10-K

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
	For the fiscal year ended December 31, 2004
	Or
[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
	For the transition period from _____________ to _____________

Commission file number 0-11129

COMMUNITY TRUST BANCORP, INC.

(Exact name of registrant as specified in its charter)

Kentucky	61-0979818
(State or other jurisdiction of incorporation or organization)	IRS Employer Identification No.
346 North Mayo Trail Pikeville, Kentucky (address of principal executive offices)	41501 (Zip Code)

(606) 432-1414

(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $5.00 par value

(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes ü No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

Yes ü No

Based upon the closing price of the Common Shares of the Registrant on the NASDAQ National Market, the aggregate market value of voting stock held by non-affiliates of the Registrant as of June 30, 2004 was $410,175,893.02. The number of shares outstanding of the Registrant’s Common Stock as of February 28, 2005 was 14,855,584. For the purpose of the foregoing calculation only, all directors and executive officers of the Registrant have been deemed affiliates.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the following documents are incorporated by reference into the Form 10-K part indicated:

Document	Form 10-K
(1) Proxy statement for the annual meeting of shareholders to be held April 26, 2005	Part III

PART I

Item 1. Business

Community Trust Bancorp, Inc. (the "Corporation") is a bank holding company registered with the Board of Governors of the Federal Reserve System pursuant to Section 5(a) of the Bank Holding Company Act of 1956, as amended. The Corporation was incorporated August 12, 1980, under the laws of the Commonwealth of Kentucky for the purpose of becoming a bank holding company. At December 31, 2004, the Corporation owned all the capital stock of one commercial bank and one trust company, serving small and mid-sized communities in eastern, northeast, central, and south central Kentucky and southern West Virginia. The commercial bank is Community Trust Bank, Inc., Pikeville, Kentucky (the "Bank"). The trust company, Community Trust and Investment Company, Lexington, Kentucky (the "Trust Company"), has offices in Lexington, Pikeville, Ashland, Middlesboro, and Versailles, Kentucky. At December 31, 2004, the Corporation had total consolidated assets of $2.7 billion and total consolidated deposits of $2.1 billion, making it the largest bank holding company headquartered in the Commonwealth of Kentucky.

Effective January 1, 2003, the Bank and the Trust Company converted their charters to state charters from national associations. The Bank remained a member of the Federal Reserve System following conversion. Following its conversion, the Trust Company changed its name from Trust Company of Kentucky, National Association to Community Trust and Investment Company in order to identify more closely the Trust Company with the Bank. While the conversions resulted in some reduction in expenses, they did not result in any changes in the management or operations of the Bank or the Trust Company.

Through its subsidiaries, the Corporation engages in a wide range of commercial and personal banking and trust 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 Bank include making commercial, construction, mortgage, and personal loans. Also available are lease-financing, lines of credit, revolving lines of credit, term loans, and other specialized loans including asset-based financing. The 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, as depositories for securities, and as providers of full service brokerage operations.

COMPETITION

The Corporation’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 state banks, national banks, thrifts, trust companies, insurance companies, mortgage banking operations, credit unions, finance companies, brokerage companies, and other financial and non-financial companies which may offer products functionally equivalent to those offered by the Corporation’s subsidiaries. Many of these providers offer services within and outside the market areas served by the Corporation’s subsidiaries. The Corporation’s subsidiaries strive to offer competitively priced products along with quality customer service to build customer relationships in the communities they serve.

Since July 1989, banking legislation in Kentucky places no limits on the number of banks or bank holding companies that a bank holding company may acquire. Interstate acquisitions are allowed where reciprocity exists between the laws of Kentucky and the home state of the bank or bank holding company to be acquired. Bank holding companies continue to be limited to control of less than 15% of deposits held by banks in the states where they do business (exclusive of inter-bank and foreign deposits).

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 Corporation has not yet elected to be treated as a financial holding company. 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. This legislation has resulted in further consolidation in the financial services industry. In addition, removal of these restrictions has increased the number of entities providing banking services and thereby created additional competition.

No material portion of the business of the Corporation is seasonal. The business of the Corporation is not dependent upon any one customer or a few customers, and the loss of any one or a few customers would not have a material adverse effect on the Corporation. See note 16 to the consolidated financial statements for additional information regarding concentrations of credit.

The Corporation engages in no operations in foreign countries.

EMPLOYEES

As of December 31, 2004, the Corporation and its subsidiaries had 954 full-time equivalent employees. Employees are provided with a variety of employee benefits. A retirement plan, an employee stock ownership plan, group life insurance, major medical insurance, a cafeteria plan, and annual management and employee incentive compensation plans are available to eligible personnel.

SUPERVISION AND REGULATION

The Corporation, as a registered bank holding company, is restricted to those activities permissible under the Bank Holding Company Act of 1956, as amended, and is subject to actions of the Board of Governors of the Federal Reserve System thereunder. It is required to file an annual report with the Federal Reserve Board and is subject to an annual examination by the Board.

The Bank is a state-chartered bank subject to state and federal banking laws and regulations and to periodic examination by the Kentucky Office of Financial Institutions and to the restrictions, including dividend restrictions, thereunder. The Bank is also a member of the Federal Reserve System and is subject to certain restrictions imposed by and to examination and supervision under the Federal Reserve Act. The Trust Company is also regulated by the Kentucky Office of Financial Institutions and the Federal Reserve.

Deposits of the Bank are insured by the Federal Deposit Insurance Corporation, which subjects banks to regulation and examination under the provisions of the Federal Deposit Insurance Act.

The operations of the Corporation and its subsidiaries also are affected by other banking legislation and policies and practices of various regulatory authorities. Such legislation and policies include statutory maximum rates on some loans, reserve requirements, domestic monetary and fiscal policy, and limitations on the kinds of services that may be offered.

The Corporation’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports are available free of charge on the Corporation’s website at www.ctbi.com as soon as reasonably practicable after such materials are electronically filed with or furnished to the Securities and Exchange Commission. The Corporation’s Code of Business Conduct and Ethics is also available on the Corporation’s website. Copies of the Corporation’s annual report will be made available free of charge upon written request.

CAUTIONARY STATEMENT

Certain of the statements contained herein that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. The Corporation’s 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, economic conditions, portfolio growth, the credit performance of the portfolios, including bankruptcies, and seasonal factors; changes in general economic conditions including the performance of financial markets, 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; the effects of competitors’ pricing policies, of changes in laws and regulations on competition and of 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 the time frames originally anticipated or unforeseen integration difficulties; the adoption by the Corporation of an 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 the resolution of 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 Federal Deposit Insurance Corporation, and state regulators, whose policies and regulations could affect the Corporation’s results. These statements are representative only on the date hereof, and the Corporation undertakes no obligation to update any forward-looking statements made.

SELECTED STATISTICAL INFORMATION

The following tables set forth certain statistical information relating to the Corporation and its subsidiaries on a consolidated basis and should be read together with the consolidated financial statements of the Corporation.

Consolidated Average Balance Sheets and Taxable Equivalent Income/Expense and Yields/Rates

	2004							2003							2002
(in thousands)	Average Balances			Interest		Average Rate		Average Balances			Interest		Average Rate		Average Balances			Interest		Average Rate
Earning assets:
Loans, net of unearned income (1)(2)(3)	$	1,816,146		$	111,417	6.13	%	$	1,658,289		$	108,827	6.56	%	$	1,660,912		$	121,130	7.29	%
Loans held for sale (4)		1,498			151	10.08	%		5,456			460	8.43	%		5,696			771	13.54	%
Securities:
U.S. Treasury and agencies		333,654			13,520	4.05	%		284,980			12,378	4.34	%		324,375			17,238	5.31	%
Tax exempt state and political subdivisions (3)		53,179			3,391	6.38	%		50,419			3,408	6.76	%		57,049			4,160	7.29	%
Other securities		87,251			2,889	3.31	%		226,505			4,289	1.89	%		130,869			3,661	2.80	%
Federal funds sold		44,960			596	1.33	%		66,499			746	1.12	%		89,559			1,485	1.66	%
Interest bearing deposits		852			11	1.29	%		103			1	0.97	%		119			2	1.68	%
Total earning assets		2,337,540		$	131,975	5.65	%		2,292,251		$	130,109	5.68	%		2,268,579		$	148,447	6.54	%
Allowance for loan losses		(26,380	)						(23,966	)						(24,520	)
		2,311,160							2,268,285							2,244,059
Nonearning assets:
Cash and due from banks		74,112							69,111							68,231
Premises and equipment, net		50,941							49,956							50,658
Other assets		107,059							104,934							104,521
Total assets	$	2,543,272						$	2,492,286						$	2,467,469
Interest bearing liabilities:
Deposits:
Savings and demand deposits	$	621,543		$	5,360	0.86	%	$	631,424		$	6,309	1.00	%	$	631,055		$	9,007	1.43	%
Time deposits		1,077,795			23,100	2.14	%		1,139,419			30,901	2.71	%		1,164,457			41,104	3.53	%
Repurchase agreements and federal funds purchased		93,281			1,496	1.60	%		83,270			1,108	1.33	%		70,275			1,400	1.99	%
Other short-term borrowings		688			72	10.47	%		262			24	9.16	%		679			33	4.86	%
Advances from Federal Home Loan Bank		63,546			1,907	3.00	%		4,123			230	5.58	%		7,381			418	5.66	%
Long-term debt		59,500			5,254	8.83	%		60,304			5,323	8.83	%		60,379			5,331	8.83	%
Total interest bearing liabilities		1,916,353		$	37,189	1.94	%		1,918,802		$	43,895	2.29	%		1,934,226		$	57,293	2.96	%
Noninterest bearing liabilities:
Demand deposits		379,353							338,909							315,202
Other liabilities		18,005							19,489							15,479
Total liabilities		2,313,711							2,277,200							2,264,907
Shareholders’ equity		229,561							215,086							202,562
Total liabilities and shareholders’ equity	$	2,543,272						$	2,492,286						$	2,467,469
Net interest income				$	94,786						$	86,214						$	91,154
Net interest spread						3.71	%						3.39	%						3.58	%
Benefit of interest free funding						0.34	%						0.37	%						0.44	%
Net interest margin						4.05	%						3.76	%						4.02	%

(1) Interest includes fees on loans of $2,646, $3,267, and $3,069 in 2004, 2003, and 2002, 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.

(4) Interest on loans held for sale includes fees of $241 in 2002. Beginning in January 2003, fees related to loans held for sale are included in noninterest income.

Net Interest Differential

The following table illustrates the approximate effect of volume and rate changes on net interest differentials between 2004 and 2003 and also between 2003 and 2002.

	Total Change			Change Due to						Total Change			Change Due to
(in thousands)	2004/2003			Volume			Rate			2003/2002			Volume			Rate
Interest income
Loans	$	2,590		$	9,959		$	(7,369	)	$	(12,303	)	$	(192	)	$	(12,111	)
Loans held for sale		(309	)		(282	)		(27	)		(311	)		(34	)		(277	)
U.S. Treasury and federal agencies		1,142			2,012			(870	)		(4,860	)		(2,246	)		(2,614	)
Tax exempt state and political subdivisions		(17	)		181			(198	)		(752	)		(505	)		(247	)
Other securities		(1,400	)		(1,747	)		347			628			2,076			(1,448	)
Federal funds sold		(150	)		(214	)		64			(739	)		(437	)		(302	)
Interest bearing deposits		10			10			0			(1	)		0			(1	)
Total interest income		1,866			9,919			(8,053	)		(18,338	)		(1,338	)		(17,000	)
Interest expense
Savings and demand deposits		(949	)		(100	)		(849	)		(2,698	)		5			(2,703	)
Time deposits		(7,801	)		(1,743	)		(6,058	)		(10,203	)		(901	)		(9,302	)
Repurchase agreements and federal funds purchased		388			143			245			(292	)		228			(520	)
Other short-term borrowings		48			44			4			(9	)		(13	)		4
Advances from Federal Home Loan Bank		1,677			1,831			(154	)		(188	)		(187	)		(1	)
Long-term debt		(69	)		(71	)		2			(8	)		28			(36	)
Total interest expense		(6,706	)		104			(6,810	)		(13,398	)		(840	)		(12,558	)
Net interest income	$	8,572		$	9,815		$	(1,243	)	$	(4,940	)	$	(498	)	$	(4,442	)

For purposes of the above table, changes which are due to both rate and volume are allocated based on a percentage basis, using the absolute values of rate and volume variance as a basis for 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, 2004 are as follows:

		Estimated Maturity at December 31, 2004
		Within 1 Year			1-5 Years			5-10 Years			After 10 Years			Total Fair Value			Amortized Cost
(in thousands)		Amount		Yield	Amount		Yield	Amount		Yield	Amount		Yield	Amount		Yield	Amount
Available-for-sale
	U.S. Treasury and government agencies	$	3,369	4.37%	$	81,611	4.96%	$	201,876	4.38%	$	92,982	4.61%	$	379,838	4.56%	$	380,509
	State and municipal obligations	2,316		7.15%	18,685		6.69%	28,434		6.48%	0		0.00%	49,435		6.59%	47,048
	Other securities	1,340		4.97%	10,889		3.94%	0		0.00%	40,778		3.66%	53,007		3.75%	53,114
Total		$	7,025	5.40%	$	111,185	5.15%	$	230,310	4.64%	$	133,760	4.32%	$	482,280	4.68%	$	480,671

		Estimated Maturity at December 31, 2004
		Within 1 Year			1-5 Years			5-10 Years			After 10 Years			Total Amortized Cost			Fair Value
(in thousands)		Amount		Yield	Amount		Yield	Amount		Yield	Amount		Yield	Amount		Yield	Amount
Held-to-maturity
	U.S. Treasury and government agencies	$	500	8.37%	$	58,886	3.68%	$	0	0.00%	$	0	0.00%	$	59,386	3.72%	$	58,612
	State and municipal obligations	101		8.73%	1,229		6.47%	393		6.61%	1,562		3.88%	3,285		5.32%	3,335
Total		$	601	8.43%	$	60,115	3.74%	$	393	6.61%	$	1,562	3.88%	$	62,671	3.80%	$	61,947
Total securities		$	7,626	5.64%	$	171,300	4.66%	$	230,703	4.64%	$	135,322	4.32%	$	544,951	4.58%

The calculations of the weighted average interest rates for each maturity category are based upon 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 that exceeded 10% of the shareholders’ equity of the Corporation at December 31, 2004.

The book values of securities available-for-sale and securities held-to-maturity as of December 31, 2004 and 2003 are presented in note 3 to the consolidated financial statements.

The book value of securities at December 31, 2002 is presented below:

(in thousands)		Available-for-Sale		Held-to-Maturity
U.S. Treasury and government agencies		$	90,288	$	37,318
State and political subdivisions			189,346		13,925
U.S. agency and mortgage-backed pass through certificates			162,325		0
Collateralized mortgage obligations			8,012		0
Other debt securities			18,312		0
	Total debt securities		468,283		51,243
Equity securities			59,056		0
	Total securities	$	527,339	$	51,243

Loan Portfolio

(in thousands)	2004			2003			2002			2001			2000
Commercial:
Construction	$	75,078		$	67,147		$	66,797		$	78,508		$	78,487
Secured by real estate		613,059			583,924			509,856			496,790			469,646
Other		276,921			256,837			280,492			293,502			303,141
Total commercial		965,058			907,908			857,145			868,800			851,274
Real estate construction		30,456			32,495			23,311			19,932			14,704
Real estate mortgage		499,410			413,939			377,109			423,953			434,397
Consumer		395,588			368,578			366,493			390,311			386,504
Equipment lease financing		12,007			13,340			10,549			6,830			6,933
Total loans	$	1,902,519		$	1,736,260		$	1,634,607		$	1,709,826		$	1,693,812
Percent of total year-end loans
Commercial:
Construction		3.95	%		3.87	%		4.08	%		4.59	%		4.63	%
Secured by real estate		32.22			33.63			31.19			29.06			27.73
Other		14.56			14.79			17.16			17.17			17.89
Total commercial		50.73			52.29			52.43			50.82			50.25
Real estate construction		1.60			1.87			1.43			1.16			0.87
Real estate mortgage		26.25			23.84			23.07			24.80			25.65
Consumer		20.79			21.23			22.42			22.82			22.82
Equipment lease financing		0.63			0.77			0.65			0.40			0.41
Total loans		100.00	%		100.00	%		100.00	%		100.00	%		100.00	%

The total loans above are net of unearned income.

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, 2004
(in thousands)	Within One Year			After One but Within Five Years			After Five Years			Total
Commercial secured by real estate and commercial other	$	196,383	$		303,374	$		390,223	$		889,980
Commercial and real estate construction		65,156			18,615			21,763			105,534
	$	261,539	$		321,989	$		411,986	$		995,514
Rate sensitivity:
Predetermined rate	$	58,281	$		65,865	$		57,611	$		181,757
Adjustable rate		203,258			256,124			354,375			813,757
	$	261,539	$		321,989	$		411,986	$		995,514

Nonperforming Assets

(in thousands)	2004			2003			2002			2001			2000
Nonaccrual loans	$	13,808		$	9,705		$	19,649		$	30,496		$	22,731
Restructured loans		974			1,726			276			518			338
90 days or more past due and still accruing interest		5,319			5,463			2,814			2,640			3,000
Total nonperforming loans		20,101			16,894			22,739			33,654			26,069
Foreclosed properties		4,756			6,566			2,761			1,982			4,339
Total nonperforming assets	$	24,857		$	23,460		$	25,500		$	35,636		$	30,408
Nonperforming assets to total loans and foreclosed properties		1.30	%		1.35	%		1.56	%		2.08	%		1.79	%
Allowance to nonperforming loans		134.41	%		145.93	%		102.34	%		70.27	%		99.30	%

Nonaccrual, Past Due, and Restructured Loans

(in thousands)		Nonaccrual loans		As a % of Loan Balances by Category		Restructured Loans		As a % of Loan Balances by Category		Accruing Loans Past Due 90 Days or More		As a % of Loan Balances by Category		Balances
December 31, 2004
Commercial construction		$	271	0.36	%	$	0	0.00	%	$	650	0.87	%	$	75,078
Commercial secured by real estate			5,093	0.83			858	0.14			2,603	0.42			613,059
Commercial other			3,473	1.25			116	0.04			569	0.21			276,921
Consumer real estate construction			114	0.37			0	0.00			0	0.00			30,456
Consumer real estate secured			4,828	0.97			0	0.00			1,131	0.23			499,410
Consumer other			29	0.01			0	0.00			366	0.09			395,588
Equipment lease financing			0	0.00			0	0.00			0	0.00			12,007
	Total	$	13,808	0.73	%	$	974	0.05	%	$	5,319	0.28	%	$	1,902,519
December 31, 2003
Commercial construction		$	84	0.13	%	$	0	0.00	%	$	0	0.00	%	$	67,147
Commercial secured by real estate			4,165	0.71			637	0.11			1,824	0.31			583,924
Commercial other			2,269	0.88			1,089	0.42			1,076	0.42			256,837
Consumer real estate construction			134	0.41			0	0.00			0	0.00			32,495
Consumer real estate secured			3,013	0.73			0	0.00			1,984	0.48			413,939
Consumer other			40	0.01			0	0.00			579	0.16			368,578
Equipment lease financing			0	0.00			0	0.00			0	0.00			13,340
	Total	$	9,705	0.56	%	$	1,726	0.10	%	$	5,463	0.31	%	$	1,736,260

In 2004, gross interest income that would have been recorded on nonaccrual loans had the loans been current in accordance with their original terms amounted to $1.0 million. Interest income actually received and included in net income for the period was $0.1 million, leaving $0.9 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 and interest income accrued in prior periods is charged to the allowance for loan losses. 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

Interest accrual is discontinued when management believes, after considering economic and business conditions, collateral value, and collection efforts, that the borrower’s financial condition is such that collection of interest is doubtful. Any loan greater than 90 days past due must be well secured and in the process of collection to continue accruing interest. Management, therefore, believes to the best of their knowledge that no additional potential problem loans exist that would result in disclosure pursuant to Item III.C.2.

Foreign Outstandings

None

Loan Concentrations

The Corporation had no concentration of loans exceeding 10% of total loans at December 31, 2004. See note 16 to the consolidated financial statements for further information.

Analysis of the Allowance for Loan Losses

(in thousands)	2004			2003			2002			2001			2000
Allowance for loan losses, beginning of year	$	24,653		$	23,271		$	23,648		$	25,886		$	25,102
Loans charged off:
Commercial construction		339			164			662			275			106
Commercial secured by real estate		1,135			773			2,386			3,252			1,210
Commercial other		2,331			4,085			3,393			2,406			1,480
Real estate construction		20			0			0			0			0
Real estate mortgage		683			957			1,098			1,061			1,006
Consumer		5,080			5,725			6,598			8,452			9,645
Equipment lease financing		0			0			0			0			0
Total charge-offs		9,588			11,704			14,137			15,446			13,447
Recoveries of loans previously charged off:
Commercial construction		1			32			0			25			4
Commercial secured by real estate		301			243			156			105			348
Commercial other		382			450			207			224			228
Real estate mortgage		244			159			107			76			123
Consumer		2,376			2,870			3,204			3,593			4,311
Equipment lease financing		0			0			0			0			0
Total recoveries		3,304			3,754			3,674			4,023			5,014
Net charge-offs:
Commercial construction		338			132			662			250			102
Commercial secured by real estate		834			530			2,230			3,147			862
Commercial other		1,949			3,635			3,186			2,182			1,252
Real estate construction		20			0			0			0			0
Real estate mortgage		439			798			991			985			883
Consumer		2,704			2,855			3,394			4,859			5,334
Equipment lease financing		0			0			0			0			0
Total net charge-offs		6,284			7,950			10,463			11,423			8,433
Provisions charged against operations		8,648			9,332			10,086			9,185			9,217
Balance, end of year	$	27,017		$	24,653		$	23,271		$	23,648		$	25,886
Allocation of allowance, end of year:
Commercial construction	$	758		$	2,323		$	305		$	552		$	499
Commercial secured by real estate		6,187			5,281			2,327			4,264			3,632
Commercial other		2,794			608			1,280			2,293			2,284
Real estate construction		52			971			50			66			32
Real estate mortgage		849			76			810			1,404			942
Consumer		2,656			2,833			3,390			7,737			8,689
Equipment lease financing		121			121			48			56			52
Unallocated		13,600			12,440			15,061			7,276			9,756
Balance, end of year	$	27,017		$	24,653		$	23,271		$	23,648		$	25,886
Average loans outstanding, net of unearned interest	$	1,816,146		$	1,658,289		$	1,660,912		$	1,748,241		$	1,665,349
Loans outstanding at end of year, net of unearned interest	$	1,902,519		$	1,736,260		$	1,634,607		$	1,709,826		$	1,693,812
Net charge-offs to average loan type:
Commercial construction		0.47	%		0.19	%		0.94	%		0.32	%		0.13	%
Commercial secured by real estate		0.14			0.10			0.44			0.63			0.19
Commercial other		0.76			1.29			1.12			0.70			0.40
Real estate construction		0.06			0.00			0.00			0.00			0.00
Real estate mortgage		0.09			0.20			0.25			0.22			0.21
Consumer		0.70			0.79			0.90			1.22			1.34
Equipment lease financing		0.00			0.00			0.00			0.00			0.00
Total		0.35	%		0.48	%		0.63	%		0.65	%		0.51	%
Other ratios:
Allowance to net loans, end of year		1.42	%		1.42	%		1.42	%		1.38	%		1.53	%
Provision for loan losses to average loans		0.48	%		0.56	%		0.61	%		0.53	%		0.55	%

The allowance for loan losses balance is maintained by management at a level considered adequate to cover anticipated probable losses based on past loss experience, general economic conditions, information about specific borrower situations including their financial position and collateral values, and other factors and estimates which are subject to change over time. This analysis is completed quarterly and forms the basis for allocation of the loan loss reserve and what charges to the provision may be required. See note 1 to the consolidated financial statements for further information.

Average Deposits and Other Borrowed Funds

(in thousands)		2004		2003		2002
Deposits:
	Noninterest bearing deposits	$	379,353	$	338,909	$	315,202
	NOW accounts		15,374		15,852		19,617
	Money market accounts		382,147		403,314		416,078
	Savings accounts		224,022		212,258		195,360
	Certificates of deposit of $100,000 or more		357,994		361,037		363,480
	Certificates of deposit < $100,000 and other time deposits		719,801		778,382		800,977
Total deposits			2,078,691		2,109,752		2,110,714
Other borrowed funds:
	Repurchase agreements and federal funds purchased		93,281		83,270		70,275
	Other short-term borrowings		688		262		679
	Advances from Federal Home Loan Bank		63,546		4,123		7,381
	Long-term debt		59,500		60,304		60,379
Total other borrowed funds			217,015		147,959		138,714
Total deposits and other borrowed funds		$	2,295,706	$	2,257,711	$	2,249,428

The maximum balance for federal funds purchased and repurchase agreements at any month-end during 2004 occurred at February 29, 2004, with a month-end balance of $117.1 million. The maximum balance for federal funds purchased and repurchase agreements at any month-end during 2003 occurred at November 30, 2003, with a month-end balance of $112.7 million. The maximum balance for federal funds purchased and repurchase agreements at any month-end during 2002 occurred at February 28, 2002, with a month-end balance of $87.7 million.

Maturities and/or repricing of time deposits of $100,000 or more outstanding at December 31, 2004 are summarized as follows:

(in thousands)	Certificates of Deposit		Other Time Deposits		Total
Three months or less	$	149,060	$	5,999	$	155,059
Over three through six months		61,600		2,309		63,909
Over six through twelve months		134,741		7,918		142,659
Over twelve through sixty months		43,610		4,919		48,529
Over sixty months		0		103		103
	$	389,011	$	21,248	$	410,259

Item 2. Properties

The Corporation’s main office, which is owned by the Bank, is located at 346 North Mayo Trail, Pikeville, Kentucky 41501. Following is a schedule of properties owned and leased by the Corporation and its subsidiaries as of December 31, 2004:

Location			Owned	Leased	Total
Banking locations:
Community Trust Bancorp, Inc.
*	Tug Valley Market		1	0	1
		1 location in Mingo County, West Virginia
*	Hamlin Market		3	0	3
		2 locations in Lincoln County, West Virginia and 1 location in Wayne County, West Virginia
*	Summersville Market		1	0	1
		1 location in Nicholas County, West Virginia
Community Trust Bank, Inc.
l	Pikeville Market (lease land to 3 owned locations)		9	1	10
		10 locations in Pike County, Kentucky
	Floyd/Knott Market		2	0	2
		1 location in Floyd County, Kentucky and 1 location in Knott County, Kentucky
	Tug Valley Market		0	1	1
		1 location in Pike County, Kentucky
	Whitesburg Market		4	1	5
		5 locations in Letcher County, Kentucky
l	Lexington Market		1	4	5
		5 locations in Fayette County, Kentucky
	Winchester Market		1	2	3
		3 locations in Clark County, Kentucky
	Richmond Market (lease land to 1 location)		3	1	4
		4 locations in Madison County, Kentucky
	Mt. Sterling Market		2	0	2
		2 locations in Montgomery County, Kentucky
l	Versailles Market (lease land to 1 location)		3	3	6
		2 locations in Woodford County, Kentucky, 2 locations in Franklin County, Kentucky, 1 location in Mercer County, Kentucky, and 1 location in Scott County, Kentucky
l	Ashland Market (lease land to 1 location)		5	0	5
		4 locations in Boyd County, Kentucky and 1 location in Greenup County, Kentucky
	Flemingsburg Market		4	0	4
		4 locations in Fleming County, Kentucky
l	Middlesboro Market (lease land to 1 owned location)		3	0	3
		3 locations in Bell County, Kentucky
	Williamsburg Market		5	0	5
		2 locations in Whitley County, Kentucky and 3 locations in Laurel County, Kentucky
	Campbellsville Market (lease land to 2 locations)		8	0	8
		2 locations in Taylor County, Kentucky, 2 locations in Pulaski County, Kentucky, 1 location in Adair County, Kentucky, 1 location in Green County, Kentucky, 1 location in Russell County, Kentucky, and 1 location in Marion County, Kentucky
	Mt. Vernon Market		2	0	2
		2 locations in Rockcastle County, Kentucky
	Hazard Market (lease land to 4 locations)		6	0	6
		6 locations in Perry County, Kentucky
Total banking locations			63	13	76
Loan production offices:
Community Trust Bank, Inc.
	Louisville (Jefferson County, Kentucky)		0	1	1
	Florence (Boone County, Kentucky)		0	1	1
Total loan production offices			0	2	2
Operational locations:
Community Trust Bank, Inc.
	Pikeville (Pike County, Kentucky) (lease land to 1 location)		1	0	1
	Lexington (Fayette County, Kentucky)		0	1	1
Total operational locations			1	1	2
Other:
Community Trust Bank, Inc.
	Ashland (Boyd County, Kentucky)		0	1	1
Total other locations			0	1	1
Total locations			64	17	81

*Community Trust Bank, Inc. leases these branch locations.

lCommunity Trust and Investment Company has leased offices in the main office locations in these markets.

See notes 7 and 13 to the consolidated financial statements included herein for the year ended December 31, 2004, for additional information relating to lease commitments and amounts invested in premises and equipment.

Item 3. Legal Proceedings

The Corporation and its subsidiaries, and from time to time, its officers are named defendants in legal actions arising from ordinary business activities. Management, after consultation with legal counsel, believes these actions are without merit or that the ultimate liability, if any, will not materially affect the Corporation’s consolidated financial position or results of operations.

Item 4. Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of security holders, through solicitation of proxies or otherwise, during the fourth quarter of 2004.

Executive Officers of the Registrant

Set forth below are the executive officers of the Corporation at December 31, 2004, their positions with the Corporation, and the year in which they first became an executive officer or director.

Name and Age (1)	Positions and Offices Currently Held	Date First Became Director or Executive Officer		Principal Occupation
Jean R. Hale; 58	Chairman, President and CEO	1992	(2)	Chairman, President and CEO of Community Trust Bancorp, Inc.
Mark A. Gooch; 46	Executive Vice President and Treasurer	1997		President and CEO of Community Trust Bank, Inc.
Tracy Little; 64	Executive Vice President	2003	(3)	President and CEO of Community Trust and Investment Company
William Hickman III; 54	Executive Vice President and Secretary	1998		Executive Vice President/Staff Attorney of Community Trust Bank, Inc.
Michael S. Wasson; 53	Executive Vice President	2000	(4)	Executive Vice President/Central Kentucky Region President of Community Trust Bank, Inc.
James B. Draughn; 45	Executive Vice President	2001	(5)	Executive Vice President/Operations of Community Trust Bank, Inc.
Kevin J. Stumbo; 44	Executive Vice President	2002	(6)	Executive Vice President/Controller of Community Trust Bank, Inc.
Ricky D. Sparkman; 42	Executive Vice President	2002	(7)	Executive Vice President/South Central Region President of Community Trust Bank, Inc.
Richard W. Newsom; 50	Executive Vice President	2002	(8)	Executive Vice President/Eastern Region President of Community Trust Bank, Inc.
James Gartner; 63	Executive Vice President	2002	(9)	Executive Vice President/Chief Credit Officer of Community Trust Bank, Inc.
Larry W. Jones; 58	Executive Vice President	2002	(10)	Executive Vice President/Northeast Region President of Community Trust Bank, Inc.
Steven E. Jameson; 48	Executive Vice President	2004	(11)	Executive Vice President/Chief Internal Audit & Risk Officer

 (1)The ages listed for the Corporation's executive officers are as of February 28, 2005.

(2)Ms. Hale assumed the position of Chairman of the Board effective December 31, 2004, upon the retirement of Burlin Coleman.

(3)Mr. Little began employment with the Corporation on August 4, 2003. Prior to joining the Corporation, Mr. Little served for three years in Sarasota, Florida as Vice President of Fisher Investments, Inc., a $10 billion private investment firm headquartered in Woodside, California. For the two years prior, he served as Senior Vice President and Executive Officer in charge of the private client group of Provident Bank of Florida. Mr. Little has thirty-six years in the trust and banking business and has been the executive in charge of five different trust departments and trust companies.

(4)Mr. Wasson was employed by Mercantile Bancorporation for 16 years prior to joining the Corporation in 2000. Mr. Wasson served as President of Mercantile Bank of Western Missouri, President of Mercantile Bank of Southern Illinois, and most recently as Chief Operating Officer of Mercantile Bank Midwest.

(5)Mr. Draughn served as Technology Manager for the Bank for seven years, most recently as Senior Vice President/Technology, prior to being promoted to Executive Vice President/Operations.

(6)Mr. Stumbo served as Senior Vice President/Controller for the Bank for five years prior to being promoted to Executive Vice President/Controller.

(7)Mr. Sparkman served as Vice President/Commercial Lending prior to being promoted to Market President in January 2000. In 2002, Mr. Sparkman was promoted to Executive Vice President and South Central Region President.

(8)Mr. Newsom served as Senior Vice President of Consumer Lending for five years prior to being promoted to Executive Vice President and Eastern Region President of Community Trust Bank, Inc.

(9)Mr. Gartner was employed for two years as Executive Vice President/Risk Management by Hamilton Bank, N.A., Miami, Florida, with assets of $1.2 billion prior to joining the Corporation. Prior to accepting his position at Hamilton Bank, Mr. Gartner was employed as Executive Vice President/Risk Manager, Chief Credit Officer, and Director at First National Bank of Nevada Holding Company. For two months in 1998, Mr. Gartner served as Executive Vice President/Merger Liaison Officer at Norwest Bank Arizona which purchased the Bank of Arizona and The Bank of New Mexico where Mr. Gartner served as Executive Vice President/Risk Management, Chief Credit Officer, and Director of the Bank of Arizona for the two years prior.

(10)Mr. Jones was employed by AmSouth Bancorp, a $35 billion financial services corporation, as District/City President for three years prior to joining the Corporation. Mr. Jones was employed by First American National Bank as Division Manager for north Mississippi for one year prior to its merger with AmSouth in 1999. For the thirty years prior, Mr. Jones was employed by Deposit Guaranty National Bank, formerly Security State Bank, prior to its merger with First American National Bank most recently as President/Community Bank.

(11)Mr. Jameson served as Lead Auditing Specialist for The World Bank Group in Washington, D.C. for one year prior to joining the Corporation in April 2004. For the four years prior, Mr. Jameson was employed by The Institute of Internal Auditors, Inc. in Altamonte Springs, Florida as Assistant Vice President of the Professional Practices Group. Mr. Jameson's certifications include Certified Public Accountant, Certified Internal Auditor, Certified Bank Auditor, Certified Fraud Examiner, Certified Financial Services Auditor, and Certification in Control Self-Assessment.

PART II

Item 5. Market for the Registrant’s Common Equity and Related Shareholder Matters

The Corporation’s common stock is listed on The NASDAQ-Stock Market’s National Market under the symbol CTBI. Additional information required by this item is included in the Quarterly Financial Data below:

Quarterly Financial Data

(in thousands except per share amounts)
Three Months Ended	December 31			September 30			June 30			March 31
2004
Net interest income	$	24,392		$	23,485		$	22,654		$	22,681
Net interest income, taxable equivalent basis		24,794			23,883			23,039			23,070
Provision for loan losses		2,685			2,045			1,785			2,133
Noninterest income		8,207			8,575			9,120			8,015
Noninterest expense		18,712			18,917			18,772			18,194
Net income		7,900			8,014			7,756			7,280
Per common share:
Basic earnings per share	$	0.53		$	0.54		$	0.53		$	0.49
Diluted earnings per share		0.52			0.53			0.52			0.48
Dividends declared		0.24			0.21			0.21			0.21
Common stock price:
High	$	34.48		$	29.55		$	31.18		$	30.00
Low		28.18			26.56			25.84			25.16
Last trade		32.36			28.26			27.73			30.00
Selected ratios:
Return on average assets, annualized		1.17	%		1.26	%		1.26	%		1.18	%
Return on average common equity, annualized		13.31	%		13.83	%		13.81	%		12.97	%
Net interest margin, annualized		3.97	%		4.08	%		4.09	%		4.09	%
2003
Net interest income	$	22,297		$	20,776		$	21,018		$	20,528
Net interest income, taxable equivalent basis		22,689			21,162			21,437			20,926
Provision for loan losses		2,115			2,085			3,585			1,547
Noninterest income		8,148			10,093			9,585			8,546
Noninterest expense		18,249			18,111			16,764			17,611
Net income		7,553			7,281			7,064			6,993
Per common share:
Basic earnings per share	$	0.51		$	0.49		$	0.48		$	0.47
Diluted earnings per share		0.50			0.48			0.48			0.47
Dividends declared		0.21			0.19			0.18			0.17
Common stock price:
High	$	30.66		$	25.69		$	24.79		$	22.02
Low		23.18			21.60			20.87			20.42
Last trade		27.46			24.03			21.62			20.87
Selected ratios:
Return on average assets, annualized		1.20	%		1.15	%		1.14	%		1.15	%
Return on average common equity, annualized		13.61	%		13.45	%		13.27	%		13.38	%
Net interest margin, annualized		3.93	%		3.62	%		3.75	%		3.74	%

There were approximately 3,500 holders of record of the Corporation's outstanding common shares at February 28, 2005.

Dividends

The annual dividend was increased from $0.75 per share to $0.87 per share during 2004. A 10% stock dividend distributed on December 15, 2004 resulted in the restatement of the 2004 cash dividend of $0.93 per share to $0.87 per share, the 2003 cash dividend of $0.82 per share to $0.75 per share, and the 2002 cash dividend of $0.71 per share to $0.65 per share. The Corporation did not adjust its fourth quarter 2004 cash dividend with the stock dividend of December 15, 2004 electing to retain the payment at $0.24 per share. The Corporation has adopted a conservative policy of cash dividends, by maintaining an average annual cash dividend ratio of less than 45%, with periodic stock dividends. Dividends are typically paid on a quarterly basis. Future dividends are subject to the discretion of the Corporation’s Board of Directors, cash needs, general business conditions, dividends from the subsidiaries, and applicable governmental regulations and policies. For information concerning restrictions on dividends from the subsidiary bank to the Corporation, see note 18 to the consolidated financial statements included herein for the year ended December 31, 2004.

Stock Repurchases

The following table shows shares of the Corporation's stock acquired through the stock repurchase program during the year 2004:

Period	Total Number of Shares Purchased	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
January 2004	0	-	0	633,519
February 2004	0	-	0	633,519
March 2004	55,000	$25.45	55,000	578,519
April 2004	0	-	0	578,519
May 2004	0	-	0	578,519
June 2004	0	-	0	578,519
July 2004	0	-	0	578,519
August 2004	0	-	0	578,519
September 2004	0	-	0	578,519
October 2004	0	-	0	578,519
November 2004	0	-	0	578,519
December 2004	0	-	0	578,519
Total	55,000	$25.45	55,000	578,519

Item 6. Selected Financial Data 2000-2004

(in thousands except per share amounts)
Year Ended December 31	2004			2003			2002			2001			2000
Interest income	$	130,401		$	128,514		$	146,550		$	176,835		$	175,749
Interest expense		37,189			43,895			57,293			93,717			91,515
Net interest income		93,212			84,619			89,257			83,118			84,234
Provision for loan losses		8,648			9,332			10,086			9,185			9,217
Noninterest income		33,917			36,372			27,928			23,774			19,526
Noninterest expense		74,595			70,735			67,341			64,938			61,927
Income before income taxes		43,886			40,924			39,758			32,769			32,616
Income taxes		12,936			12,033			12,158			10,497			10,270
Net income	$	30,950		$	28,891		$	27,600		$	22,272		$	22,346
Per common share:
Basic earnings per share	$	2.09		$	1.95		$	1.83		$	1.45		$	1.41
Cash dividends declared-	$	0.87		$	0.75		$	0.65		$	0.61		$	0.56
as a % of net income		41.63	%		38.46	%		35.52	%		42.07	%		39.72	%
Book value, end of year	$	15.91		$	14.95		$	14.02		$	12.60		$	11.68
Market price, end of year	$	32.36		$	27.46		$	20.78		$	17.85		$	11.17
Market value to book value, end of year		2.03	x		1.84	x		1.48	x		1.42	x		0.96	x
Price/earnings ratio, end of year		15.48	x		14.08	x		11.36	x		12.31	x		7.92	x
Cash dividend yield, end of year		2.69	%		2.73	%		3.13	%		3.42	%		5.01	%
At year-end:
Total assets	$	2,709,094		$	2,474,039		$	2,487,911		$	2,503,905		$	2,264,395
Long-term debt		59,500			59,500			60,604			47,944			48,060
Shareholders’ equity		236,169			221,393			209,419			191,606			181,904
Averages:
Assets	$	2,543,272		$	2,492,286		$	2,467,469		$	2,444,695		$	2,195,380
Deposits		2,078,691			2,109,752			2,110,714			2,094,296			1,886,198
Earning assets		2,337,540			2,292,251			2,268,579			2,256,341			2,004,686
Loans		1,816,146			1,658,289			1,660,912			1,748,241			1,665,349
Shareholders’ equity		229,561			215,086			202,562			187,899			176,911
Profitability ratios:
Return on average assets		1.22	%		1.16	%		1.12	%		0.91	%		1.02	%
Return on average equity		13.48	%		13.43	%		13.63	%		11.85	%		12.63	%
Capital ratios:
Equity to assets, end of year		8.72	%		8.95	%		8.42	%		7.65	%		8.03	%
Average equity to average assets		9.03	%		8.63	%		8.21	%		7.69	%		8.06	%
Risk based capital ratios:
Tier 1 capital
(to average assets)		8.78	%		8.73	%		8.23	%		6.44	%		7.29	%
Tier 1 capital
(to risk weighted assets)		11.82	%		11.35	%		10.98	%		9.11	%		9.26	%
Total capital
(to risk weighted assets)		13.07	%		12.60	%		12.22	%		10.32	%		10.51	%
Other significant ratios:
Allowance to net loans, end of year		1.42	%		1.42	%		1.42	%		1.38	%		1.53	%
Allowance to nonperforming loans, end of year		134.41	%		145.93	%		102.34	%		70.27	%		99.30	%
Nonperforming assets to loans and foreclosed properties, end of year		1.30	%		1.35	%		1.56	%		2.08	%		1.79	%
Net interest margin		4.05	%		3.76	%		4.02	%		3.77	%		4.33	%
Other statistics:
Average common shares outstanding		14,811			14,821			15,095			15,329			15,901
Number of full-time equivalent employees, end of year		954			901			874			883			795

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Community Trust Bancorp, Inc. reported record earnings of $31.0 million for 2004 compared to $28.9 million for 2003 and $27.6 million for 2002. Basic earnings per share for 2004 were $2.09 compared to $1.95 per share for 2003 and $1.83 per share for 2002. Basic earnings per share for the year 2004 reflects the Corporation’s sixth consecutive year of increased earnings per share. All per share data has been restated to reflect the 10% stock dividend distributed on December 15, 2004.

The increase in earnings is reflected in the Corporation's return on average assets and return on average equity for 2004. Return on average assets for 2004 was 1.22% compared to 1.16% and 1.12% in 2003 and 2002, respectively. Return on average equity for 2004 was 13.48% compared to 13.43% and 13.63% in 2003 and 2002, respectively.

The Corporation's assets increased to $2.7 billion at December 31, 2004 from the $2.5 billion at December 31, 2003. The Corporation experienced an increase of $244.2 million in earning assets during the year 2004. The investment portfolio grew $77.9 million and the loan portfolio grew $166.3 million. The growth in the investment portfolio was primarily a result of a $200 million transaction completed in August 2004, which increased our investment portfolio with funds borrowed from the Federal Home Loan Bank of Cincinnati, Ohio. Loan growth has occurred in all three major loan categories, commercial, residential real estate, and consumer loans. Total deposits and repurchase agreements of $2.2 billion at December 31, 2004 experienced growth of $67.4 million from prior year-end.

As was anticipated, the investment transaction completed in August 2004 has been accretive to earnings but has resulted in a lower net interest margin and return on average assets.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires the appropriate application of certain accounting policies, many of which require us to make estimates and assumptions about future events and their impact on amounts reported in our consolidated financial statements and related notes. Since future events and their impact cannot be determined with certainty, the actual results will inevitably differ from our estimates. Such differences could be material to the consolidated financial statements.

We believe the application of accounting policies and the estimates required therein are reasonable. These accounting policies and estimates are constantly reevaluated, and adjustments are made when facts and circumstances dictate a change. Historically, we have found our application of accounting policies to be appropriate, and actual results have not differed materially from those determined using necessary estimates.

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

Loans - - Loans are reported at the carrying value of unpaid principal reduced by unearned interest and an allowance for loan losses. Income is recorded on the level yield basis. Interest accrual is discontinued when management believes, after considering economic and business conditions, collateral value, and collection efforts, that the borrower’s financial condition is such that collection of interest is doubtful. Any loan greater than 90 days past due must be well secured and in the process of collection to continue accruing interest. Cash payments received on nonaccrual loans generally are applied against principal, and interest income is only recorded once principal recovery is reasonably assured. Loans are not reclassified as accruing until principal and interest payments are brought current and future payments appear reasonably certain.

Allowance for Loan Losses - The adequacy of the allowance is reviewed quarterly by management using a methodology that includes several key factors. The Corporation utilizes an internal risk grading system for commercial credits, and those larger commercial credits identified through this grading system as having weaknesses are individually reviewed for the customer's ability and potential to repay their loans. The borrower’s cash flow, adequacy of collateral held for the loan, and other options available to the Corporation including legal avenues are all evaluated. Based upon this individual credit evaluation, a specific allocation to the allowance may be made for the loan.

For other commercial loans that are not individually evaluated, an allowance allocation is determined by applying an eight-quarter moving average historical loss rate for this group of loans. Consumer installment and residential mortgage loans are not individually risk graded. Allowance allocations are provided for these pools of loans based upon an eight-quarter moving average historical loss rate for each of these categories of loans.

An unallocated portion of the allowance is also determined in recognition of the inherent inability to precisely determine the loss potential in any particular loan or pool of loans. The factors considered by management in determining this amount of inherent risk include delinquency trends, current economic conditions and trends, strength of the supervision and administration of the loan portfolio, level of nonperforming loans, trend in loan losses, recovery rates associated with previously charged-off loans, concentrations within commercial credits, problem loan identification strengths and weaknesses, collateral evaluation strengths and weaknesses, and the level of financial statement exceptions. These factors are reviewed quarterly and weighted as deemed appropriate by management. The total of these weighted factors is then applied against the total loan portfolio and the allowance is adjusted accordingly.

Investments - - Management determines the classification of securities at purchase. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 115, Accounting for Certain Investments in Debt and Equity Securities, the Corporation classifies securities into held-to-maturity or available-for-sale categories. Held-to-maturity securities are those which the Corporation has the positive intent and ability to hold to maturity and are reported at amortized cost. Available-for-sale securities are those the Corporation may decide to sell if needed for liquidity, asset/liability management, or other reasons. Available-for-sale securities are reported at fair value, with unrealized gains and losses included as a separate component of shareholders’ equity, net of tax. If declines in fair value are not temporary, the carrying value of the securities is written down to fair value as a realized loss.

Gains or losses on disposition of securities are computed by specific identification for all securities except for shares in mutual funds, which are computed by average cost. Interest and dividend income, adjusted by amortization of purchase premium or discount, is included in earnings.

Mortgage loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated market value in the aggregate. Net unrealized losses, if any, are recognized in a valuation allowance by charges to income.

Goodwill - - The Corporation evaluates total goodwill for impairment, based upon SFAS No. 142, Goodwill and Other Intangible Assets and SFAS No. 147, Acquisitions of Certain Financial Institutions, using fair value techniques including multiples of price/equity. Goodwill is evaluated for impairment on an annual basis.

Effects of Accounting Changes

Ø   Consolidation of Variable Interest Entities - In January 2003, the Financial Accounting Standards Board ("FASB") issued Interpretation No. 46 ("FIN 46"), Consolidation of Variable Interest Entities, an interpretation of Accounting Research Bulletin 51. The primary objectives of this interpretation are to provide guidance on the identification of entities for which control is achieved through means other than through voting rights (variable interest entities) and how to determine when and which business enterprise (the primary beneficiary) should consolidate the variable interest entity. This new model for consolidation applies to an entity in which either (a) the equity investors (if any) do not have a controlling financial interest, or (b) the equity investment at risk is insufficient to finance that entity’s activities without receiving additional subordinated financial support from other parties. In addition, FIN 46 requires that the primary beneficiary, as well as all other enterprises with a significant variable interest in a variable interest entity, make additional disclosures. Certain disclosure requirements of FIN 46 were effective for financial statements issued after January 31, 2003. In December 2003, FASB issued FIN 46 (revised December 2003), Consolidation of Variable Interest Entities ("FIN 46-R") to address certain FIN 46 implementation issues. The provisions of FIN 46 were applicable for variable interests in entities obtained after January 31, 2003. The adoption of the provisions applicable to special purpose entities ("SPEs") and all other variable interests obtained after January 31, 2003 did not have a material impact on the Corporation’s consolidated financial statements. Effective March 31, 2004, the Corporation adopted the provisions of FIN 46-R applicable to non-SPEs created prior to February 1, 2003. Adoption of FIN 46-R had no impact on the Corporation’s consolidated financial statements.

Ø   Accounting for Certain Loans and Debt Securities Acquired in a Transfer - In December 2003, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued Statement of Position ("SOP") 03-3, Accounting for Certain Loans and Debt Securities Acquired in a Transfer. SOP 03-3 addresses the accounting for certain acquired loans that show evidence of credit deterioration since their origination (i.e. impaired loans) and for which a loss is deemed probable of occurring. SOP 03-3 prohibits the carryover of an allowance for loan loss on certain acquired loans within its scope. SOP 03-3 is effective for loans that are acquired in fiscal years beginning after December 15, 2004. The Corporation will evaluate the applicability of this SOP for all prospective loans acquired in fiscal years beginning after December 15, 2004. The Corporation does not anticipate this Statement to have material effect on its consolidated financial statements.

Ø   Application of Accounting Principles to Loan Commitments - In March 2004, the Securities and Exchange Commission staff released Staff Accounting Bulletin ("SAB") No. 105, Application of Accounting Principles to Loan Commitments. This SAB disallows the inclusion of expected future cash flows related to the servicing of a loan in the determination of the fair value of a loan commitment. Further, no other internally developed intangible asset should be recorded as part of the loan commitment derivative. Recognition of intangible assets would only be appropriate in a third-party transaction, such as a purchase of a loan commitment or in a business combination. The SAB is effective for all loan commitments entered into after March 31, 2004, but does not require retroactive adoption for loan commitments entered into on or before March 31, 2004. Adoption of this SAB did not have a material effect on the Corporation's consolidated financial statements.

Ø   The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments - In March 2004, a consensus was reached on the Emerging Issues Task Force ("EITF") Issue 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. The EITF reached a consensus on an other-than-temporary impairment model for debt and equity securities accounted for under SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, and cost method investments. The basic model developed to evaluate whether an investment within the scope of Issue 03-1 is other-than-temporarily impaired involves a three-step process including determining whether an investment is impaired (fair value less than cost), evaluating whether the impairment is other-than-temporary (including the Corporation's intent and ability to hold the impaired securities until the cost is recovered) and, if other-than-temporary, requiring recognition of an impairment loss equal to the difference between the investment's cost and its fair value. The first step in the model used to determine other-than-temporary impairments shall be applied prospectively to all current and future investments in interim or annual reporting periods beginning after June 15, 2004. The second and third steps in the model have been delayed pending issuance of proposed FASB Staff Position EITF 03-1-a., Implementation Guidance for the Application of Paragraph 16 of EITF Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. At December 31, 2004, the Corporation had approximately $4.0 million in gross unrealized losses, none of which is considered to be other than temporary impairment. The Corporation is evaluating the impact of this Issue.

Ø   Stock-Based Employee Compensation - The Corporation currently maintains two incentive stock option plans covering key employees; however, only one plan is active. The 1998 Stock Option Plan ("1998 Plan") was approved by the Board of Directors and the Shareholders in 1998. The 1998 Plan had 1,046,831 shares authorized, 432,770 of which were available at December 31, 2004 for future grants. All options granted have a maximum term of ten years. Options granted as management retention options vest after five years, all other options vest ratably over four years. The Corporation has elected to follow Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees and related interpretations in accounting for its employee stock options. Under APB Opinion No. 25, because the exercise price of all employee stock options equals the market price of the underlying stock on the date of the grant, no compensation expense is recognized.

Had compensation cost for the Corporation’s stock options granted in 2004, 2003, and 2002 been determined under the fair value approach described in SFAS No. 123, Accounting for Stock-Based Compensation, the Corporation’s net income and earnings per share would have been reduced to the pro forma amounts indicated below:

(in thousands, except per share amounts) Years ended December 31		2004			2003			2002
Net income as reported		$	30,950		$	28,891		$	27,600
Stock-based compensation expense			(535	)		(522	)		(762	)
Tax effect			187			183			267
Net income pro forma		$	30,602		$	28,552		$	27,105
Basic net income per share	As reported	$	2.09		$	1.95		$	1.83
	Pro forma		2.06			1.91			1.80
Diluted net income per share	As reported	$	2.05		$	1.93		$	1.81
	Pro forma		2.03			1.89			1.77

    The fair value of the options presented above was estimated at the date of the grant using a Black-Scholes option pricing model with the following weighted average assumptions for 2004, 2003, and 2002, respectively: risk-free interest rates of 3.70%, 2.69%, and 3.68%, dividend yields of 3.02%, 3.29%, and 3.58%, volatility factors of the expected market price of the Corporation’s common stock of 0.756, 0.593, and 0.290, and a weighted average expected option life of 6.8, 4.0, and 5.0.

In December 2004, FASB issued SFAS No. 123R, Share-Based Payment. SFAS No. 123R is a revision of SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25. Among other items, SFAS No. 123R eliminates the use of APB Opinion No. 25 and the intrinsic value method of accounting and requires companies to recognize the cost of employee services received in exchange for awards of equity instruments, based on the grant date fair value of those awards, in the financial statements. The effective date of SFAS No. 123R is the first reporting period beginning after June 15, 2005, which is the third quarter 2005 for calendar year companies, although early adoption is allowed. SFAS No. 123R permits companies to adopt its requirements using either a "modified prospective" method, or a "modified retrospective" method. Under the "modified prospective" method, the compensation cost is recognized in the financial statements beginning with the effective date, based on the requirements of SFAS No. 123R for all share-based payments granted after that date, and based on the requirements of SFAS No. 123 for all unvested awards granted prior to the effective date of SFAS No. 123R. Under the "modified retrospective" method, the requirements are the same as under the "modified prospective" method, but this method also permits entities to restate financial statements of previous periods based on pro forma disclosures made in accordance with SFAS No. 123. The Corporation currently utilizes a standard option pricing model (i.e., Black-Scholes) to measure the fair value of stock options granted to employees. While SFAS No. 123R permits entities to continue to use such a model, the standard also permits the use of a "lattice" model. The Corporation has not yet determined which model it will use to measure the fair value of employee stock options upon the adoption of SFAS No. 123R. SFAS No. 123R also requires that the benefits associated with the tax deductions in excess of recognized compensation cost be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after the effective date. These future amounts cannot be estimated, because they depend on, among other things, when employees exercise stock options. However, the amount of operating cash flows recognized in prior periods for such excess tax deductions, as shown in the Corporation's Consolidated Statement of Cash Flows, were $0.3 million, $0.2 million, and $0.1 million, respectively, for 2004, 2003, and 2002. The Corporation currently expects to adopt SFAS No. 123R effective July 1, 2005; however, the Corporation has not yet determined which of the aforementioned adoption methods it will use. Subject to a complete review of the requirements of SFAS No. 123R, based on stock options granted to employees through December 31, 2004 and stock options that were granted in January 2005, the Corporation expects that the adoption of SFAS No. 123R on July 1, 2005 will reduce both third quarter 2005 and fourth quarter 2005 net earnings by approximately $0.1 million ($0.01 per share, diluted) each. See note 12 to the consolidated financial statements for additional information.

Results of Operations

2004 Compared to 2003

Net income for 2004 was $31.0 million compared to $28.9 million for 2003. The increase in net income was primarily driven by a 10.2% increase in net interest income, as interest income increased 1.5% and interest expense decreased 15.3%. See the Net Interest Income section below for further information. Basic earnings per share for 2004 were $2.09 compared to $1.95 per share for 2003. The average shares outstanding in 2004 and 2003 were 14.8 million.

Net interest income for 2004 was $93.2 million compared to $84.6 million in 2003. Noninterest income was $33.9 million compared to $36.4 million in 2003 and noninterest expense was $74.6 million compared to $70.7 million in 2003. See the Noninterest Income and Noninterest Expense sections below for further information.

Return on average assets was 1.22% for 2004 compared to 1.16% in 2003, and return on average equity for 2004 was 13.48% compared to 13.43% in 2003.

Net Interest Income:

The Corporation's net interest margin of 4.05% was a 29 basis point increase from the 3.76% for the year ended December 31, 2003. Management expects that, as interest rates continue to rise, the Corporation will benefit in the short term as its variable rate commercial loan portfolio reprices at a more rapid pace than its liabilities but that, by the end of a twelve-month cycle, the margin will be slightly compressed as the repricing of liabilities occurs. For further information, see the table titled "Consolidated Average Balance Sheets and Taxable Equivalent Income/Expense and Yields/Rates" in the Selected Statistical Information.

Average earning assets were $2.3 billion at December 31, 2004 and at December 31, 2003. Average interest bearing liabilities were $1.9 billion at December 31, 2004 and at December 31, 2003. Average interest bearing liabilities as a percentage of average earning assets were 82.0% at December 31, 2004 compared to 83.7% in 2003.

The taxable equivalent yield on average earning assets was 5.65% for 2004 compared to 5.68% in 2003. The cost of average interest bearing liabilities was 1.94% for 2004 compared to 2.29% for 2003. The yield on interest bearing assets has been impacted by the change in the earning asset mix between the loan portfolio and the investment portfolio as well as by the change in market rates. Average loans accounted for 72.3% of average earning assets in 2003 while average loans accounted for 77.7% of average earning assets in 2004. Average loans accounted for 66.5% of total average assets for the year ended December 31, 2003 compared to 71.4% for the year ended December 31, 2004. Total loans as a percentage of total assets as of December 31, 2004 and 2003 were 70.2%.

Provision for Loan Losses and Allowance for Loan Losses:

The provision for loan losses that was added to the allowance was $8.6 million as of December 31, 2004 compared to $9.3 million for 2003. This provision represents a charge against current earnings in order to maintain the allowance at an appropriate level determined using the accounting estimates described in the Critical Accounting Policies and Estimates section. Loan losses, net of recoveries, as a percentage of average loans outstanding were 0.35% in 2004 compared to 0.48% in 2003 as net loan losses were $6.3 million for 2004 compared to $8.0 million for 2003.

Our reserve for losses on loans as a percentage of total loans outstanding remained flat at 1.42% as of December 31, 2004 and December 31, 2003.

Nonperforming loans at December 31, 2004 of $20.1 million, or 1.1% of total loans, increased from the $16.9 million, or 1.0% of total loans, at December 31, 2003. The Corporation's continued focus on liquidation of foreclosed properties has resulted in the decrease of foreclosed properties to $4.8 million on December 31, 2004 from the $6.6 million reported at December 31, 2003. Foreclosed properties consist primarily of 1-4 family residential real estate. Nonperforming assets at December 31, 2004 were $24.9 million compared to $23.5 million at December 31, 2003.

Noninterest Income:

Noninterest income for the year ended December 31, 2004 decreased 6.7% from prior year. The following table displays the year-to-date activity in the various significant noninterest income accounts.

Noninterest Income Summary
(in thousands)		12 Months 2004		12 Months 2003
Deposit related fees		$	17,658	$	17,057
Loan related fees			5,203		4,644
Mortgage servicing rights			46		(1,269)
Loan valuation adjustments*			1,384		348
Trust revenue			2,456		2,457
Gains on sales of loans			1,619		5,693
Securities gains			639		3,042
Other revenue			4,912		4,400
	Total noninterest income	$	33,917	$	36,372

*Loan valuation adjustments consist of the adjustments of loans obtained through acquisitions to their net realizable value.

Noninterest Expense:

Noninterest expense for the year ended December 31, 2004 of $74.6 million was a 5.5% increase from the $70.7 million for the year ended December 31, 2003. The increase in noninterest expense from prior year was primarily attributable to increased personnel expense due to the filling of budgeted key positions and the accrual of a performance-based incentive in the amount of $2.3 million. No incentive accrual was booked in 2003. The Corporation’s performance incentive plan requires a performance incentive payment to eligible employees if the Corporation reaches goals established by the Board of Directors. These goals were not met in 2003; however, they were met for the year 2004.

The efficiency ratio for the year ended December 31, 2004 improved almost 100 basis points to 58.25% from the 59.17% for the year ended December 31, 2003. The deposit to FTE (full-time equivalent) ratio decreased to $2.2 million at December 31, 2004 from $2.3 million at December 31, 2003.

2003 Compared to 2002

Net income for 2003 was $28.9 million compared to $27.6 million for 2002. The increase in net income was primarily driven by a 30.2% increase in noninterest income. See the Noninterest Income section below for additional information. Basic earnings per share for 2003 were $1.95 compared to $1.83 per share for 2002. The average shares outstanding in 2003 and 2002 were 14.8 million and 15.1 million, respectively.

Net interest income for 2003 was $84.6 million compared to $89.3 million in 2002. Noninterest income was $36.4 million compared to $27.9 million in 2002 and noninterest expense was $70.7 million compared to $67.3 million in 2002.

Return on average assets was 1.16% for 2003 compared to 1.12% in 2002, and return on average equity was 13.43% compared to 13.63% in 2002.

Net Interest Income:

The Corporation's net interest margin of 3.76% was a 26 basis point or 7.2% decrease from the 4.02% for the year ended December 31, 2002. However, the net interest margin had shown improvement as seen by the 31 basis point increase quarter-over-quarter from 3.62% for the quarter ended September 30, 2003 to 3.93% for the quarter ended December 31, 2003. The Corporation experienced growth in all three loan categories during the last seven months of 2003.

Average earning assets were $2.3 billion at December 31, 2003 and at December 31, 2002. Average interest bearing liabilities were $1.9 billion at December 31, 2003 and at December 31, 2002. Average interest bearing liabilities as a percentage of average earning assets were 83.7% at December 31, 2003 compared to 85.3% in 2002.

The taxable equivalent yield on average earning assets was 5.68% for 2003 compared to 6.54% in 2002. The cost of average interest bearing liabilities was 2.29% for 2003 compared to 2.96% for 2002. The yield on interest bearing assets had been impacted by the change in the earning asset mix between the loan portfolio and the investment portfolio as well as by the change in market rates. Average loans accounted for 73.2% of average earning assets in 2002 while average loans accounted for 72.3% of average earning assets in 2003. Average loans accounted for 67.3% of total average assets for the year ended December 31, 2002 compared to 66.5% for the year ended December 31, 2003. Total loans as a percentage of total assets as of December 31, 2003 and 2002 were 70.2% and 65.7%, respectively.

As was presented in the interest rate sensitivity table in the Liquidity and Market Risk section that was included in the Management Discussion and Analysis of the Corporation's annual report on Form 10-K for the year ended December 31, 2003, the Corporation’s gap position on December 31, 2003 was relatively flat as the Corporation had sold securities during the year and reinvested in securities with shorter maturities to offset the shortened term of its liabilities. During 2003, the Corporation sold floating rate securities, U.S. treasuries, and 15-year mortgage-backed securities and reinvested in agencies, municipals, and mortgage-backed securities with a slightly longer duration, but with a favorable increase in the portfolio’s taxable equivalent yield. This extension of duration on the asset side of the balance sheet was the primary factor in the Corporation’s estimated earnings sensitivity in a 200 basis point increased rate environment declining from 4.38% at December 31, 2002 to 1.46% at December 31, 2003.

Provision for Loan Losses and Allowance for Loan Losses:

The provision for loan losses that was added to the allowance was $9.3 million as of December 31, 2003 compared to $10.1 million for 2002. This provision represented a charge against current earnings in order to maintain the allowance at an appropriate level determined using the accounting estimates described above. Loan losses, net of recoveries, as a percentage of average loans outstanding were 0.48% in 2003 compared to 0.63% in 2002 as net loan losses were $8.0 million for 2003 compared to $10.5 million for 2002.

Our reserve for losses on loans as a percentage of total loans outstanding remained flat at 1.42% as of December 31, 2003 and December 31, 2002.

Asset quality improved for the Corporation with nonperforming loans decreasing to $16.9 million, a 25.7% decrease from the $22.7 million at December 31, 2002. Nonperforming assets also improved by 8.0% for the year 2003, reflecting management’s continued focus on improving asset quality.

Foreclosed properties on December 31, 2003 were $6.6 million, an increase from the $2.8 million at December 31, 2002. During the fourth quarter of 2003, the Corporation was successful in obtaining title to $3.1 million in real estate collateral from a problem credit that has been in foreclosure proceedings for approximately two years. The property was recorded at cost which was lower than market value. Foreclosed properties consisted primarily of 1-4 family residential real estate.

Noninterest Income:

Noninterest income for the year ended December 31, 2003 of $36.4 million was a 30.2% increase from the $27.9 million earned during 2002. Increased deposit service charge income due to the Overdraft Honor Program implemented in September 2002 and a 20% increase in the overdraft fee effective June 2003, gains on sales of securities, gains on sales of loans due to increased refinancing activity, and other noninterest income contributed to the increase in noninterest income year-over-year. Service charges on deposit accounts increased $3.6 million from December 31, 2002 to December 31, 2003, securities gains increased $1.5 million, gains on sales of loans increased $1.3 million, and other noninterest income increased $2.1 million. As residential mortgage refinancing slowed, the Corporation had a decrease in gains on sales of loans during the fourth quarter of 2003.

While the increase in residential real estate loan refinancing activity, due to the low interest rate environment, resulted in higher noninterest income from the gains on sales of loans, noninterest income was negatively impacted by charges to our valuation reserve for capitalized mortgage servicing rights of $1.3 million for the year ended December 31, 2003 compared to $1.1 million for the year ended December 31, 2002. The impact to earnings per share for the years ended December 31, 2003 and 2002 was $0.06 per share and $0.05 per share, respectively.

Noninterest Expense:

Noninterest expense increased 5.0% from $67.3 million for the year ended December 31, 2002 to $70.7 million for the year ended December 31, 2003. The increase in noninterest expense for the year was primarily attributable to increases in legal and professional fees, operating losses, and other noninterest expense. Legal and professional fees increased $1.0 million from December 31, 2002 to December 31, 2003, primarily due to fees incurred as a result of implementing the Overdraft Honor Program, operating losses increased $0.8 million, and other noninterest expense increased $1.6 million, including $0.8 million in nonrecurring charges to miscellaneous expense. Salaries and employee benefits remained relatively flat to prior year at $34.6 million; however, this line item included $1.8 million in charges in 2002 relative to the Corporation’s performance incentive plan. This plan requires a performance incentive payment to eligible employees if the Corporation reaches goals established by the Board of Directors. These goals were not met in 2003; however, if they were met in 2004, it was anticipated the cost would be approximately $2 million.

Our efficiency ratio was 59.2% at year-end 2003 compared to 57.3% at year-end 2002. The deposit to FTE (full-time equivalent) ratio decreased to $2.3 million at December 31, 2003 from $2.4 million at December 31, 2002.

Liquidity and Market Risk

The objective of the Corporation’s Asset/Liability management function is to maintain consistent growth in net interest income within the Corporation’s policy limits. This objective is accomplished through management of the Corporation’s consolidated balance sheet composition, liquidity, and interest rate risk exposures arising from changing economic conditions, interest rates, and customer preferences. The goal of liquidity management is to provide adequate funds to meet changes in loan and lease demand or unexpected deposit withdrawals. This is accomplished by maintaining liquid assets in the form of cash and cash equivalents and investment securities, maintaining sufficient unused borrowing capacity, and growth in core deposits. As of December 31, 2004, the Corporation had approximately $129 million in cash and cash equivalents and approximately $482 million in securities valued at estimated fair value designated as available-for-sale and available to meet liquidity needs on a continuing basis. Additional asset-driven liquidity is provided by the remainder of the securities portfolio and the repayment of loans. In addition to core deposit funding, the Corporation also accesses a variety of other short-term and long-term funding sources. The Corporation also relies on Federal Home Loan Bank advances for both liquidity and management of its asset/liability position. Federal Home Loan Bank advances were $162.4 million at December 31, 2004 compared to $3.2 million at December 31, 2003. The increase in Federal Home Loan Bank advances was a result of a transaction completed in August 2004, which increased our investment portfolio with funds borrowed from the Federal Home Loan Bank of Cincinnati, Ohio, as discussed earlier in the Management Discussion and Analysis. As of December 31, 2004, the Corporation had a $188.9 million available borrowing position with the Federal Home Loan Bank. The Corporation 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 repurchase agreements and federal funds purchased, and issuance of long-term debt. At December 31, 2004, the Corporation had a $12 million revolving line of credit, all of which is currently available to meet any future cash needs. The Corporation’s primary investing activities include purchases of securities and loan originations. Management does not rely on any one source of liquidity and manages availability in response to changing consolidated balance sheet needs.

The Corporation’s stock repurchase program began in December 1998 with the authorization to acquire up to 500,000 shares and was increased by an additional 1,000,000 shares in July 2000. The Corporation issued a press release on May 13, 2003 announcing its intention to repurchase up to 1,000,000 additional shares. The Corporation’s stock repurchase program continues to be accretive to shareholder value. During the year 2004, the Corporation acquired 55,000 shares of the Corporation’s stock. As of December 31, 2004, a total of 1,921,481 shares have been repurchased through this program. The following table shows Board allocations and repurchases made through the stock repurchase program for the years 1998 through 2004:

	Board Allocations	Repurchases*		Shares Available for Repurchase
		Average Price ($)	# of Shares
1998	500,000	-	0
1999	0	15.89	131,517
2000	1,000,000	11.27	694,064
2001	0	14.69	444,945
2002	0	19.48	360,287
2003	1,000,000	21.58	235,668
2004	0	25.45	55,000
Total	2,500,000	15.59	1,921,481	578,519

*Repurchased shares and average prices have been restated to reflect stock dividends that have occurred; however, board allocated shares have not been adjusted.

Management considers interest rate risk one of the Corporation’s most significant market risks. Interest rate risk is the exposure to adverse changes in net interest income due to changes in interest rates. Consistency of the Corporation’s net interest revenue is largely dependent upon the effective management of interest rate risk. The Corporation employs a variety of measurement techniques to identify and manage its interest rate risk including the use of an earnings simulation model to analyze net interest income sensitivity to changing interest rates. The model is based on actual cash flows and repricing characteristics for on and off-balance sheet instruments and incorporates market-based assumptions regarding the effect of changing interest rates on the prepayment rates of certain assets and liabilities. Assumptions based on the historical behavior of deposit rates and balances in relation to changes in interest rates are also incorporated into the model. These assumptions are inherently uncertain, and as a result, the model cannot precisely measure net interest income or precisely predict the impact of fluctuations in interest rates on net interest income. Actual results will differ from simulated results due to timing, magnitude, and frequency of interest rate changes as well as changes in market conditions and management strategies.

The Corporation’s Asset/Liability Management Committee (ALCO), which includes executive and senior management representatives and reports to the Board of Directors, monitors and manages interest rate risk within Board-approved policy limits. The Corporation’s current exposure to interest rate risks is determined by measuring the anticipated change in net interest income over a twelve-month period assuming a 200 basis point increase or decrease in rates, spread evenly over the twelve-month period. The following table shows the Corporation’s estimated earnings sensitivity profile as of December 31, 2004:

Change in Interest Rates (basis points)	Percentage Change in Net Interest Income (12 Months)
+200	5.26%
-200	(5.42)%

The following table shows the Corporation’s estimated earnings sensitivity profile as of December 31, 2003:

Change in Interest Rates (basis points)	Percentage Change in Net Interest Income (12 Months)
+200	1.46%
-200	(2.18)%

The simulation model used a 200 basis point increase in the yield curve spread evenly over a twelve-month period. The measurement at December 31, 2004 estimates that net interest income for the Corporation would increase by 5.26% over one year. A 200 basis point immediate and sustained decrease in interest rates would decrease net interest income by 5.42% over one year. In order to reduce the exposure to interest rate fluctuations and to manage liquidity, the Corporation has developed sale procedures for several types of interest-sensitive assets. Virtually all long-term, fixed rate single family residential mortgage loans underwritten according to Federal Home Loan Mortgage Corporation guidelines are sold for cash upon origination. Periodically, additional assets such as commercial loans are also sold. In 2004 and 2003, $68.6 million and $195.8 million, respectively, was realized on the sale of fixed rate residential mortgages. Management focuses its efforts on consistent net interest revenue and net interest margin growth through each of the retail and wholesale business lines. The Corporation does not currently engage in trading activities.

Capital Resources

The Corporation continues to grow its shareholders’ equity while also providing an average annual dividend yield during 2004 of 2.69% to shareholders. Shareholders’ equity of $236.2 million on December 31, 2004 is a 6.7% increase from the $221.4 million on December 31, 2003. The primary source of capital growth for the Corporation is retained earnings. Cash dividends were $0.87 per share for 2004 and $0.75 per share for 2003. The Corporation retained 58.4% of its earnings in 2004 compared to 61.7% in 2003.

Regulatory guidelines require bank holding companies, commercial banks, and savings banks to maintain certain minimum capital 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 Corporation’s ratios as of December 31, 2004 were 8.78%, 11.82%, and 13.07%, respectively. Community Trust Bancorp, Inc. and it subsidiaries met the criteria for "well-capitalized" at December 31, 2004. See note 18 to the consolidated financial statements for further information.

Upon the early adoption of FIN 46 effective July 1, 2003, the Corporation deconsolidated CTBI Preferred Capital Trust and CTBI Preferred Capital Trust II, resulting in a recharacterization of the underlying consolidated debt obligations from the previous trust preferred securities obligations to junior subordinated debenture obligations. Under the current Federal Reserve Board’s regulatory framework, the junior subordinated debenture obligations both qualify as total capital for regulatory capital purposes. The Federal Reserve Board is currently evaluating whether these capital securities should continue to qualify as Tier 1 capital as a result of deconsolidating the related trust preferred securities in accordance with generally accepted accounting principals. If the Federal Reserve Board disallows the capital securities as Tier 1 regulatory capital, the effect of such a change could have a material impact on the Corporation’s regulatory ratios.

As of December 31, 2004, 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 Corporation’s liquidity, capital resources, or operations.

Impact of Inflation, Changing Prices, and Local Economic Conditions

The majority of the Corporation’s assets and liabilities are monetary in nature. Therefore, the Corporation differs greatly from most commercial and industrial companies that have significant investments in non-monetary assets, such as fixed assets and inventories. However, inflation does have an important impact on the growth of assets 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 Corporation’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.

Our success is dependent on the general economic conditions of the communities we serve. Unlike larger banks that are more geographically diversified, we provide financial and banking services primarily to eastern, northeast, central, and south central Kentucky and southern West Virginia. The economic conditions in these areas have a significant impact on loan demand, the ability of borrowers to repay loans, and the value of the collateral securing loans. A significant decline in general economic conditions will affect these local economic conditions and will negatively affect the financial results of our banking operations. Factors influencing general conditions include inflation, recession, unemployment, and other factors beyond our control.

Contractual Obligations and Commitments

As disclosed in the notes to the consolidated financial statements, the Corporation has certain obligations and commitments to make future payments under contracts. At December 31, 2004, the aggregate contractual obligations and commitments are:

Contractual Obligations:	Payments Due by Period
(in thousands)	Total		1 Year		2-5 Years		After 5 Years
Deposits without stated maturity	$	1,021,377	$	1,021,377	$	0	$	0
Certificates of deposit		1,119,041		972,342		146,024		675
Repurchase agreements and other short-term borrowings		92,644		62,873		29,749		22
Advances from Federal Home Loan Bank		162,391		40,604		121,119		668
Interest on advances from Federal Home Loan Bank*		12,212		5,119		7,084		9
Long-term debt		59,500		0		0		59,500
Interest on long-term debt*		136,286		5,647		22,590		108,049
Annual rental commitments under leases		9,697		1,465		4,121		4,111
Total	$	2,464,650	$	2,098,661	$	301,013	$	64,976

*The amounts provided as interest on advances from Federal Home Loan Bank and interest on long-term debt assume the liabilities will not be prepaid and interest is calculated to their individual maturities.

Other Commitments:	Amount of Commitment - Expiration by Period
(in thousands)	Total		1 Year		2-5 Years		After 5 Years
Standby letters of credit	$	39,313	$	35,815	$	3,498	$	0
Commitments to extend credit		326,784		224,984		94,307		7,493
Total	$	366,097	$	260,799	$	97,805	$	7,493

Commitments to extend credit and standby letters of credit do not necessarily represent future cash requirements in that these commitments often expire without being drawn upon.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

The Corporation currently does not engage in any derivative or hedging activity. Analysis of the Corporation’s interest rate sensitivity can be found above.

Item 8. Financial Statements

Consolidated Balance Sheets

(dollars in thousands) December 31	2004			2003
Assets:
Cash and due from banks	$	78,725		$	79,907
Federal funds sold		50,855			9,054
Securities available-for-sale at fair value
(amortized cost of $480,671 and $414,404, respectively)		482,280			421,855
Securities held-to-maturity at amortized cost
(fair value of $61,947 and $87,061, respectively)		62,671			87,497
Loans held for sale		0			315
Loans		1,902,519			1,736,260
Allowance for loan losses		(27,017	)		(24,653	)
Net loans		1,875,502			1,711,607
Premises and equipment, net		53,111			49,990
Goodwill		60,122			60,122
Core deposit intangible (net of accumulated amortization of $3,711 and
$3,131, respectively)		3,249			3,829
Other assets		42,579			49,863
Total assets	$	2,709,094		$	2,474,039
Liabilities and shareholders’ equity:
Deposits
Noninterest bearing	$	403,792		$	359,403
Interest bearing		1,736,626			1,708,212
Total deposits		2,140,418			2,067,615
Repurchase agreements		88,404			96,506
Federal funds purchased and other short-term borrowings		4,240			8,787
Advances from Federal Home Loan Bank		162,391			3,192
Long-term debt		59,500			59,500
Other liabilities		17,972			17,046
Total liabilities		2,472,925			2,252,646
Shareholders’ equity:
Preferred stock, 300,000 shares authorized and unissued
Common stock, $5 par value, shares authorized 25,000,000;
shares outstanding 2004 - 14,845,217; 2003 - 14,807,760		74,226			67,308
Capital surplus		145,023			105,579
Retained earnings		15,874			43,663
Accumulated other comprehensive income, net of tax		1,046			4,843
Total shareholders’ equity		236,169			221,393
Total liabilities and shareholders’ equity	$	2,709,094		$	2,474,039

See notes to consolidated financial statements.

Consolidated Statements of Income

(in thousands except per share data) Year Ended December 31		2004		2003		2002
Interest income:
Interest and fees on loans, including loans held for sale		$	111,181	$	108,885	$	121,460
Interest and dividends on securities
	Taxable		16,409		16,667		20,899
	Tax exempt		2,204		2,215		2,704
Other, including interest on federal funds sold			607		747		1,487
	Total interest income		130,401		128,514		146,550
Interest expense:
Interest on deposits			28,460		37,210		50,111
Interest on repurchase agreements and other short-term borrowings			1,568		1,132		1,433
Interest on advances from Federal Home Loan Bank			1,907		230		418
Interest on long-term debt			5,254		5,323		5,331
	Total interest expense		37,189		43,895		57,293
	Net interest income		93,212		84,619		89,257
Provision for loan losses			8,648		9,332		10,086
	Net interest income after provision for loan losses		84,564		75,287		79,171
Noninterest income:
Service charges on deposit accounts			17,658		17,057		13,484
Gains on sales of loans, net			1,619		5,693		4,415
Trust income			2,456		2,457		2,500
Securities gains, net			639		3,042		1,528
Other			11,545		8,123		6,001
	Total noninterest income		33,917		36,372		27,928
Noninterest expense:
Salaries and employee benefits			39,501		34,593		34,643
Occupancy, net			5,629		5,819		5,580
Equipment			3,855		3,688		3,626
Data processing			4,166		3,841		3,890
Stationery, printing, and office supplies			1,461		1,407		1,459
Taxes other than payroll, property, and income			3,197		2,772		2,850
FDIC insurance			301		319		375
Legal and professional fees			3,187		3,937		2,940
Other			13,298		14,359		11,978
	Total noninterest expense		74,595		70,735		67,341
	Income before income taxes		43,886		40,924		39,758
Income taxes			12,936		12,033		12,158
	Net income	$	30,950	$	28,891	$	27,600
Basic earnings per share		$	2.09	$	1.95	$	1.83
Diluted earnings per share		$	2.05	$	1.93	$	1.81

See notes to consolidated financial statements.

Consolidated Statements of Changes in Shareholders’ Equity

(in thousands except per share and share amounts)		Common Stock			Capital Surplus			Retained Earnings			Accumulated Other Comprehensive Income (Loss), Net of Tax			Total
Balance, January 1, 2002	$	57,129		$	51,122		$	81,395		$	1,960		$	191,606
Net income								27,600						27,600
Net change in unrealized appreciation on securities available-for-sale, net of tax of $2,938											5,455			5,455
Comprehensive income														33,055
Cash dividends declared ($0.65 per share)								(9,770	)					(9,770	)
To record 10% common stock dividend		5,604			27,081			(32,685	)					0
Issuance of 97,506 shares of common stock		372			1,224									1,596
Purchase of 363,099 shares of common stock		(1,364	)		(5,704	)								(7,068	)
Balance, December 31, 2002		61,741			73,723			66,540			7,415			209,419
Net income								28,891						28,891
Net change in unrealized depreciation on securities available-for-sale, net of tax of $1,385											(2,572	)		(2,572	)
Comprehensive income														26,319
Cash dividends declared ($0.75 per share)								(11,055	)					(11,055	)
To record 10% common stock dividend		6,114			34,599			(40,713	)					0
Issuance of 103,234 shares of common stock		431			1,389									1,820
Purchase of 236,768 shares of common stock		(978	)		(4,132	)								(5,110	)
Balance, December 31, 2003		67,308			105,579			43,663			4,843			221,393
Net income								30,950						30,950
Net change in unrealized depreciation on securities available-for-sale, net of tax of $2,044											(3,797	)		(3,797	)
Comprehensive income														27,153
Cash dividends declared ($0.87 per share)								(12,854	)					(12,854	)
To record 10% common stock dividend		6,746			39,139			(45,885	)					0
Issuance of 92,857 shares of common stock		422			1,409									1,831
Purchase of 55,000 shares of common stock		(250	)		(1,150	)								(1,400	)
Other					46									46
Balance, December 31, 2004	$	74,226		$	145,023		$	15,874		$	1,046		$	236,169

See notes to consolidated financial statements.

Consolidated Statements of Cash Flows

(in thousands) Year Ended December 31	2004			2003			2002
Cash flows from operating activities:
Net income	$	30,950		$	28,891		$	27,600
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		4,469			4,418			4,458
Change in net deferred tax asset, net		1,886			561			2,448
Provision for loan and other real estate losses		8,934			9,541			10,158
Securities gains		(796	)		(3,404	)		(1,580	)
Securities losses		157			362			52
Gains on sale of mortgage loans held for sale		(1,619	)		(5,378	)		(4,415	)
Gains on sale of other loans		0			(315	)		0
Gains (losses) on sale of assets, net		(238	)		90			(22	)
Proceeds from sale of mortgage loans held for sale		68,573			195,794			162,864
Amortization of securities premiums, net		1,252			1,435			626
Change in mortgage loans held for sale, net		315			1,964			(1,033	)
Changes in:
Other liabilities		1,153			2,306			(3,712	)
Other assets		4,938			(8,549	)		986
Net cash provided by operating activities		119,974			227,716			198,430
Cash flows from investing activities:
Securities available-for-sale:
Proceeds from sales		141,801			189,628			74,960
Proceeds from prepayments and maturities		95,166			138,504			101,875
Purchase of securities		(303,485	)		(224,837	)		(327,720	)
Securities held-to-maturity:
Proceeds from prepayments and maturities		26,027			44,646			32,154
Purchase of securities		(1,562	)		(81,060	)		0
Proceeds from sale of loans		0			7,315			0
Change in loans, net		(241,120	)		(315,128	)		(99,029	)
Purchase of premises, equipment, and other real estate		(7,039	)		(3,065	)		(3,544	)
Proceeds from sale of premises and equipment		35			15			8
Proceeds from sale of other real estate		3,846			4,134			4,552
Assets acquired net of cash		0			0			(577	)
Net cash used in investing activities		(286,331	)		(239,848	)		(217,321	)
Cash flows from financing activities:
Change in deposits, net		72,803			(60,101	)		(28,056	)
Change in repurchase agreements and other short-term borrowings, net		(12,649	)		36,862			(14,153	)
Advances from Federal Home Loan Bank		200,000			0			0
Payments on advances from Federal Home Loan Bank		(40,801	)		(2,425	)		(3,908	)
Proceeds from junior subordinated debentures		0			0			25,000
Payments on long-term debt		0			(1,104	)		(12,340	)
Issuance of common stock		1,831			1,820			1,596
Purchase of common stock		(1,400	)		(5,110	)		(7,068	)
Other equity adjustments		46			0			0
Dividends paid		(12,854	)		(11,055	)		(9,770	)
Net cash provided by (used in) financing activities		206,976			(41,113	)		(48,699	)
Net increase (decrease) in cash and cash equivalents		40,619			(53,245	)		(67,590	)
Cash and cash equivalents at beginning of year		88,961			142,206			209,796
Cash and cash equivalents at end of year	$	129,580		$	88,961		$	142,206

See notes to consolidated financial statements.

Notes to Consolidated Financial Statements

1. Accounting Policies

Basis of Presentation - The consolidated financial statements include Community Trust Bancorp, Inc. (the "Corporation") and its subsidiaries, including its principal subsidiary, Community Trust Bank, Inc. (the "Bank"). Intercompany transactions and accounts have been eliminated in consolidation. In preparing the consolidated financial statements, management must make certain estimates and assumptions. These estimates and assumptions affect the amounts reported for assets, liabilities, revenues, and expenses, as well as affecting the disclosures provided. Future results could differ from the current estimates. Such estimates include, but are not limited to, the allowance for loan losses, fair value of securities and mortgage servicing rights, and goodwill (the excess of cost over net assets acquired).

Nature of Operations - Substantially all assets, liabilities, revenues, and expenses are related to banking operations, including lending, investing of funds, obtaining of deposits, trust operations, full service brokerage operations, and other financing. All of the Corporation’s business offices and the majority of its business are located in eastern, northeast, central, and south central Kentucky and southern West Virginia.

Cash and Cash Equivalents - Cash and cash equivalents include cash on hand, amounts due from banks, interest bearing deposits in other financial institutions, and federal funds sold. Generally, federal funds are sold for one-day periods.

Investments -Management determines the classification of securities at purchase. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 115, Accounting for Certain Investments in Debt and Equity Securities, the Corporation classifies securities into held-to-maturity or available-for-sale categories. Held-to-maturity securities are those which the Corporation has the positive intent and ability to hold to maturity and are reported at amortized cost. Available-for-sale securities are those the Corporation may decide to sell if needed for liquidity, asset/liability management, or other reasons. Available-for-sale securities are reported at fair value, with unrealized gains and losses included as a separate component of shareholders’ equity, net of tax. If declines in fair value are not temporary, the carrying value of the securities is written down to fair value as a realized loss.

Gains or losses on disposition of securities are computed by specific identification for all securities except for shares in mutual funds, which are computed by average cost. Interest and dividend income, adjusted by amortization of purchase premium or discount, is included in earnings.

Loans -Loans are reported at the carrying value of unpaid principal reduced by unearned interest and an allowance for loan losses. Income is recorded on the level yield basis. Interest accrual is discontinued when management believes, after considering economic and business conditions, collateral value, and collection efforts, that the borrower’s financial condition is such that collection of interest is doubtful. Any loan greater than 90 days past due must be well secured and in the process of collection to continue accruing interest. Cash payments received on nonaccrual loans generally are applied against principal, and interest income is only recorded once principal recovery is reasonably assured. Loans are not reclassified as accruing until principal and interest payments are brought current and future payments appear reasonably certain.

Allowance for Loan Losses -The adequacy of the allowance is reviewed quarterly by management using a methodology that includes several key factors. The Corporation utilizes an internal risk grading system for commercial credits, and those larger commercial credits identified through this grading system as having weaknesses are individually reviewed for the customer's ability and potential to repay their loans. The borrower’s cash flow, adequacy of collateral held for the loan, and other options available to the Corporation including legal avenues are all evaluated. Based upon this individual credit evaluation, a specific allocation to the allowance may be made for the loan.

For other commercial loans that are not individually evaluated, an allowance allocation is determined by applying an eight-quarter moving average historical loss rate for this group of loans. Consumer installment and residential mortgage loans are not individually risk graded. Allowance allocations are provided for these pools of loans based upon an eight-quarter moving average historical loss rate for each of these categories of loans.

An unallocated portion of the allowance is also determined in recognition of the inherent inability to precisely determine the loss potential in any particular loan or pool of loans. The factors considered by management in determining this amount of inherent risk include delinquency trends, current economic conditions and trends, strength of the supervision and administration of the loan portfolio, level of nonperforming loans, trend in loan losses, recovery rates associated with previously charged-off loans, concentrations within commercial credits, problem loan identification strengths and weaknesses, collateral evaluation strengths and weaknesses, and the level of financial statement exceptions. These factors are reviewed quarterly and weighted as deemed appropriate by management. The total of these weighted factors is then applied against the total loan portfolio and the allowance is adjusted accordingly.

Mortgage loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated market value in the aggregate. Net unrealized losses, if any, are recognized in a valuation allowance by charges to income.

Premises and Equipment - Premises and equipment are stated at cost less accumulated depreciation and amortization. Capital leases are included in premises and equipment at the capitalized amount less accumulated amortization.

Depreciation and amortization are computed primarily using the straight-line method. Estimated useful lives range up to 40 years for buildings, 2 to 10 years for furniture, fixtures, and equipment, and up to the lease term for leasehold improvements. Capitalized leased assets are amortized on a straight-line basis over the lives of the respective leases.

Other Real Estate - Real estate acquired by foreclosure is carried at the lower of the investment in the property or its fair value. Other real estate owned by the Corporation included in other assets at December 31, 2004 and 2003 was $4.8 million and $7.0 million, respectively.

Goodwill -The Corporation evaluates total goodwill for impairment, based upon SFAS No. 142, Goodwill and Other Intangible Assets and SFAS No. 147, Acquisitions of Certain Financial Institutions, using fair value techniques including multiples of price/equity. Goodwill is evaluated for impairment on an annual basis.

Loan Servicing Rights - Servicing assets are recognized as separate assets when rights are acquired through purchase or through sale of financial assets with servicing retained. Capitalized servicing rights are amortized against noninterest income in proportion to, and over the period of, the estimated future life of the underlying financial assets. Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to amortized cost. Fair value is determined using prices for similar assets with like characteristics. Servicing rights are assessed for impairment quarterly, based on fair value, with temporary impairment recognized through a valuation allowance and permanent impairment recognized through a write-off of the servicing asset and related valuation reserve. A subsequent increase in the fair value of servicing rights that were previously determined to be temporarily impaired is recorded as a reduction in the capitalized servicing rights valuation reserve.

Income Taxes - Income tax expense is based on the taxes due on the consolidated tax return plus deferred taxes based on the expected future tax consequences of temporary differences between carrying amounts and tax bases of assets and liabilities, using enacted tax rates.

Earnings Per Share ("EPS") - Basic EPS is calculated by dividing net income available to common shareholders by the weighted average number of common shares outstanding.

Diluted EPS adjusts the number of weighted average shares of common stock outstanding under the treasury stock method, which includes the dilutive effect of stock options.

Basic and diluted EPS have been restated for 2002 and 2003 to reflect the 10 percent common stock dividend paid on December 15, 2004.

Effects of Accounting Changes - -

ØConsolidation of Variable Interest Entities - In January 2003, the Financial Accounting Standards Board ("FASB") issued Interpretation No. 46 ("FIN 46"), Consolidation of Variable Interest Entities, an interpretation of Accounting Research Bulletin 51. The primary objectives of this interpretation are to provide guidance on the identification of entities for which control is achieved through means other than through voting rights (variable interest entities) and how to determine when and which business enterprise (the primary beneficiary) should consolidate the variable interest entity. This new model for consolidation applies to an entity in which either (a) the equity investors (if any) do not have a controlling financial interest, or (b) the equity investment at risk is insufficient to finance that entity’s activities without receiving additional subordinated financial support from other parties. In addition, FIN 46 requires that the primary beneficiary, as well as all other enterprises with a significant variable interest in a variable interest entity, make additional disclosures. Certain disclosure requirements of FIN 46 were effective for financial statements issued after January 31, 2003. In December 2003, FASB issued FIN 46 (revised December 2003), Consolidation of Variable Interest Entities ("FIN 46-R") to address certain FIN 46 implementation issues. The provisions of FIN 46 were applicable for variable interests in entities obtained after January 31, 2003. The adoption of the provisions applicable to special purpose entities ("SPEs") and all other variable interests obtained after January 31, 2003 did not have a material impact on the Corporation’s consolidated financial statements. Effective March 31, 2004, the Corporation adopted the provisions of FIN 46-R applicable to non-SPEs created prior to February 1, 2003. Adoption of FIN 46-R had no impact on the Corporation’s consolidated financial statements.

ØAccounting for Certain Loans and Debt Securities Acquired in a Transfer - In December 2003, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued Statement of Position ("SOP") 03-3, Accounting for Certain Loans and Debt Securities Acquired in a Transfer. SOP 03-3 addresses the accounting for certain acquired loans that show evidence of credit deterioration since their origination (i.e. impaired loans) and for which a loss is deemed probable of occurring. SOP 03-3 prohibits the carryover of an allowance for loan loss on certain acquired loans within its scope. SOP 03-3 is effective for loans that are acquired in fiscal years beginning after December 15, 2004. The Corporation will evaluate the applicability of this SOP for all prospective loans acquired in fiscal years beginning after December 15, 2004. The Corporation does not anticipate this Statement to have material effect on its consolidated financial statements.

ØApplication of Accounting Principles to Loan Commitments - In March 2004, the Securities and Exchange Commission staff released Staff Accounting Bulletin ("SAB") No. 105, Application of Accounting Principles to Loan Commitments. This SAB disallows the inclusion of expected future cash flows related to the servicing of a loan in the determination of the fair value of a loan commitment. Further, no other internally developed intangible asset should be recorded as part of the loan commitment derivative. Recognition of intangible assets would only be appropriate in a third-party transaction, such as a purchase of a loan commitment or in a business combination. The SAB is effective for all loan commitments entered into after March 31, 2004, but does not require retroactive adoption for loan commitments entered into on or before March 31, 2004. Adoption of this SAB did not have a material effect on the Corporation's consolidated financial statements.

ØThe Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments - In March 2004, a consensus was reached on the Emerging Issues Task Force ("EITF") Issue 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. The EITF reached a consensus on an other-than-temporary impairment model for debt and equity securities accounted for under SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, and cost method investments. The basic model developed to evaluate whether an investment within the scope of Issue 03-1 is other-than-temporarily impaired involves a three-step process including determining whether an investment is impaired (fair value less than cost), evaluating whether the impairment is other-than-temporary (including the Corporation's intent and ability to hold the impaired securities until the cost is recovered) and, if other-than-temporary, requiring recognition of an impairment loss equal to the difference between the investment's cost and its fair value. The first step in the model used to determine other-than-temporary impairments shall be applied prospectively to all current and future investments in interim or annual reporting periods beginning after June 15, 2004. The second and third steps in the model have been delayed pending issuance of proposed FASB Staff Position EITF 03-1-a., Implementation Guidance for the Application of Paragraph 16 of EITF Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. At December 31, 2004, the Corporation had approximately $4.0 million in gross unrealized losses, none of which is considered to be other than temporary impairment. The Corporation is evaluating the impact of this Issue.

ØStock-Based Employee Compensation - The Corporation currently maintains two incentive stock option plans covering key employees; however, only one plan is active. The 1998 Stock Option Plan ("1998 Plan") was approved by the Board of Directors and the Shareholders in 1998. The 1998 Plan had 1,046,831 shares authorized, 432,770 of which were available at December 31, 2004 for future grants. All options granted have a maximum term of ten years. Options granted as management retention options vest after five years, all other options vest ratably over four years. The Corporation has elected to follow Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees and related interpretations in accounting for its employee stock options. Under APB Opinion No. 25, because the exercise price of all employee stock options equals the market price of the underlying stock on the date of the grant, no compensation expense is recognized.

Had compensation cost for the Corporation’s stock options granted in 2004, 2003, and 2002 been determined under the fair value approach described in SFAS No. 123, Accounting for Stock-Based Compensation, the Corporation’s net income and earnings per share would have been reduced to the pro forma amounts indicated below:

(in thousands, except per share amounts) Years ended December 31		2004			2003			2002
Net income as reported		$	30,950		$	28,891		$	27,600
Stock-based compensation expense			(535	)		(522	)		(762	)
Tax effect			187			183			267
Net income pro forma		$	30,602		$	28,552		$	27,105
Basic net income per share	As reported	$	2.09		$	1.95		$	1.83
	Pro forma		2.06			1.91			1.80
Diluted net income per share	As reported	$	2.05		$	1.93		$	1.81
	Pro forma		2.03			1.89			1.77

The fair value of the options presented above was estimated at the date of the grant using a Black-Scholes option pricing model with the following weighted average assumptions for 2004, 2003, and 2002, respectively: risk-free interest rates of 3.70%, 2.69%, and 3.68%, dividend yields of 3.02%, 3.29%, and 3.58%, volatility factors of the expected market price of the Corporation’s common stock of 0.76, 0.59, and 0.29, and a weighted average expected option life of 6.8, 4.0, and 5.0.

In December 2004, FASB issued SFAS No. 123R, Share-Based Payment. SFAS No. 123R is a revision of SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25. Among other items, SFAS No. 123R eliminates the use of APB Opinion No. 25 and the intrinsic value method of accounting and requires companies to recognize the cost of employee services received in exchange for awards of equity instruments, based on the grant date fair value of those awards, in the financial statements. The effective date of SFAS No. 123R is the first reporting period beginning after June 15, 2005, which is the third quarter 2005 for calendar year companies, although early adoption is allowed. SFAS No. 123R permits companies to adopt its requirements using either a "modified prospective" method, or a "modified retrospective" method. Under the "modified prospective" method, the compensation cost is recognized in the financial statements beginning with the effective date, based on the requirements of SFAS No. 123R for all share-based payments granted after that date, and based on the requirements of SFAS No. 123 for all unvested awards granted prior to the effective date of SFAS No. 123R. Under the "modified retrospective" method, the requirements are the same as under the "modified prospective" method, but this method also permits entities to restate financial statements of previous periods based on pro forma disclosures made in accordance with SFAS No. 123. The Corporation currently utilizes a standard option pricing model (i.e., Black-Scholes) to measure the fair value of stock options granted to employees. While SFAS No. 123R permits entities to continue to use such a model, the standard also permits the use of a "lattice" model. The Corporation has not yet determined which model it will use to measure the fair value of employee stock options upon the adoption of SFAS No. 123R. SFAS No. 123R also requires that the benefits associated with the tax deductions in excess of recognized compensation cost be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after the effective date. These future amounts cannot be estimated, because they depend on, among other things, when employees exercise stock options. However, the amount of operating cash flows recognized in prior periods for such excess tax deductions, as shown in the Corporation's Consolidated Statement of Cash Flows, were $0.3 million, $0.2 million, and $0.1 million, respectively, for 2004, 2003, and 2002. The Corporation currently expects to adopt SFAS No. 123R effective July 1, 2005; however, the Corporation has not yet determined which of the aforementioned adoption methods it will use. Subject to a complete review of the requirements of SFAS No. 123R, based on stock options granted to employees through December 31, 2004 and stock options that were granted in January 2005, the Corporation expects that the adoption of SFAS No. 123R on July 1, 2005 will reduce both third quarter 2005 and fourth quarter 2005 net earnings by approximately $0.1 million ($0.01 per share, diluted) each. See note 12 to the consolidated financial statements for additional information.

Reclassification - Certain reclassifications have been made in the prior year consolidated financial statements to conform to current year classifications.

2. Cash and Due from Banks

Included in cash and due from banks are noninterest bearing deposits that are required to be held at the Federal Reserve or maintained in vault cash in accordance with regulatory reserve requirements. The balance requirements were $36.8 million and $31.8 million at December 31, 2004 and 2003, respectively. Cash paid during the years ended 2004, 2003, and 2002 for interest was $36.4 million, $45.4 million, and $59.8 million, respectively. Cash paid during the same periods for income taxes was $11.5 million, $9.3 million and $11.0 million, respectively.

3. Securities

 Amortized cost and fair value of securities at December 31, 2004 are as follows:

Available-for-Sale

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury and government agencies	$	1,006	$	0	$	(2	)	$	1,004
State and political subdivisions		47,048		2,387		0			49,435
U.S. agency mortgage-backed pass through certificates		379,503		2,323		(2,992	)		378,834
Collateralized mortgage obligations		2,336		58		0			2,394
Other debt securities		10,000		0		(165	)		9,835
Total debt securities		439,893		4,768		(3,159	)		441,502
Marketable equity securities		40,778		0		0			40,778
	$	480,671	$	4,768	$	(3,159	)	$	482,280

Held-to-Maturity

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury and government agencies	$	500	$	0	$	0		$	500
State and political subdivisions		3,285		92		(42	)		3,335
U.S. agency mortgage-backed pass through certificates		58,886		0		(774	)		58,112
	$	62,671	$	92	$	(816	)	$	61,947

    Amortized cost and fair value of securities at December 31, 2003 are as follows:

Available-for-Sale

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury and government agencies	$	34,165	$	149	$	0		$	34,314
State and political subdivisions		89,107		2,965		0			92,072
U.S. agency mortgage-backed pass through certificates		180,236		4,252		(748	)		183,740
Collateralized mortgage obligations		4,197		178		0			4,375
Other debt securities		30,538		621		(10	)		31,149
Total debt securities		338,243		8,165		(758	)		345,650
Marketable equity securities		76,161		44		0			76,205
	$	414,404	$	8,209	$	(758	)	$	421,855

Held-to-Maturity

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury and government agencies	$	9,499	$	168	$	0		$	9,667
State and political subdivisions		3,726		177		0			3,903
U.S. agency mortgage-backed pass through certificates		74,272		0		(781	)		73,491
	$	87,497	$	345	$	(781	)	$	87,061

The amortized cost and fair value of securities at December 31, 2004 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Available-for-Sale				Held-to-Maturity
(in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	3,292	$	3,321	$	601	$	602
Due after one through five years		17,702		18,685		1,229		1,293
Due after five through ten years		27,060		28,434		393		420
Due after ten years		0		0		1,562		1,520
Mortgage-backed securities and collateralized mortgage obligations		381,839		381,228		58,886		58,112
Other securities		10,000		9,834		0		0
		439,893		441,502		62,671		61,947
Marketable equity securities		40,778		40,778		0		0
	$	480,671	$	482,280	$	62,671	$	61,947

 Pre-tax gains of $0.8 million and losses of $0.2 million were realized on sales and calls in 2004, pre-tax gains of $3.4 million and losses of $0.4 million were realized on sales and calls in 2003, and pre-tax gains of $1.6 million and losses of $0.1 million were realized on sales and calls in 2002.

 Securities in the amount of $370 million and $358 million at December 31, 2004 and 2003, respectively, were pledged to secure public deposits, trust funds, repurchase agreements, and advances from the Federal Home Loan Bank.

 The Corporation evaluates its investment portfolio on a quarterly basis for impairment. The analysis performed as of December 31, 2004 indicates that all impairment is considered temporary, market driven, and not credit-related. The following tables provide the amortized cost, gross unrealized losses, and fair market value, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position as of December 31, 2004.

Available-for-Sale

(in thousands)	Amortized Cost		Gross Unrealized Losses			Fair Value
Less Than 12 Months
U.S. Treasury and government agencies	$	1,006	$	(2	)	$	1,004
U.S. agency mortgage-backed pass through certificates		282,272		(2,264	)		280,008
Other debt securities		10,000		(165	)		9,835
		293,278		(2,431	)		290,847
12 Months or More
U.S. Treasury and government agencies		0		0			0
U.S. agency mortgage-backed pass through certificates		30,070		(728	)		29,342
Other debt securities		0		0			0
		30,070		(728	)		29,342
Total
U.S. Treasury and government agencies		1,006		(2	)		1,004
U.S. agency mortgage-backed pass through certificates		312,342		(2,992	)		309,350
Other debt securities		10,000		(165	)		9,835
	$	323,348	$	(3,159	)	$	320,189

Held-to-Maturity

(in thousands)	Amortized Cost		Gross Unrealized Losses			Fair Value
Less Than 12 Months
U.S. Treasury and government agencies	$	500	$	0		$	500
State and political subdivisions		1,562		(42	)		1,520
U.S. agency mortgage-backed pass through certificates		58,886		(774	)		58,112
	$	60,948	$	(816	)	$	60,132

No held-to-maturity securities have been impaired for more than 12 months.

 At December 31, 2003, all securities currently impaired were considered temporary, market driven, and not credit-related. In addition, all these securities had been so for less than twelve months.

Available-for-Sale

(in thousands)	Amortized Cost		Gross Unrealized Losses			Fair Value
U.S. agency mortgage-backed pass through certificates	$	34,871	$	(748	)	$	34,123
Other debt securities		1,409		(10	)		1,399
	$	36,280	$	(758	)	$	35,522

Held-to-Maturity

(in thousands)	Amortized Cost		Gross Unrealized Losses				Fair Value
U.S. agency mortgage-backed pass through certificates	$	74,272	$	(781	)	$	73,491

4. Loans

Major classifications of loans, net of unearned income and deferred loan origination costs, are summarized as follows:

(in thousands) December 31	2004		2003
Commercial construction	$	75,078	$	67,147
Commercial secured by real estate		613,059		583,924
Commercial other		276,921		256,837
Real estate construction		30,456		32,495
Real estate mortgage		499,410		413,939
Consumer		395,588		368,578
Equipment lease financing		12,007		13,340
	$	1,902,519	$	1,736,260

Not included in the loan balances above are loans held for sale in the amount of $0.3 at December 31, 2003.

The amount of loans on a non-accruing income status was $13.8 million and $9.7 million at December 31, 2004 and December 31, 2003, respectively. Additional interest which would have been recorded during 2004, 2003, and 2002 if such loans had been accruing interest was approximately $0.9 million, $0.9 million, and $2.1 million, respectively.

 At December 31, 2004, 2003, and 2002, the recorded investment in impaired loans was $9.6 million, $6.5 million, and $14.5 million, respectively. Included in these amounts at December 31, 2004, 2003, and 2002, respectively, are $7.0 million, $3.0 million, and $6.0 million of impaired loans for which specific reserves for loan losses are carried in the amounts of $3.1 million, $1.1 million, and $1.4 million. The average investment in impaired loans for 2004, 2003, and 2002 was $9.7 million, $6.6 million, and $15.0 million, respectively, while interest income of $0.1 million, $0.1 million, and $0.2 million was recognized on cash payments of $0.4 million, $0.4 million, and $0.5 million.

5. Related Party Transactions

In the ordinary course of business, the Corporation’s banking subsidiary has made loans at prevailing interest rates and terms to directors and executive officers of the Corporation or its subsidiaries, including their associates (as defined by the Securities and Exchange Commission). Management believes such loans were made on substantially the same terms, including interest rate and collateral, as those prevailing at the same time for comparable transactions with other persons. The aggregate amount of these loans at January 1, 2004 was $32.0 million. During 2004, activity with respect to these loans included new loans of $2.7 million, repayment of $3.4 million, and a net increase of $0.4 million resulting from the change in status of executive officers and directors. As a result of these activities, the aggregate balance of these loans was $31.7 million at December 31, 2004.

At December 31, 2004, 2003, and 2002, loans serviced for the benefit of others, not included in the detail above, totaled $377 million, $383 million, and $331 million, respectively.

6. Allowance for Loan Losses

Activity in the allowance for loan losses was as follows:

(in thousands) 2004 2003 2002

Balance, beginning of year	$	24,653		$	23,271		$	23,648
Provision charged to operations		8,648			9,332			10,086
Recoveries		3,304			3,754			3,674
Charge-offs		(9,588	)		(11,704	)		(14,137	)
Balance, end of year	$	27,017		$	24,653		$	23,271

7. Premises and Equipment

Premises and equipment are summarized as follows:

(in thousands) December 31		2004			2003
Land and buildings	$	58,875		$	57,140
Leasehold improvements		5,333			4,826
Furniture, fixtures, and equipment		33,523			29,351
Construction in progress		765			343
		98,496			91,660
Less accumulated depreciation and amortization		(45,385	)		(41,670	)
	$	53,111		$	49,990

Depreciation and amortization of premises and equipment for 2004, 2003, and 2002 was $3.9 million, $3.8 million, and $3.9 million, respectively.

8. Deposits

Major classifications of deposits are categorized as follows:

(in thousands) December 31	2004		2003
Noninterest bearing deposits	$	403,792	$	359,403
NOW accounts		15,101		16,578
Money market deposits		378,531		380,613
Savings		223,953		217,358
Certificates of deposit of $100,000 or more		389,011		357,573
Certificates of deposit less than $100,000 and other time deposits		730,030		736,090
	$	2,140,418	$	2,067,615

Interest expense on deposits is categorized as follows:

(in thousands)	2004		2003		2002
Savings, NOW, and money market accounts	$	5,360	$	6,309	$	9,007
Certificates of deposit of $100,000 or more		8,080		10,092		13,372
Certificates of deposit less than $100,000 and other time deposits		15,020		20,809		27,732
	$	28,460	$	37,210	$	50,111

9. Advances from Federal Home Loan Bank

Federal Home Loan Bank advances consisted of the following monthly amortizing and term borrowings at December 31:

(in thousands)	2004		2003
Monthly amortizing	$	2,391	$	3,192
Term		160,000		0
	$	162,391	$	3,192

The advances from the Federal Home Loan Bank that require monthly principal payments were due for repayment as follows:

	Principal Payments Due by Period at December 31, 2004
(in thousands)	Total		Within 1 Year		1-5 Years		5-10 Years		After 10 Years
Outstanding advances, weighted average interest rate - 5.33%	$	2,391	$	604	$	1,120	$	646	$	21

	Principal Payments Due by Period at December 31, 2003
(in thousands)	Total		Within 1 Year		1-5 Years		5-10 Years		After 10 Years
Outstanding advances, weighted average interest rate - 5.51%	$	3,192	$	846	$	1,628	$	689	$	29

The term advances that require the total payment to be made at maturity follow:

(in thousands) December 31	2004		2003
Advance #143, 2.37%, due 8/30/05	$	40,000	$	0
Advance #144, 2.88%, due 8/30/06		40,000		0
Advance #145, 3.31%, due 8/30/07		40,000		0
Advance #146, 3.70%, due 8/30/08		40,000		0
	$	160,000	$	0

The advances are collateralized by Federal Home Loan Bank stock of $20.8 million and certain first mortgage loans totaling $219.2 million as of December 31, 2004. Advances totaled $162.4 million at December 31, 2004 with fixed interest rates ranging from 1.00% to 7.05% with a weighted average rate of 3.10%.

10. Borrowings

Short-term debt is categorized as follows:

(in thousands) December 31		2004		2003
Subsidiaries:
	Repurchase agreements	$	88,404	$	96,506
	Federal funds purchased		4,240		7,785
	Capital lease obligations		0		1,002
		$	92,644	$	105,293

On April 29, 2004, the Corporation entered into a revolving note agreement for a line of credit in the amount of $12 million, all of which is currently available to meet any future cash needs. The agreement will mature on April 28, 2005.

All federal funds purchased and the majority of repurchase agreements mature and reprice daily. The average rates paid for federal funds purchased and repurchase agreements on December 31, 2004 were 2.11% and 2.29%, respectively.

The maximum balance for federal funds purchased and repurchase agreements at any month-end during 2004 occurred at February 29, 2004, with a month-end balance of $117.1 million.

Long-term debt is categorized as follows:

(in thousands) December 31		2004		2003
Parent:
	Junior subordinated debentures, 9.00%, due 3/31/27	$	34,500	$	34,500
	Junior subordinated debentures, 8.25%, due 3/31/32		25,000		25,000
		$	59,500	$	59,500

11. Federal Income Taxes

The components of the provision for income taxes, exclusive of tax effect of unrealized securities gains, are as follows:

(in thousands)	2004		2003		2002
Current income taxes	$	11,050	$	11,472	$	9,710
Deferred income taxes		1,886		561		2,448
	$	12,936	$	12,033	$	12,158

The components of the net deferred tax asset as of December 31 are as follows:

(in thousands)	2004			2003
Deferred tax assets
Allowance for loan losses	$	9,729		$	9,234
Interest on nonperforming loans		767			856
Other		1,271			1,481
Total deferred tax assets		11,767			11,571
Deferred tax liabilities
Depreciation		(7,775	)		(5,841	)
FHLB stock dividends		(3,586	)		(3,293	)
Other		(2,222	)		(2,367	)
Total deferred tax liabilities		(13,583	)		(11,501	)
Net deferred tax asset	$	(1,816	)	$	70

The Corporation reports income taxes on the liability method, which places primary emphasis on the valuation of current and deferred tax assets and liabilities. The amount of income tax expense recognized for a period is the amount of income taxes currently payable or refundable, plus or minus the change in aggregate deferred tax assets and liabilities. The method focuses first on the consolidated balance sheet, and the amount of income tax expense is determined by changes in the components of the consolidated balance sheet.

(in thousands)		2004			2003			2002
Tax at statutory rate	$	15,360		$	14,323		$	13,915
Tax-exempt interest		(1,023	)		(1,037	)		(1,233	)
Housing and new market credits		(903	)		(747	)		0
Other, net		(498	)		(506	)		(524	)
	$	12,936		$	12,033		$	12,158

12. Employee Benefits

The Corporation has a KSOP plan covering substantially all employees. Half of the first 8% of wages contributed by an employee is matched and goes into the savings and retirement portion of the plan. Employees may contribute additional non-matched amounts up to maximum limits provided by IRS regulations, and the Corporation may at its discretion, contribute an additional percentage of covered employees’ gross wages.

The Corporation currently contributes 4% of covered employees’ gross wages to the employee stock ownership plan (ESOP) portion of the plan. The ESOP uses the contribution to acquire shares of the Corporation’s common stock. The KSOP plan owned 1,123,807 shares of Corporation stock at December 31, 2004. Substantially all shares owned by the KSOP were allocated to employees’ accounts at December 31, 2004. The market price of the shares at the date of allocation is essentially the same as the market price at the date of purchase.

The total retirement plan expense, including KSOP expense, for 2004, 2003, and 2002 was $1.8 million, $1.6 million and $1.6 million, respectively.

The Corporation currently maintains two incentive stock option plans covering key employees; however, only one plan is active. The 1998 Stock Option Plan ("1998 Plan") was approved by the Board of Directors and the Shareholders in 1998. The 1998 Plan had 1,046,831 shares authorized, 432,770 of which were available at December 31, 2004 for future grants. All options granted have a maximum term of ten years. Options granted as management retention options vest after five years, all other options vest ratably over four years.

The Corporation has elected to follow APB Opinion No. 25, Accounting for Stock Issued to Employees and related interpretations in accounting for its employee stock options. Under APB Opinion No. 25, because the exercise price of all employee stock options equals the market price of the underlying stock on the date of the grant, no compensation expense is recognized.

The Corporation’s stock option activity for the 1998 Plan for the years ended December 31, 2004, 2003, and 2002 is summarized as follows:

December 31	2004					2003					2002
		Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price
Outstanding at beginning of year		600,913		$	16.75		566,218		$	15.66		368,764		$	13.83
Granted		75,900			27.77		126,719			20.98		209,632			18.79
Exercised		(52,292	)		15.07		(41,353	)		15.96		(9,780	)		13.89
Forfeited/expired		(10,460	)		17.07		(50,671	)		15.74		(2,398	)		14.77
Outstanding at end of year		614,061		$	18.25		600,913		$	16.75		566,218		$	15.66
Exercisable at end of year		112,185		$	15.81		43,538		$	13.26		40,585		$	13.49

The 1998 Stock Option Plan had options with the following remaining lives at December 31, 2004:

1998 Option Plan
Remaining Life	Outstanding Options		Weighted Average Price
Four years	48,761	$	15.35
Five years	68,879		12.47
Six years	115,964		13.02
Seven years	197,160		18.93
Eight years	107,397		20.99
Nine years	75,900		27.77
Total outstanding	614,061
Weighted average price		$	18.25

The 1989 Stock Option Plan ("1989 Plan") has no remaining options available for grant. The maximum term is ten years. Options granted as management retention options vest after five years, all other options vest ratably over four years.

The Corporation’s stock option activity for the 1989 Plan for the years ended December 31, 2004, 2003, and 2002 is summarized as follows:

December 31	2004					2003					2002
		Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price
Outstanding at beginning of year		107,852		$	13.35		132,917		$	13.38		186,802		$	13.77
Exercised		(13,212	)		13.28		(25,065	)		13.52		(45,028	)		14.91
Forfeited/expired		(995	)		19.47		0			0.00		(8,857	)		13.96
Outstanding at end of year		93,645		$	13.29		107,852		$	13.35		132,917		$	13.38
Exercisable at end of year		93,645		$	13.29		107,852		$	13.35		132,917		$	13.38

The 1989 Stock Option Plan had options with the following remaining lives at December 31, 2004:

1989 Option Plan
Remaining Life	Outstanding Options		Weighted Average Price
One year or less		1,594	$	11.61
Two years		35,431		11.57
Three years		51,788		13.95
Four years		4,832		19.33
Total outstanding		93,645
Weighted average price			$	13.29

No options were granted in 2004, 2003, or 2002 from the 1989 Plan.

The weighted average fair value of options granted during the years 2004, 2003, and 2002 was $7.75, $4.53, and $4.83 per share, respectively.

13. Operating Leases

Certain premises and equipment are leased under operating leases. Minimum rental payments are as follows:

(in thousands)
2005	$	1,465
2006		1,259
2007		1,157
2008		919
2009		786
Thereafter		4,111
	$	9,697

Rental expense net of rental income under operating leases was $0.5 million, $0.5 million, and $0.6 million in 2004, 2003, and 2002, respectively.

14. Fair Market Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Cash and Cash Equivalents - The carrying amount approximates fair value.

Securities - - Fair values are based on quoted market prices or dealer quotes.

Loans and Loans Held for Sale - The fair value of fixed rate loans and variable rate mortgage loans is estimated by discounting the future cash flows using current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. For other variable rate loans, the carrying amount approximates fair value.

FHLB Stock - The carrying value of Federal Home Loan Bank stock approximates fair value based on the redemption provisions of the Federal Home Loan Bank.

Deposits - - The fair value of deposits is estimated by discounting the future cash flows using the rates currently offered for deposits of similar remaining maturities.

Short-term Borrowings - The carrying amount approximates fair value.

Advances from Federal Home Loan Bank - The fair value of these fixed-maturity advances is estimated by discounting future cash flows using rates currently offered for advances of similar remaining maturities.

Long-term Debt - The fair value is estimated by discounting future cash flows using current rates.

Other Financial Instruments - The estimated fair value for other financial instruments and off-balance sheet loan commitments approximates cost at December 31, 2004 and 2003. Off-balance sheet loan commitments at December 31, 2004 and 2003 were $366.1 million and $299.7 million, respectively.

Commitments to Extend Credit - The fair value of commitments to extend credit is based upon the difference between the interest rate at which the Corporation is committed to make the loans and the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities, adjusted for the estimated volume of loan commitments actually expected to close. The fair value of such commitments is not material.

(in thousands) December 31		2004				2003
		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial assets
	Cash and cash equivalents	$	129,580	$	129,580	$	88,961	$	88,961
	Securities		544,951		544,227		509,352		508,916
	Loans and loans held for sale		1,902,519		2,191,452		1,736,575		1,898,448
		$	2,577,050	$	2,865,259	$	2,334,888	$	2,496,325
Financial liabilities
	Deposits	$	2,140,418	$	2,143,750	$	2,067,615	$	2,074,022
	Short-term borrowings		92,644		92,369		105,293		104,536
	Advances from Federal Home Loan Bank		162,391		156,364		3,192		3,244
	Long-term debt		59,500		66,390		59,500		66,295
		$	2,454,953	$	2,458,873	$	2,235,600	$	2,248,097

15. Off-Balance Sheet Transactions and Guarantees

The Bank is a party to transactions with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include standby letters of credit and commitments to extend credit in the form of unused lines of credit. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

At December 31, the Bank had the following off-balance sheet financial instruments, whose approximate contract amounts represent additional credit risk to the Corporation:

(in thousands)	2004		2003
Standby letters of credit	$	39,313	$	30,654
Commitments to extend credit		326,784		269,095

Standby letters of credit represent conditional commitments to guarantee the performance of a third party. The credit risk involved is essentially the same as the risk involved in making loans. At December 31, 2004, the Corporation maintained a credit loss reserve of approximately $0.02 million relating to these financial standby letters of credit. The reserve coverage calculation was determined using essentially the same methodology used for the allowance for loan losses. Approximately 83% of the total standby letters of credit are secured, with $26.3 million of the total $39.3 million secured by cash. Collateral for the remaining secured standby letters of credit varies but is comprised primarily of accounts receivable, inventory, property, equipment, and income-producing properties.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The Bank evaluates each customer’s credit-worthiness on a case-by-case basis. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. A portion of the commitments is to extend credit at fixed rates. Fixed rate loan commitments at December 31, 2004 of $19.4 million had interest rates and terms ranging predominantly from 7.00% to 8.99% and 6 months to 1 year, respectively. These credit commitments were based on prevailing rates, terms, and conditions applicable to other loans being made at December 31, 2004.

16. Concentrations of Credit Risk

The Corporation’s banking subsidiary grants commercial, residential, and consumer loans to customers primarily located in eastern, northeast, central, and south central Kentucky and southern West Virginia. The Bank is continuing to increase all components of its portfolio mix in a manner to reduce risk from changes in economic conditions. Concentrations of credit, as defined for regulatory purposes, are reviewed quarterly by management to ensure that internally established limits based on Tier 1 Capital plus the allowance for loan losses are not exceeded. At December 31, 2004 and 2003, the Corporation’s concentration of hotel/motel industry credits were 41% and 37% of Tier 1 Capital plus the allowance for loan losses, respectively. Coal mining and related support industries credits at December 31, 2004 and 2003 based on established limits were 37% and 44% of Tier 1 Capital plus the allowance for loan losses, respectively. Agricultural credits at December 31, 2004 and 2003 were 35% and 40% of Tier 1 Capital plus the allowance for loan losses, respectively. These exposures were in the tobacco, beef cattle, dairy, and equine subsectors of this industry. Apartment and rental housing credits at December 31, 2004 and 2003 were 26% and 27%, respectively. These percentages are within the Corporation’s internally established limits regarding concentrations of credit.

17. Commitments and Contingencies

The Corporation and its subsidiaries, and from time to time, its officers are named defendants in legal actions arising from ordinary business activities. Management, after consultation with legal counsel, believes these actions are without merit or that the ultimate liability, if any, will not materially affect the Corporation’s consolidated financial position or results of operations.

18. Regulatory Matters

The Corporation’s principal source of funds is dividends received from the subsidiary bank. Regulations limit the amount of dividends that may be paid by the Corporation’s banking subsidiary without prior approval. During 2005, approximately $30.1 million plus any 2005 net profits can be paid by the Corporation’s banking subsidiary without prior regulatory approval.

The Federal Reserve Bank adopted quantitative measures which assign risk weightings to assets and off-balance-sheet items and also define and set minimum regulatory capital requirements (risk-based capital ratios). All banks are required to have a minimum Tier 1 (core capital) leverage ratio of 4% of adjusted quarterly average assets, Tier 1 capital of at least 4% of risk-weighted assets, and total capital of at least 8% of risk-weighted assets. Tier 1 capital consists principally of shareholders’ equity including capital-qualifying subordinated debt but excluding unrealized gains and losses on securities available-for-sale, less goodwill and certain other intangibles. Total capital consists of Tier 1 capital plus certain debt instruments and the reserve for credit losses, subject to limitation. Failure to meet certain capital requirements can initiate certain actions by regulators that, if undertaken, could have a direct material effect on the consolidated financial statements of the Corporation. The regulations also define well-capitalized levels of Tier 1 leverage, Tier 1, and total capital as 5%, 6%, and 10%, respectively. The Corporation had Tier 1 leverage, Tier 1, and total capital ratios above the well-capitalized levels at December 31, 2004 and 2003. Management believes, as of December 31, 2004, the Corporation meets all capital adequacy requirements for which it is subject to be defined as well-capitalized under the regulatory framework for prompt corrective action.

Under the current Federal Reserve Board’s regulatory framework, certain capital securities offered by wholly owned unconsolidated trust preferred entities of the Corporation are included as Tier 1 regulatory capital. On March 1, 2005, the Federal Reserve Board adopted a final rule that allows the continued limited inclusion of trust preferred securities in the Tier 1 capital of bank holding companies ("BHCs"). Under the final rule, trust preferred securities and other restricted core capital elements will be subject to stricter quantitative limits. The Board's final rule limits restricted core capital elements to 25 percent of all core capital elements, net of goodwill less any associated deferred tax liability. Internationally active BHCs, defined as those with consolidated assets greater than $250 billion or on-balance-sheet foreign exposure greater than $10 billion, will be subject to a 15 percent limit, but they may include qualifying mandatory convertible preferred securities up to the generally applicable 25 percent limit. Amounts of restricted core capital elements in excess of these limits generally may be included in Tier 2 capital. The final rule provides a five-year transition period, ending March 31, 2009, for application of the quantitative limits. The requirement for trust preferred securities to include a call option has been eliminated, and standards for the junior subordinated debt underlying trust preferred securities eligible for tier 1 capital treatment have been clarified. The final rule addresses supervisory concerns, competitive equity considerations, and the accounting for trust preferred securities. The final rule also strengthens the definition of regulatory capital by incorporating longstanding Board policies regarding the acceptable terms of capital instruments included in banking organizations' Tier 1 or Tier 2 capital. It is not anticipated that the final rule will have a material impact on the Corporation's regulatory ratios.

Consolidated Capital Ratios

		Actual		For Capital Adequacy Purposes		To Be Well-Capitalized Under Prompt Corrective Action Provision
(in thousands)		Amount	Ratio	Amount	Ratio	Amount	Ratio
As of December 31, 2004:
Tier 1 capital
	(to average assets)	$ 230,784	8.78%	$ 105,141	4.00%	$ 131,426	5.00%
Tier 1 capital
	(to risk weighted assets)	230,784	11.82%	78,099	4.00%	117,149	6.00%
Total capital
	(to risk weighted assets)	255,172	13.07%	156,188	8.00%	195,235	10.00%
As of December 31, 2003:
Tier 1 capital
	(to average assets)	$ 211,751	8.73%	$ 97,022	4.00%	$ 121,278	5.00%
Tier 1 capital
	(to risk weighted assets)	211,751	11.35%	74,626	4.00%	111,939	6.00%
Total capital
	(to risk weighted assets)	235,047	12.60%	149,236	8.00%	186,545	10.00%

19. Parent Company Financial Statements

Condensed Balance Sheets

(in thousands) December 31		2004		2003
Assets:
Cash on deposit		$	4,885	$	3,707
Securities available-for-sale			0		243
Investment in and advances to subsidiaries			287,281		274,297
Excess of cost over net assets acquired (net of accumulated amortization)			4,973		4,973
Other assets			4,462		4,600
	Total assets	$	301,601	$	287,820
Liabilities and shareholders’ equity:
Subordinated debt		$	61,341	$	61,341
Other liabilities			4,091		5,086
	Total liabilities		65,432		66,427
Shareholders’ equity			236,169		221,393
Total liabilities and shareholders’ equity		$	301,601	$	287,820

Condensed Statements of Income

(in thousands) Year Ended December 31	2004			2003			2002
Income:
Dividends from subsidiary banks	$	17,810		$	18,660		$	17,155
Securities gains/losses		51			0			0
Other income		237			79			70
Total income		18,098			18,739			17,225
Expenses:
Interest expense		5,414			5,415			5,425
Amortization expense		0			0			6
Other expenses		1,096			1,018			857
Total expenses		6,510			6,433			6,288
Income before income taxes and equity in undistributed income of subsidiaries		11,588			12,306			10,937
Applicable income taxes		(2,609	)		(2,715	)		(2,476	)
Income before equity in undistributed income of subsidiaries		14,197			15,021			13,413
Equity in undistributed income of subsidiaries		16,753			13,870			14,187
Net income	$	30,950		$	28,891		$	27,600

Condensed Statements of Cash Flows

(in thousands) Year Ended December 31	2004			2003			2002
Cash flows from operating activities:
Net income	$	30,950		$	28,891		$	27,600
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization, net		0			0			6
Gains on sales of assets		(51	)		0			0
Equity in undistributed earnings of subsidiaries		(16,753	)		(13,870	)		(14,187	)
Change in other assets and liabilities, net		(841	)		2,831			(6,698	)
Net cash provided by operating activities		13,305			17,852			6,721
Cash flows from investing activities:
Payments to acquire subsidiary		0			0			(1,639	)
Repayment of investments in and advances to subsidiaries		0			0			16
Proceeds from sale of investment securities		250			0			0
Other		0			(2,066	)		12
Net cash provided by (used in) investing activities		250			(2,066	)		(1,611	)
Cash flows from financing activities:
Dividends paid		(12,854	)		(11,055	)		(9,770	)
Net repurchase of common stock		431			(3,288	)		(5,472	)
Proceeds from long-term debt		0			0			25,773
Repayment of long-term debt		0			0			(12,230	)
Proceeds from short-term debt		0			0			0
Repayment of short-term debt		46			0			(8,000	)
Net cash used in financing activities		(12,377	)		(14,343	)		(9,699	)
Net increase (decrease) in cash and cash equivalents		1,178			1,443			(4,589	)
Cash and cash equivalents at beginning of year		3,707			2,264			6,853
Cash and cash equivalents at end of year	$	4,885		$	3,707		$	2,264

20. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share:

Year Ended December 31			2004		2003		2002
Numerator:
	Net income (in thousands)		$	30,950	$	28,891	$	27,600
Denominator:
	Basic earnings per share:
		Weighted average shares		14,811,493		14,820,915		15,094,590
	Diluted earnings per share:
		Effect of dilutive securities - stock options		270,985		223,982		160,437
	Adjusted weighted average shares			15,082,478		15,044,897		15,255,027
Earnings per share:
	Basic earnings per share		$	2.09	$	1.95	$	1.83
	Diluted earnings per share			2.05		1.93		1.81

At December 31, 2004, 33,000 stock options at a price of $28.64 were outstanding and were not used in the computation of diluted earnings per share because their exercise price was greater than the average market value of the common stock. At December 31, 2003, all outstanding stock options were used in the computation of diluted earnings per share. At December 31, 2002, 133,100 stock options at a price of $19.99 were outstanding and were not used in the computation of diluted earnings per share because their exercise price was greater than the average market value of the common stock.

21. Accumulated Other Comprehensive Income

The Corporation has elected to present the disclosure required by SFAS No. 130, Reporting Comprehensive Income, in the consolidated Statements of Changes in Shareholders' Equity. The subtotal Comprehensive income represents total comprehensive income as defined in the statement. Reclassification adjustments, related tax effects allocated to changes in equity, and accumulated other comprehensive income as of and for the years ended December 31 were as follows:

(in thousands)		2004			2003			2002
Reclassification adjustment, pretax:
Change in unrealized net gains arising during year	$	(5,203	)	$	(915	)	$	9,921
Reclassification adjustment for net gains included in net income		(639	)		(3,042	)		(1,528	)
Change in unrealized gains on securities available-for-sale		(5,842	)		(3,957	)		8,393
Related tax effects:
Change in unrealized net gains arising during year		(1,821	)		(320	)		3,473
Reclassification adjustment for net gains included in net income		(224	)		(1,065	)		(535	)
Change in net deferred tax liability		(2,045	)		(1,385	)		2,938
Reclassification adjustment, net of tax:
Change in unrealized net gains arising during year		(3,382	)		(595	)		6,448
Reclassification adjustment for net gains included in net income		(415	)		(1,977	)		(993	)
Change in other comprehensive income	$	(3,797	)	$	(2,572	)	$	5,455

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

Community Trust Bancorp, Inc.

Pikeville, Kentucky

We have audited the accompanying statements of financial condition of Community Trust Bancorp, Inc. and subsidiaries (the "Corporation") as of December 31, 2004 and 2003, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2004.  These financial statements are the responsibility of the Corporation’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material respects, the financial position of Community Trust Bancorp, Inc. and subsidiaries as of December 31, 2004 and 2003, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 11, 2005 expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting and an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ Deloitte & Touche LLP

Deloitte & Touche LLP

Louisville, Kentucky

March 11, 2005

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

Community Trust Bancorp, Inc.

Pikeville, Kentucky

We have audited management’s assessment, included in the accompanying Management Report on Internal Control, that Community Trust Bancorp, Inc. and subsidiaries (the "Corporation") maintained effective internal control over financial reporting as of December 31, 2004, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.  Because management’s assessment and our audit were conducted to meet the reporting requirements of Section 112 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA), management’s assessment and our audit of the Corporation’s internal control over financial reporting included controls over the preparation of the schedules equivalent to the basic financial statements in accordance with the instructions for the Consolidated Financial Statements for Bank Holding Companies (Form FR Y-9C).  The Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting.  Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Corporation’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.  Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing, and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances.  We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis.  Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that the Corporation maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.  Also, in our opinion, the Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have not examined and, accordingly, we do not express an opinion or any other form of assurance on management's statement referring to compliance with laws and regulations.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2004 of the Corporation and our report dated March 11, 2005 expressed an unqualified opinion on those consolidated financial statements.

/s/ Deloitte & Touche LLP

Deloitte & Touche LLP

Louisville, Kentucky

March 11, 2005

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None

Item 9A. Controls and Procedures

The Corporation's management is responsible for establishing and maintaining effective disclosure controls and procedures, as defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. As of December 31, 2004, an evaluation was performed under the supervision and with the participation of management, including the Chief Executive Officer and the Controller, of the effectiveness of the design and operation of the Corporation's disclosure controls and procedures. Based on that evaluation, management concluded that disclosure controls and procedures as of December 31, 2004 were effective in ensuring material information required to be disclosed in this annual report on Form 10-K was recorded, processed, summarized, and reported on a timely basis. Additionally, there were no changes in the Corporation's internal control over financial reporting that occurred during the quarter ended December 31, 2004 that have materially affected, or are reasonably likely to materially affect, the Corporation's internal control over financial reporting.

Management's responsibilities related to establishing and maintaining effective disclosure controls and procedures include maintaining effective internal controls over financial reporting that are designed to produce reliable financial statements in accordance with accounting principles generally accepted in the United States. As disclosed in the Management Report on Internal Control which follows, management assessed the Corporation's system of internal control over financial reporting as of December 31, 2004, in relation to criteria for effective internal control over financial reporting as described in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management believes that, as of December 31, 2004, its system of internal control over financial reporting met those criteria and is effective.

There have been no significant changes in the Corporation's internal controls or in other factors that could significantly affect internal controls subsequent to December 31, 2004.

MANAGEMENT REPORT ON INTERNAL CONTROL

We, as management of Community Trust Bancorp, Inc. and its subsidiaries (the "Corporation"), are responsible for establishing and maintaining adequate internal control over financial reporting. Pursuant to the rules and regulations of the Securities and Exchange Commission, internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

·   Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;

·   Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

·   Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Management has evaluated the effectiveness of its internal control over financial reporting as of December 31, 2004 based on the control criteria established in a report entitled Internal Control—Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on such evaluation, we have concluded that the Corporation’s internal control over financial reporting is effective as of December 31, 2004.

The registered independent public accounting firm of Deloitte & Touche LLP, as auditors of the Corporation’s consolidated financial statements, has issued an attestation report on management’s assessment of the Corporation’s internal control over financial reporting.

Date: March 11, 2005	/s/ Jean R. Hale
	Jean R. Hale
	Chairman, President and CEO

/s/ Kevin J. Stumbo

Kevin J. Stumbo

Executive Vice President/Controller

PART III

Items 10 and 11. Directors and Executive Officers of the Registrant and Executive Compensation

The information required by these Items other than the information set forth above under Part I, "Executive Officers of Registrant," is omitted because the Corporation is filing a definitive proxy statement pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report which includes the required information. The required information contained in the Corporation’s proxy statement is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

The information required by this Item other than the information provided below is omitted because the Corporation is filing a definitive proxy statement pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report which includes the required information. The required information contained in the Corporation’s proxy statement is incorporated herein by reference.

Equity Compensation Plan Information

The following table provides information as of December 31, 2004, with respect to compensation plans under which common shares of the Corporation are authorized for issuance to officers or employees in exchange for consideration in the form of services provided to the Corporation and/or its subsidiaries. The Corporation currently maintains two incentive stock option plans covering key employees; however, only one plan is active. The 1998 Stock Option Plan ("1998 Plan") was approved by the Board of Directors and the Shareholders in 1998. The 1998 Plan had 1,046,831 shares authorized, 432,770 of which were available at December 31, 2004 for future grants. The 1989 Stock Option Plan ("1989 Plan") was approved by the Board of Directors and the Shareholders in 1989. The 1989 Stock Option Plan ("1989 Plan") has no remaining options available for grant.

	A	B	C
Plan Category	Number of Common Shares to be Issued Upon Exercise of Outstanding Options	Weighted Average Exercise Price of Issuance Outstanding Options	Number of Securities Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in Column A)
Equity compensation plans approved by shareholders	707,706	$  17.59	432,770
Equity compensation plans not approved by shareholders	0	0	0
Total	707,706	$  17.59	432,770

Additional information regarding the Corporation’s stock option plans can be found in notes 1 and 12 to the consolidated financial statements.

Item 13. Certain Relationships and Related Transactions

The information required by this Item is omitted because the Corporation is filing a definitive proxy statement pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report which includes the required information. The required information contained in the Corporation’s proxy statement is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

The information required by this Item is omitted because the Corporation is filing a definitive proxy statement pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report which includes the required information. The required information contained in the Corporation’s proxy statement is incorporated herein by reference.

PART IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a) The following documents are filed as a part of this report:

Financial Statements and Financial Statement Schedules

Exhibit No.	Description of Exhibits
3.1	Articles of Incorporation and all amendments thereto (incorporated by reference to registration statement no. 33-35138)
3.2	By-laws of the Corporation, as amended July 25, 1995 (incorporated by reference to registration statement no. 33-61891)
10.1	Community Trust Bancorp, Inc. Savings and Employee Stock Ownership Plan (Revised November 2002) (incorporated herein by reference to Form 10-K for the fiscal year ended December 31, 2002 under SEC file no. 000-111-29)
10.2	Second restated Pikeville National Corporation 1989 Stock Option Plan (commonly known as Community Trust Bancorp, Inc. 1989 Stock Option Plan) (incorporated by reference to registration statement no. 33-36165)
10.3	Community Trust Bancorp, Inc. 1998 Stock Option Plan (incorporated by reference to registration statement no. 333-74217)
10.4	Form of Severance Agreement between Community Trust Bancorp, Inc. and executive officers (currently in effect with respect to eleven executive officers) (incorporated herein by reference to Form 10-K for the fiscal year ended December 31, 2001 under SEC file no. 000-111-29)
10.5	Senior Management Incentive Compensation Plan (2005)
21	List of subsidiaries
23.1	Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm
31.1	Certification of Principal Executive Officer (Jean R. Hale, Chairman, President and CEO)
31.2	Certification of Principal Financial Officer (Kevin J. Stumbo, Executive Vice President/Controller)
32.1	Certification of Jean R. Hale, Chairman, President and CEO, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)
32.2	Certification of Kevin J. Stumbo, Executive Vice President/Controller, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b)Reports on Form 8-K required to be filed during the last quarter of 2004

1.)   On October 13, 2004, the Corporation issued a Form 8-K announcing third quarter earnings. (incorporated herein by reference to Form 8-K filed under SEC file no. 000-111-29)

2.)   On October 27, 2004, the Corporation issued a Form 8-K with respect to the declaration of a 10% stock dividend and announcing the retirement of Burlin Coleman, Chairman of the Board of Directors. (incorporated herein by reference to Form 8-K filed under SEC file no. 000-111-29)

3.)   On December 16, 2004, the Corporation issued a Form 8-K announcing the addition of Paul E. Patton to the Board of Directors. (incorporated herein by reference to Form 8-K filed under SEC file no. 000-111-29)

(c)Exhibits

The response to this portion of Item 15 is submitted as a separate section of this report.

(d)Financial Statement Schedules

None

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf the undersigned, thereunto duly authorized.

	COMMUNITY TRUST BANCORP, INC.
Date: March 14, 2005	By:	/s/ Jean R. Hale
		Jean R. Hale
		Chairman, President and Chief Executive Officer

By:	/s/ Kevin J. Stmbo
	Kevin J. Stumbo
	Executive Vice President/Controller

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.

March 14, 2005	/s/ Jean R. Hale	Chairman, President, and Chief Executive Officer
	Jean R. Hale
March 14, 2005	/s/ Kevin J. Stumbo	Executive Vice President and Controller
	Kevin J. Stumbo
March 14, 2005	/s/ Charles J. Baird	Director
	Charles J. Baird
March 14, 2005	/s/ Nick A. Cooley	Director
	Nick A. Cooley
March 14, 2005	/s/ William A. Graham, Jr.	Director
	William A. Graham, Jr.
March 14, 2005	/s/ M. Lynn Parrish	Director
	M. Lynn Parrish
March 14, 2005	/s/ E. M. Rogers	Director
	E. M. Rogers
March 14, 2005	/s/ James R. Ramsey	Director
	James R. Ramsey
March 14, 2005	/s/ Paul E. Patton	Director
	Paul E. Patton

COMMUNITY TRUST BANCORP, INC. AND SUBSIDIARIES

INDEX TO EXHIBITS

Exhibit No.	Description of Exhibits
3.1	Articles of Incorporation and all amendments thereto (incorporated herein by reference)
3.2	By-laws of the Corporation, as amended July 25, 1995 (incorporated herein by reference)
10.1	Community Trust Bancorp, Inc. Savings and Employee Stock Ownership Plan (Revised November 2002) (incorporated herein by reference)
10.2	Second restated Pikeville National Corporation 1989 Stock Option Plan (commonly known as Community Trust Bancorp, Inc. 1989 Stock Option Plan) (incorporated herein by reference)
10.3	Community Trust Bancorp, Inc. 1998 Stock Option Plan (incorporated herein by reference)
10.4	Form of Severance Agreement between Community Trust Bancorp, Inc. and executive officers (currently in effect with respect to eleven executive officers) (incorporated herein by reference)
10.5	Senior Management Incentive Compensation Plan (2005)
21	List of subsidiaries
23.1	Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm
31.1	Certification of Principal Executive Officer (Jean R. Hale, Chairman, President and CEO)
31.2	Certification of Principal Financial Officer (Kevin J. Stumbo, Executive Vice President/Controller)
32.1	Certification of Jean R. Hale, Chairman, President and CEO, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)
32.2	Certification of Kevin J. Stumbo, Executive Vice President/Controller, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

EX-10

EXHIBIT 10.5

COMMUNITY TRUST BANCORP, INC.

SENIOR MANAGEMENT INCENTIVE

COMPENSATION PLAN

EFFECTIVE JANUARY 1, 2005

ARTICLE I

OBJECTIVES

Section 1.01

This plan is designed to reward senior management for meeting or exceeding industry standards for profitability and adopted to achieve the following objectives:

(a)  Increase the profitability and growth of Community Trust Bancorp, Inc. in a manner which is consistent with other goals of the Company, its stockholders, and its employees,

(b)  Provide executive compensation which is competitive with other financial institutions,

(c)  Attract and retain personnel of outstanding ability and encourage excellence in the performance of individual responsibilities,

(d)  Motivate and reward those members of management who contribute to the success of the Company,

(e)  Distinguish among the performance contributions of some individuals by providing financial recognition for individual performance, as well as group performance, and

(f)  Allow the flexibility which permits revision and strengthening from time to time to reflect changing organizational goals and objectives.

ARTICLE II

DEFINITIONS

Section 2.01

As used herein, the following words and phrases shall have the meanings below unless the context clearly indicates otherwise:

(a)  “Annual Incentive Plan” or “Annual Plan” shall mean the Senior Management Incentive Compensation Plan set forth in this document and all amendments thereto.

(b)  “Award Period ” means one Fiscal Year.

(c)  “Board ” means the Board of Directors of Community Trust Bancorp, Inc.

(d)  “Company” means Community Trust Bancorp, Inc., and its subsidiaries.

(e)  “Compensation Committee” means the Compensation Committee of the Board.

(f)  “Disability” means the total and permanent disability of a participant as defined by any Long-Term Disability Plans in effect for the Company and as thereafter may be amended.

(g)  “Effective Date” means the date upon which the Plan shall become effective.

(h)  “Fiscal Year ” means the accounting period adopted by the Company for federal income tax purposes.

(i)  “Participant” means a person designated by the Company to participate in the Plan.

(j)  “Plan” shall mean the Company’s Senior Management Incentive Compensation Plan.

(k)  “Salary” or “Salaries” shall mean the base salary in effect for each participant as of the last pay period in December of the Award Period.

(l)  “Stock Option” shall mean stock options granted under the Community Trust Bancorp, Inc. 1998 Stock Option Plan as hereinafter may be amended including substitutions or replacements of the Plan. Such options shall be incentive stock options to the extent possible under tax laws in effect at the time the option is awarded.

ARTICLE III

ADMINISTRATION OF THE PLAN

Section 3.01

The Compensation Committee shall administer the Plan and employ such other agents as may reasonably be required to administer the Plan.

Section 3.02

The Compensation Committee shall adopt such rules and regulations of general application as are beneficial for the administration of the Plan and shall make all discretionary decisions involving a participant of the Plan. Said committee shall also have the right to interpret the Plan, to determine the Effective Date, and to approve all employees who are to participate in the Plan.

Section 3.03

A majority of the Compensation Committee shall constitute a quorum. The acts of a majority of the members present at any meeting at which there is a quorum shall be valid acts. Acts reduced to and approved in writing by a majority of said committee shall also be valid acts.

Section 3.04

All incentive compensation payable under the Plan shall be paid from the general assets of the Company. To the extent that any person acquires a right to receive payments under the Plan, such right shall be no greater than the right of any unsecured creditor of the Company.

Section 3.05

The Compensation Committee may authorize the President and CEO of the Company to send a written notice of such Plan to each selected Participant. No person shall have the right to be included in the Plan until receiving said notice in the form of Attachment "A" hereto .

Section 3.06

All costs and expenses involved in the administration of this Plan shall be paid by the Company.

Section 3.07

Any determination or action of the Compensation Committee or the Board shall be final, conclusive, and binding on all participants and their beneficiaries, heirs, personal representatives, executors, and administrators.

Section 3.08

The Board of Directors, in its sole discretion, may amend, modify, or terminate the Plan at any time. The Board shall also annually review the pre-determined performance standards and may amend such schedules in its sole discretion.

ARTICLE IV 

PARTICIPANT ELIGIBILITY

Section 4.01

The following groups shall participate in the Plan:

(a)  Group I shall consist of the Executive Committee of the Corporation.

(b)  Group II shall consist of the (1) CTB officers responsible for the divisions of Commercial Lending, Consumer Lending, Residential Real Estate Lending, Loan Review, Finance, Sales and Marketing, Human Resources, Compliance, and Facilities Management and (2) the Presidents of each market.

(c) Group III shall consist of Senior Vice Presidents of consolidated functions who are selected for participation by the Compensation Committee.

(d) Individuals below SVP level may be recommended and approved by the Compensation Committee for special awards of options for extraordinary performance.

Section 4.02

Voluntary or involuntary termination of full-time employment of a Participant prior to the payment of incentive awards for an Award Period will result in such Participant forfeiting any incentive compensation for the Award Period (except as provided in Section 4.03 herein).

Section 4.03

If a Participant dies, retires, becomes disabled, or is granted a leave of absence during an Award Period, the Compensation Committee may, at its discretion or under such rules as it may have prescribed, award partial incentive compensation based on the level of achievement in relation to goals established for the Award Period.

Section 4.04

Directors who are also employees of the Company shall be eligible to participate in the Plan. However, a director who is compensated on the basis of a fee or retainer, as distinguished from a salary, shall not be eligible.

Section 4.05

New employees of the Company and persons promoted during the Award Period who were not eligible to participate in the Plan at the beginning of the Award Period, but have become a member of Group I, II, or III shall participate in the Plan so long as such eligibility came into existence no later than six (6) months after the beginning of said Award Period. If a person becomes eligible at a date later than six (6) months into an Award Period, such person shall not be a Participant under this Plan until the first day of the next Award Period.

ARTICLE V 

PAYMENT TO PARTICIPANTS

Section 5.01

Incentive compensation to be awarded under the Plan shall be paid to Participants within thirty days after the close of the Award Period. Awards are not earned until paid to Participants.

Section 5.02

A Participant may elect to defer payment of all or part of his or her incentive compensation so long as the Participant requests such deferred payment under the terms of the Company’s Voluntary Deferred Compensation Plan.

ARTICLE VI 

DETERMINATION OF ANNUAL AWARD FUND

Section 6.01

The Annual Incentive Plan fund for each group shall be generated by a percent of the aggregate salaries for the individuals in each group. The target award fund shall be computed as shown in Table I below:

TABLE I

TARGET ANNUAL AWARD FUND

GROUP	AGGREGATE SALARIES	TARGET AWARD EXPRESSED AS A % OF SALARIES	TARGET ANNUAL AWARD FUND
I	$____________	X 10% =	$____________
II	$____________	X 9% =	$____________
III	$____________	X 8.5% =	$____________

Section 6.02

The actual amount of the Senior Management Incentive Compensation Plan award fund shall be calculated according to a schedule comparing earnings per share ("EPS") and return on average assets ("ROAA") for the Award Period to a pre-determined performance standard. When performance is at or above the performance standard, the actual award fund is adjusted upward from the target award fund.

Section 6.03

There shall be a minimum acceptable performance beneath which no incentive awards are paid (sometimes referred to as the “threshold”) and a maximum above which there is no additional award paid to avoid excessive payout in the event of windfall profits. Said minimum and maximum shall be reviewed annually and amended when necessary in the sole discretion of the Compensation Committee.

Section 6.04

A Participant who is rated a "4" or "5" on the most recent Performance Appraisal and Development Plan shall not be eligible to receive an award under the Plan.

ARTICLE VII 

CALCULATION OF AWARD

Section 7.01

The Corporation’s (Group I) will earn an award determined by EPS, as shown below:

TABLE I

2005 ANNUAL CASH INCENTIVE COMPENSATION AWARD

INITIAL CALCULATION

Group I - Executive Committee of Community Trust Bancorp, Inc.

*Target/ROAA		Award as a % of Target Award	Award as a % of Salary
			Group I
ROAA
Base	**%	100%	10%
	**%	200%	20%
	**%	300%	30%
	**%	400%	40%
	**%+	600%	60%

*  For 2005, 100% of Targeted (Base) ROAA and $** EPS is required for an incentive to be earned. These results are after accrual of the incentive.

** To be provided to the Securities and Exchange Commission upon request.

Section 7.02

The Corporation’s (Group II) will earn an award determined by EPS, as shown below:

TABLE II

2005 ANNUAL CASH INCENTIVE COMPENSATION AWARD

INITIAL CALCULATION

Group II – Consolidated Division Officers of CTB, Inc. and Market Presidents

EPS as a % of *Target/ROAA		Award as a % of Target Award	Award as a % of Salary
			Group II
ROAA
Base	**%	100%	9%
	**%	133%	12%
	**%	200%	18%
	**%	275%	25%
	**%+	333%	30%

*  For 2005, 100% of the targeted (Base) ROAA and $** EPS is required for an incentive to be earned. These results are after accrual of the incentive.

** To be provided to the Securities and Exchange Commission upon request.

Section 7.03

Senior Vice Presidents of consolidated functions designated by the Compensation Committee will earn an award primarily determined by EPS, as shown below:

TABLE III

2005 ANNUAL CASH INCENTIVE COMPENSATION AWARD

INITIAL CALCULATION

Group III - Senior Vice Presidents of Consolidated Functions

EPS as a % of *Target/ROAA		Award as a % of Target Award	Award as a % of Salary
			Group III
ROAA
Base	**%	100%	8.5%
	**%	118%	10%
	**%	176%	15%
	**%	235%	20%
	**%+	294%	25%

*  For 2005, 100% of the targeted (Base) ROAA and $** EPS is required for an incentive to be earned. These results are after accrual of the incentive.

** To be provided to the Securities and Exchange Commission upon request.

Section 7.04

Participants in Groups I, II, and III shall be eligible to receive Stock Option awards on the same day that cash awards are paid under the terms of this Plan. Such Stock Options shall have a face value equal to the percentage of salary shown on Table IV below, adjusted in the same manner and in the same proportion as cash awards are adjusted under the terms of Sections 7.01, 7.02, and 7.03, and rounded down as necessary to grant an option for whole shares.

TABLE IV

2005 SENIOR MANAGEMENT INCENTIVE COMPENSATION PLAN

STOCK OPTION AWARDS

EPS as a % of *Target/ROAA		Stock Option Award as a % of Salary
		Group I	Group II	Group III
ROAA
Base	**%	100%	50%	25%
	**%	125%	60%	30%
	**%	150%	70%	35%
	**%	175%	80%	40%
	**%+	200%	100%	50%

*   For 2005, 100% of Targeted (Base) ROAA and $** EPS is required for an incentive to be earned. These results are after accrual of the incentive.

** To be provided to the Securities and Exchange Commission upon request.

ARTICLE VIII 

MISCELLANEOUS PROVISIONS

Section 8.01

If the financial performance of the Company for any Fiscal Year taken into account for determination of an award is found to be incorrect by the Company's independent registered public accounting firm and was more than the correct amount, there shall be no recourse by the Company against any person or estate. However, the Company shall have the right to correct such error by reducing by the excess amount any subsequent payments yet to be made under the Plan.

Section 8.02

The Compensation Committee may elect to remove unusual, extraordinary or non-recurring items from the calculation of the EPS.

Section 8.03

The Company shall not merge into or consolidate with another entity or sell all or substantially all of its assets to another entity unless such other entity shall become obligated to perform the terms and conditions hereof relating to any awards already earned but not yet paid to the participant on his/her behalf.

ATTACHMENT A

NOTICE OF PARTICIPATION

    is eligible for participation in the 2005 Plan Year for Community Trust Bancorp, Inc. Senior Management Incentive Compensation Plan, such participant being subject to all of the terms and conditions of said Plan.

Compensation Committee of the Board of Directors

BY: ___________________________________

Dated: ____________________

ATTACHMENT B

DESIGNATION OF BENEFICIARY

I, a participant in the Community Trust Bancorp, Inc. Senior Management Incentive Compensation Plan, name the following as my primary beneficiary under said Plan in the event of my death prior to receiving an award payable to me under said Plan.

Name

Relationship

Address

If the primary beneficiary predeceases me, I designate the following persons as a contingent beneficiary, in the order shown, to receive an award payable to me under the Plan:

Name

Relationship

Address

Name

Relationship

Address

Name

Relationship

Address

This supersedes any previous beneficiary designation made by me with respect to this Plan. However, any compensation covered by the Community Trust Bancorp, Inc. Voluntary Deferred Compensation Plan shall be governed by the Beneficiary Designation applicable to that Plan.

Date

Signature of Participant

EX-21

EXHIBIT 21

Subsidiaries of the Registrant

The Corporation had four subsidiaries as of January 1, 2005.

	Jurisdiction of Organization	Shares Owned by Corporation	Percent Voting Stock Held by Corporation
Community Trust Bank, Inc., Pikeville, Kentucky	Kentucky	285,000 Common	100%
Community Trust and Investment Company, Lexington, Kentucky	Kentucky	500 Common	100%
CTBI Preferred Capital Trust	Delaware	42,720 Common Trust Securities	100%
CTBI Preferred Capital Trust II	Delaware	77,320 Common Trust Securities	100%

EX-23

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333-74217 of Community Trust Bancorp, Inc. on Form S-8 of our reports dated March 11, 2005, relating to the consolidated financial statements of Community Trust Bancorp, Inc. and management’s report of the effectiveness of internal control over financial reporting, appearing in this Annual Report on Form 10-K of Community Trust Bancorp, Inc. for the year ended December 31, 2004.

/s/ Deloitte & Touche LLP

Deloitte & Touche LLP

Louisville, Kentucky

March 11, 2005

EX-31

Exhibit 31.1

Certification of Principal Executive Officer

I, Jean R. Hale, Vice Chairman, President, and Chief Executive Officer of the Corporation, certify that:

(1) I have reviewed this annual report on Form 10-K of Community Trust Bancorp, Inc.;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operation and cash flows of the Corporation as of, and for, the periods presented in this report;

(4) The Corporation's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Corporation and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Corporation, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the Corporation's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the Corporation's internal control over financial reporting that occurred during the Corporation's most recent fiscal quarter (the Corporation's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonable likely to materially affect, the Corporation's internal control over financial reporting; and

(5) The Corporation's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Corporation's auditors and the audit committee of the Corporation's board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Corporation's ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Corporation's internal control over financial reporting.

/s/ Jean R. Hale

Jean R. Hale

Chairman, President and CEO

March 14, 2005

Exhibit 31.2

Certification of Principal Financial Officer

I, Kevin J. Stumbo, Executive Vice President/Controller of the Corporation, certify that:

(1) I have reviewed this annual report on Form 10-K of Community Trust Bancorp, Inc.;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operation and cash flows of the Corporation as of, and for, the periods presented in this report;

(4) The Corporation's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Corporation and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Corporation, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the Corporation's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the Corporation's internal control over financial reporting that occurred during the Corporation's most recent fiscal quarter (the Corporation's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonable likely to materially affect, the Corporation's internal control over financial reporting; and

(5) The Corporation's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Corporation's auditors and the audit committee of the Corporation's board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Corporation's ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Corporation's internal control over financial reporting.

/s/ Kevin J. Stumbo

Kevin J. Stumbo

Executive Vice President/Controller

March 14, 2005

EX-32

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report of Community Trust Bancorp, Inc. (the "Corporation") on Form 10-K for the period ended December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jean R. Hale, Chairman, President and Chief Executive Officer of the Corporation, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Corporation.

/s/ Jean R. Hale

Jean R. Hale

Chairman, President and CEO

March 14, 2005

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report of Community Trust Bancorp, Inc. (the "Corporation") on Form 10-K for the period ended December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Kevin J. Stumbo, Executive Vice President/Controller of the Corporation, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

/s/ Kevin J. Stumbo

Kevin J. Stumbo

Executive Vice President/Controller

March 14, 2005