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, 2015 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	$	201,461	$	990	$	(401	)	$	202,050
State and political subdivisions		132,249		3,718		(508	)		135,459
U.S. government sponsored agency mortgage-backed securities		212,829		2,473		(1,126	)		214,176
Total debt securities		546,539		7,181		(2,035	)		551,685
CRA investment funds		25,000		28		0			25,028
Total available-for-sale securities	$	571,539	$	7,209	$	(2,035	)	$	576,713

Held-to-Maturity

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury and government agencies	$	480	$	0	$	(11	)	$	469
State and political subdivisions		1,181		1		0			1,182
Total held-to-maturity securities	$	1,661	$	1	$	(11	)	$	1,651

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
CRA investment funds		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 September 30, 2015 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	$	30,015	$	30,092	$	0	$	0
Due after one through five years		128,605		129,937		1,181		1,182
Due after five through ten years		124,654		126,142		480		469
Due after ten years		50,436		51,338		0		0
U.S. government sponsored agency mortgage-backed securities		212,829		214,176		0		0
Total debt securities		546,539		551,685		1,661		1,651
CRA investment funds		25,000		25,028		0		0
Total securities	$	571,539	$	576,713	$	1,661	$	1,651

As of September 30, 2015, there was a net gain of $142 thousand realized on sales and calls of AFS securities, consisting of a pre-tax gain of $840 thousand and a pre-tax loss of $698 thousand. As of September 30, 2014, there was a net loss of $145 thousand.

The amortized cost of securities pledged as collateral, to secure public deposits and for other purposes, was $217.6 million at September 30, 2015 and $267.1 million at December 31, 2014.

The amortized cost of securities sold under agreements to repurchase amounted to $286.4 million at September 30, 2015 and $280.9 million at December 31, 2014.

CTBI evaluates its investment portfolio on a quarterly basis for impairment. The analysis performed as of September 30, 2015 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 September 30, 2015 was 34.8% compared to 44.1% as of December 31, 2014. 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, 2015 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	$	22,178	$	(13	)	$	22,165
State and political subdivisions		17,068		(179	)		16,889
U.S. government sponsored agency mortgage-backed securities		50,213		(207	)		50,006
Total debt securities		89,459		(399	)		89,060
CRA investment funds		0		(0	)		0
Total <12 months temporarily impaired AFS securities		89,459		(399	)		89,060

12 Months or More
U.S. Treasury and government agencies		54,773		(388	)		54,385
State and political subdivisions		7,297		(329	)		6,968
U.S. government sponsored agency mortgage-backed securities		51,291		(919	)		50,372
Total debt securities		113,361		(1,636	)		111,725
CRA investment funds		0		0			0
Total ≥12 months temporarily impaired AFS securities		113,361		(1,636	)		111,725

Total
U.S. Treasury and government agencies		76,951		(401	)		76,550
State and political subdivisions		24,365		(508	)		23,857
U.S. government sponsored agency mortgage-backed securities		101,504		(1,126	)		100,378
Total debt securities		202,820		(2,035	)		200,785
CRA investment funds		0		(0	)		0
Total temporarily impaired AFS securities	$	202,820	$	(2,035	)	$	200,785

Held-to-Maturity

(in thousands)	Amortized Cost		Gross Unrealized Losses			Fair Value
12 Months or More
U.S. Treasury and government agencies	$	480	$	(11	)	$	469
Total temporarily impaired HTM securities	$	480	$	(11	)	$	469

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 September 30, 2015, 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 at 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 September 30, 2015, because CTBI does not intend to sell the investments before recovery of their amortized cost, which may be at 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 September 30, 2015, 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 at maturity.

The analysis performed as of December 31, 2014 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, 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
CRA investment funds		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
CRA investment funds		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
CRA investment funds		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