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Fair Market Value of Financial Instruments | 12 Months Ended
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Dec. 31, 2011
Fair Market Value of Financial Instruments [Abstract] |
Fair Market Value of Financial Instruments | 17. Fair Market Value of Financial Instruments The following table presents the carrying amounts and estimated fair values of financial instruments at December 31, 2011 and 2010:
(in thousands) December 31 |  | 2011 |  |  | 2010 |
|  | Carrying Amount |  |  | Estimated Fair Value |  |  | Carrying Amount |  |  | Estimated Fair Value |
Financial assets |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 238,481 |  |  | $ | 238,481 |  |  | $ | 158,983 |  |  | $ | 158,983 |
Certificates of deposit in other banks |  |  | 11,875 |  |  |  | 11,860 |  |  |  | 14,762 |  |  |  | 14,775 |
Securities available-for-sale |  |  | 527,398 |  |  |  | 527,398 |  |  |  | 338,675 |  |  |  | 338,675 |
Securities held-to-maturity |  |  | 1,662 |  |  |  | 1,661 |  |  |  | 1,662 |  |  |  | 1,662 |
Loans held for sale |  |  | 536 |  |  |  | 550 |  |  |  | 455 |  |  |  | 462 |
Loans, net |  |  | 2,523,377 |  |  |  | 2,520,297 |  |  |  | 2,570,375 |  |  |  | 2,590,818 |
Federal Home Loan Bank stock |  |  | 25,673 |  |  |  | 25,673 |  |  |  | 25,673 |  |  |  | 25,673 |
Federal Reserve Bank stock |  |  | 4,883 |  |  |  | 4,883 |  |  |  | 4,434 |  |  |  | 4,434 |
Accrued interest receivable |  |  | 12,280 |  |  |  | 12,280 |  |  |  | 12,574 |  |  |  | 12,574 |
Mortgage servicing rights |  |  | 2,282 |  |  |  | 2,282 |  |  |  | 3,161 |  |  |  | 3,161 |
Financial liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  | $ | 2,878,359 |  |  | $ | 2,879,722 |  |  | $ | 2,706,117 |  |  | $ | 2,690,960 |
Repurchase agreements |  |  | 217,177 |  |  |  | 217,062 |  |  |  | 188,275 |  |  |  | 186,989 |
Federal funds purchased |  |  | 13,104 |  |  |  | 13,104 |  |  |  | 9,680 |  |  |  | 9,680 |
Advances from Federal Home Loan Bank |  |  | 21,609 |  |  |  | 21,617 |  |  |  | 21,238 |  |  |  | 21,213 |
Long-term debt |  |  | 61,341 |  |  |  | 31,030 |  |  |  | 61,341 |  |  |  | 30,894 |
Accrued interest payable |  |  | 2,171 |  |  |  | 2,171 |  |  |  | 2,848 |  |  |  | 2,848 |
Unrecognized financial instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Letters of credit |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |
Commitments to extend credit |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Forward sale commitments |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
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. Certificates of deposit in other banks - Fair values are based on quoted market prices or dealer quotes. Securities - Fair values are based on quoted market prices, if available. If a quoted price is not available, fair value is estimated using quoted prices for similar securities. The fair value estimate is provided to management from a third party using modeling assumptions specific to each type of security that are reviewed and approved by management. Quarterly sampling of fair values provided by additional third parties supplement the fair value review process. Loans held for sale - The fair value is predetermined at origination based on sale price. Loans (net of the allowance for loan and lease losses) - 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. Loans acquired through acquisition were booked at their fair value on their date of acquisition. Management utilized a third party to assist in the valuation of the acquired loans and considered such factors as coupon rate on the acquired loans versus the current rate for similar instruments on the date of acquisition, weighted average expected life and expected loss rates using both national and regional loss rates on similar loans, and the historic loss rates on the pools of loans acquired. Federal Home Loan Bank stock - The carrying value of Federal Home Loan Bank stock approximates fair value based on the redemption provisions of the Federal Home Loan Bank. Federal Reserve Bank stock - The carrying value of Federal Reserve Bank stock approximates fair value based on the redemption provisions of the Federal Reserve Bank. Accrued interest receivable - The carrying amount approximates fair value. Mortgage servicing rights - The fair value is determined quarterly based on an independent third-party valuation using a discounted cash flow analysis and calculated using a computer pricing model. The computer valuation is based on key economic assumptions including the prepayment speeds of underlying loans, the weighted-average life of the loan, the discount rate, the weighted-average coupon, and the weighted-average default rate, as applicable. Deposits - The fair value of fixed maturity time deposits is estimated by discounting the future cash flows using the rates currently offered for deposits of similar remaining maturities. For deposits including demand deposits, savings accounts, NOW accounts, and certain money market accounts, the carrying value approximates fair value. Repurchase agreements - The fair value is estimated by discounting future cash flows using current rates. Federal funds purchased - 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. Accrued interest payable - The carrying amount approximates fair value. Commitments to originate loans, forward sale commitments, letters of credit, and lines of credit - The fair value of commitments to originate loans is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of forward sale commitments is estimated based on current market prices for loans of similar terms and credit quality. The fair values of letters of credit and lines of credit are based on fees currently charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the counterparties at the reporting date. The fair values of these commitments are not material. Fair Value Measurements ASC 820, Fair Value Measurements, defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. ASC 820 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value but does not expand the use of fair value in any new circumstances. In this standard, the FASB clarifies the principle that fair value should be based on the assumptions market participants would use when pricing the asset or liability. In support of this principle, ASC 820 establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy is as follows: Level 1 Inputs - Quoted prices in active markets for identical assets or liabilities. Level 2 Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 Inputs - Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity's own assumptions about the assumptions that market participants would use in pricing the assets or liabilities. A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of CTBI's financial assets carried at fair value. The following tables present information about CTBI's assets measured at fair value on a recurring and nonrecurring basis as of December 31, 2011 and December 31, 2010, and indicates the fair value hierarchy of the valuation techniques and inputs utilized by CTBI to determine such fair value. CTBI had no liabilities measured at fair value as of December 31, 2011 and December 31, 2010.
(in thousands) |  |  |  |  | Fair Value Measurements at December 31, 2011 Using |
|  | Fair Value December 31 2011 |  |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3) |
Assets Measured - Recurring Basis |  |  |  |  |  |  |  |  |  |  |  |
Available-for-sale securities: |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury and government agencies |  | $ | 33,248 |  |  | $ | 0 |  |  | $ | 33,248 |  |  | $ | 0 |
State and political subdivisions |  |  | 72,144 |  |  |  | 0 |  |  |  | 72,144 |  |  |  | 0 |
U.S. government sponsored agency mortgage-backed securities |  |  | 400,336 |  |  |  | 0 |  |  |  | 400,336 |  |  |  | 0 |
Collateralized mortgage obligations |  |  | 507 |  |  |  | 507 |  |  |  | 0 |  |  |  | 0 |
Marketable equity securities |  |  | 21,163 |  |  |  | 20,675 |  |  |  | 277 |  |  |  | 211 |
Mortgage servicing rights |  |  | 2,282 |  |  |  | 0 |  |  |  | 0 |  |  |  | 2,282 |
Total recurring assets measured at fair value |  | $ | 529,680 |  |  | $ | 21,182 |  |  | $ | 506,005 |  |  | $ | 2,493 |
Assets Measured - Nonrecurring Basis |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Impaired loans (collateral dependent) |  | $ | 7,898 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 7,898 |
Other real estate/assets owned |  |  | 16,362 |  |  |  | 0 |  |  |  | 0 |  |  |  | 16,362 |
Total nonrecurring assets measured at fair value |  | $ | 24,260 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 24,260 |
(in thousands) |  |  |  |  | Fair Value Measurements at December 31, 2010 Using |
|  | Fair Value December 31 2010 |  |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3) |
Assets Measured - Recurring Basis |  |  |  |  |  |  |  |  |  |  |  |
Available-for-sale securities: |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury and government agencies |  | $ | 29,254 |  |  | $ | 0 |  |  | $ | 29,254 |  |  | $ | 0 |
State and political subdivisions |  |  | 51,865 |  |  |  | 0 |  |  |  | 51,865 |  |  |  | 0 |
U.S. government sponsored agency mortgage-backed securities |  |  | 237,243 |  |  |  | 0 |  |  |  | 237,243 |  |  |  | 0 |
Collateralized mortgage obligations |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Marketable equity securities |  |  | 20,313 |  |  |  | 20,102 |  |  |  | 0 |  |  |  | 211 |
Mortgage servicing rights |  |  | 3,161 |  |  |  | 0 |  |  |  | 0 |  |  |  | 3,161 |
Total recurring assets measured at fair value |  | $ | 341,836 |  |  | $ | 20,102 |  |  | $ | 318,362 |  |  | $ | 3,372 |
Assets Measured - Nonrecurring Basis |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Impaired loans (collateral dependent) |  | $ | 16,589 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 16,589 |
Other real estate/assets owned |  |  | 4,579 |  |  |  | 0 |  |  |  | 0 |  |  |  | 4,579 |
Total nonrecurring assets measured at fair value |  | $ | 21,168 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 21,168 |
In general, fair value is based upon quoted market prices, where available. If quoted market prices are not available, fair value is based on internally developed models or obtained from an independent pricing service. While management believes CTBI's valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Available-For-Sale Securities Securities classified as available-for-sale are reported at fair value on a recurring basis. CTBI's collateralized mortgage obligations and CRA investment funds (included in marketable equity securities) are classified as Level 1 of the valuation hierarchy where quoted market prices are available in the active market on which the individual securities are traded. If quoted market prices are not available, CTBI obtains fair value measurements from an independent pricing service, such as Interactive Data, which utilizes pricing models to determine fair value measurement. CTBI reviews the pricing quarterly to verify the reasonableness of the pricing. The fair value measurements consider observable date that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond's terms and conditions, among other factors. U.S. Treasury and government agencies, state and political subdivisions, U.S. government sponsored agency mortgage-backed securities, and certain marketable equity securities are classified as Level 2 inputs. The securities owned by CTBI that were measured using Level 3 criteria are auction rate securities (included in marketable equity securities) issued by FNMA. These securities which have been exchanged into public preferred stock are valued at the closing price reported on the active market on which the individual securities are traded. Consideration is also given for the relative illiquidity of these shares. The securities that remain in the auction-rate security structure are valued assuming that they are exchanged into the contractual shares of public preferred stock. Likewise, consideration is given for the uncertainty of the reorganization process currently on-going. Mortgage Servicing Rights CTBI records MSRs at fair value on a recurring basis with subsequent remeasurement of MSRs based on change in fair value. In determining fair value, CTBI utilizes the expertise of an independent third party. An estimate of the fair value of CTBI's MSRs is determined by the independent third party utilizing assumptions about factors such as mortgage interest rates, discount rates, mortgage loan prepayment speeds, market trends and industry demand. Management reviews and approves these assumptions prior to final determination of the fair value. All of CTBI's MSRs are classified as Level 3. See note 6 for description of significant inputs. Impaired Loans (Collateral Dependent) Loans considered impaired under ASC 310-35, Impairment of a Loan, are loans for which, based on current information and events, it is probable that the creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans are subject to nonrecurring fair value adjustments to reflect subsequent partial write-downs that are based on the observable market price or current appraised value of the collateral. Year-to-date losses on impaired loans were $2.6 million and $5.5 million for the years ended December 31, 2011 and 2010, respectively. Other Real Estate/Assets Owned In accordance with the provisions of ASC 360, Property, Plant, and Equipment, long-lived assets held for sale with a carrying amount of $16.4 million were written down to their fair value less costs to sell during the year. Long-lived assets are subject to nonrecurring fair value adjustments to reflect subsequent partial write-downs that are based on the observable market price or current appraised value of the collateral. Losses on other real estate/assets owned were $6.5 million and $0.7 million, respectively, for the years ended December 31, 2011 and 2010. Following is a reconciliation of the beginning and ending balances of recurring fair value measurements using significant unobservable (Level 3) inputs:
Marketable Equity Securities (in thousands) |  | 2011 |  |  | 2010 |
Beginning balance, January 1 |  | $ | 211 |  |  | $ | 211 |
Total realized and unrealized gains and losses: |  |  |  |  |  |  |  |
Included in net income |  |  | 0 |  |  |  | 0 |
Transfer of securities from Level 3 to Level 2 |  |  | 0 |  |  |  | 0 |
Purchases, issuances, and settlements |  |  | 0 |  |  |  | 0 |
Ending balance, December 31 |  | $ | 211 |  |  | $ | 211 |
Mortgage Servicing Rights (in thousands) |  | 2011 |  |  | 2010 |
Beginning balance, January 1 |  | $ | 3,161 |  |  | $ | 3,406 |
Total realized and unrealized gains and losses: |  |  |  |  |  |  |  |
Included in net income |  |  | (842 | ) |  |  | (418 | )
Issuances |  |  | 526 |  |  |  | 524 |
Settlements |  |  | (563 | ) |  |  | (351 | )
Ending balance, December 31 |  | $ | 2,282 |  |  | $ | 3,161 |
There were no transfers in or out of Levels 1, 2, or 3 financial assets for the years ended December 31, 2011 and 2010.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19296-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 159 -Paragraph 17-22, 27, 28 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13433-108611 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15C, 15D -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13504-108611 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15A -Subparagraph a-d -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13537-108611 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 133 -Paragraph 44A, 44B -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19207-110258 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 3, 10, 14, 15 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15B -Subparagraph a, b -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 157 -Paragraph 32, 33, 34 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. + Details
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