiduciary standards and other requirements applicable to investments by the
plan. We and certain of our affiliates may each be considered a "party in
interest" within the meaning of ERISA or a "disqualified person" within the
meaning of Section 4975 of the Code with respect to many employee benefit plans
that are subject to ERISA. The purchase of the preferred securities by a plan
that is subject to the fiduciary responsibility provisions of ERISA or the
prohibited transaction provisions of ERISA and the Code and with respect to
which either we, or any affiliate of ours, is a service provider, or otherwise
is a party in interest or a disqualified person, may constitute or result in a
prohibited transaction under ERISA or the Code, unless the preferred securities
are acquired pursuant to and in accordance with an applicable exemption.
Any plan fiduciary considering whether to purchase or hold any preferred
securities on behalf of a plan should consult with its counsel regarding the
applicability of the fiduciary responsibility and prohibited transaction
provisions of ERISA and the prohibited transaction provisions of the Code to
such investment. Among other things, before purchasing any preferred
securities, a fiduciary of a plan that is subject to the fiduciary
responsibility and prohibited transaction provisions of ERISA or to the
prohibited transaction provisions of the Code should make its own determination
as to its compliance with such applicable provisions, together with the
availability, if needed, of the exemptive relief provided in an exemption.
In addition, a plan fiduciary considering the purchase of preferred
securities should be aware that the assets of the trust may be considered "plan
assets" for ERISA purposes. In such event, any persons exercising discretion
with respect to the debentures may become fiduciaries, parties in interest or
disqualified persons with respect to an investing plan. Accordingly, each
investing plan, by purchasing the preferred securities, will be offered for
sale and distributed bydeemed to have
directed the Company and CTBI Trust, astrust to invest in the case may be, by
Morgan Keegan & Company, Inc. and J.J.B. Hilliard, W.L. Lyons, Inc. (the
"Underwriters"). The Underwriters will be obligateddebentures, consented to purchase allthe appointment of
the Preferred Securities on or beforeproperty trustee, and made its own determination as to the date this Prospectus is first deliveredplan's
compliance with the applicable provisions of ERISA and the Code, insofar as
they relate to offeree.
It ispersons exercising discretion with respect to the intention of the Company and CTBI Trust that, within 30 days of
the effective date of the Registration Statement of which this Prospectus is a
part, that the Preferred Securities will be trading on The Nasdaq Stock
Market's National Market under the trading symbol "CTBIP."preferred
securities.
53
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreementunderwriting agreement among Morgan Keegan & Company, Inc.,us,
the trust, J.J.B. Hilliard, W.L. Lyons, Inc., and Ferris, Baker Watts,
Incorporated, the Company
and CTBI Trust, the Underwritersunderwriters have severally and not jointly, agreed to purchase from CTBI Trust,the
trust, and CTBI Trustthe trust has agreed to sell to them, an aggregate of 1,000,000
preferred securities in the Underwriters, the respective numbers of the Preferred Securitiesamounts set forth below opposite their respective names below.names.
NUMBER OF
NAME OF UNDERWRITER PREFERRED SECURITIES
-------------------Number of
Underwriters Preferred Securities
------------ --------------------
Morgan Keegan & Company, Inc.........................
J.J.B. Hilliard, W.L. Lyons, Inc.....................Inc.........
Ferris, Baker Watts, Incorporated........
---------
Total............................................Total................................. 1,000,000
=========
The Underwriting AgreementUnder the terms and conditions of the underwriting agreement, the
underwriters are committed to accept and pay for all of the preferred
securities, if any are taken. If an underwriter defaults, the underwriting
agreement provides that the purchase commitments of the non-defaulting
underwriter may be increased or, in certain cases, the underwriting agreement
may be terminated. In the underwriting agreement, the obligations of the
Underwriters
thereunderunderwriters are subject to approval of certain legal matters by their counsel,
including the authorization and the validity of the preferred securities, and
to various other conditions including, among other things, the continuing
accuracy of the representations and warranties of the Company and CTBI Trust contained in the Underwriting Agreement, the performanceunderwriting agreement, such as receipt by
the Companyunderwriters of officers' certificates and CTBI Trust of their obligations under the Underwriting Agreement and the
receipt of certain opinions of counsel in form and substance reasonably
satisfactory to counsel for the Underwriters.legal opinions.
The nature of the Underwriters
obligations is such that they are committed to purchase and pay for all of the
Preferred Securities, if any are purchased.
The Underwritersunderwriters propose to offer the Preferred Securitiespreferred securities directly to the
public at the initial public offering price set forth on the cover page of this
Prospectus. The Underwriters have advised the Companyprospectus, and CTBI Trust that
sales of the Preferred Securities to certain securities dealers (who may be madeinclude the
underwriters) at this price, less a concession not in excess of $ per
Preferred Security, and that the
Underwriterspreferred security. The underwriters may allow, and suchthe selected dealers may
reallow, discountsa concession not in excess of $ per Preferred Security on salespreferred security to certain
otherbrokers and dealers. After the preferred securities are released for sale to
the public, offering, the offering price and other selling terms may, from time to time,
be changed by the Underwriters.
61
In viewunderwriters.
The table below shows the price and proceeds on a per preferred security and
aggregate basis. The proceeds to be received by the trust, as shown in the
table below, do not reflect estimated expenses payable by us. See "Use of
Proceeds."
Per Preferred
Security Total
------------- -----------
Public offering price............................ $25.00 $25,000,000
Proceeds, before expenses, to the trust..........
Underwriting commission..........................
------ -----------
Net proceeds to Community Trust Bancorp, Inc.. $ $
====== ===========
The offering of the fact thatpreferred securities is made for delivery when, as and
if accepted by the proceeds from theunderwriters and subject to prior sale and to withdrawal,
cancellation or modification of the Preferred
Securities will be usedoffering without notice. The underwriters
reserve the right to purchase the Subordinated Debentures issued by the
Company, the Underwriting Agreement provides that the Company will pay as
Underwriters' Compensationreject any order for the Underwriters' arranging the investment
therein of such proceeds an amount of $ per Preferred Security for the
accountspurchase of the preferred
securities.
We and the trust have agreed to indemnify the underwriters against several
Underwriters.
CTBI Trust has grantedliabilities, including liabilities under the Securities Act of 1933.
We have applied to have the Underwriters an option, exercisable during a
thirty-day period after the date of this Prospectus, to purchase up to 180,000
shares of Preferred Securities at the public offering price, all as describedpreferred securities listed for trading on the
cover page hereof, solely to cover over-allotments, if any. The Company
has also agreed to payAmerican Stock Exchange under the Underwriters the same commission described in the
immediately preceding paragraph in the event the Underwriters exercise this
option.
Prior to this offering, there has been no public market for the Preferred
Securities. The Preferred Securities have been approved for listing on The
Nasdaq Stock Market's National Market, subject to notice of issuance. Trading
of the Preferred Securities on Nasdaq Stock Market's National Marketsymbol "BPF", and trading is expected to
commence within 30 days after the initialon or prior to delivery of the Preferred
Securities.preferred securities. The Underwritersunderwriters
have advised the Companytrust that they presently intend to make a market in the
Preferred Securities prior topreferred securities after the commencement of trading on The
Nasdaqthe American Stock
Market's National Market,Exchange, but are not obligated to do so, and may discontinue market making at
any time without notice. No assurance can be givenWe cannot assure you as to the liquidity of the
preferred securities or that an active and liquid market will develop or, if
developed, that the
existence54
market will continue. The offering price and distribution rate have been
determined by negotiations between the underwriters and us, and the offering
price of the tradingpreferred securities may not be indicative of the market price
following the offering. The underwriters will have no obligation to make a
market in the preferred securities, however, and may cease market-making
activities, if commenced, at any time.
In connection with the offering, the underwriters may engage in transactions
that are intended to stabilize, maintain or otherwise affect the price of the
preferred securities during and after the offering, such as the following:
. the underwriters may over-allot or otherwise create a short position in
the preferred securities for their own account by selling more preferred
securities than have been sold to them;
. the Preferred
Securities.underwriters may elect to cover any short position by purchasing
preferred securities in the open market;
. the underwriters may stabilize or maintain the price of the preferred
securities by bidding;
. the underwriters may engage in passive market making transactions; and
. the underwriters may impose penalty bids, under which selling concessions
allowed to other broker-dealers participating in this offering are
reclaimed if preferred securities previously distributed in the offering
are repurchased in connection with stabilization transactions or otherwise.
The Companyeffect of these transactions may be to stabilize or maintain the market
price at a level above that which might otherwise prevail in the open market.
The imposition of a penalty bid may also affect the price of the preferred
securities to the extent that it discourages resales. No representation is made
as to the magnitude or effect of any such stabilization or other transactions.
Such transactions may be effected on the American Stock Exchange or otherwise
and, CTBI Trust have agreed to indemnifyif commenced, may be discontinued at any time.
Because the several Underwriters
against certain liabilities, including liabilitiesNational Association of Securities Dealers, Inc. may view the
preferred securities as interests in a direct participation program, the offer
and sale of the preferred securities is being made in compliance with the
provisions of Rule 2810 under the Securities Act of
1933, as amended.NASD Conduct Rules.
Certain of the Underwriters orunderwriters and their affiliates have, provided from time to time,
performed investment banking and expect to provideother services for us in the future, investment banking services to the
Companyordinary course
of business and its affiliates, for which such Underwriters or their affiliates have received or will receive customary fees and commissions.
At the request of the Company, up to 120,000 Preferred Securities have been
reservedfrom us for sale to certain individuals, including directors, officers and
employees of the Company and member of their families.
VALIDITY OF PREFERRED SECURITIESservices.
55
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of theCTBI Preferred SecuritiesCapital Trust II
will be passed upon upon behalf offor CTBI Preferred Capital Trust II and Community Trust
Bancorp by Richards, Layton & Finger, special Delaware counsel to CTBI Trust.P.A., Wilmington, Delaware. The due
authorization, execution and delivery of the junior subordinated debentures and
the validity of the Subordinated Debenturesjunior subordinated debentures and the Preferred Securities Guarantee and certain
matters relating theretoguarantees will be
passed upon for Community Trust Bancorp Inc.and CTBI Preferred Capital Trust II by
Greenebaum Doll & McDonald PLLC, Lexington,Louisville, Kentucky. CounselThe validity of the
junior subordinated debentures and the guarantees will be passed upon for the
Underwriters, Kingunderwriters by Squire, Sanders & Spalding,Dempsey L.L.P., Columbus, Ohio. Certain
United States federal income taxation matters also will passbe passed upon certain legal matters for the
Underwriters.
EXPERTS
The consolidated financial statements for the year ended December 31, 1996 of
Community Trust Bancorp Inc. appearingand CTBI Preferred Capital Trust II by Greenebaum Doll
& McDonald PLLC.
EXPERTS
The financial statements incorporated in this prospectus by reference from
Community Trust Bancorp Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1996,2000 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
The consolidated financial statements for the years ended December 31, 1999
and 1998, incorporated in this prospectus by reference from Community Trust
Bancorp Inc.'s Annual Report on Form 10-K for the year ended December 31, 2000,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report, thereon included therein and incorporated herein by reference. Such
consolidated financial statements arewhich is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such reportfirm given upon thetheir
authority of such firm as experts in accounting and auditing.
The consolidated financial statements for the year
ended December 31, 1995 and each of the two years in the period ending December
31, 1995 ofWHERE YOU CAN FIND MORE INFORMATION
Community Trust Bancorp, Inc. appearing in Community Trust Bancorp,
Inc.'s Annual Report on Form 10-K forand the year ended December 31, 1996,trust have been auditedalso filed a registration
statement with the SEC relating to the securities offered by Crowe, Chisek & Company LLP, independent auditors, as set forth
in their report thereon included therein and incorporated herein by reference.
Nicholas R. Glancy, a Member of Greenebaum Doll & McDonald PLLC who
participated in the preparation of this Registration Statement beneficially
owns 2,812 sharesprospectus.
This prospectus is part of the common stockregistration statement. You may obtain from the
SEC a copy of the Company.
62
AVAILABLE INFORMATION
This Prospectus constitutes a part of a combined Registration Statement on
Form S-3 (together with all amendments,registration statement and exhibits and schedules thereto, the
"Registration Statement") filed by the Company and CTBI Trust with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Securities Act"), and the rules and regulations
promulgated thereunder, with respect to this offering. This Prospectus does not
contain all of the information set forth in such Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission, although it does include a summary of the material terms of
the Indenture and the CTBI Trust Agreement (each as defined herein). Reference
is made to such Registration Statement and to the exhibits relating thereto for
further information with respect to the Company, CTBI Trust and the Preferred
Securities. Any statements contained herein concerning the provisions of any
document filed as an exhibit to the Registration Statement or otherwisethat we filed with the
Commission or incorporated by reference herein are not necessarily
complete, and, in each instance, referenceSEC. The registration statement may contain additional information that is
madeimportant to the copy of such document
so filed for a more complete description of the matter involved. Each such
statement is qualified in its entirety by such reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith filesyou.
We file periodic reports, proxy statements and other information with the
Commission. Such reports, proxy statementsSEC. Our filings are available to the public over the Internet at the SEC's web
site at http://www.sec.gov. You may also inspect and other information filed by the
Company with the Commission can be inspected and copiedcopy these materials at
the public reference facilities maintained byof the CommissionSEC at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549 and at its regional offices at
Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661, and Seven
World Trade Center, New York, New York 10048.20549. Copies of such material can be obtained at
prescribed rates from the Public Reference Section of the Commission, Room 1024,SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information.
The Company's Common Stocktrust is listed onnot currently subject to the National Association of Securities
Dealers Automated Quotation/National Market System ("Nasdaq"), 1735 K Street,
N.W., Washington, D.C. 20006 under the symbol "CTBI." If available, such
reports and other information may also be accessed through the Commission's
electronic data gathering, analysis and retrieval system ("EDGAR") via
electronic means, including the Commission's web site on the Internet
(http://www.sec.gov).
No separate financial statementsreporting requirements
of the CTBI Trust have been included or
incorporated by reference herein. The CompanySecurities Exchange Act of 1934 and, CTBI Trust do not consider
thatalthough the trust will become
subject to such financial statements would be material to holdersrequirements upon the effectiveness of the Preferred
Securities because CTBI Trust is a newly formed special purpose entity, has no
operating history or independent operations andregistration
statement, it is not engaged in and does not
propose to engage in any activity other than holding asexpected that the trust assets the
Subordinated Debentures and issuing the Trust Securities. See "Description of
the Preferred Securities," "Description of Subordinated Debentures" and
"Description of Guarantee." In addition, the Company does not expect that CTBI
Trust will be filingfile separate reports under
the Exchange ActAct.
Each holder of the trust securities will receive a copy of our annual report
at the same time as we furnish the annual report to the holders of our common
stock.
56
DOCUMENTS INCORPORATED BY REFERENCE
We "incorporate by reference" into this prospectus the information in
documents we file with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCESEC, which means that we can disclose important
information to you through those documents. The following documents filed with the Commission by the Company pursuant to
Section 13 of the Exchange Act areinformation incorporated by
reference is an important part of this prospectus. Some information contained
in this Prospectus:
(a)prospectus updates the information incorporated by reference and some
information that we file subsequently with the SEC will automatically update
this prospectus. We incorporate by reference:
. our Annual Report on Form 10-K for the fiscal year ended December 31, 1996;2000;
. our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2001,
June 30, 2001 and (b)September 30, 2001; and
. our Current Report on Form 8-K datedfiled on January 17, 1997.
All documents filed, 2002.
We also incorporate by reference any filings we make with the Registrant pursuant to SectionSEC under
Sections 13(a), 13(c), 14 andor 15(d) of the Securities Exchange Act of 1934 after
the date of this Registration Statement and
prior to theinitial filing of a post-effective amendment tothe registration statement that contains this Registration
Statement which indicatesprospectus
and before the time that all of the securities offered hereby have been sold or
which deregisters all securities then remaining unsold, shall be deemed to be
incorporated by reference in this Prospectusprospectus are
sold.
You may request, and to be a part hereof from the
filing date of such documents. Any statement contained in this Prospectus or in
a document incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to
63
the extent that a statement contained herein or in the original Section 10(a)
prospectus (as regards any statement in any previously filed document
incorporated by reference herein), or a statement in any subsequently filed
document that is also incorporated by reference herein or a statement in any
subsequent Section 10(a) prospectus, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Companywe will provide, without charge to each person to whom a copy of this
Prospectus has been delivered, uponthese filings at no cost by
contacting Jean R. Hale, our Vice Chairman, President and Chief Executive
Officer, at the written or oral request of such person,
a copy of any or all of the documents referred to above which have been or may
be incorporated by reference herein (other than exhibits to such documents
unless such exhibits are specifically incorporated by reference in such
documents). Requests for such copies should be directed tofollowing mailing address and phone number:
Community Trust Bancorp, Inc., 208 North Mayo Trail,
P.O. Box 2947
Pikeville, Kentucky 41501;KY 41502-2947
Attention: Chief Financial Officer.
64Jean R. Hale
(606) 432-1414
57
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY1,000,000 Preferred Securities
CTBI TRUST, THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY ANY OF
THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO
WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET
FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF CTBI TRUST OR THE COMPANY SINCE
SUCH DATE HEREOF.
-------------
TABLE OF CONTENTS
PAGE
----
Prospectus Summary........................................................ 1
Risk Factors.............................................................. 6
Use of Proceeds........................................................... 12
Accounting Treatment...................................................... 12
The Company............................................................... 13
Capitalization............................................................ 14
Selected Consolidated Financial Data of the Company....................... 15
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 16
Quarterly Financial Data.................................................. 22
Executive Officers of the Company......................................... 23
Directors of the Company.................................................. 24
Selected Statistical Information.......................................... 26
Description of the Preferred Securities................................... 33
Description of Subordinated Debentures.................................... 44
Book-Entry Issuance....................................................... 52
Description of Guarantee.................................................. 54
Relationship Among the Preferred Securities, the Subordinated Debentures
and the Guarantee ....................................................... 56
Certain Federal Income Tax Consequences................................... 57
Plan of Distribution...................................................... 61
Underwriting.............................................................. 61
Validity of Preferred Securities.......................................... 62
Experts................................................................... 62
Available Information..................................................... 63
Incorporation of Certain Documents by Reference........................... 63
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1,200,000 PREFERRED SECURITIES
CTBI PREFERRED
CAPITAL TRUSTPreferred Capital Trust II
% CUMULATIVE TRUSTPREFERRED SECURITIES
(LIQUIDATION AMOUNTCumulative Trust
Preferred Securities
(Liquidation Amount $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
LOGO
----------------
PROSPECTUS
----------------
MORGAN KEEGAN & COMPANY, INC.per Preferred Security)
Fully, irrevocably and unconditionally guaranteed on a
subordinated basis, as described in the prospectus, by
[LOGO] Community Trust(R)
Bancorp, Inc.
-----------------
$25,000,000
% Subordinated Debentures of
Community Trust Bancorp, Inc.
-----------------
Prospectus
-----------------
J.J.B. HILLIARD,Hilliard, W.L. LYONS, INC.Lyons, Inc.
Ferris, Baker Watts
Incorporated
, 19972002
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN THE REGISTRATION STATEMENT
ITEMPROSPECTUS
Item 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.Other Expenses of Issuance and Distribution.
The estimatedfollowing table sets forth the various expenses payable by Community
Trust Bancorp, Inc. in connection with this offering (excluding underwriting
discounts and commissions). All amounts except the SEC registration fee, the
NASD filing fee and the AMEX listing fee are estimates.
SEC registration fee........ $ 5,975
NASD filing fee............. 3,000
AMEX listing fee............ 16,000
Legal fees and expenses..... 90,000
Accounting fees and expenses 15,000
Printing expenses........... 60,000
Blue sky fees and expenses.. 3,500
Trustee fees and expenses... 13,500
Miscellaneous............... 43,025
--------
Total.................... $250,000
========
Item 15. Indemnification of Directors and Officers.
Section 271B.8-510 of the Kentucky Revised Statutes empowers a Kentucky
corporation to indemnify an individual (including his estate or personal
representative) who was, is or is threatened to be made a party to a
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, and whether formal or informal,
because he is or was a director against liability incurred in the proceeding
if: (i) he conducted himself in good faith; (ii) he reasonably believed, in the
case of conduct in his official capacity with the corporation, that his conduct
was in the corporation's best interests and, in all other cases, that his
conduct was at least not opposed to its best interests; and (iii) in the case
of any criminal proceeding, he had no reasonable cause to believe his conduct
was unlawful. Indemnification may be made against the obligation to pay a
judgment, settlement, penalty, fine or reasonable expenses (including counsel
fees) incurred with respect to a proceeding, except that if the proceeding was
by or in the right of the corporation, indemnification may be made only against
reasonable expenses incurred in connection with the issuance and distributionproceeding. A corporation
may not indemnify a director under KRS 271B.8-510 in connection with a
proceeding by or in the right of the securities being registered,corporation in which the director was
adjudged liable to the corporation or in connection with any other than underwriting compensation, are:
Registration Fee................................................ $ 10,455
Legal Fees and Expenses......................................... 100,000
Accounting Fees and Expenses.................................... 5,000
Printing Expenses............................................... 30,000
Blue Sky Registration Fees and Expenses......................... 2,000
Trustees' Fees.................................................. 20,000
Stock Exchange Listing Fees..................................... 1,000
NASD Filing Fee................................................. 3,950
Miscellaneous Expenses.......................................... 2,595
--------
Total....................................................... $175,000
========
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.proceeding
charging improper personal benefit to him, whether or not involving action in
his official capacity, in which he was adjudged liable on the basis that
personal benefit was improperly received by him. Pursuant to KRS 271B.8-530, a
corporation may pay for or reimburse the reasonable expenses incurred by a
director in advance of final disposition of the proceeding if (i) the director
affirms to the corporation in writing his good faith belief that he has met the
standard of conduct required for indemnification; (ii) the director undertakes
the personal obligation to repay such advance upon an ultimate determination
that he failed to meet such standard of conduct; and (iii) the corporation
determines that the facts then known to those making the determination would
not preclude indemnification.
Unless limited by the articles of incorporation, a director who has been
wholly successful, on the merits or otherwise, in the defense of any proceeding
to which he was a party because he is or was a director of the corporation is
entitled to indemnification against reasonable expenses incurred by him in
connection with the proceeding. Unless limited by its articles of
incorporation, a Kentucky corporation may indemnify and advance expenses to an
officer, employee or agent of the corporation to the same extent that it may
indemnify and advance expenses to directors. The indemnification provided by or
granted pursuant to Section 271B.8-510 is not exclusive of any rights to which
those seeking indemnification may otherwise be entitled. Section 271B.8-570
II-1
empowers a Kentucky corporation to purchase and maintain insurance on behalf of
its directors, officers, employees or agents of the corporation, whether or not
the corporation would have the power under Sections 271B.8-510 or 271B.8-520 to
indemnify them against such liability.
Article VI of the Company'sCommunity Trust Bancorp, Inc.'s Articles of Incorporation, as
amended, provides that any person who was or is a party or threatened party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was a director or officer of the Company:Community Trust Bancorp, Inc.: (a) shall be
indemnified (and may be indemnified if made a party to such proceeding by
reason of the fact that he is or was serving as a Company employee or agent, or
is or was serving at the request of the CompanyCommunity Trust Bancorp, Inc. as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise) by the
CompanyCommunity Trust Bancorp, Inc. against
expenses (including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding (other than a derivative suit), even if he is not
successful on the merits, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the CompanyCommunity
Trust Bancorp, Inc. (and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful); (b) shall be
indemnified (and may be indemnified if made a party to such proceeding by
reason of the fact that he is or was serving as a Company employee or agent, or
is or was serving at the request of the CompanyCommunity Trust Bancorp, Inc. as a
director, officer, employee or agent of another enterprise) for expenses of a
derivative suit (a suit by a shareholder alleging a breach by a director or
officer of a duty owed to the Company)Community Trust Bancorp, Inc.), even if he is not
successful on the merits, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the CompanyCommunity
Trust Bancorp, Inc. provided that no such indemnification may be made in
accordance with this clause (b) if he is adjudged liable to the Company,Community Trust
Bancorp, Inc., unless a court determines that, despite such adjudication, but
in view of all the circumstances, he is entitled to indemnification; and (c)
shall be indemnified by the CompanyCommunity Trust Bancorp, Inc. for all expenses of such
litigation when he is successful on the merits. The indemnification described
in clauses (a) and (b) above shall be made only upon a determination, by (i) a
majority vote of the disinterested directors, or (ii) the stockholders,shareholders, that
indemnification is proper because the applicable standard of conduct has been
met. The Board of Directors or the stockholdersshareholders may authorize the advancement
of litigation expenses to a director or officer upon receipt of an undertaking
by such director or officer to repay such expenses if it is ultimately
determined that he is not entitled to be indemnified for them. The
indemnification and the advancement of expenses provided for by Article VI are
not deemed exclusive of any rights the indemnitee may have under any by-law,
agreement, vote of stockholdersshareholders or disinterested directors, or otherwise.
Article X of the Company'sCommunity Trust Bancorp, Inc.'s Articles of Incorporation, as
amended, provides that a director of the CompanyCommunity Trust Bancorp, Inc. shall not be
personally liable to the CompanyCommunity Trust Bancorp, Inc. or its shareholders for
monetary damages for breach of his duties as a director, provided that this
provision will not eliminate or limit the liability of a director for the
following: (a) for any transaction in which the director's personal financial
interest is in conflict with the financial interests II-1
of the CompanyCommunity Trust
Bancorp, Inc. or its shareholders; (b) for acts or omissions not in good faith
or which involve intentional misconduct or are known to the director to be a
violation of law; (c) for any vote for or assent to an unlawful distribution to
shareholders as prohibited under Section 271B.8-330 of the Kentucky Revised
Statutes; or (d) for any transaction from which the director derived an
improper personal benefit. Article X is applicable with respect to any such
breach of duties by a director of the CompanyCommunity Trust Bancorp, Inc. as a director
notwithstanding that such director thereafter ceases to be a director. Article
X inures to the personal benefit of such director's heirs, executors and
administrators.
ITEMCommunity Trust Bancorp, Inc. has purchased and maintains directors' and
officers' liability insurance which insures the directors and officers against
certain liabilities, including liabilities under the Securities Act of 1933.
Under the form of Underwriting Agreement filed as Exhibit 1.1 hereto, the
underwriters have agreed to indemnify, under certain circumstances, the
Registrants, their officers, directors and persons who control the Registrants
against certain liabilities which may be incurred in connection with the
offering, including certain liabilities under the Securities Act of 1933.
II-2
Item 16. EXHIBITS.Exhibits.
The following exhibits are filed as part of this registration statement.
Exhibit
Number Description of Exhibits
- ------ -----------------------
1.1 --Form-- Form of Underwriting Agreement.
3.1 --Articles-- Articles of Incorporation, with all amendments thereto
(Exhibit 4.1as amended, of Community Trust Bancorp, Inc. (incorporated by
reference to Registration Statement No. 33-35138 is
incorporated herein by reference)registration statement no. 33-35138).
3.2 --By-laws (Exhibit 4.2-- Amended Bylaws of Community Trust Bancorp, Inc. (incorporated by reference to Registration Statement No. 33-35138
is incorporated herein by reference)registration
statement no. 33-61891).
4.1 --Certificate-- Form of Indenture for Subordinated Debentures.
4.2 -- Form of Subordinated Debenture (included as Exhibit A to Exhibit 4.1).
4.3 -- Certificate of Trust of CTBI Trust.
4.2 --TrustPreferred Capital Trust II.
4.4 -- Trust Agreement of CTBI Trust.
4.3 --FormPreferred Capital Trust II.
4.5 -- Form of Amended and Restated Trust Agreement of Company.
4.4 --Form of Indenture between CommunityCTBI Preferred Capital Trust Bancorp, Inc. and
State Street Bank and Trust Company, as Trustee.
4.5 --Form of Subordinated Debenture of Community Trust Bancorp,
Inc. (included in Exhibit 4.3 above).II.
4.6 --Form-- Form of Preferred SecuritySecurities Certificate of CTBI Preferred Capital Trust II (included inas Exhibit 4.2 above)D
to Exhibit 4.5).
4.7 --Form-- Form of Preferred SecuritySecurities Guarantee Agreement of CommunityCTBI Preferred Capital Trust Bancorp, Inc.II.
4.8 -- Form of Agreement as to Expenses and Liabilities of CTBI Preferred Capital Trust II (included as
Exhibit C to Exhibit 4.5).
5.1 --Opinion-- Opinion of Greenebaum, Doll & McDonald PLLC as to the validity
of the issuance of the Subordinated Debentures and the
Guarantee to be issued by the CompanyPLLC.
5.2 --Opinion-- Opinion of Richards, Layton & Finger, special Delaware
Counsel, as to the validity of the issuance of the Preferred
Securities to be issued by CTBI Preferred Capital Trust.P.A.
8.1 --Opinion-- Opinion of Greenebaum, Doll & McDonald PLLC, as to certain federal income tax matters.
12.1 --Computation-- Calculation of ratioratios of earnings to fixed charges (included
in Schedule on page 15 of Prospectus).
12.2 --Computation of ratio of earnings to fixed charges plus
preferred dividend requirements (included in Schedule on page
15 of Prospectus).charges.
23.1 --Consent-- Consent of Ernst & Young LLP.
23.2 --Consent-- Consent of Crowe, Chizek and Company LLPDeloitte & Touche LLP.
23.3 --Consent-- Consent of Greenebaum, Doll & McDonald PLLC (included in ExhibitExhibits 5.1 above)and 8.1).
23.4 --Consent of Greenebaum Doll & McDonald PLLC (included in
Exhibit 8.1 above).
23.5 --Consent-- Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5.2
above)5.2).
24.1 --Powers-- Powers of Attorney (included in signatures(reference is made to page II-5 of this Registration Statement)
and Resolution.registration statement).
25.1 --Statement-- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of
State Street Bank andFirst Union Trust Company, National Association, as Property Trustee.trustee under the Indenture for Junior
Subordinated Debentures.
25.2 --Statement-- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of
State Street Bank andFirst Union Trust Company, National Association, as Guarantee Trustee.property trustee under the Amended and
Restated Trust Agreement for CTBI Preferred Capital Trust II.
25.3 --Statement-- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of
State Street Bank andFirst Union Trust Company, National Association, as Indenture Trustee.trustee under the Guarantee Agreement
relating to CTBI Preferred Capital Trust II.
II-2II-3
ITEMItem 17. UNDERTAKINGS.
(a) Filings incorporating subsequent Exchange Act documents by reference.
TheUndertakings.
Each of the undersigned Registrantsregistrants hereby undertake that,undertakes:
(1) That, for purposes of determining any liability under the Securities Act
of 1933, each filing of the
Company'sCommunity Trust Bancorp, Inc.'s annual report pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act)1934 that is
incorporated by reference in the Registration Statementregistration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at thatthe time shall be deemed to be the initial bona
fide offering thereof.
(b) Filing of Registration Statement on Form S-3.
Insofar as indemnification(2) That, for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the foregoing, the Registrants have been advised that
in the opinion of the Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by Registrants of expenses incurred or paid by a director, officer
or controlling person of Registrants in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrants
will, unless in the opinion of their counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by them is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
(c) Rule 430A Undertaking.
For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrants pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act of 1933 shall be deemed to be part of this
registration statement as of the time it was declared effective.
For(3) That, for the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3The undersigned registrants hereby undertake to provide to the underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities under the Securities Act of 1933
may be permitted to directors, officers, and controlling persons of the
registrants under Item 15 above, or otherwise, the registrants have been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrants of expenses
incurred or paid by a director, officer, or controlling person of the
registrants in the successful defense of any action, suit, or proceeding) is
asserted against the registrants by such director, officer, or controlling
person in connection with the securities being registered, the registrants
will, unless in the opinion of their counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by them is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
II-4
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OFPursuant to the requirements of the Securities Act of 1933, THE COMPANY
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF PIKEVILLE, COMMONWEALTH OF KENTUCKY, ON MARCH 26,
1997. Community Trust
Bancorp, Inc. certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Pikeville, Commonwealth of Kentucky, on the 11
day of January, 2002.
COMMUNITY TRUST BANCORP, INC.
(Co-Registrant)
/s/ Richard M. Levy
By: _________________________________
Richard M. Levy
Executive Vice President
Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS RICHARD M. LEVY AND JEAN R. HALE
AND EACH OF
THEM, WITH FULL POWER TO ACT WITHOUT THE OTHER, HIS OR HER TRUE AND LAWFUL
ATTORNEY-IN-FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION AND
RESUBSTITUTION, FOR HIM OR HER AND IN HIS OR HER NAME, PLACE AND STEAD, IN ANY
AND ALL CAPACITIES, TO SIGN ANY AND ALL AMENDMENTS OR POST-EFFECTIVE
AMENDMENTS TO THIS REGISTRATION STATEMENT, AND TO FILE THE SAME, WITH ALL
EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE
SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND
AGENTS, AND EACH OF THEM, FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND
EVERY ACT AND THING REQUISITE OR NECESSARY TO BE DONE IN AND ABOUT THE
PREMISES, AS FULLY TO ALL INTENTS AND PURPOSES AS HE OR SHE MIGHT OR COULD DO
IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT EACH SUCH ATTORNEY-IN-FACT
AND AGENT, OR HIS OR HER SUBSTITUTE, MAY LAWFULLY DO OR CAUSE TO BE DONE BY
VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OFBy: _________________________________
Jean R. Hale
Vice Chairman, President and Chief
Executive Officer
/s/ KEVIN STUMBO
By: _________________________________
Kevin Stumbo
Senior Vice President and
Controller
Pursuant to the requirements of the Securities Act of 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THEIR
CAPACITIES AND ON THE DATE INDICATED.
NAME AND SIGNATURE TITLE DATE
------------------ ----- ----
/s/ Burlin Coleman Director, Chairman of the March 26, 1997
____________________________________ Board, and Chief Executive
Burlin Coleman Officer
Director March 26, 1997
____________________________________
Charles J. Baird
/s/ Jean R. Hale Director, Secretary and March 26, 1997
____________________________________ Executive Vice President
Jean R. Hale
Director March 26, 1997
____________________________________this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each person whose signature appears
below hereby authorizes Jean R. Hale and Mark A. Gooch, or either one of them,
to execute in the name of each such person and to file, any amendments to this
Registration Statement as the registrant deems appropriate, and appoints each
such agent as attorney-in-fact to sign in his or her behalf individually and in
each capacity stated below and to file any and all amendments and
post-effective amendments to this Registration Statement.
Signature Title Date
--------- ----- ----
/s/ BURLIN COLEMAN Chairman of the Board of Directors January 11, 2002
- --------------------------
Burlin Coleman
/s/ JEAN R. HALE Vice Chairman of the Board, January 11, 2002
- -------------------------- President and Chief Executive
Jean R. Hale Officer
/s/ CHARLES J. BAIRD Director January 11, 2002
- --------------------------
Charles J. Baird
/s/ NICK A. COOLEY Director January 11, 2002
- --------------------------
Nick A. Cooley
II-4
Director March 26, 1997
____________________________________/s/ WILLIAM A. GRAHAM, JR. Director January 11, 2002
- --------------------------
William A. Graham, Jr.
/s/ Brandt Mullins Director March 26, 1997
____________________________________
Brandt Mullins
/s/ M. Lynn Parrish Director March 26, 1997
____________________________________
M. Lynn Parrish
/s/ Ernest M. LYNN PARRISH Director January 11, 2002
- --------------------------
M. Lynn Parrish
/s/ E.M. ROGERS Director January 11, 2002
- --------------------------
E.M. Rogers Director March 26, 1997
____________________________________
Ernest M. Rogers
Director March 26, 1997
____________________________________
Porter P. Welch
/s/ Richard M. Levy Chief Financial Officer March 26, 1997
____________________________________
Richard M. Levy
II-5
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OFPursuant to the requirements of the Securities Act of 1933, CTBI TRUST
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF PIKEVILLE, COMMONWEALTH OF KENTUCKY, ON MARCH 26,
1997. CTBI Preferred
Capital Trust By:II certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Pikeville, Commonwealth of Kentucky, on the 11
day of January, 2002.
CTBI PREFERRED CAPITAL TRUST II
(Co-Registrant)
COMMUNITY TRUST BANCORP, INC.,
By:
as depositorDepositor
/s/ Richard M. LevyJEAN R. HALE
By: _________________________________
Richard M. Levy________________________________
Jean R. Hale
Vice Chairman, President and Chief
Executive Vice President
Chief Financial Officer
II-6
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibits
- ------ -----------------------
1.1 -- Form of Underwriting Agreement.
3.1 -- Articles of Incorporation, as amended, of Community Trust Bancorp, Inc. (incorporated by reference
to registration statement no. 33-35138).
3.2 -- Amended Bylaws of Community Trust Bancorp, Inc. (incorporated by reference to registration
statement no. 33-61891).
4.1 -- Form of Indenture for Subordinated Debentures.
4.2 -- Form of Subordinated Debenture (included as Exhibit A to Exhibit 4.1).
4.3 -- Certificate of Trust of CTBI Preferred Capital Trust II.
4.4 -- Trust Agreement of CTBI Preferred Capital Trust II.
4.5 -- Form of Amended and Restated Trust Agreement of CTBI Preferred Capital Trust II.
4.6 -- Form of Preferred Securities Certificate of CTBI Preferred Capital Trust II (included as Exhibit D to
Exhibit 4.5).
4.7 -- Form of Preferred Securities Guarantee Agreement of CTBI Preferred Capital Trust II.
4.8 -- Form of Agreement as to Expenses and Liabilities of CTBI Preferred Capital Trust II (included as
Exhibit C to Exhibit 4.5).
5.1 -- Opinion of Greenebaum, Doll & McDonald PLLC.
5.2 -- Opinion of Richards, Layton & Finger, P.A.
8.1 -- Opinion of Greenebaum, Doll & McDonald PLLC, as to certain tax matters.
12.1 -- Calculation of ratios of earnings to fixed charges.
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Deloitte & Touche LLP.
23.3 -- Consent of Greenebaum, Doll & McDonald PLLC (included in Exhibits 5.1 and 8.1).
23.4 -- Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5.2).
24.1 -- Powers of Attorney (reference is made to page II-5 of this registration statement).
25.1 -- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of First
Union Trust Company, National Association, as trustee under the Indenture for Junior Subordinated
Debentures.
25.2 -- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of First
Union Trust Company, National Association, as property trustee under the Amended and Restated
Trust Agreement for CTBI Preferred Capital Trust II.
25.3 -- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of First
Union Trust Company, National Association, as trustee under the Guarantee Agreement relating to
CTBI Preferred Capital Trust II.
II-7