Note 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 September 30, 2013 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	$	66,049	$	284	$	(3,817	)	$	62,516
State and political subdivisions		118,708		2,261		(2,604	)		118,365
U.S. government sponsored agency mortgage-backed securities		429,547		5,676		(5,706	)		429,517
Total debt securities		614,304		8,221		(12,127	)		610,398
Marketable equity securities		55,000		0		(1,482	)		53,518
Total available-for-sale securities	$	669,304	$	8,221	$	(13,609	)	$	663,916

Held-to-Maturity

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury and government agencies	$	480	$	0	$	(49	)	$	431
State and political subdivisions		1,182		1		0			1,183
Total held-to-maturity securities	$	1,662	$	1	$	(49	)	$	1,614

The amortized cost and fair value of securities as of 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		791		(165	)		45,626
Total available-for-sale securities	$	583,858	$	19,970	$	(485	)	$	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 September 30, 2013 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	$	4,305	$	4,326	$	0	$	0
Due after one through five years		23,044		23,774		0		0
Due after five through ten years		120,948		117,093		1,182		1,183
Due after ten years		36,460		35,688		480		431
U.S. government sponsored agency mortgage-backed securities		429,547		429,517		0		0
Total debt securities		614,304		610,398		1,662		1,614
Marketable equity securities		55,000		53,518		0		0
Total securities	$	669,304	$	663,916	$	1,662	$	1,614

As of September 30, 2013, there was a combined loss of $31 thousand due to the partial call of two municipal securities, the sale of one agency security and the sale of three mortgage-backed securities. A pre-tax gain of $284 thousand and a pre-tax loss of $315 thousand were realized as of September 30, 2013. As of September 30, 2012, there was a combined gain of $819 thousand due to the sale of two agency securities. A pre-tax gain of $885 thousand and a pre-tax loss of $66 thousand were realized as of September 30, 2012.

The amortized cost of securities pledged as collateral, to secure public deposits and for other purposes, was $258.5 million at September 30, 2013 and $262.4 million at December 31, 2012.

The amortized cost of securities sold under agreements to repurchase amounted to $246.7 million at September 30, 2013 and $237.3 million at December 31, 2012.

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 September 30, 2013 indicates that all impairment is considered temporary, market driven, and not credit-related. The percentage of total investments with unrealized losses as of September 30, 2013 was 61.1% compared to 14.8% as of December 31, 2012 as a result of changes in the market rates during the third quarter of 2013. 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 September 30, 2013 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	$	55,516	$	(3,817	)	$	51,699
State and political subdivisions		60,407		(2,568	)		57,839
U.S. government sponsored agency mortgage-backed securities		240,284		(5,698	)		234,586
Total debt securities		356,207		(12,083	)		344,124
Marketable equity securities		55,000		(1,482	)		53,518
Total <12 months temporarily impaired AFS securities		411,207		(13,565	)		397,642

12 Months or More
State and political subdivisions		1,407		(36	)		1,371
U.S. government sponsored agency mortgage-backed securities		7,282		(8	)		7,274
Total ≥12 months temporarily impaired AFS securities		8,689		(44	)		8,645

Total
U.S. Treasury and government agencies		55,516		(3,817	)		51,699
State and political subdivisions		61,814		(2,604	)		59,210
U.S. government sponsored agency mortgage-backed securities		247,566		(5,706	)		241,860
Total debt securities		364,896		(12,127	)		352,769
Marketable equity securities		55,000		(1,482	)		53,518
Total temporarily impaired AFS securities	$	419,896	$	(13,609	)	$	406,287

Held-to-Maturity

(in thousands)	Amortized Cost		Gross Unrealized Losses			Fair Value
Less Than 12 Months
U.S. Treasury and government agencies	$	480	$	(49	)	$	431
Total temporarily impaired HTM securities	$	480	$	(49	)	$	431

The analysis performed as of December 31, 2012 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, 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
Marketable equity securities		20,000		(165	)		19,835
Total temporarily impaired AFS securities	$	89,265	$	(485	)	$	88,780

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