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, 2014 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	$	190,563	$	509	$	(2,140	)	$	188,932
State and political subdivisions		133,951		3,973		(466	)		137,458
U.S. government sponsored agency mortgage-backed securities		288,881		2,876		(2,850	)		288,907
Total debt securities		613,395		7,358		(5,456	)		615,297
Marketable equity securities		25,000		0		(111	)		24,889
Total available-for-sale securities	$	638,395	$	7,358	$	(5,567	)	$	640,186

Held-to-Maturity

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury and government agencies	$	480	$	0	$	(19	)	$	461
State and political subdivisions		1,182		1		0			1,183
Total held-to-maturity securities	$	1,662	$	1	$	(19	)	$	1,644

The amortized cost and fair value of securities at December 31, 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	$	77,838	$	277	$	(5,492	)	$	72,623
State and political subdivisions		118,055		1,907		(3,259	)		116,703
U.S. government sponsored agency mortgage-backed securities		370,860		4,273		(7,836	)		367,297
Total debt securities		566,753		6,457		(16,587	)		556,623
Marketable equity securities		55,000		0		(2,218	)		52,782
Total available-for-sale securities	$	621,753	$	6,457	$	(18,805	)	$	609,405

Held-to-Maturity

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury and government agencies	$	480	$	0	$	(62	)	$	418
State and political subdivisions		1,182		1		0			1,183
Total held-to-maturity securities	$	1,662	$	1	$	(62	)	$	1,601

The amortized cost and fair value of securities at December 31, 2014 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	$	9,153	$	9,193	$	0	$	0
Due after one through five years		124,725		125,444		0		0
Due after five through ten years		141,407		141,625		1,662		1,644
Due after ten years		49,229		50,128		0		0
U.S. government sponsored agency mortgage-backed securities		288,881		288,907		0		0
Total debt securities		613,395		615,297		1,662		1,644
Marketable equity securities		25,000		24,889		0		0
Total securities	$	638,395	$	640,186	$	1,662	$	1,644

There was a combined loss of $211 thousand realized in 2014. A pre-tax gain of $2.1 million and a pre-tax loss of $2.4 million were realized during the year. There was a combined loss of $45 thousand realized in 2013 and a combined gain of $1.2 million realized in 2012.

The amortized cost of securities pledged as collateral, to secure public deposits and for other purposes, was $267.1 million at December 31, 2014 and $257.5 million at December 31, 2013.

The amortized cost of securities sold under agreements to repurchase amounted to $280.9 million at December 31, 2014 and $255.4 million at December 31, 2013.

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, 2014 indicates that all impairment is considered temporary, market and interest rate driven, and not credit-related. The percentage of total investments with unrealized losses as of December 31, 2014 was 44.1% compared to 67.8% as of December 31, 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 December 31, 2014 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	$	31,185	$	(87	)	$	31,098
State and political subdivisions		8,800		(23	)		8,777
U.S. government sponsored agency mortgage-backed securities		50,115		(442	)		49,673
Total debt securities		90,100		(552	)		89,548
Marketable equity securities		25,000		(111	)		24,889
Total <12 months temporarily impaired AFS securities		115,100		(663	)		114,437

12 Months or More
U.S. Treasury and government agencies		65,209		(2,053	)		63,156
State and political subdivisions		21,308		(443	)		20,865
U.S. government sponsored agency mortgage-backed securities		86,389		(2,408	)		83,981
Total debt securities		172,906		(4,904	)		168,002
Marketable equity securities		0		0			0
Total ≥12 months temporarily impaired AFS securities		172,906		(4,904	)		168,002

Total
U.S. Treasury and government agencies		96,394		(2,140	)		94,254
State and political subdivisions		30,108		(466	)		29,642
U.S. government sponsored agency mortgage-backed securities		136,504		(2,850	)		133,654
Total debt securities		263,006		(5,456	)		257,550
Marketable equity securities		25,000		(111	)		24,889
Total temporarily impaired AFS securities	$	288,006	$	(5,567	)	$	282,439

Held-to-Maturity

(in thousands)	Amortized Cost		Gross Unrealized Losses			Fair Value
12 Months or More
U.S. Treasury and government agencies	$	480	$	(19	)	$	461
Total temporarily impaired HTM securities	$	480	$	(19	)	$	461

U.S. Treasury and Government Agencies

The unrealized losses in U.S. Treasury and government agencies were caused by interest rate increases. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than amortized cost. CTBI does not consider those investments to be other-than-temporarily impaired at December 31, 2014, because CTBI does not intend to sell the investments and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost, which may be maturity.

State and Political Subdivisions

The unrealized losses in securities of state and political subdivisions were caused by interest rate increases. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than amortized cost. CTBI does not consider those investments to be other-than-temporarily impaired at December 31, 2014, because CTBI does not intend to sell the investments before recovery of their amortized cost, which may be maturity.

U.S. Government Sponsored Agency Mortgage-Backed Securities

The unrealized losses in U.S. government sponsored agency mortgage-backed securities were caused by interest rate increases. CTBI expects to recover the amortized cost basis over the term of the securities. CTBI does not consider those investments to be other-than-temporarily impaired at December 31, 2014, because (i) the decline in market value is attributable to changes in interest rates and not credit quality, (ii) CTBI does not intend to sell the investments, and (iii) it is not more likely than not we will be required to sell the investments before recovery of their amortized cost, which may be maturity.

Marketable Equity Securities

CTBI's investments in marketable equity securities consist of investments in fixed income mutual funds ($24.9 million of the total fair value and $111 thousand of the total unrealized losses in common stock investments). The severity of the impairment (fair value is approximately 0.4% less than cost) and the duration of the impairment correlates with the decline in long-term interest rates in 2014. CTBI evaluated the near-term prospects of these funds in relation to the severity and duration of the impairment. Based on that evaluation, CTBI does not consider those investments to be other-than-temporarily impaired at December 31, 2014.

The analysis performed as of December 31, 2013 indicated that all impairment was considered temporary, market and interest rate 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, 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	$	31,631	$	(1,970	)	$	29,661
State and political subdivisions		57,165		(2,789	)		54,376
U.S. government sponsored agency mortgage-backed securities		238,824		(7,829	)		230,995
Total debt securities		327,620		(12,588	)		315,032
Marketable equity securities		55,000		(2,218	)		52,782
Total <12 months temporarily impaired AFS securities		382,620		(14,806	)		367,814

12 Months or More
U.S. Treasury and government agencies		35,750		(3,522	)		32,228
State and political subdivisions		7,639		(470	)		7,169
U.S. government sponsored agency mortgage-backed securities		6,579		(7	)		6,572
Total debt securities		49,968		(3,999	)		45,969
Marketable equity securities		0		0			0
Total ≥12 months temporarily impaired AFS securities		49,968		(3,999	)		45,969

Total
U.S. Treasury and government agencies		67,381		(5,492	)		61,889
State and political subdivisions		64,804		(3,259	)		61,545
U.S. government sponsored agency mortgage-backed securities		245,403		(7,836	)		237,567
Total debt securities		377,588		(16,587	)		361,001
Marketable equity securities		55,000		(2,218	)		52,782
Total temporarily impaired AFS securities	$	432,588	$	(18,805	)	$	413,783

Held-to-Maturity

(in thousands)	Amortized Cost		Gross Unrealized Losses			Fair Value
12 Months or More
U.S. Treasury and government agencies	$	480	$	(62	)	$	418
Total temporarily impaired HTM securities	$	480	$	(62	)	$	418