3. Securities

Securities are classified into held-to-maturity and available-for-sale categories. Held-to-maturity (HTM) securities are those that CTBI has the positive intent and ability to hold to maturity and are reported at amortized cost. Available-for-sale (AFS) securities are those that CTBI 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 or losses included as a separate component of equity, net of tax.

The amortized cost and fair value of securities at December 31, 2012 are summarized as follows:

Available-for-Sale

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury and government agencies	$	60,625	$	463	$	(173	)	$	60,915
State and political subdivisions		107,987		5,369		(135	)		113,221
U.S. government sponsored agency mortgage-backed securities		370,246		13,347		(12	)		383,581
Total debt securities		538,858		19,179		(320	)		557,717
Marketable equity securities		45,000		626		(0	)		45,626
Total available-for-sale securities	$	583,858	$	19,805	$	(320	)	$	603,343

Held-to-Maturity

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury and government agencies	$	480	$	0	$	(4	)	$	476
State and political subdivisions		1,182		1		0			1,183
Total held-to-maturity securities	$	1,662	$	1	$	(4	)	$	1,659

The amortized cost and fair value of securities at December 31, 2011 are summarized as follows:

Available-for-Sale

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury and government agencies	$	32,077	$	1,171	$	0		$	33,248
State and political subdivisions		68,358		3,816		(30	)		72,144
U.S. government sponsored agency mortgage-backed securities		390,714		10,186		(57	)		400,843
Total debt securities		491,149		15,173		(87	)		506,235
Marketable equity securities		20,582		718		(137	)		21,163
Total available-for-sale securities	$	511,731	$	15,891	$	(224	)	$	527,398

Held-to-Maturity

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury and government agencies	$	480	$	0	$	(1	)	$	479
State and political subdivisions		1,182		0		0			1,182
Total held-to-maturity securities	$	1,662	$	0	$	(1	)	$	1,661

The amortized cost and fair value of securities at December 31, 2012 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because issuers 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	$	6,408	$	6,483	$	0	$	0
Due after one through five years		23,034		24,006		0		0
Due after five through ten years		102,857		105,721		1,182		1,183
Due after ten years		36,313		37,926		480		476
U.S. government sponsored agency mortgage-backed securities		370,246		383,581		0		0
Total debt securities		538,858		557,717		1,662		1,659
Marketable equity securities		45,000		45,626		0		0
Total securities	$	583,858	$	603,343	$	1,662	$	1,659

There was a combined gain of $1.2 million realized in 2012 due to sales of four agency securities, one mortgage-backed security, and five auction rate securities and a call of a municipal security. A pre-tax gain of $2.4 million and a pre-tax loss of $1.2 million were realized during the year. There was a pre-tax gain of $218 thousand realized in 2011 due to the sale of an agency security. There were no securities gains or losses during the year 2010.

The amortized cost of securities pledged as collateral, to secure public deposits and for other purposes, was $262.4 million at December 31, 2012 and $198.6 million at December 31, 2011.

The amortized cost of securities sold under agreements to repurchase amounted to $237.3 million at December 31, 2012 and $217.2 million at December 31, 2011.

Certain investments in debt and marketable equity securities are reported in the financial statements at amounts less than their historical costs. CTBI evaluates its investment portfolio on a quarterly basis for impairment. The analysis performed as of December 31, 2012 indicates that all impairment is considered temporary, market driven, and not credit-related. The percentage of total investments with unrealized losses as of December 31, 2012 was 11.5% compared to 4.8% as of December 31, 2011. 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, 2012 that are not deemed to be other-than-temporarily impaired.

Available-for-Sale

(in thousands)	Amortized Cost		Gross Unrealized Losses			Fair Value
Less Than 12 Months
U.S. Treasury and government agencies	$	47,576	$	(173	)	$	47,403
State and political subdivisions		11,126		(135	)		10,991
U.S. government sponsored agency mortgage-backed securities		10,563		(12	)		10,551
Total debt securities		69,265		(320	)		68,945
Total < 12 months temporarily impaired AFS securities		69,265		(320	)		68,945

Total
U.S. Treasury and government agencies		47,576		(173	)		47,403
State and political subdivisions		11,126		(135	)		10,991
U.S. government sponsored agency mortgage-backed securities		10,563		(12	)		10,551
Total debt securities		69,265		(320	)		68,945
Total temporarily impaired AFS securities	$	69,265	$	(320	)	$	68,945

Held-to-Maturity

(in thousands)	Amortized Cost		Gross Unrealized Losses			Fair Value
Less Than 12 Months
U.S. Treasury and government agencies	$	480	$	(4	)	$	476
Total temporarily impaired HTM securities	$	480	$	(4	)	$	476

The analysis performed as of December 31, 2011 indicated that all impairment was 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, 2011 that are not deemed to be other-than-temporarily impaired.

Available-for-Sale

(in thousands)	Amortized Cost		Gross Unrealized Losses			Fair Value
Less Than 12 Months
State and political subdivisions	$	6,173	$	(25	)	$	6,148
U.S. government sponsored agency mortgage-backed securities		17,900		(57	)		17,843
Total debt securities		24,073		(82	)		23,991
Total < 12 months temporarily impaired AFS securities		24,073		(82	)		23,991

12 Months or More
State and political subdivisions		613		(5	)		608
Total debt securities		613		(5	)		608
Marketable equity securities		329		(137	)		192
Total ≥12 months temporarily impaired AFS securities		942		(142	)		800

Total
State and political subdivisions		6,786		(30	)		6,756
U.S. government sponsored agency mortgage-backed securities		17,900		(57	)		17,843
Total debt securities		24,686		(87	)		24,599
Marketable equity securities		329		(137	)		192
Total temporarily impaired AFS securities	$	25,015	$	(224	)	$	24,791

Held-to-Maturity

(in thousands)	Amortized Cost		Gross Unrealized Losses			Fair Value
Less Than 12 Months
U.S. Treasury and government agencies	$	480	$	(1	)	$	479
Total temporarily impaired HTM securities	$	480	$	(1	)	$	479