15. Employee Benefits

CTBI maintains two separate retirement savings plans, a 401(k) Plan and an Employee Stock Ownership Plan ("ESOP").

The 401(k) Plan is available to all employees (age 21 and over) with one year of service and who work at least 1,000 hours per year. Participants in the plan have the option to contribute from 1% to 20% of their annual compensation. CTBI matches 50% of participant contributions up to 4% of gross pay. CTBI may at its discretion, contribute an additional percentage of covered employees' compensation. CTBI's matching contributions were $1.0 million for the years ended December 31, 2016, 2015, and 2014. The 401(k) Plan owned 482,426, 515,062, and 503,082 shares of CTBI's common stock at December 31, 2016, 2015, and 2014, respectively. Substantially all shares owned by the 401(k) were allocated to employee accounts on those dates. 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 ESOP Plan has the same entrance requirements as the 401(k) Plan above. CTBI currently contributes 4% of covered employees' gross compensation to the ESOP. The ESOP uses the contributions to acquire shares of CTBI's common stock. CTBI's contributions to the ESOP were $1.5 million for the years ended December 31, 2016, 2015, and 2014. The ESOP owned 788,308, 765,630, and 752,710 shares of CTBI's common stock at December 31, 2016, 2015, and 2014, respectively. Substantially all shares owned by the ESOP were allocated to employee accounts on those dates. The market price of the shares at the date of allocation is essentially the same as the market price at the date of purchase.

Stock-Based Compensation:

As of December 31, 2016, CTBI maintained one active and two inactive incentive stock ownership plans covering key employees. The 2015 Stock Ownership Incentive Plan (“2015 Plan”) was approved by the Board of Directors and the Shareholders in 2015. The 2006 Stock Ownership Incentive Plan (“2006 Plan”) was approved by the Board of Directors and the Shareholders in 2006. The 2006 Plan was rendered inactive as of April 28, 2015. The 1998 Stock Option Plan (“1998 Plan”) was approved by the Board of Directors and the Shareholders in 1998. The 1998 Plan was rendered inactive as of April 26, 2006. The 2015 Plan has 550,000 shares authorized, 540,131 of which were available at December 31, 2016. Shares issuable pursuant to awards which were granted under the prior plans on or before their respective expiration or termination dates will be issued from the remaining shares reserved for issuance under the prior plans. The shares of common stock reserved for issuance under the prior plans in excess of the number of shares as to which options or other benefits are awarded thereunder, and any shares as to which options or other benefits granted under the prior plans may lapse, expire, terminate or be canceled, will not be reserved and available for issuance or reissuance under the 2015 Plan. In January 2016, 18,069 shares were issued under the terms of the 2015 Plan pursuant to awards granted and earned under the 2006 Plan. Accordingly, this issuance did not reduce the shares available under the 2015 Plan. Additional shares will not be issued under the 2015 Plan pursuant to awards granted under the 2006 Plan. The following table provides detail of the number of shares to be issued upon exercise of outstanding stock-based awards and remaining shares available for future issuance under all of CTBI's equity compensation plans as of December 31, 2016:

Plan Category (shares in thousands)

Number of Shares to Be Issued Upon Exercise

Weighted Average Price

Shares Available for Future Issuance

Equity compensation plans approved by shareholders:

Stock options

30.36

540

(a)

Restricted stock

(c)

(b)

(a)

Performance units

(d)

(b)

(a)

Stock appreciation rights (“SARs”)

(e)

(b)

(a)

Total

540

(a)

Under the 2015 Plan, 550,000 shares are authorized for issuance; 10,000 have been issued as of December 31, 2016. In January of 2016, 18,069 restricted stock shares were issued under the terms of the 2015 Plan pursuant to awards granted under the 2006 Plan. Additional shares will not be issued pursuant to awards granted from prior plans.

(b)	Not applicable

(c)	The maximum number of shares of restricted stock that may be granted is 550,000 shares, and the maximum that may be granted to a participant during any calendar year is 75,000 shares.

(d)	No performance units payable in stock had been issued as of December 31, 2016. The maximum payment that can be made pursuant to performance units granted to any one participant in any calendar year shall be $1,000,000.

(e)	No SARS have been issued. The maximum number of shares with respect to which SARs may be granted to a participant during any calendar year shall be 100,000 shares.

The following table details the shares available for future issuance under the 2015 Plan at December 31, 2016.

Plan Category	Shares Available for Future Issuance
Shares available at January 1, 2016	550,000
Stock option issuances	(10,000)
Restricted stock issuances	0
Forfeitures	131
Shares available for future issuance	540,131

CTBI uses a Black-Scholes option pricing model with the following weighted average assumptions, which are evaluated and revised as necessary, in estimating the grant-date fair value of each option grant for the year end:

	2016	2015	2014
Expected option life (in years)	7.5	7.5	7.5
Expected volatility	34.34%	43.11%	43.32%
Expected dividend yield	3.70%	3.72%	3.40%
Risk-free interest rate	1.45%	1.54%	2.01%

The expected option life is derived from the “safe-harbor” rules for estimating option life in ASC 718, Share-Based Payment. The expected volatility is based on historical volatility of the stock using a historical look back that approximates the expected life of the option grant. The interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. CTBI's stock-based compensation expense for the years 2016, 2015, and 2014 was $0.5 million, $0.8 million, and $0.9 million, respectively. Included in stock-based compensation expense were dividends paid on restricted stock shares in the amount of $37 thousand, $80 thousand, and $121 thousand, respectively, for the same periods.

The 2015 Plan:

CTBI’s stock option activity for the 2015 Plan for the year ended December 31, 2016 is summarized as follows:

December 31	2016
	Options		Weighted Average Exercise Price
Outstanding at beginning of year		0		--
Granted		10,000	$	33.55
Exercised		0		--
Forfeited/expired		0		--
Outstanding at end of year		10,000	$	33.55

Exercisable at end of year		0		--

A summary of the status of CTBI’s 2015 Plan for nonvested options as of December 31, 2016, and changes during the year ended December 31, 2016, is presented as follows:

Nonvested Options	Options		Weighted Average Grant Date Fair Value
Nonvested at January 1, 2016		0		--
Granted		10,000	$	6.82
Vested		0		--
Forfeited		0		--
Nonvested at December 31, 2016		10,000	$	6.82

The weighted average remaining contractual term in years of the options outstanding at December 31, 2016 was 9.1 years.

The weighted-average fair value of options granted from the 2015 Plan during the year 2016 was $0.07 million, or $6.82 per share.

The following table shows the intrinsic values of options exercised, exercisable, and outstanding for the 2015 Plan for the years ended December 31, 2016:

(in thousands)	2016
Options exercised		--
Options exercisable		--
Outstanding options	$	161

The following table shows restricted stock activity for the 2015 Plan for the year ended December 31, 2016:

December 31	2016
	Grants			Weighted Average Fair Value at Grant
Outstanding at beginning of year		0		$	--
Granted*		18,069			33.55
Vested		(442	)		33.55
Forfeited		(131	)		33.55
Outstanding at end of year		17,496		$	33.55

* Issued under the terms of the 2015 Plan pursuant to awards granted and earned under the 2006 Plan.

The 2006 Plan:

CTBI’s stock option activity for the 2006 Plan for the years ended December 31, 2016, 2015, and 2014 is summarized as follows:

December 31	2016					2015					2014
	Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price
Outstanding at beginning of year		118,574		$	32.36		98,821		$	32.35		97,047		$	32.29
Granted		0			--		20,000			32.27		10,000			34.75
Exercised		(57,423	)		35.02		(247	)		24.12		(5,757	)		34.62
Forfeited/expired		(110	)		35.41		0			--		(2,469	)		34.29
Outstanding at end of year		61,041		$	29.84		118,574		$	32.36		98,821		$	32.35

Exercisable at end of year		30,629		$	26.64		87,749		$	32.12		86,264		$	32.25

A summary of the status of CTBI’s 2006 Plan for nonvested options as of December 31, 2016, and changes during the year ended December 31, 2016, is presented as follows:

Nonvested Options	Options			Weighted Average Grant Date Fair Value
Nonvested at January 1, 2016		30,825		$	7.02
Granted		0			--
Vested		(413	)		8.23
Forfeited		0			--
Nonvested at December 31, 2016		30,412		$	7.00

The weighted average remaining contractual term in years of the options outstanding at December 31, 2016 was 4.6 years.

There were no options granted from the 2006 Plan for the year 2016. The weighted-average fair value of options granted from the 2006 Plan during the years 2015 and 2014 were $0.13 million or $6.60 per share and $0.08 million or $7.76 per share; respectively.

The following table shows the intrinsic values of options exercised, exercisable, and outstanding for the 2006 Plan for the years ended December 31, 2016, 2015, and 2014:

(in thousands)	2016		2015		2014
Options exercised	$	139	$	3	$	11
Options exercisable		703		275		376
Outstanding options		1,206		334		421

The following table shows restricted stock activity for the years ended December 31, 2016, 2015, and 2014:

December 31	2016					2015					2014
	Grants			Weighted Average Fair Value at Grant		Grants			Weighted Average Fair Value at Grant		Grants			Weighted Average Fair Value at Grant
Outstanding at beginning of year		64,735		$	28.92		101,309		$	26.19		107,511		$	25.91
Granted		0			--		10,582			32.27		4,561			37.85
Vested		(52,521	)		28.01		(46,482	)		23.66		(8,949	)		28.35
Forfeited		(225	)		32.52		(674	)		33.31		(1,814	)		28.38
Outstanding at end of year		11,989		$	32.85		64,735		$	28.92		101,309		$	26.19

The 1998 Plan:

CTBI’s stock option activity for the 1998 Plan for the years ended December 31, 2016, 2015, and 2014 is summarized as follows:

December 31	2016					2015					2014
	Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price
Outstanding at beginning of year		2,980		$	29.49		43,960		$	29.43		78,066		$	28.91
Granted		0			--		0			--		0			--
Exercised		(2,980	)		29.49		(40,980	)		29.42		(34,106	)		28.25
Forfeited/expired		0			--		0			--		0			--
Outstanding at end of year		0			--		2,980		$	29.49		43,960		$	29.43

Exercisable at end of year		0			--		2,980		$	29.49		43,960		$	29.43

There were no options outstanding in the 1998 Plan at December 31, 2016.

The following table shows the intrinsic values of options exercised, exercisable, and outstanding for the 1998 Plan for the years ended December 31, 2016, 2015, and 2014:

(in thousands)	2016		2015		2014
Options exercised	$	13	$	241	$	270
Options exercisable		0		16		316
Outstanding options		0		16		316

There were no nonvested options in the 1998 Plan for the years December 31, 2016, 2015, and 2014.

The following table shows the unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the plans at December 31, 2016, 2015, and 2014 and the total grant-date fair value of shares vested, cash received from option exercises under all share-based payment arrangements, and the actual tax benefit realized for the tax deductions from option exercises of the share-based payment arrangements for the years ended December 31, 2016, 2015, and 2014.

(in thousands)	2016		2015		2014
Unrecognized compensation cost of unvested share-based compensation arrangements granted under the plan at year-end	$	835	$	495	$	861
Grant date fair value of shares vested for the year		1,490		1,111		343
Cash received from option exercises under all share-based payment arrangements for the year		2,099		1,212		1,163
Tax benefit realized for the tax deductions from option exercises of the share-based payment arrangements for the year		3		82		93

The unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the plans at December 31, 2016 is expected to be recognized over a weighted-average period of 2.9 years.