10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended March 31, 2013
	Or
[   ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _____________ to _____________

Commission file number 0-11129

COMMUNITY TRUST BANCORP, INC.

(Exact name of registrant as specified in its charter)

Kentucky	61-0979818
(State or other jurisdiction of incorporation or organization)	IRS Employer Identification No.
346 North Mayo Trail Pikeville, Kentucky (address of principal executive offices)	41501 (Zip Code)

(606) 432-1414

(Registrant’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes  ü No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)

Yes  ü No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of “accelerated filer, large accelerated filer, and smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	Accelerated filer  ü	Non-accelerated filer	Smaller reporting company
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes    No ü

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.

Common stock – 15,661,375 shares outstanding at April 30, 2013

CAUTIONARY STATEMENT

REGARDING FORWARD LOOKING STATEMENTS

Certain of the statements contained herein that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. CTBI’s actual results may differ materially from those included in the forward-looking statements. Forward-looking statements are typically identified by words or phrases such as “believe,” “expect,” “anticipate,” “intend,” “estimate,” “may increase,” “may fluctuate,” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” and “could.” These forward-looking statements involve risks and uncertainties including, but not limited to, economic conditions, portfolio growth, the credit performance of the portfolios, including bankruptcies, and seasonal factors; changes in general economic conditions including the performance of financial markets, prevailing inflation and interest rates, realized gains from sales of investments, gains from asset sales, and losses on commercial lending activities; results of various investment activities; the effects of competitors’ pricing policies, changes in laws and regulations, competition, and demographic changes on target market populations’ savings and financial planning needs; industry changes in information technology systems on which we are highly dependent; failure of acquisitions to produce revenue enhancements or cost savings at levels or within the time frames originally anticipated or unforeseen integration difficulties; the adoption by CTBI of a Federal Financial Institutions Examination Council (FFIEC) policy that provides guidance on the reporting of delinquent consumer loans and the timing of associated credit charge-offs for financial institution subsidiaries; and the resolution of legal  proceedings and related matters.  In addition, the banking industry in general is subject to various monetary and fiscal policies and regulations, which include those determined by the Federal Reserve Board, the Federal Deposit Insurance Corporation, and state regulators, whose policies and regulations could affect CTBI’s results.  These statements are representative only on the date hereof, and CTBI undertakes no obligation to update any forward-looking statements made.

PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

The accompanying information has not been audited by our independent registered public accountants; however, in the opinion of management such information reflects all adjustments necessary for a fair presentation of the results for the interim period.  All such adjustments are of a normal and recurring nature.

The accompanying condensed consolidated financial statements are presented in accordance with the requirements of Form 10-Q and consequently do not include all of the disclosures normally required by accounting principles generally accepted in the United States of America or those normally made in the Registrant’s annual report on Form 10-K.  Accordingly, the reader of the Form 10-Q should refer to the Registrant’s Form 10-K for the year ended December 31, 2012 for further information in this regard.

Community Trust Bancorp, Inc.

Condensed Consolidated Balance Sheets

(dollars in thousands)	(unaudited) March 31 2013			December 31 2012
Assets:
Cash and due from banks	$	54,589		$	73,451
Interest bearing deposits		111,128			127,438
Federal funds sold		2,227			6,671
Cash and cash equivalents		167,944			207,560
Certificates of deposit in other banks		9,320			5,336
Securities available-for-sale at fair value (amortized cost of $660,611 and $583,858, respectively)		677,510			603,343
Securities held-to-maturity at amortized cost (fair value of $1,656 and $1,659, respectively)		1,662			1,662
Loans held for sale		1,449			22,486
Loans		2,563,314			2,550,573
Allowance for loan losses		(33,393	)		(33,245	)
Net loans		2,529,921			2,517,328
Premises and equipment, net		53,491			54,321
Federal Home Loan Bank stock		25,673			25,673
Federal Reserve Bank stock		4,886			4,885
Goodwill		65,490			65,490
Core deposit intangible (net of accumulated amortization of $7,765 and $7,712, respectively)		850			904
Bank owned life insurance		53,166			44,893
Mortgage servicing rights		2,652			2,364
Other real estate owned		45,720			47,537
Other assets		32,361			31,882
Total assets	$	3,672,095		$	3,635,664
Liabilities and shareholders’ equity:
Deposits:
Noninterest bearing	$	619,819		$	606,448
Interest bearing		2,313,761			2,297,400
Total deposits		2,933,580			2,903,848
Repurchase agreements		213,573			210,120
Federal funds purchased and other short-term borrowings		15,272			12,314
Advances from Federal Home Loan Bank		1,387			1,429
Long-term debt		61,341			61,341
Other liabilities		40,308			46,268
Total liabilities		3,265,461			3,235,320
Shareholders’ equity:
Preferred stock, 300,000 shares authorized and unissued		-			-
Common stock, $5 par value, shares authorized 25,000,000; shares outstanding 2013 – 15,653,090; 2012 – 15,612,935		78,266			78,065
Capital surplus		161,520			160,670
Retained earnings		155,864			148,944
Accumulated other comprehensive income, net of tax		10,984			12,665
Total shareholders’ equity		406,634			400,344
Total liabilities and shareholders’ equity	$	3,672,095		$	3,635,664

Community Trust Bancorp, Inc.

Condensed Consolidated Statements of Income and Other Comprehensive Income

(unaudited)

	Three Months Ended
	March 31
(in thousands except per share data)	2013			2012
Interest income:
Interest and fees on loans, including loans held for sale	$	32,848		$	35,052
Interest and dividends on securities
Taxable		2,895			2,771
Tax exempt		558			477
Interest and dividends on Federal Reserve Bank and Federal Home Loan Bank stock		348			364
Other, including interest on federal funds sold		127			162
Total interest income		36,776			38,826
Interest expense:
Interest on deposits		3,019			4,471
Interest on repurchase agreements and other short-term borrowings		263			338
Interest on advances from Federal Home Loan Bank		7			11
Interest on long-term debt		290			1,000
Total interest expense		3,579			5,820
Net interest income		33,197			33,006
Provision for loan losses		1,559			1,160
Net interest income after provision for loan losses		31,638			31,846
Noninterest income:
Service charges on deposit accounts		5,767			5,872
Gains on sales of loans, net		1,397			617
Trust income		2,000			1,613
Loan related fees		948			1,287
Bank owned life insurance		421			428
Other noninterest income		1,387			1,370
Total noninterest income		11,920			11,187
Noninterest expense:
Officer salaries and employee benefits		2,551			2,356
Other salaries and employee benefits		10,431			10,457
Occupancy, net		1,927			1,853
Equipment		978			918
Data processing		1,813			1,579
Bank franchise tax		1,123			1,155
Legal fees		606			601
Professional fees		382			260
FDIC insurance		602			657
Other real estate owned provision and expense		1,839			790
Other noninterest expense		4,047			5,124
Total noninterest expense		26,299			25,750
Income before income taxes		17,259			17,283
Income taxes		5,439			5,414
Net income		11,820			11,869
Other comprehensive income:
Unrealized holding gains on securities available-for-sale:
Unrealized holding gains arising during the period		(2,586	)		(2,202	)
Tax benefit		(905	)		(771	)
Other comprehensive income, net of tax		(1,681	)		(1,431	)
Comprehensive income	$	10,139		$	10,438
Basic earnings per share	$	0.76		$	0.77
Diluted earnings per share	$	0.76		$	0.77
Weighted average shares outstanding-basic		15,539			15,407
Weighted average shares outstanding-diluted		15,592			15,456
Dividends declared per share	$	0.315		$	0.310

See notes to condensed consolidated financial statements.

Community Trust Bancorp, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

	Three Months Ended
	March 31
(in thousands)	2013			2012
Cash flows from operating activities:
Net income	$	11,820		$	11,869
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,151			1,061
Deferred taxes		905			771
Stock-based compensation		164			146
Excess tax benefits of stock-based compensation		35			336
Provision for loan losses		1,559			1,160
Write-downs of other real estate owned and other repossessed assets		1,146			179
Gains on sale of mortgage loans held for sale		(1,397	)		(617	)
(Gains)/losses on sale of assets, net		65			(35	)
Proceeds from sale of mortgage loans held for sale		59,723			26,731
Funding of mortgage loans held for sale		(37,289	)		(27,220	)
Amortization of securities premiums and discounts, net		1,086			1,287
Change in cash surrender value of bank owned life insurance		(324	)		(344	)
Mortgage servicing rights:
Fair value adjustments		69			(207	)
New servicing assets created		(357	)		(151	)
Changes in:
Other assets		(486	)		(392	)
Other liabilities		(5,968	)		10,090
Net cash provided by operating activities		31,902			24,664
Cash flows from investing activities:
Certificates of deposit in other banks:
Purchase of certificates of deposit		(3,984	)		(1,117	)
Securities available-for-sale (AFS):
Purchase of AFS securities		(109,477	)		(123,695	)
Proceeds from prepayments and maturities of AFS securities		31,637			33,626
Change in loans, net		(15,881	)		8,803
Purchase of premises and equipment		(267	)		(1,436	)
Proceeds from sale of premises and equipment		0			73
Additional investment in Federal Reserve Bank stock		(1	)		(1	)
Proceeds from sale of other real estate and other repossessed assets		2,347			2,089
Additional investment in other real estate and other repossessed assets		(5	)		(90	)
Additional investment in bank owned life insurance		(7,949	)		0
Net cash used in investing activities		(103,580	)		(81,748	)
Cash flows from financing activities:
Change in deposits, net		29,732			69,194
Change in repurchase agreements, federal funds purchased, and other short-term borrowings, net		6,411			15,773
Payments on advances from Federal Home Loan Bank		(42	)		(20,047	)
Issuance of common stock		883			1,993
Excess tax benefits of stock-based compensation		(35	)		(336	)
Dividends paid		(4,887	)		(4,753	)
Net cash provided by financing activities		32,062			61,824
Net increase (decrease) in cash and cash equivalents		(39,616	)		4,740
Cash and cash equivalents at beginning of period		207,560			238,481
Cash and cash equivalents at end of period	$	167,944		$	243,221
Supplemental disclosures:
Income taxes paid	$	4,500		$	3,800
Interest paid		3,411			5,290
Non-cash activities:
Loans to facilitate the sale of other real estate and other repossessed assets		318			952
Common stock dividends accrued, paid in subsequent quarter		4,900			4,783
Real estate acquired in settlement of loans		2,047			5,370

See notes to condensed consolidated financial statements.

Community Trust Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

Note 1 - Summary of Significant Accounting Policies

In the opinion of management, the unaudited condensed consolidated financial statements include all adjustments (which consist of normal recurring accruals) necessary, to present fairly the condensed consolidated financial position as of March 31, 2013, the results of operations for the three months ended March 31, 2013 and 2012, and the cash flows for the three months ended March 31, 2013 and 2012.  In accordance with accounting principles generally accepted in the United States of America for interim financial information, these statements do not include certain information and footnote disclosures required by accounting principles generally accepted in the United States of America for complete annual financial statements.  The results of operations for the three months ended March 31, 2013 and 2012, and the cash flows for the three months ended March 31, 2013 and 2012, are not necessarily indicative of the results to be expected for the full year.  The condensed consolidated balance sheet as of December 31, 2012 has been derived from the audited consolidated financial statements of Community Trust Bancorp, Inc. (“CTBI”) for that period.  For further information, refer to the consolidated financial statements and footnotes thereto for the year ended December 31, 2012, included in our annual report on Form 10-K.

Principles of Consolidation – The unaudited condensed consolidated financial statements include the accounts of CTBI and its separate and distinct, wholly owned subsidiaries Community Trust Bank, Inc. (the “Bank”) and Community Trust and Investment Company.  All significant intercompany transactions have been eliminated in consolidation.

Reclassifications – Certain reclassifications considered to be immaterial have been made in the prior year condensed consolidated financial statements to conform to current year classifications.  These reclassifications had no effect on net income.

New Accounting Standards –

ØTesting Goodwill for Impairment – In July 2012, the FASB issued ASU 2012-02, Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment.  Under these amendments, an entity would not be required to calculate the fair value of an indefinite-lived intangible asset unless the entity determines, based on qualitative assessment, that it is not more likely than not that the indefinite-lived intangible asset is impaired.  The amendments include a number of events and circumstances for an entity to consider in conducting the qualitative assessment.  ASU 2012-02 is effective for annual and interim indefinite-lived intangible asset impairment tests performed for fiscal years beginning after September 15, 2012.  Adoption of this ASU did not have a material effect on our consolidated financial statements.

ØAmounts Reclassified Out of Other Comprehensive Income – In February 2013, the FASB issued ASU No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into net income.  The amendments in the ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP.  The new amendments will require an organization to:

-   Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income - but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period; and

-   Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense.

The amendments apply to all public and private companies that report items of other comprehensive income.  Public companies are required to comply with these amendments for all reporting periods (interim and annual).  The amendments are effective for reporting periods beginning after December 15, 2012, for public companies.  The adoption of ASU No. 2013-02 did not have a material impact on CTBI’s consolidated financial statements.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires the appropriate application of certain accounting policies, many of which require us to make estimates and assumptions about future events and their impact on amounts reported in our consolidated financial statements and related notes.  Since future events and their impact cannot be determined with certainty, the actual results will inevitably differ from our estimates.  Such differences could be material to the consolidated financial statements.

We believe the application of accounting policies and the estimates required therein are reasonable.  These accounting policies and estimates are constantly reevaluated, and adjustments are made when facts and circumstances dictate a change.  Historically, we have found our application of accounting policies to be appropriate, and actual results have not differed materially from those determined using necessary estimates.

Our accounting policies are described above.  We have identified the following critical accounting policies:

Investments –Management determines the classification of securities at purchase.  We classify securities into held-to-maturity, trading, or available-for-sale categories.  Held-to-maturity securities are those which we have the positive intent and ability to hold to maturity and are reported at amortized cost.  In accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 320, Investment Securities, investments in debt securities that are not classified as held-to-maturity and equity securities that have readily determinable fair values shall be classified in one of the following categories and measured at fair value in the statement of financial position:

a. Trading securities. Securities that are bought and held principally for the purpose of selling them in the near term (thus held for only a short period of time) shall be classified as trading securities. Trading generally reflects active and frequent buying and selling, and trading securities are generally used with the objective of generating profits on short-term differences in price.

b. Available-for-sale securities. Investments not classified as trading securities (nor as held-to-maturity securities) shall be classified as available-for-sale securities.

We do not have any securities that are classified as trading securities.  Available-for-sale securities are reported at fair value, with unrealized gains and losses included as a separate component of shareholders’ equity, net of tax.  If declines in fair value are other than temporary, the carrying value of the securities is written down to fair value as a realized loss with a charge to income for the portion attributable to credit losses and a charge to other comprehensive income for the portion that is not credit related.

Gains or losses on disposition of securities are computed by specific identification for all securities except for shares in mutual funds, which are computed by average cost.  Interest and dividend income, adjusted by amortization of purchase premium or discount, is included in earnings.

When the fair value of a security is below its amortized cost, and depending on the length of time the condition exists and the extent the fair market value is below amortized cost, additional analysis is performed to determine whether an other than temporary impairment condition exists.  Available-for-sale and held-to-maturity securities are analyzed quarterly for possible other than temporary impairment.  The analysis considers (i) whether we have the intent to sell our securities prior to recovery and/or maturity and (ii) whether it is more likely than not that we will not have to sell our securities prior to recovery and/or maturity.  Often, the information available to conduct these assessments is limited and rapidly changing, making estimates of fair value subject to judgment.  If actual information or conditions are different than estimated, the extent of the impairment of the security may be different than previously estimated, which could have a material effect on the CTBI’s results of operations and financial condition.

Loans –Loans with the ability and the intent to be held until maturity and/or payoff are reported at the carrying value of unpaid principal reduced by unearned interest, an allowance for loan and lease losses, and unamortized deferred fees or costs.  Income is recorded on the level yield basis.  Interest accrual is discontinued when management believes, after considering economic and business conditions, collateral value, and collection efforts, that the borrower’s financial condition is such that collection of interest is doubtful.  Any loan greater than 90 days past due must be well secured and in the process of collection to continue accruing interest.  Cash payments received on nonaccrual loans generally are applied against principal, and interest income is only recorded once principal recovery is reasonably assured.  Loans are not reclassified as accruing until principal and interest payments remain current for a period of time, generally six months, and future payments appear reasonably certain.  Included in certain loan categories of impaired loans are troubled debt restructurings that were classified as impaired.  A restructuring of a debt constitutes a troubled debt restructuring if the creditor for economic or legal reasons related to the debtor’s financial difficulties grants a concession to the debtor that it would not otherwise consider.

Loan origination and commitment fees and certain direct loan origination costs are deferred and the net amount amortized over the estimated life of the related loans, leases, or commitments as a yield adjustment.

Allowance for Loan and Lease Losses –We maintain an allowance for loan and lease losses (“ALLL”) at a level that is appropriate to cover estimated credit losses on individually evaluated loans determined to be impaired, as well as estimated credit losses inherent in the remainder of the loan and lease portfolio.  Since arriving at an appropriate ALLL involves a high degree of management judgment, we use an ongoing quarterly analysis to develop a range of estimated losses.  In accordance with accounting principles generally accepted in the United States, we use our best estimate within the range of potential credit loss to determine the appropriate ALLL.  Credit losses are charged and recoveries are credited to the ALLL.

We utilize an internal risk grading system for commercial credits.  Those larger commercial credits that exhibit probable or observed credit weaknesses are subject to individual review.  The borrower’s cash flow, adequacy of collateral coverage, and other options available to CTBI, including legal remedies, are evaluated.  The review of individual loans includes those loans that are impaired as defined by ASC 310-35, Impairment of a Loan.  We evaluate the collectability of both principal and interest when assessing the need for loss provision.  Historical loss rates are analyzed and applied to other commercial loans not subject to specific allocations.  The ALLL allocation for this pool of commercial loans is established based on the historical average, maximum, minimum, and median loss ratios.

A loan is considered impaired when, based on current information and events, it is probable that CTBI will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.  Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.  Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.  Impairment is measured on a loan-by-loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

Homogenous loans, such as consumer installment, residential mortgages, and home equity lines are not individually risk graded.  The associated ALLL for these loans is measured under ASC 450, Contingencies.

When any secured commercial loan is considered uncollectable, whether past due or not, a current assessment of the value of the underlying collateral is made.  If the balance of the loan exceeds the fair value of the collateral, the loan is placed on non-accrual and the loan is charged down to the value of the collateral less estimated cost to sell or a specific reserve equal to the difference between book value of the loan and the fair value assigned to the collateral is created until such time as the loan is foreclosed.  When the foreclosed collateral has been legally assigned to CTBI, a charge off is taken, if necessary, in order that the remaining balance reflects the fair value estimated less costs to sell of the collateral then transferred to other real estate owned or other repossessed assets.  When any unsecured commercial loan is considered uncollectable the loan is charged off no later than at 90 days past due.

All closed-end consumer loans (excluding conventional 1-4 family residential loans and installment and revolving loans secured by real estate) are charged off no later than 120 days (5 monthly payments) delinquent.  If a loan is considered uncollectable, it is charged off earlier than 120 days delinquent.  For conventional 1-4 family residential loans and installment and revolving loans secured by real estate, when a loan is 90 days past due, a current assessment of the value of the real estate is made.  If the balance of the loan exceeds the fair value of the property, the loan is placed on nonaccrual and foreclosure proceedings are initiated.  When the foreclosed property has been legally assigned to CTBI, a charge-off is taken with the remaining balance, reflecting the fair value less estimated costs to sell, transferred to other real estate owned.

Historical loss rates for loans are adjusted for significant factors that, in management’s judgment, reflect the impact of any current conditions on loss recognition.  We generally review the historical loss rates over eight quarters and four quarters on a rolling average basis.  Factors that we consider include delinquency trends, current economic conditions and trends, strength of supervision and administration of the loan portfolio, levels of underperforming loans, level of recoveries to prior year’s charge-offs, trend in loan losses, industry concentrations and their relative strengths, amount of unsecured loans and underwriting exceptions.  Based upon management’s judgment, “best case,” “worst case,” and “most likely” scenarios are determined.  The total of each of these weighted factors is then applied against the applicable portion of the portfolio and the ALLL is adjusted accordingly to approximate the most likely scenario.  Management continually reevaluates the other subjective factors included in its ALLL analysis.

Other Real Estate Owned – When foreclosed properties are acquired, appraisals are obtained and the properties are booked at the current market value less expected sales costs.  Additionally, periodic updated appraisals are obtained on unsold foreclosed properties.  When an updated appraisal reflects a market value below the current book value, a charge is booked to current earnings to reduce the property to its new market value less expected sales costs.  Our policy for determining the frequency of periodic reviews is based upon consideration of the specific properties and the known or perceived market fluctuations in a particular market and is typically between 12 and 18 months but generally not more than 24 months.  All revenues and expenses related to the carrying of other real estate owned are recognized by a charge to income.

Note 2 – Stock-Based Compensation

CTBI’s compensation expense related to stock option grants was $3 thousand and $19 thousand for the three months ended March 31, 2013 and 2012, respectively.  Restricted stock expense for the first three months of 2013 and 2012 was $161 thousand and $157 thousand, respectively, including $31 thousand and $30 thousand, respectively, in dividends paid for each period.  As of March 31, 2013, there was a total of $17 thousand of unrecognized compensation expense related to unvested stock option awards that will be recognized as expense as the awards vest over a weighted average period of 1.6 years and a total of $1.3 million of unrecognized compensation expense related to restricted stock grants that will be recognized as expense as the awards vest over a weighted average period of 1.5 years.

There were 10,822 shares and 331 shares of restricted stock granted during the three months ended March 31, 2013 and 2012.  The restrictions on the restricted stock granted in 2013 and 2012 will lapse over four years.  However, in the event of a change in control of CTBI or the death of the participant, the restrictions will lapse.  In the event of the disability of the participant, the restrictions will lapse on a pro rata basis.  The Compensation Committee of the Board of Directors will have discretion to review and revise restrictions applicable to a participant’s restricted stock in the event of the participant’s retirement.  There were 1,500 options granted to purchase shares of CTBI common stock during the three months ended March 31, 2013.  There were no options granted to purchase shares of CTBI common stock during the three months ended March 31, 2012.

The fair values of options granted during the three months ended March 31, 2013, were established at the date of grant using a Black-Scholes option pricing model with the weighted average assumptions as follows:

	Three Months Ended
	March 31
	2013
Expected dividend yield		3.74	%
Risk-free interest rate		1.33	%
Expected volatility		39.11	%
Expected term (in years)		7.5
Weighted average fair value of options	$	9.05

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 March 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	$	61,100	$	435	$	(272	)	$	61,263
State and political subdivisions		115,724		4,949		(225	)		120,448
U.S. government sponsored agency mortgage-backed securities		428,787		11,992		(309	)		440,470
Total debt securities		605,611		17,376		(806	)		622,181
Marketable equity securities		55,000		606		(277	)		55,329
Total available-for-sale securities	$	660,611	$	17,982	$	(1,083	)	$	677,510

Held-to-Maturity

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury and government agencies	$	480	$	0	$	(7	)	$	473
State and political subdivisions		1,182		1		0			1,183
Total held-to-maturity securities	$	1,662	$	1	$	(7	)	$	1,656

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 March 31, 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	$	7,602	$	7,653	$	0	$	0
Due after one through five years		23,004		24,051		0		0
Due after five through ten years		107,594		109,952		1,182		1,183
Due after ten years		38,624		40,055		480		473
U.S. government sponsored agency mortgage-backed securities		428,787		440,470		0		0
Total debt securities		605,611		622,181		1,662		1,656
Marketable equity securities		55,000		55,329		0		0
Total securities	$	660,611	$	677,510	$	1,662	$	1,656

There were no sales of securities and no gains or losses realized as of March 31, 2013 or 2012.

The amortized cost of securities pledged as collateral, to secure public deposits and for other purposes, was $258.6 million at March 31, 2013 and $262.4 million at December 31, 2012.

The amortized cost of securities sold under agreements to repurchase amounted to $237.0 million at March 31, 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 March 31, 2013 indicates that all impairment is considered temporary, market driven, and not credit-related. The percentage of total investments with unrealized losses as of March 31, 2013 was 22.2% compared to 14.8% as of December 31, 2012.  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 March 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	$	48,078	$	(272	)	$	47,806
State and political subdivisions		17,012		(212	)		16,800
U.S. government sponsored agency mortgage-backed securities		55,489		(309	)		55,180
Total debt securities		120,579		(793	)		119,786
Marketable equity securities		30,000		(277	)		29,723
Total <12 months temporarily impaired AFS securities		150,579		(1,070	)		149,509
12 Months or More
State and political subdivisions		1,106		(13	)		1,093
Total ≥12 months temporarily impaired AFS securities		1,106		(13	)		1,093
Total
U.S. Treasury and government agencies		48,078		(272	)		47,806
State and political subdivisions		18,118		(225	)		17,893
U.S. government sponsored agency mortgage-backed securities		55,489		(309	)		55,180
Total debt securities		121,685		(806	)		120,879
Marketable equity securities		30,000		(277	)		29,723
Total temporarily impaired AFS securities	$	151,685	$	(1,083	)	$	150,602

Held-to-Maturity

(in thousands)	Amortized Cost		Gross Unrealized Losses			Fair Value
Less Than 12 Months
U.S. Treasury and government agencies	$	480	$	(7	)	$	473
Total temporarily impaired HTM securities	$	480	$	(7	)	$	473

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 <12 months temporarily impaired AFS securities		89,265		(485	)		88,780
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
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

Note 4 – Loans

Major classifications of loans, net of unearned income and deferred loan origination costs, are summarized as follows:

(in thousands)	March 31 2013		December 31 2012
Commercial construction	$	102,303	$	119,447
Commercial secured by real estate		847,807		807,213
Equipment lease financing		9,944		9,246
Commercial other		375,409		376,348
Real estate construction		51,978		55,041
Real estate mortgage		696,321		696,928
Home equity		79,899		82,292
Consumer direct		119,191		122,581
Consumer indirect		280,462		281,477
Total loans	$	2,563,314	$	2,550,573

CTBI has segregated and evaluates its loan portfolio through nine portfolio segments. The nine segments are commercial construction, commercial secured by real estate, equipment lease financing, commercial other, real estate construction, real estate mortgage, home equity, consumer direct, and consumer indirect.  CTBI serves customers in small and mid-sized communities in eastern, northeastern, central, and south central Kentucky, southern West Virginia, and northeastern Tennessee.  Therefore, CTBI’s exposure to credit risk is significantly affected by changes in these communities.

Commercial construction loans are for the purpose of erecting or rehabilitating buildings or other structures for commercial purposes, including any infrastructure necessary for development.   Included in this category are improved property, land development, and tract development loans.  The terms of these loans are generally short-term with permanent financing upon completion.

Commercial real estate loans include loans secured by nonfarm, nonresidential properties, 1-4 family/ multi-family properties, farmland, and other commercial real estate.  These loans are originated based on the borrower’s ability to service the debt and secondarily based on the fair value of the underlying collateral.

Equipment lease financing loans are fixed, variable, and tax exempt leases for commercial purposes.

Commercial other loans consist of commercial check loans, agricultural loans, receivable financing, floorplans, loans to financial institutions, loans for purchasing or carrying securities, and other commercial purpose loans.  Commercial loans are underwritten based on the borrower’s ability to service debt from the business’s underlying cash flows.  As a general practice, we obtain collateral such as real estate, equipment, or other assets, although such loans may be uncollateralized but guaranteed.

Real estate construction loans are typically for owner-occupied properties.  The terms of these loans are generally short-term with permanent financing upon completion.

Residential real estate loans are a mixture of fixed rate and adjustable rate first and second lien residential mortgage loans.  As a policy, CTBI holds adjustable rate loans and sells the majority of its fixed rate first lien mortgage loans into the secondary market.  Changes in interest rates or market conditions may impact a borrower’s ability to meet contractual principal and interest payments.  Residential real estate loans are secured by real property.

Home equity lines are revolving adjustable rate credit lines secured by real property.

Consumer direct loans are fixed rate products comprised of unsecured loans, consumer revolving credit lines, deposit secured loans, and all other consumer purpose loans.

Consumer indirect loans are fixed rate loans secured by automobiles, trucks, vans, and recreational vehicles originated at the selling dealership underwritten and purchased by CTBI’s indirect lending department.  Both new and used products are financed.  Only dealers who have executed dealer agreements with CTBI participate in the indirect lending program.

Not included in the loan balances above were loans held for sale in the amount of $1.4 million at March 31, 2013 and $22.5 million at December 31, 2012.  The amount of capitalized fees and costs under ASC 310-20, included in the above loan totals were $0.2 million and $0.4 million at March 31, 2013 and December 31, 2012, respectively.

Refer to note 1 to the condensed consolidated financial statements for further information regarding our nonaccrual policy.  Nonaccrual loans segregated by class of loans were as follows:

(in thousands)	March 31 2013	December 31 2012
Commercial:
Commercial construction	$6,196	$5,955
Commercial secured by real estate	6,256	5,572
Commercial other	1,344	1,655
Residential:
Real estate construction	635	315
Real estate mortgage	3,763	3,153
Home equity	143	141
Total nonaccrual loans	$18,337	$16,791

The following tables present CTBI’s loan portfolio aging analysis, segregated by class, as of March 31, 2013 and December 31, 2012:

	March 31, 2013
(in thousands)	30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Total Past Due		Current		Total Loans		90+ and Accruing*
Commercial:
Commercial construction	$	617	$	16	$	8,599	$	9,232	$	93,071	$	102,303	$	2,532
Commercial secured by real estate		6,619		7,111		9,129		22,859		824,948		847,807		4,475
Equipment lease financing		0		0		0		0		9,944		9,944		0
Commercial other		1,776		1,398		5,101		8,275		367,134		375,409		3,827
Residential:
Real estate construction		195		272		866		1,333		50,645		51,978		232
Real estate mortgage		1,822		2,394		6,698		10,914		685,407		696,321		3,635
Home equity		1,118		119		497		1,734		78,165		79,899		374
Consumer:
Consumer direct		851		247		79		1,177		118,014		119,191		79
Consumer indirect		1,860		546		379		2,785		277,677		280,462		379
Total	$	14,858	$	12,103	$	31,348	$	58,309	$	2,505,005	$	2,563,314	$	15,533

	December 31, 2012
(in thousands)	30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Total Past Due		Current		Total Loans		90+ and Accruing*
Commercial:
Commercial construction	$	1,413	$	312	$	9,598	$	11,323	$	108,124	$	119,447	$	3,778
Commercial secured by real estate		9,733		1,633		10,456		21,822		785,391		807,213		5,943
Equipment lease financing		0		0		0		0		9,246		9,246		0
Commercial other		259		1,142		5,164		6,565		369,783		376,348		3,867
Residential:
Real estate construction		248		572		511		1,331		53,710		55,041		196
Real estate mortgage		2,765		4,029		7,138		13,932		682,996		696,928		4,511
Home equity		921		102		565		1,588		80,704		82,292		441
Consumer:
Consumer direct		1,360		336		98		1,794		120,787		122,581		98
Consumer indirect		2,772		907		381		4,060		277,417		281,477		381
Total	$	19,471	$	9,033	$	33,911	$	62,415	$	2,488,158	$	2,550,573	$	19,215

*90+ and Accruing are also included in 90+ Days Past Due column.

The risk characteristics of CTBI’s material portfolio segments are as follows:

Commercial real estate loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate.  Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan.  Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy.  Management monitors and evaluates commercial real estate loans based on collateral and risk grade criteria.

Commercial loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower.  The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value.  Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis.  In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

With respect to residential loans that are secured by 1-4 family residences and are generally owner occupied, CTBI generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded.  Home equity loans are typically secured by a subordinate interest in 1-4 family residences, and consumer loans are secured by consumer assets such as automobiles or recreational vehicles.  Some consumer loans are unsecured such as small installment loans and certain lines of credit.  Repayment of these loans is primarily dependent on the personal income and credit rating of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels.  Repayment can also be impacted by changes in property values on residential properties.  Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

Credit Quality Indicators:

CTBI categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors.  CTBI also considers the fair value of the underlying collateral and the strength and willingness of the guarantor(s).  CTBI analyzes commercial loans individually by classifying the loans as to credit risk.  Loans classified as loss, doubtful, substandard, or special mention are reviewed quarterly by CTBI for further deterioration or improvement to determine if appropriately classified and valued if deemed impaired.  All other commercial loan reviews are completed every 12 to 18 months.  In addition, during the renewal process of any loan, as well as if a loan becomes past due or if other information becomes available, CTBI will evaluate the loan grade.  CTBI uses the following definitions for risk ratings:

Ø   Pass grades include investment grade, low risk, moderate risk, and acceptable risk loans.  The loans range from loans that have no chance of resulting in a loss to loans that have a limited chance of resulting in a loss.  Customers in this grade have excellent to fair credit ratings.  The cash flows are adequate to meet required debt repayments.

Ø   Watch graded loans are loans that warrant extra management attention but are not currently criticized.  Loans on the watch list may be potential troubled credits or may warrant “watch” status for a reason not directly related to the asset quality of the credit.  The watch grade is a management tool to identify credits which may be candidates for future classification or may temporarily warrant extra management monitoring.

Ø   Other assets especially mentioned (OAEM) reflects loans that are currently protected but are potentially weak.  These loans constitute an undue and unwarranted credit risk but not to the point of justifying a classification of substandard.  The credit risk may be relatively minor yet constitute an unwarranted risk in light of circumstances surrounding a specific asset. Loans in this grade display potential weaknesses which may, if unchecked or uncorrected, inadequately protect CTBI’s credit position at some future date.  The loans may be adversely affected by economic or market conditions.

Ø   Substandard grading indicates that the loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged.  These loans have a well-defined weakness or weaknesses that jeopardize the orderly liquidation of the debt with the distinct possibility that CTBI will sustain some loss if the deficiencies are not corrected.

Ø   Doubtful graded loans have the weaknesses inherent in the substandard grading with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.  The probability of loss is extremely high, but because of certain important and reasonably specific pending factors which may work to CTBI’s advantage or strengthen the asset(s), its classification as an estimated loss is deferred until its more exact status may be determined.  Pending factors include proposed merger, acquisition, or liquidation procedures, capital injection, perfecting liens on additional collateral, and refinancing plans.

The following tables present the credit risk profile of CTBI’s commercial loan portfolio based on rating category and payment activity, segregated by class of loans, as of March 31, 2013 and December 31, 2012:

(in thousands)	Commercial Construction		Commercial Secured by Real Estate		Equipment Leases		Commercial Other		Total
March 31, 2013
Pass	$	74,898	$	704,073	$	9,944	$	327,158	$	1,116,073
Watch		14,142		85,439		0		29,830		129,411
OAEM		56		13,769		0		974		14,799
Substandard		7,011		39,387		0		16,336		62,734
Doubtful		6,196		5,139		0		1,111		12,446
Total	$	102,303	$	847,807	$	9,944	$	375,409	$	1,335,463
December 31, 2012
Pass	$	92,140	$	665,764	$	9,246	$	328,646	$	1,095,796
Watch		12,915		79,517		0		28,760		121,192
OAEM		1,054		16,532		0		2,816		20,402
Substandard		7,383		40,021		0		14,878		62,282
Doubtful		5,955		5,379		0		1,248		12,582
Total	$	119,447	$	807,213	$	9,246	$	376,348	$	1,312,254

The following tables present the credit risk profile of the CTBI’s residential real estate and consumer loan portfolios based on performing or nonperforming status, segregated by class, as of March 31, 2013 and December 31, 2012:

(in thousands)	Real Estate Construction		Real Estate Mortgage		Home Equity		Consumer Direct		Consumer Indirect		Total
March 31, 2013
Performing	$	51,111	$	688,923	$	79,382	$	119,112	$	280,083	$	1,218,611
Nonperforming (1)		867		7,398		517		79		379		9,240
Total	$	51,978	$	696,321	$	79,899	$	119,191	$	280,462	$	1,227,851
December 31, 2012
Performing	$	54,530	$	689,264	$	81,710	$	122,483	$	281,096	$	1,229,083
Nonperforming (1)		511		7,664		582		98		381		9,236
Total	$	55,041	$	696,928	$	82,292	$	122,581	$	281,477	$	1,238,319

(1)  A loan is considered nonperforming if it is 90 days or more past due and/or on nonaccrual.

A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-10-35-16), when based on current information and events, it is probable CTBI will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan.  Impaired loans include nonperforming commercial loans but also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties.  These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance, or other actions intended to maximize collection.

The following table presents impaired loans, the average investment in impaired loans, and interest income recognized on impaired loans for the periods ended March 31, 2013, December 31, 2012, and March 31, 2012:

	March 31, 2013
(in thousands)	Recorded Balance		Unpaid Contractual Principal Balance		Specific Allowance		Average Investment in Impaired Loans		*Interest Income Recognized
Loans without a specific valuation allowance:
Commercial construction	$	5,155	$	5,609	$	0	$	5,225	$	74
Commercial secured by real estate		33,765		34,586		0		33,908		297
Commercial other		15,779		17,920		0		15,435		154
Real estate mortgage		657		657		0		658		7
Loans with a specific valuation allowance:
Commercial construction		6,073		7,303		1,911		6,075		0
Commercial secured by real estate		4,158		4,276		1,192		4,166		0
Commercial other		867		2,188		322		868		0
Totals:
Commercial construction		11,228		12,912		1,911		11,300		74
Commercial secured by real estate		37,923		38,862		1,192		38,074		297
Commercial other		16,646		20,108		322		16,303		154
Real estate mortgage		657		657		0		658		7
Total	$	66,454	$	72,539	$	3,425	$	66,335	$	532

	December 31, 2012
(in thousands)	Recorded Balance		Unpaid Contractual Principal Balance		Specific Allowance		Average Investment in Impaired Loans		*Interest Income Recognized
Loans without a specific valuation allowance:
Commercial construction	$	3,692	$	4,146	$	0	$	4,249	$	97
Commercial secured by real estate		35,046		35,818		0		35,542		1,337
Commercial other		13,285		15,484		0		11,083		416
Real estate mortgage		695		695		0		481		30
Loans with a specific valuation allowance:
Commercial construction		5,703		6,933		1,820		6,585		0
Commercial secured by real estate		3,067		3,189		1,090		3,243		0
Commercial other		1,010		2,331		338		1,441		0
Totals:
Commercial construction		9,395		11,079		1,820		10,834		97
Commercial secured by real estate		38,113		39,007		1,090		38,785		1,337
Commercial other		14,295		17,815		338		12,524		416
Real estate mortgage		695		695		0		481		30
Total	$	62,498	$	68,596	$	3,248	$	62,624	$	1,880

	March 31, 2012
(in thousands)	Recorded Balance		Unpaid Contractual Principal Balance		Specific Allowance		Average Investment in Impaired Loans		*Interest Income Recognized
Loans without a specific valuation allowance:
Commercial construction	$	4,594	$	4,595	$	0	$	4,683	$	18
Commercial secured by real estate		36,312		37,778		0		36,506		332
Commercial other		6,696		7,406		0		6,785		16
Real estate mortgage		279		279		0		280		3
Loans with a specific valuation allowance:
Commercial construction		5,912		6,764		2,180		5,809		0
Commercial secured by real estate		3,382		3,508		1,246		3,385		0
Commercial other		2,791		5,391		1,104		2,829		0
Totals:
Commercial construction		10,506		11,359		2,180		10,492		18
Commercial secured by real estate		39,694		41,286		1,246		39,891		332
Commercial other		9,487		12,797		1,104		9,614		16
Real estate mortgage		279		279		0		280		3
Total	$	59,966	$	65,721	$	4,530	$	60,277	$	369

*Cash basis interest is substantially the same as interest income recognized.

Included in certain loan categories of impaired loans are certain loans and leases that have been modified in a troubled debt restructuring, where economic concessions have been granted to borrowers who have experienced financial difficulties. These concessions typically result from our loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions.  Modifications of terms for our loans and their inclusion as troubled debt restructurings are based on individual facts and circumstances.  Loan modifications that are included as troubled debt restructurings may involve either an increase or reduction of the interest rate, extension of the term of the loan, or deferral of principal and/or interest payments, regardless of the period of the modification.  All of the loans identified as troubled debt restructuring were modified due to financial stress of the borrower.  In order to determine if a borrower is experiencing financial difficulty, an evaluation is performed to determine the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification.  This evaluation is performed under CTBI’s internal underwriting policy.

When we modify loans and leases in a troubled debt restructuring, we evaluate any possible impairment similar to other impaired loans based on the present value of expected future cash flows, discounted at the contractual interest rate of the original loan or lease agreement, or use the current fair value of the collateral, less selling costs for collateral dependent loans. If we determined that the value of the modified loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized through an allowance estimate or a charge-off to the allowance. In periods subsequent to modification, we evaluate all troubled debt restructuring, including those that have payment defaults, for possible impairment and recognize impairment through the allowance.

During 2013, certain loans were modified in troubled debt restructurings, where economic concessions were granted to borrowers consisting of reductions in the interest rates, payment extensions, forgiveness of principal, and forbearances.  Presented below, segregated by class of loans, are troubled debt restructurings that occurred during the three months ended March 31, 2013 and 2012 and the year ended December 31, 2012:

	Three Months Ended March 31, 2013
(in thousands)	Number of Loans		Post-Modification Outstanding Balance		Net Charge-offs Resulting from Modification
Commercial:
Commercial construction		3	$	2,110	$	0
Commercial secured by real estate		5		605		0
Commercial other		9		5,585		0
Total troubled debt restructurings		17	$	8,300	$	0

	Year Ended December 31, 2012
(in thousands)	Number of Loans		Post-Modification Outstanding Balance		Net Charge-offs Resulting from Modification
Commercial:
Commercial construction		5	$	557	$	0
Commercial secured by real estate		11		4,506		0
Commercial other		23		3,233		0
Residential:
Real estate mortgage		1		391		0
Total troubled debt restructurings		40	$	8,687	$	0

	Three Months Ended March 31, 2012
(in thousands)	Number of Loans		Post-Modification Outstanding Balance		Net Charge-offs Resulting from Modification
Commercial:
Commercial construction		0	$	0	$	0
Commercial secured by real estate		3		1,665		0
Commercial other		1		48		0
Total troubled debt restructurings		4	$	1,713	$	0

Loans retain their accrual status at the time of their modification. As a result, if a loan is on nonaccrual at the time it is modified, it stays as nonaccrual, and if a loan is on accrual at the time of the modification, it generally stays on accrual.  Commercial and consumer loans modified in a troubled debt restructuring are closely monitored for delinquency as an early indicator of possible future default.  If loans modified in a troubled debt restructuring subsequently default, CTBI evaluates the loan for possible further impairment.  The allowance for loan losses may be increased, adjustments may be made in the allocation of the allowance, or partial charge-offs may be taken to further write-down the carrying value of the loan.  Presented below, segregated by class of loans, are loans that were modified as troubled debt restructurings which have subsequently defaulted.  CTBI considers a loan in default when it is 90 days or more past due or transferred to nonaccrual.

(in thousands)	Three Months Ended March 31, 2013
	Number of Loans		Recorded Balance
Commercial:
Commercial construction		2	$	328
Commercial secured by real estate		2		662
Commercial other		1		12
Total defaulted restructured loans		5	$	1,002

(in thousands)	Three Months Ended March 31, 2012
	Number of Loans		Recorded Balance
Commercial:
Commercial construction		0	$	0
Commercial secured by real estate		3		370
Commercial other		2		32
Total defaulted restructured loans		5	$	402

Note 5 – Allowance for Loan and Lease Losses

The following tables present the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of March 31, 2013, December 31, 2012 and March 31, 2012:

	March 31, 2013
(in thousands)	Commercial Construction			Commercial Secured by Real Estate		Equipment Lease Financing		Commercial Other			Real Estate Construction			Real Estate Mortgage		Home Equity		Consumer Direct		Consumer Indirect		Total
Allowance for loan losses
Beginning balance	$	4,033		$	13,541	$	126	$	5,469		$	376		$	4,767	$	563	$	1,102	$	3,268	$	33,245
Provision charged to expense		(212	)		484		2		(155	)		(4	)		334		50		165		895		1,559
Losses charged off		0			365		0		332			0			131		47		314		999		2,188
Recoveries		6			22		0		169			0			10		5		145		420		777
Ending balance	$	3,827		$	13,682	$	128	$	5,151		$	372		$	4,980	$	571	$	1,098	$	3,584	$	33,393
Ending balance:
Individually evaluated for impairment	$	1,911		$	1,192	$	0	$	322		$	0		$	0	$	0	$	0	$	0	$	3,425
Collectively evaluated for impairment	$	1,916		$	12,490	$	128	$	4,829		$	372		$	4,980	$	571	$	1,098	$	3,584	$	29,968
Loans
Ending balance:
Individually evaluated for impairment	$	11,228		$	37,923	$	0	$	16,646		$	0		$	657	$	0	$	0	$	0	$	66,454
Collectively evaluated for impairment	$	91,075		$	809,884	$	9,944	$	358,763		$	51,978		$	695,664	$	79,899	$	119,191	$	280,462	$	2,496,860

	December 31, 2012
(in thousands)	Commercial Construction		Commercial Secured by Real Estate		Equipment Lease Financing		Commercial Other		Real Estate Construction		Real Estate Mortgage		Home Equity		Consumer Direct		Consumer Indirect			Total
Allowance for loan losses
Balance, beginning of year	$	4,023	$	11,753	$	112	$	5,608	$	354	$	4,302	$	562	$	917	$	5,540		$	33,171
Provision charged to expense		1,009		3,520		14		2,330		183		1,437		238		892		(173	)		9,450
Losses charged off		1,034		2,035		0		3,233		189		1,123		248		1,245		3,483			12,590
Recoveries		35		303		0		764		28		151		11		538		1,384			3,214
Balance, end of year	$	4,033	$	13,541	$	126	$	5,469	$	376	$	4,767	$	563	$	1,102	$	3,268		$	33,245
Ending balance:
Individually evaluated for impairment	$	1,820	$	1,090	$	0	$	338	$	0	$	0	$	0	$	0	$	0		$	3,248
Collectively evaluated for impairment	$	2,213	$	12,451	$	126	$	5,131	$	376	$	4,767	$	563	$	1,102	$	3,268		$	29,997
Loans
Ending balance:
Individually evaluated for impairment	$	9,395	$	38,113	$	0	$	14,295	$	0	$	695	$	0	$	0	$	0		$	62,498
Collectively evaluated for impairment	$	110,052	$	769,100	$	9,246	$	362,053	$	55,041	$	696,233	$	82,292	$	122,581	$	281,477		$	2,488,075

	March 31, 2012
(in thousands)	Commercial Construction		Commercial Secured by Real Estate		Equipment Lease Financing			Commercial Other		Real Estate Construction		Real Estate Mortgage		Home Equity		Consumer Direct			Consumer Indirect			Total
Allowance for loan losses
Beginning balance	$	4,023	$	11,753	$	112		$	5,608	$	354	$	4,302	$	562	$	917		$	5,540		$	33,171
Provision charged to expense		42		1,280		(7	)		718		155		71		29		(117	)		(1,011	)		1,160
Losses charged off		18		96		0			612		171		190		46		146			847			2,126
Recoveries		19		40		0			251		6		57		1		192			401			967
Ending balance	$	4,066	$	12,977	$	105		$	5,965	$	344	$	4,240	$	546	$	846		$	4,083		$	33,172
Ending balance:
Individually evaluated for impairment	$	2,180	$	1,246	$	0		$	1,104	$	0	$	0	$	0	$	0		$	0		$	4,530
Collectively evaluated for impairment	$	1,886	$	11,731	$	105		$	4,861	$	344	$	4,240	$	546	$	846		$	4,083		$	28,642
Loans
Ending balance:
Individually evaluated for impairment	$	10,506	$	39,694	$	0		$	9,487	$	0	$	279	$	0	$	0		$	0		$	59,966
Collectively evaluated for impairment	$	103,655	$	767,215	$	8,219		$	372,459	$	52,558	$	648,059	$	83,498	$	121,645		$	324,894		$	2,482,202

Note 6 – Other Real Estate Owned

Activity for other real estate owned was as follows:

(in thousands)	March 31, 2013			March 31, 2012
Beginning balance of other real estate owned	$	47,537		$	56,965
New assets acquired		2,047			5,370
Capitalized costs		0			90
Fair value adjustments		(1,146	)		(179	)
Sale of assets		(2,718	)		(3,092	)
Ending balance of other real estate owned	$	45,720		$	59,154

Foreclosed properties at March 31, 2013 and 2012 were $45.2 million and $58.6 million, respectively.  Also included in other real estate owned are two properties totaling $0.5 million which were not acquired through foreclosure.  Carrying costs and fair value adjustments associated with foreclosed properties at March 31, 2013, 2012 and 2011, respectively, were $1.84 million, $0.79 million, and $0.85 million.

Note 7 – Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share:

	Three Months Ended
	March 31
(in thousands except per share data)	2013		2012
Numerator:
Net income	$	11,820	$	11,869
Denominator:
Basic earnings per share:
Weighted average shares		15,539		15,407
Diluted earnings per share:
Effect of dilutive stock options		53		49
Adjusted weighted average shares		15,592		15,456
Earnings per share:
Basic earnings per share	$	0.76	$	0.77
Diluted earnings per share		0.76		0.77

Options to purchase 88,246 common shares were excluded from the diluted calculations above for the three months ended March 31, 2013, because the exercise prices on the options were greater than the average market price for the period.  Unvested restricted stock grants were also used in the calculation of diluted earnings per share based on the treasury method.   Options to purchase 248,555 common shares were excluded from the diluted calculations above for the three months ended March 31, 2012.

Note 8 – Fair Value of Financial Assets and Liabilities

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.  Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs.  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.

Recurring Measurements

The following tables present the fair value measurements of assets recognized in the accompanying balance sheets measured at fair value on a recurring basis as of March 31, 2013 and December 31, 2012 and indicates the level within the fair value hierarchy of the valuation techniques.

(in thousands)			Fair Value Measurements at March 31, 2013 Using
	Fair Value		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	$	61,263	$	0	$	61,263	$	0
State and political subdivisions		120,448		0		120,448		0
U.S. government sponsored agency mortgage-backed securities		440,470		0		440,470		0
Marketable equity securities		55,329		55,329		0		0
Mortgage servicing rights		2,652		0		0		2,652

(in thousands)			Fair Value Measurements at December 31, 2012 Using
	Fair Value		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	$	60,915	$	0	$	60,915	$	0
State and political subdivisions		113,221		0		113,221		0
U.S. government sponsored agency mortgage-backed securities		383,581		0		383,581		0
Marketable equity securities		45,626		45,626		0		0
Mortgage servicing rights		2,364		0		0		2,364

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a recurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.  These valuation methodologies were applied to all of CTBI’s financial assets carried at fair value.  CTBI had no liabilities measured at fair value as of March 31, 2013 and December 31, 2012.  There have been no significant changes in the valuation techniques during the quarter ended March 31, 2013.  For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

Available-for-Sale Securities

Securities classified as available-for-sale are reported at fair value on a recurring basis.  CTBI’s CRA investment funds and Federated GNMA trust 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 data 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, and U.S. government sponsored agency mortgage-backed securities are classified as Level 2 inputs.

In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.  Fair value determinations for Level 3 measurements are estimated on a quarterly basis where assumptions used are reviewed to ensure the estimated fair value complies with accounting standards generally accepted in the United States.  As of March 31, 2013, CTBI does not own any securities classified as Level 3 inputs.

Mortgage Servicing Rights

Mortgage servicing rights do not trade in an active, open market with readily observable prices.  CTBI reports mortgage servicing rights 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.  Accordingly, fair value is determined by the independent third party by utilizing assumptions about factors such as mortgage interest rates, discount rates, mortgage loan prepayment speeds, market trends and industry demand.  Due to the nature of the valuation inputs, mortgage servicing rights are classified within Level 3 of the hierarchy.  Fair value determinations for Level 3 measurements of mortgage servicing rights are tested for impairment on a quarterly basis where assumptions used are reviewed to ensure the estimated fair value complies with accounting standards generally accepted in the United States.  See the table below for inputs and valuation techniques used for Level 3 mortgage servicing rights.

Transfers between Levels

There were no transfers between Levels 1, 2, and 3 as of March 31, 2013.

Level 3 Reconciliation

Following is a reconciliation of the beginning and ending balances of recurring fair value measurements recognized in the accompanying balance sheet using significant unobservable (Level 3) inputs for the three months ended March 31, 2013 and 2012:

(in thousands)	Three Months Ended March 31, 2013
	Marketable Equity Securities		Mortgage Servicing Rights
Beginning balance	$	0	$	2,364
Total recognized gains (losses)
Included in net income		0		117
Issues		0		357
Settlements		0		(186	)
Ending balance	$	0	$	2,652
Total gains for the period included in net income attributable to the change in unrealized gains or losses related to assets still held at the reporting date	$	0	$	117

(in thousands)	Three Months Ended March 31, 2012
	Marketable Equity Securities		Mortgage Servicing Rights
Beginning balance	$	211	$	2,282
Total recognized gains (losses)
Included in net income		0		341
Issues		0		151
Settlements		0		(134	)
Ending balance	$	211	$	2,640
Total gains for the period included in net income attributable to the change in unrealized gains or losses related to assets still held at the reporting date	$	0	$	341

Realized and unrealized gains and losses for items reflected in the tables above are included in net income in the consolidated statements of income as follows:

(in thousands)	Three Months Ended March 31, 2013
	Noninterest Income			Noninterest Expense
Total gains	$	(69	)	$	0

(in thousands)	Three Months Ended March 31, 2012
	Noninterest Income		Noninterest Expense
Total gains	$	207	$	0

Nonrecurring Measurements

The following table presents the fair value measurements of assets recognized in the accompanying balance sheets measured at fair value on a nonrecurring basis as of March 31, 2013 and December 31, 2012 and indicates the level within the fair value hierarchy of the valuation techniques.

(in thousands)			Fair Value Measurements at March 31, 2013 Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets measured – nonrecurring basis
Impaired loans (collateral dependent)	$	2,326	$	0	$	0	$	2,326
Other real estate/assets owned		4,365		0		0		4,365

(in thousands)			Fair Value Measurements at December 31, 2012 Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets measured – nonrecurring basis
Impaired loans (collateral dependent)	$	5,465	$	0	$	0	$	5,465
Other real estate/assets owned		13,892		0		0		13,892

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying balance sheet, as well as the general classification of such assets pursuant to the valuation hierarchy.  For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

Impaired Loans (Collateral Dependent)

The estimated fair value of collateral-dependent impaired loans is based on the appraised fair value of the collateral, less estimated cost to sell.  Collateral-dependent impaired loans are classified within Level 3 of the fair value hierarchy.

CTBI considers the appraisal or evaluation as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value.  Appraisals of the collateral underlying collateral-dependent loans are obtained when the loan is determined to be collateral-dependent and subsequently as deemed necessary by the Chief Credit Officer.  Appraisals are reviewed for accuracy and consistency by the Chief Credit Officer.  Appraisers are selected from the list of approved appraisers maintained by management.  The appraised values are reduced by discounts to consider lack of marketability and estimated cost to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral.  These discounts and estimates are developed by the Chief Credit Officer by comparison to historical results.

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 (1) partial write-downs that are based on the observable market price or current appraised value of the collateral or (2) the full charge-off of the loan carrying value.  Quarter-to-date fair value adjustments on impaired loans were $0.5 million, $0.5 million, and $0.1 million for the quarters ended March 31, 2013, December 31, 2012 and March 31, 2012, respectively.

Other Real Estate Owned

In accordance with the provisions of ASC 360, Property, Plant, and Equipment, other real estate owned (OREO) is carried at the lower of fair value at acquisition date or current estimated fair value, less estimated cost to sell when the real estate is acquired.  Estimated fair value of OREO is based on appraisals or evaluations.  OREO is classified within Level 3 of the fair value hierarchy.  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.  Quarter-to-date fair value adjustments on other real estate/assets owned were $1.1 million, $1.8 million, and $0.2 million for the quarters ended March 31, 2013, December 31, 2012, and March 31, 2012, respectively.

Appraisals of OREO are obtained when the real estate is acquired and subsequently as deemed necessary by the Chief Credit Officer.  Appraisers are selected from the list of approved appraisers maintained by management.

Unobservable (Level 3) Inputs

The following tables present quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements at March 31, 2013 and December 31, 2012.

(in thousands)	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at March 31, 2013		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Mortgage servicing rights	$	2,652	Discount cash flows, computer pricing model	Constant prepayment rate		11.4% - 21.4% (15.1%)
				Probability of default		0.55% - 4.71% (2.73%)
				Discount rate	Not applicable (10.5%)
Impaired loans (collateral-dependent)	$	2,326	Market comparable properties	Marketability discount		5.0% - 10.0% (7.0%)
Other real estate/assets owned	$	4,365	Market comparable properties	Comparability adjustments (%)		5.0% - 57.0% (24.0%)

(in thousands)	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at December 31, 2012		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Mortgage servicing rights	$	2,364	Discount cash flows, computer pricing model	Constant prepayment rate		8.5% - 25.0% (16.3%)
				Probability of default		1.02% - 4.81% (2.65%)
				Discount rate	Not applicable (10.5%)
Impaired loans (collateral-dependent)	$	5,465	Market comparable properties	Marketability discount		5.0% - 10.0% (7.0%)
Other real estate/assets owned	$	13,892	Market comparable properties	Comparability adjustments (%)		5.0% - 35.0% (13.0%)

Sensitivity of Significant Unobservable Inputs

The following is a discussion of the sensitivity of significant unobservable inputs, the interrelationships between those inputs and other unobservable inputs used in recurring fair value measurement and of how those inputs might magnify or mitigate the effect of changes in the unobservable inputs on the fair value measurement.

Mortgage Servicing Rights

Market value for mortgage servicing rights is derived based on unobservable inputs, such as prepayment speeds of the underlying loans generated using the Andrew Davidson Prepayment Model, FHLMC/FNMA guidelines, the weighted-average life of the loan, the discount rate, the weighted average coupon, and the weighted average default rate.  Significant increases (decreases) in either of those inputs in isolation would result in a significantly lower (higher) fair value measurement.  Generally, a change in the assumption used for prepayment speeds is accompanied by a directionally opposite change in the assumption for interest rates.

Fair Value of Financial Instruments

The following table presents estimated fair value of CTBI’s financial instruments as of March 31, 2013 and indicates the level within the fair value hierarchy of the valuation techniques.

(in thousands)			Fair Value Measurements at March 31, 2013 Using
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets  (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs  (Level 3)
Financial assets:
Cash and cash equivalents	$	167,944	$	167,944	$	0	$	0
Certificates of deposit in other banks		9,320		0		9,335		0
Securities available-for-sale		677,510		55,329		622,181		0
Securities held-to-maturity		1,662		0		1,656		0
Loans held for sale		1,449		1,495		0		0
Loans, net		2,529,921		0		0		2,542,905
Federal Home Loan Bank stock		25,673		0		25,673		0
Federal Reserve Bank stock		4,886		0		4,886		0
Accrued interest receivable		13,545		0		13,545		0
Mortgage servicing rights		2,652		0		0		2,652
Financial liabilities:
Deposits	$	2,933,580	$	619,819	$	2,313,712	$	0
Repurchase agreements		213,573		0		0		213,556
Federal funds purchased		15,272		0		15,272		0
Advances from Federal Home Loan Bank		1,387		0		1,668		0
Long-term debt		61,341		0		0		31,227
Accrued interest payable		1,477		0		1,477		0
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 table presents estimated fair value of CTBI’s financial instruments as of December 31, 2012 and indicates the level within the fair value hierarchy of the valuation techniques.

(in thousands)			Fair Value Measurements at December 31, 2012 Using
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs  (Level 3)
Financial assets:
Cash and cash equivalents	$	207,560	$	207,560	$	0	$	0
Certificates of deposit in other banks		5,336		0		5,370		0
Securities available-for-sale		603,343		45,626		557,717		0
Securities held-to-maturity		1,662		0		1,659		0
Loans held for sale		22,486		22,960		0		0
Loans, net		2,517,328		0		0		2,540,272
Federal Home Loan Bank stock		25,673		0		25,673		0
Federal Reserve Bank stock		4,885		0		4,885		0
Accrued interest receivable		12,970		0		12,790		0
Mortgage servicing rights		2,364		0		0		2,364
Financial liabilities:
Deposits	$	2,903,848	$	606,448	$	2,297,632	$	0
Repurchase agreements		210,120		0		0		210,008
Federal funds purchased		12,314		0		12,314		0
Advances from Federal Home Loan Bank		1,429		0		1,719		0
Long-term debt		61,341		0		0		31,185
Accrued interest payable		1,309		0		1,309		0
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 for similar instruments.

Securities held-to-maturity – 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.

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.

Item 2.  Management’s Discussion and Analysis of Financial Condition

and Results of Operations

Overview

The following Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand Community Trust Bancorp, Inc., our operations, and our present business environment.  The MD&A is provided as a supplement to—and should be read in conjunction with—our condensed consolidated financial statements and the accompanying notes contained in this quarterly report.  The MD&A includes the following sections:

v   Our Business

v   Results of Operations and Financial Condition

v   Dividends

v   Liquidity and Market Risk

v   Interest Rate Risk

v   Capital Resources

v   Impact of Inflation, Changing Prices, and Economic Conditions

v   Stock Repurchase Program

v   Critical Accounting Policies and Estimates

Our Business

Community Trust Bancorp, Inc. (“CTBI”) is a bank holding company headquartered in Pikeville, Kentucky.  Currently, we own one commercial bank and one trust company.  Through our subsidiaries, we have eighty-one banking locations in eastern, northeastern, central, and south central Kentucky, southern West Virginia, and northeastern Tennessee, four trust offices across Kentucky, and one trust office in northeastern Tennessee.  At March 31, 2013, we had total consolidated assets of $3.7 billion and total consolidated deposits, including repurchase agreements, of $3.1 billion, making us the largest bank holding company headquartered in the Commonwealth of Kentucky.  Total shareholders’ equity at March 31, 2013 was $406.6 million.

Through our subsidiaries, we engage in a wide range of commercial and personal banking and trust and wealth management activities, which include accepting time and demand deposits; making secured and unsecured loans to corporations, individuals and others; providing cash management services to corporate and individual customers; issuing letters of credit; renting safe deposit boxes; and providing funds transfer services.  The lending activities of our Bank include making commercial, construction, mortgage, and personal loans.  Lease-financing, lines of credit, revolving lines of credit, term loans, and other specialized loans, including asset-based financing, are also available.  Our corporate subsidiaries act as trustees of personal trusts, as executors of estates, as trustees for employee benefit trusts, as registrars, transfer agents, and paying agents for bond and stock issues, as depositories for securities, and as providers of full service brokerage services.  For further information, see Item 1 of our annual report on Form 10-K for the year ended December 31, 2012.

Results of Operations and Financial Condition

For the quarter ended March 31, 2013, we reported earnings of $11.8 million, or $0.76 per basic share, compared to $11.9 million, or $0.77 per basic share, earned during the first quarter 2012 and $10.6 million, or $0.68 per basic share, earned during the fourth quarter 2012.

1st Quarter 2013 Highlights

v   CTBI's basic earnings per share for the quarter decreased $0.01 per share from the first quarter 2012 but increased $0.08 per share from the fourth quarter 2012.

v   Net interest income for the quarter increased 0.6% from prior year first quarter and decreased 1.7% from prior quarter as our net interest margin decreased 3 basis points and 1 basis point, respectively, for those time periods, while average earning assets increased 2.2% and 0.4%.

v   Nonperforming loans at $33.9 million decreased $0.7 million from March 31, 2012 and $2.1 million from December 31, 2012.  Nonperforming assets at $79.0 million decreased $14.2 million from March 31, 2012 and $4.0 million from December 31, 2012.

v   Net loan charge-offs for the quarter ended March 31, 2013 were $1.4 million, or 0.22% of average loans annualized, compared to $1.2 million, or 0.18%, experienced for the first quarter 2012 and $2.9 million, or 0.45%, for the fourth quarter 2012.

v   Our loan loss provision for the quarter increased $0.04 million from prior year first quarter but decreased $1.4 million from prior quarter.

v   Our loan loss reserve as a percentage of total loans outstanding remained at 1.30% from March 31, 2012 to March 31, 2013.  Our reserve coverage (allowance for loan loss reserve to nonperforming loans) at March 31, 2013 was 98.6% compared to 95.9% at March 31, 2012 and 92.3% at December 31, 2012.

v   Noninterest income increased 6.6% for the quarter ended March 31, 2013 compared to the same period in 2012 but decreased 0.2% from prior quarter.  The increase in noninterest income from first quarter 2012 is the result of increased gains on sales of loans and trust revenue, offset partially by decreases in loan related fees and deposit service charges.

v   Noninterest expense for the quarter ended March 31, 2013 increased 2.1% from prior year first quarter but decreased 5.5% from prior quarter.  The decrease from prior quarter resulted primarily from a $0.4 million decrease in personnel expense and a $0.8 million decrease in other real estate owned expense.

v   Our loan portfolio increased $21.1 million from March 31, 2012 and $12.7 million during the quarter.

v   Our investment portfolio increased $63.5 million from March 31, 2012 and $74.2 million during the quarter.

v   Deposits, including repurchase agreements, declined $25.7 million from March 31, 2012 but increased $33.2 million during the quarter.

v   Our tangible common equity/tangible assets ratio remains strong at 9.44%.

Income Statement Review

(dollars in thousands)							Change 2013 vs. 2012
Quarter Ended March 31	2013			2012			Amount			Percent
Net interest income	$	33,197		$	33,006		$	191			0.6	%
Provision for loan losses		1,559			1,160			399			34.4
Noninterest income		11,920			11,187			733			6.6
Noninterest expense		26,299			25,750			549			2.1
Income taxes		5,439			5,414			25			0.5
Net income	$	11,820		$	11,869		$	(49	)		(0.4	)%
Average earning assets	$	3,393,848		$	3,319,597		$	74,251			2.2	%
Yield on average earnings assets		4.45	%		4.76	%		(0.31	)%		(6.5	)%
Cost of interest bearing funds		0.56	%		0.90	%		(0.34	)%		(37.9	)%
Net interest margin		4.02	%		4.05	%		(0.03	)%		(0.8	)%

Net Interest Income

Net interest income for the quarter increased $0.2 million from prior year first quarter but decreased $0.6 million from prior quarter with average earning assets increasing 2.2% and 0.4% and our net interest margin decreasing 3 basis points and 1 basis point for the same periods.  The yield on average earning assets decreased 31 basis points from prior year first quarter and 8 basis points from prior quarter.  Loans represented 75.2% of our average earning assets for the quarter ended March 31, 2013 compared to 77.1% for the quarter ended March 31, 2012 and 75.5% for the quarter ended December 31, 2012.  The cost of interest bearing funds decreased 34 basis points from prior year first quarter and 10 basis points from prior quarter.

Provision for Loan Losses

The provision for loan losses that was added to the allowance for the first quarter 2013 was $1.6 million compared to $1.2 million in the first quarter 2012.  This provision represented a charge against current earnings in order to maintain the allowance at an appropriate level determined using the accounting estimates described in the Critical Accounting Policies and Estimates section.

Noninterest Income

Noninterest income increased 6.6% for the first quarter 2013 compared to the first quarter 2012 but decreased 0.2% from prior quarter.  The increase in noninterest income from prior year first quarter is the result of increased gains on sales of loans and trust revenue, offset partially by decreases in loan related fees and deposit service charges.  The $0.8 million increase in gains on sales of loans includes a $0.5 million gain on one commercial loan sold during the quarter.  Loan related fees were impacted by a $0.3 million variance in fair value adjustments to our mortgage servicing rights.  The variance from prior quarter was impacted by $0.3 million in securities gains in the fourth quarter 2012.

Noninterest Expense

Noninterest expense for the first quarter 2013 increased 2.1% from prior year first quarter but decreased 5.5% from prior quarter.  The decrease from prior quarter resulted primarily from a $0.4 million decrease in personnel expense and a $0.8 million decrease in other real estate owned expense.  The increase from prior year first quarter was primarily due to a $1.0 million increase in other real estate owned expense.

Balance Sheet Review

CTBI’s total assets at $3.7 billion decreased $1.9 million, or 0.1%, from March 31, 2012 but increased $36.4 million, or an annualized 4.1%, during the quarter.  Loans outstanding at March 31, 2013 were $2.6 billion, increasing $21.1 million, or 0.8%, from March 31, 2012 and $12.7 million, or an annualized 2.0%, during the quarter.  Loan growth during the quarter of $23.2 million in the commercial loan portfolio was partially offset by a $6.1 million decline in the residential loan portfolio and a $4.4 million decline in the consumer loan portfolio.  CTBI's investment portfolio increased $63.5 million, or 10.3%, from March 31, 2012 and $74.2 million, or an annualized 49.7%, during the quarter.  Deposits, including repurchase agreements, at $3.1 billion decreased $25.7 million, or 0.8%, from March 31, 2012 but increased $33.2 million, or an annualized 4.3%, from prior quarter.

Shareholders’ equity at March 31, 2013 was $406.6 million compared to $375.0 million at March 31, 2012 and $400.3 million at December 31, 2012.  CTBI's annualized dividend yield to shareholders as of March 31, 2013 was 3.70%.

Loans

(in thousands)	March 31, 2013
Loan Category	Balance		Variance from Prior Year-End			Net Charge-Offs			Nonperforming		ALLL
Commercial:
Construction	$	102,303		(14.4	)%	$	(6	)	$	8,728	$	3,827
Secured by real estate		847,807		5.0			343			10,731		13,682
Equipment lease financing		9,944		7.5			0			0		128
Other commercial		375,409		(0.2	)		163			5,171		5,151
Total commercial		1,335,463		1.8			500			24,630		22,788
Residential:
Real estate construction		51,978		(5.6	)		0			867		372
Real estate mortgage		696,321		(0.1	)		121			7,398		4,980
Home equity		79,899		(2.9	)		42			517		571
Total residential		828,198		(0.7	)		163			8,782		5,923
Consumer:
Consumer direct		119,191		(2.8	)		169			79		1,098
Consumer indirect		280,462		(0.4	)		579			379		3,584
Total consumer		399,653		(1.1	)		748			458		4,682
Total loans	$	2,563,314		0.5	%	$	1,411		$	33,870	$	33,393

Asset Quality

CTBI's total nonperforming loans were $33.9 million at March 31, 2013, a 2.1% decrease from the $34.6 million at March 31, 2012 and a 5.9% decrease from the $36.0 million at December 31, 2012.  The decrease for the quarter included a $3.7 million decrease in the 90+ days past due category partially offset by a $1.5 million increase in nonaccrual loans.  Loans 30-89 days past due at $26.1 million is an increase of $6.7 million from March 31, 2012 but a $0.9 million decrease from prior quarter.  Our loan portfolio management processes focus on the immediate identification, management, and resolution of problem loans to maximize recovery and minimize loss.  Our loan risk management processes include weekly delinquent loan review meetings at the market levels and monthly delinquent loan review meetings involving senior corporate management to review all nonaccrual loans and loans 30 days or more past due.  Any activity regarding a criticized/classified loan (i.e. problem loan) must be approved by CTB's Watch List Asset Committee (i.e. Problem Loan Committee).  CTB's Watch List Asset Committee also meets on a quarterly basis and reviews every criticized/classified loan of $100,000 or greater.  We also have a Loan Review Department that reviews every market within CTB annually and performs extensive testing of the loan portfolio to assure the accuracy of loan grades and classifications for delinquency, troubled debt restructuring, impaired status, impairment, nonaccrual status, and adequate loan loss reserves.

Impaired loans, loans not expected to meet contractual principal and interest payments other than insignificant delays, at March 31, 2013 totaled $66.5 million, compared to $60.0 million at March 31, 2012 and $62.5 million at December 31, 2012.  Included in certain loan categories of impaired loans are troubled debt restructurings that were classified as impaired.  At March 31, 2013, CTBI had $19.8 million in commercial loans secured by real estate, $7.1 million in commercial real estate construction loans, $10.0 million in commercial other loans, and $0.7 million in consumer loans that were modified in troubled debt restructurings and impaired.  Management evaluates all impaired loans for impairment and records a direct charge-off or provides specific reserves when necessary.

For further information regarding nonperforming and impaired loans, see note 4 to the condensed consolidated financial statements.

CTBI generally does not offer high risk loans such as option ARM products, high loan to value ratio mortgages, interest-only loans, loans with initial teaser rates, or loans with negative amortizations, and therefore, CTBI would have no significant exposure to these products.

Our level of foreclosed properties at $45.2 million at March 31, 2013 was a decrease from $58.6 million at March 31, 2012 and $47.0 million at December 31, 2012.  Sales of foreclosed properties for the quarter ended March 31, 2013 totaled $2.7 million while new foreclosed properties totaled $2.0 million.  At March 31, 2013, the book value of properties under contracts to sell was $5.5 million; however, the closings had not occurred at quarter-end.

When foreclosed properties are acquired, appraisals are obtained and the properties are booked at the current market value less expected sales costs.  Additionally, periodic updated appraisals are obtained on unsold foreclosed properties.  When an updated appraisal reflects a market value below the current book value, a charge is booked to current earnings to reduce the property to its new market value less expected sales costs.  Charges to earnings in the first quarter 2013 to reflect the decrease in current market values of foreclosed properties totaled $1.1 million.  There were 18 properties reappraised during the first quarter 2013.  Of these, ten were written down by a total of $0.4 million.  The remaining write-downs were primarily the result of pending sales with agreed upon prices.  Charges during the quarters ended March 31, 2012 and December 31, 2012 were $0.2 million and $1.8 million, respectively.  Our policy for determining the frequency of periodic reviews is based upon consideration of the specific properties and the known or perceived market fluctuations in a particular market and is typically between 12 and 18 months but generally not more than 24 months.  Sixty-three percent of our OREO properties have been reappraised within the past 12 months.  Our nonperforming loans and foreclosed properties remain primarily concentrated in our Central Kentucky Region.  Management anticipates that our foreclosed properties will remain elevated as we work through current market conditions.

The major classifications of foreclosed properties are shown in the following table:

(in thousands)	March 31, 2013		December 31, 2012
1-4 family	$	11,046	$	12,381
Agricultural/farmland		653		653
Construction/land development/other		23,265		23,823
Multifamily		2,404		1,281
Non-farm/non-residential		7,800		8,848
Total foreclosed properties	$	45,168	$	46,986

The appraisal aging analysis of foreclosed properties, as well as the holding period, at March 31, 2013 is shown below:

(in thousands)
Appraisal Aging Analysis			Holding Period Analysis
Days Since Last Appraisal	Current Book Value		Holding Period	Current Book Value
Up to 90 days	$	2,842	Less than one year	$	5,609
91 to 180 days		16,442	1 to 2 years		17,796
181 to 270 days		3,334	2 to 3 years		6,071
271 to 365 days		5,831	3 to 4 years		11,865
Over one year		16,719	Over 4 years		3,827
Total	$	45,168	Total	$	45,168

Net loan charge-offs for the quarter ended March 31, 2013 were $1.4 million, or 0.22% of average loans annualized, compared to $1.2 million, or 0.18%, experienced for the first quarter 2012 and $2.9 million, or 0.45%, for the fourth quarter 2012.  Of the total net charge-offs for the quarter, $0.5 million were in commercial loans, $0.6 million were in indirect auto loans, and $0.2 million were in residential real estate mortgage loans.  Allocations to loan loss reserves were $1.6 million for the quarter ended March 31, 2013 compared to $1.2 million for the quarter ended March 31, 2012 and $2.9 million for the quarter ended December 31, 2012.  Our loan loss reserve as a percentage of total loans outstanding has remained at 1.30% from March 31, 2012 to March 31, 2013.  Our reserve coverage was 98.6% at March 31, 2013.

Dividends

The following schedule shows the quarterly cash dividends paid for the past six quarters:

Pay Date	Record Date	Amount Per Share
April 1, 2013	March 15, 2013	$0.315
January 1, 2013	December 15, 2012	$0.315
October 1, 2012	September 15, 2012	$0.315
July 1, 2012	June 15, 2012	$0.310
April 1, 2012	March 15, 2012	$0.310
January 1, 2012	December 15, 2011	$0.310

On April 23, 2013, the Board of Directors of CTBI declared the payment of a quarterly cash dividend of $0.315 per share to be paid on July 1, 2013, to shareholders of record on June 15, 2013.

Liquidity and Market Risk

The objective of CTBI’s Asset/Liability management function is to maintain consistent growth in net interest income within our policy limits. This objective is accomplished through management of our consolidated balance sheet composition, liquidity, and interest rate risk exposures arising from changing economic conditions, interest rates, and customer preferences. The goal of liquidity management is to provide adequate funds to meet changes in loan and lease demand or deposit withdrawals. This is accomplished by maintaining liquid assets in the form of cash and cash equivalents and investment securities, sufficient unused borrowing capacity, and growth in core deposits. As of March 31, 2013, we had approximately $167.9 million in cash and cash equivalents and approximately $677.5 million in securities valued at estimated fair value designated as available-for-sale and available to meet liquidity needs on a continuing basis.  Additional asset-driven liquidity is provided by the remainder of the securities portfolio and the repayment of loans.  In addition to core deposit funding, we also have a variety of other short-term and long-term funding sources available.  We also rely on Federal Home Loan Bank advances for both liquidity and management of our asset/liability position.  Federal Home Loan Bank advances were $1.4 million at March 31, 2013 and December 31, 2012.  As of March 31, 2013, we had a $336.7 million available borrowing position with the Federal Home Loan Bank.  We generally rely upon net inflows of cash from financing activities, supplemented by net inflows of cash from operating activities, to provide cash for our investing activities.  As is typical of many financial institutions, significant financing activities include deposit gathering, use of short-term borrowing facilities such as repurchase agreements and federal funds purchased, and issuance of long-term debt.  At March 31, 2013, we had $44 million in lines of credit with various correspondent banks available to meet any future cash needs.  Our primary investing activities include purchases of securities and loan originations.  We do not rely on any one source of liquidity and manage availability in response to changing consolidated balance sheet needs.  At March 31, 2013, federal funds sold were $2.2 million compared to $6.7 million at December 31, 2012, and deposits with the Federal Reserve were $107.3 million compared to $123.9 million at December 31, 2012.  Additionally, we project cash flows from our investment portfolio to generate additional liquidity over the next 90 days.

The investment portfolio consists of investment grade short-term issues suitable for bank investments.  The majority of the investment portfolio is in U.S. government and government sponsored agency issuances.  The average life of the portfolio is4.40 years.At the end of March 31, 2013, available-for-sale (“AFS”) securities comprised approximately 99.8%of the total investment portfolio, and the AFS portfoliowas approximately 166%of equity capital.  Seventy-six percentof the pledge eligible portfolio was pledged.

Interest Rate Risk

We consider interest rate risk one of our most significant market risks. Interest rate risk is the exposure to adverse changes in net interest income due to changes in interest rates.  Consistency of our net interest revenue is largely dependent upon the effective management of interest rate risk.  We employ a variety of measurement techniques to identify and manage our interest rate risk including the use of an earnings simulation model to analyze net interest income sensitivity to changing interest rates.  The model is based on actual cash flows and repricing characteristics for on and off-balance sheet instruments and incorporates market-based assumptions regarding the effect of changing interest rates on the prepayment rates of certain assets and liabilities.  Assumptions based on the historical behavior of deposit rates and balances in relation to changes in interest rates are also incorporated into the model.  These assumptions are inherently uncertain, and as a result, the model cannot precisely measure net interest income or precisely predict the impact of fluctuations in interest rates on net interest income.  Actual results will differ from simulated results due to timing, magnitude, and frequency of interest rate changes as well as changes in market conditions and management strategies.

CTBI’s Asset/Liability Management Committee (ALCO), which includes executive and senior management representatives and reports to the Board of Directors, monitors and manages interest rate risk within Board-approved policy limits.  Our current exposure to interest rate risks is determined by measuring the anticipated change in net interest income spread evenly over the twelve-month period.

Capital Resources

We continue to grow our shareholders’ equity while also providing an annual dividend yield for the quarter ended March 31, 2013 of 3.70% to shareholders.  Shareholders’ equity increased an annualized 6.4% from December 31, 2012 to $406.6 million at March 31, 2013.  Our primary source of capital growth is the retention of earnings.  Cash dividends were $0.315 per share for the three months ended March 31, 2013 and $0.31 per share for the three months ended March 31, 2012.  We retained 58.6% of our earnings for the first three months of 2013 compared to 59.7% for the first three months of 2012.

Regulatory guidelines require bank holding companies, commercial banks, and savings banks to maintain certain minimum capital ratios and define companies as “well-capitalized” that sufficiently exceed the minimum ratios.  The banking regulators may alter minimum capital requirements as a result of revising their internal policies and their ratings of individual institutions.  To be “well-capitalized” banks and bank holding companies must maintain a Tier 1 leverage ratio of no less than 5.0%, a Tier 1 risk based ratio of no less than 6.0%, and a total risk based ratio of no less than 10.0%.  Our ratios as of March 31, 2013 were 10.86%, 15.33%, and 16.58%, respectively, all exceeding the threshold for meeting the definition of “well-capitalized.”

As of March 31, 2013, we are not aware of any current recommendations by banking regulatory authorities which, if they were to be implemented, would have, or are reasonably likely to have, a material adverse impact on our liquidity, capital resources, or operations, except as provided for in the Dodd-Frank Act, which is discussed in the Supervision and Regulation section of Item 1. Business in our annual report on Form 10-K for the year ended December 31, 2012, and the current Basel III proposal.  On June 7, 2012, the Board of Governors of the Federal Reserve System announced Notices of Proposed Rulemaking (NPRs) for three sets of capital rules that translate the Basel III capital rules into U.S. regulation.  The Basel III capital standards substantially increase the complexity of capital calculations and the amount of required capital to be maintained.  Specifically, Basel III reduces the items that count as capital, establishes higher capital ratios for all banks and increases risk weighted assets.  While we continue to analyze the NPRs and recognize that the final rules may differ from the proposed rules, the potential impact of Basel III includes, but is not limited to, reduced lending and negative pressure on profitability and return on equity due to the higher capital requirements.  The cost of implementation and ongoing compliance with Basel III may also negatively impact overhead costs.  To the extent CTBI is required to increase capital in the future to comply with Basel III, existing shareholders may be diluted and/or our ability to pay common stock dividends may be reduced.  Given our strong capital position, if the proposed Basel III rules are adopted as final rules, we expect to be able to satisfy such requirements.

Impact of Inflation, Changing Prices, and Economic Conditions

The majority of our assets and liabilities are monetary in nature. Therefore, CTBI differs greatly from most commercial and industrial companies that have significant investment in nonmonetary assets, such as fixed assets and inventories.  However, inflation does have an important impact on the growth of assets in the banking industry and on the resulting need to increase equity capital at higher than normal rates in order to maintain an appropriate equity to assets ratio.  Inflation also affects other expenses, which tend to rise during periods of general inflation.

We believe one of the most significant impacts on financial and operating results is our ability to react to changes in interest rates.  We seek to maintain an essentially balanced position between interest rate sensitive assets and liabilities in order to protect against the effects of wide interest rate fluctuations.

Our success is dependent on the general economic conditions of the communities we serve.  Unlike larger banks that are more geographically diversified, we provide financial and banking services primarily to eastern, northeastern, central, and south central Kentucky, southern West Virginia, and northeastern Tennessee. The economic conditions in these areas have a significant impact on loan demand, the ability of borrowers to repay loans, and the value of the collateral securing loans.  A significant decline in general economic conditions will affect these local economic conditions and will negatively affect the financial results of our banking operations.  Factors influencing general conditions include inflation, recession, unemployment, and other factors beyond our control.

The national and global economic downturn has resulted in unprecedented levels of financial market volatility and has in general adversely impacted the market value of financial institutions, limited access to capital, and had an adverse effect on the financial condition and results of operations of banking companies in general, including CTBI.  From early 2008 to the middle of 2010, CTBI experienced significant challenges, credit quality deteriorated, and net income and results of operations were adversely impacted.  While there has been improvement in economic conditions in our markets starting in the second half of 2010 and continuing into the first quarter of 2013, we believe that we will continue to experience a challenging environment throughout 2013.  CTBI is a part of the financial system and a continuation of systemic lack of available credit, lack of confidence in the financial sector, increased volatility in the financial markets, and reduced business activity could materially and adversely impact CTBI’s business, financial condition and results of operations.

Stock Repurchase Program

CTBI’s stock repurchase program currently has 288,519 shares remaining under CTBI’s current repurchase authorization.  We have not repurchased any shares of our common stock since February 2008.  As of March 31, 2013, a total of 2,211,481 shares have been repurchased through this program.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires the appropriate application of certain accounting policies, many of which require us to make estimates and assumptions about future events and their impact on amounts reported in our consolidated financial statements and related notes.  Since future events and their impact cannot be determined with certainty, the actual results will inevitably differ from our estimates.  Such differences could be material to the consolidated financial statements.

We believe the application of accounting policies and the estimates required therein are reasonable.  These accounting policies and estimates are constantly reevaluated, and adjustments are made when facts and circumstances dictate a change.  Historically, we have found our application of accounting policies to be appropriate, and actual results have not differed materially from those determined using necessary estimates.

Our accounting policies are described in note 1 to the condensed consolidated financial statements.  We have identified the following critical accounting policies:

Investments –Management determines the classification of securities at purchase.  We classify securities into held-to-maturity, trading, or available-for-sale categories.  Held-to-maturity securities are those which we have the positive intent and ability to hold to maturity and are reported at amortized cost.  In accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 320, Investment Securities, investments in debt securities that are not classified as held-to-maturity and equity securities that have readily determinable fair values shall be classified in one of the following categories and measured at fair value in the statement of financial position:

a. Trading securities. Securities that are bought and held principally for the purpose of selling them in the near term (thus held for only a short period of time) shall be classified as trading securities. Trading generally reflects active and frequent buying and selling, and trading securities are generally used with the objective of generating profits on short-term differences in price.

b. Available-for-sale securities. Investments not classified as trading securities (nor as held-to-maturity securities) shall be classified as available-for-sale securities.

We do not have any securities that are classified as trading securities.  Available-for-sale securities are reported at fair value, with unrealized gains and losses included as a separate component of shareholders’ equity, net of tax.  If declines in fair value are other than temporary, the carrying value of the securities is written down to fair value as a realized loss with a charge to income for the portion attributable to credit losses and a charge to other comprehensive income for the portion that is not credit related.

Gains or losses on disposition of securities are computed by specific identification for all securities except for shares in mutual funds, which are computed by average cost.  Interest and dividend income, adjusted by amortization of purchase premium or discount, is included in earnings.

When the fair value of a security is below its amortized cost, and depending on the length of time the condition exists and the extent the fair market value is below amortized cost, additional analysis is performed to determine whether an other than temporary impairment condition exists.  Available-for-sale and held-to-maturity securities are analyzed quarterly for possible other than temporary impairment.  The analysis considers (i) whether we have the intent to sell our securities prior to recovery and/or maturity and (ii) whether it is more likely than not that we will not have to sell our securities prior to recovery and/or maturity.  Often, the information available to conduct these assessments is limited and rapidly changing, making estimates of fair value subject to judgment.  If actual information or conditions are different than estimated, the extent of the impairment of the security may be different than previously estimated, which could have a material effect on the CTBI’s results of operations and financial condition.

Loans –Loans with the ability and the intent to be held until maturity and/or payoff are reported at the carrying value of unpaid principal reduced by unearned interest, an allowance for loan and lease losses, and unamortized deferred fees or costs.  Income is recorded on the level yield basis.  Interest accrual is discontinued when management believes, after considering economic and business conditions, collateral value, and collection efforts, that the borrower’s financial condition is such that collection of interest is doubtful.  Any loan greater than 90 days past due must be well secured and in the process of collection to continue accruing interest.  Cash payments received on nonaccrual loans generally are applied against principal, and interest income is only recorded once principal recovery is reasonably assured.  Loans are not reclassified as accruing until principal and interest payments remain current for a period of time, generally six months, and future payments appear reasonably certain.  Included in certain loan categories of impaired loans are troubled debt restructurings that were classified as impaired.  A restructuring of a debt constitutes a troubled debt restructuring if the creditor for economic or legal reasons related to the debtor’s financial difficulties grants a concession to the debtor that it would not otherwise consider.

Loan origination and commitment fees and certain direct loan origination costs are deferred and the net amount amortized over the estimated life of the related loans, leases, or commitments as a yield adjustment.

Allowance for Loan and Lease Losses –We maintain an allowance for loan and lease losses (“ALLL”) at a level that is appropriate to cover estimated credit losses on individually evaluated loans determined to be impaired, as well as estimated credit losses inherent in the remainder of the loan and lease portfolio.  Since arriving at an appropriate ALLL involves a high degree of management judgment, we use an ongoing quarterly analysis to develop a range of estimated losses.  In accordance with accounting principles generally accepted in the United States, we use our best estimate within the range of potential credit loss to determine the appropriate ALLL.  Credit losses are charged and recoveries are credited to the ALLL.

We utilize an internal risk grading system for commercial credits.  Those larger commercial credits that exhibit probable or observed credit weaknesses are subject to individual review.  The borrower’s cash flow, adequacy of collateral coverage, and other options available to CTBI, including legal remedies, are evaluated.  The review of individual loans includes those loans that are impaired as defined by ASC 310-35, Impairment of a Loan.  We evaluate the collectability of both principal and interest when assessing the need for loss provision.  Historical loss rates are analyzed and applied to other commercial loans not subject to specific allocations.  The ALLL allocation for this pool of commercial loans is established based on the historical average, maximum, minimum, and median loss ratios.

A loan is considered impaired when, based on current information and events, it is probable that CTBI will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.  Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.  Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.  Impairment is measured on a loan-by-loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

Homogenous loans, such as consumer installment, residential mortgages, and home equity lines are not individually risk graded.  The associated ALLL for these loans is measured under ASC 450, Contingencies.

When any secured commercial loan is considered uncollectable, whether past due or not, a current assessment of the value of the underlying collateral is made.  If the balance of the loan exceeds the fair value of the collateral, the loan is placed on non-accrual and the loan is charged down to the value of the collateral less estimated cost to sell or a specific reserve equal to the difference between book value of the loan and the fair value assigned to the collateral is created until such time as the loan is foreclosed.  When the foreclosed collateral has been legally assigned to CTBI, a charge off is taken, if necessary, in order that the remaining balance reflects the fair value estimated less costs to sell of the collateral then transferred to other real estate owned or other repossessed assets.  When any unsecured commercial loan is considered uncollectable the loan is charged off no later than at 90 days past due.

All closed-end consumer loans (excluding conventional 1-4 family residential loans and installment and revolving loans secured by real estate) are charged off no later than 120 days (5 monthly payments) delinquent.  If a loan is considered uncollectable, it is charged off earlier than 120 days delinquent.  For conventional 1-4 family residential loans and installment and revolving loans secured by real estate, when a loan is 90 days past due, a current assessment of the value of the real estate is made.  If the balance of the loan exceeds the fair value of the property, the loan is placed on nonaccrual and foreclosure proceedings are initiated.  When the foreclosed property has been legally assigned to CTBI, a charge-off is taken with the remaining balance, reflecting the fair value less estimated costs to sell, transferred to other real estate owned.

Historical loss rates for loans are adjusted for significant factors that, in management’s judgment, reflect the impact of any current conditions on loss recognition.  We generally review the historical loss rates over eight quarters and four quarters on a rolling average basis.  Factors that we consider include delinquency trends, current economic conditions and trends, strength of supervision and administration of the loan portfolio, levels of underperforming loans, level of recoveries to prior year’s charge-offs, trend in loan losses, industry concentrations and their relative strengths, amount of unsecured loans and underwriting exceptions.  Based upon management’s judgment, “best case,” “worst case,” and “most likely” scenarios are determined.  The total of each of these weighted factors is then applied against the applicable portion of the portfolio and the ALLL is adjusted accordingly to approximate the most likely scenario.  Management continually reevaluates the other subjective factors included in its ALLL analysis.

Other Real Estate Owned – When foreclosed properties are acquired, appraisals are obtained and the properties are booked at the current market value less expected sales costs.  Additionally, periodic updated appraisals are obtained on unsold foreclosed properties.  When an updated appraisal reflects a market value below the current book value, a charge is booked to current earnings to reduce the property to its new market value less expected sales costs.  Our policy for determining the frequency of periodic reviews is based upon consideration of the specific properties and the known or perceived market fluctuations in a particular market and is typically between 12 and 18 months but generally not more than 24 months.  All revenues and expenses related to the carrying of other real estate owned are recognized by a charge to income.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Interest rate risk management focuses on maintaining consistent growth in net interest income within Board-approved policy limits.  CTBI uses an earnings simulation model to analyze net interest income sensitivity to movements in interest rates.  Given a 200 basis point increase to the yield curve used in the simulation model, it is estimated net interest income for CTBI would increase by 0.38 percent over one year and would decrease by 2.11 percent over two years.  A 25 basis point decrease in the yield curve would decrease net interest income by an estimated 0.10 percent over one year and by 0.33 percent over two years.  For further discussion of CTBI’s market risk, see the Management’s Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Market Risk included in the annual report on Form 10-K for the year ended December 31, 2012.

Item  4.  Controls and Procedures

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

CTBI’s management is responsible for establishing and maintaining effective disclosure controls and procedures, as defined under Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934.  As of the end of the period covered by this report, an evaluation was carried out by CTBI’s management, with the participation of our Chief Executive Officer and the Executive Vice President, Treasurer, and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures.  Based on this evaluation, management concluded that disclosure controls and procedures as of March 31, 2013 were effective in ensuring material information required to be disclosed in this quarterly report on Form 10-Q was recorded, processed, summarized, and reported on a timely basis.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in CTBI’s internal control over financial reporting that occurred during the quarter ended March 31, 2013 that have materially affected, or are reasonably likely to materially affect, CTBI’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	None
Item 1A.	Risk Factors	None
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	None
Item 3.	Defaults Upon Senior Securities	None
Item 4.	Mine Safety Disclosure	Not applicable
Item 5.	Other Information:
	CTBI’s Principal Executive Officer and Principal Financial Officer have furnished to the SEC the certifications with respect to this Form 10-Q that are required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002
Item 6.	a. Exhibits:
	(1)   Certifications Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Exhibit 31.1 Exhibit 31.2
	(2)   Certifications Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Exhibit 32.1 Exhibit 32.2
	(3)  XBRL Instance Document*	Exhibit 101.INS
	(4)  XBRL Taxonomy Extension Schema*	Exhibit 101.SCH
	(5)  XBRL Taxonomy Extension Calculation Linkbase*	Exhibit 101.CAL
	(6)  XBRL Taxonomy Extension Definition Linkbase*	Exhibit 101.DEF
	(7)  XBRL Taxonomy Extension Label Linkbase*	Exhibit 101.LAB
	(8)  XBRL Taxonomy Extension Presentation Linkbase*	Exhibit 101.PRE

* These interactive data files are being submitted electronically with this report and, in accordance with Rule 406T of Regulation S-T, are not deemed filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, are not deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, CTBI has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	COMMUNITY TRUST BANCORP, INC.
Date:  May 10, 2013	By:	/s/ Jean R. Hale
		Jean R. Hale
		Chairman, President, and Chief Executive Officer

/s/ Kevin J. Stumbo

Kevin J. Stumbo

Executive Vice President, Treasurer, and Chief Financial Officer

EX-31.1

Exhibit 31.1

Certification of Principal Executive Officer

I, Jean R. Hale, Chairman, President, and Chief Executive Officer of Community Trust Bancorp, Inc. (“CTBI”), certify that:

 (1) I have reviewed this quarterly report on Form 10-Q of Community Trust Bancorp, Inc.;

 (2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 (3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operation and cash flows of CTBI as of, and for, the periods presented in this report;

 (4) CTBI's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for CTBI and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to CTBI, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of CTBI's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in CTBI's internal control over financial reporting that occurred during CTBI's most recent fiscal quarter (CTBI's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonable likely to materially affect, CTBI's internal control over financial reporting; and

 (5) CTBI's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to CTBI's auditors and the audit committee of CTBI's board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect CTBI's ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in CTBI's internal control over financial reporting.

/s/ Jean R. Hale                                                                

Jean R. Hale

Chairman, President and CEO

May 10, 2013

EX-31.2

Exhibit 31.2

Certification of Principal Financial Officer

I, Kevin J. Stumbo, Executive Vice President, Treasurer, and Chief Financial Officer of Community Trust Bancorp, Inc. (“CTBI”), certify that:

 (1) I have reviewed this quarterly report on Form 10-Q of Community Trust Bancorp, Inc.;

 (2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 (3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operation and cash flows of CTBI as of, and for, the periods presented in this report;

 (4) CTBI's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for CTBI and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to CTBI, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of CTBI's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in CTBI's internal control over financial reporting that occurred during CTBI's most recent fiscal quarter (CTBI's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonable likely to materially affect, CTBI's internal control over financial reporting; and

 (5) CTBI's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to CTBI's auditors and the audit committee of CTBI's board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect CTBI's ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in CTBI's internal control over financial reporting.

/s/ Kevin J. Stumbo                                                      

Kevin J. Stumbo

Executive Vice President, Treasurer, and Chief Financial Officer

May 10, 2013

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Community Trust Bancorp, Inc. (“CTBI”) on Form 10-Q for the period ended March 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jean R. Hale, Chairman, President and Chief Executive Officer of CTBI, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of CTBI.

/s/ Jean R. Hale                                                                

Jean R. Hale

Chairman, President and CEO

May 10, 2013

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Community Trust Bancorp, Inc. (“CTBI”) on Form 10-Q for the period ended March 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Kevin J. Stumbo, Executive Vice President, Treasurer, and Chief Financial Officer of CTBI, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of CTBI.

/s/ Kevin J. Stumbo                                                      

Kevin J. Stumbo

Executive Vice President, Treasurer, and Chief Financial Officer

May 10, 2013

XML

Fair Market Value of Financial Assets and Liabilities (Details) (USD $)	3 Months Ended		12 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Dec. 31, 2012
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Total gains, noninterest income	$ (69,000)	$ 207,000
Total gains, noninterest expense	0	0
Recurring [Member] | Marketable Equity Securities [Member]
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance	0	211,000	211,000
Total recognized gains (losses) Included in net income	0	0
Issues	0	0
Settlements	0	0
Ending balance	0	211,000
Total gains for the period included in net income	0	0
Recurring [Member] | Mortgage Servicing Rights [Member]
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance	2,364,000	2,282,000	2,282,000
Total recognized gains (losses) Included in net income	117,000	341,000
Issues	357,000	151,000
Settlements	(186,000)	(134,000)
Ending balance	2,652,000	2,640,000
Total gains for the period included in net income	117,000	341,000
Recurring [Member] | Fair Value [Member]
Available-for-sale securities [Abstract]
U.S. Treasury and government agencies	61,263,000		60,915,000
State and political subdivisions	120,448,000		113,221,000
U.S. government sponsored agency mortgage-backed securities	440,470,000		383,581,000
Marketable equity securities	55,329,000		45,626,000
Mortgage servicing rights	2,652,000		2,364,000
Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Available-for-sale securities [Abstract]
U.S. Treasury and government agencies	0		0
State and political subdivisions	0		0
U.S. government sponsored agency mortgage-backed securities	0		0
Marketable equity securities	55,329,000		45,626,000
Mortgage servicing rights	0		0
Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Available-for-sale securities [Abstract]
U.S. Treasury and government agencies	61,263,000		60,915,000
State and political subdivisions	120,448,000		113,221,000
U.S. government sponsored agency mortgage-backed securities	440,470,000		383,581,000
Marketable equity securities	0		0
Mortgage servicing rights	0		0
Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Available-for-sale securities [Abstract]
U.S. Treasury and government agencies	0		0
State and political subdivisions	0		0
U.S. government sponsored agency mortgage-backed securities	0		0
Marketable equity securities	0		0
Mortgage servicing rights	2,652,000		2,364,000
Nonrecurring [Member]
Impaired loan (collateral dependent) [Abstract]
Impaired loans, fair value adjustments	500,000	100,000	500,000
Other real estate owned [Abstract]
Other real estate /assets owned, fair value adjustment	1,100,000	200,000	1,800,000
Nonrecurring [Member] | Fair Value [Member]
Assets measured-nonrecurring basis [Abstract]
Impaired loans (collateral dependent)	2,326,000		5,465,000
Other real estate /assets owned	4,365,000		13,892,000
Nonrecurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets measured-nonrecurring basis [Abstract]
Impaired loans (collateral dependent)	0		0
Other real estate /assets owned	0		0
Nonrecurring [Member] | Significant Other Observable Inputs (Level 2) [Member]
Assets measured-nonrecurring basis [Abstract]
Impaired loans (collateral dependent)	0		0
Other real estate /assets owned	0		0
Nonrecurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Assets measured-nonrecurring basis [Abstract]
Impaired loans (collateral dependent)	2,326,000		5,465,000
Other real estate /assets owned	$ 4,365,000		$ 13,892,000

XML

Loans, Major Classifications of Loans, Net of Income and Deferred Loan Origination Cost (Details) (USD $)	Mar. 31, 2013	Dec. 31, 2012
Major classification of loans, net of unearned income and deferred loan origination costs [Line Items]
Loans, net of unearned income and deferred origination costs	$ 2,563,314,000	$ 2,550,573,000
Loans held for sale [Abstract]
Loans held-for-sale, Amount	1,400,000	22,500,000
Capitalized fees and cost related to origination of loans	200,000	400,000
Commercial Construction [Member]
Major classification of loans, net of unearned income and deferred loan origination costs [Line Items]
Loans, net of unearned income and deferred origination costs	102,303,000	119,447,000
Commercial Secured by Real Estate [Member]
Major classification of loans, net of unearned income and deferred loan origination costs [Line Items]
Loans, net of unearned income and deferred origination costs	847,807,000	807,213,000
Equipment Lease Financing [Member]
Major classification of loans, net of unearned income and deferred loan origination costs [Line Items]
Loans, net of unearned income and deferred origination costs	9,944,000	9,246,000
Commercial Other [Member]
Major classification of loans, net of unearned income and deferred loan origination costs [Line Items]
Loans, net of unearned income and deferred origination costs	375,409,000	376,348,000
Real Estate Construction [Member]
Major classification of loans, net of unearned income and deferred loan origination costs [Line Items]
Loans, net of unearned income and deferred origination costs	51,978,000	55,041,000
Real Estate Mortgage [Member]
Major classification of loans, net of unearned income and deferred loan origination costs [Line Items]
Loans, net of unearned income and deferred origination costs	696,321,000	696,928,000
Home Equity [Member]
Major classification of loans, net of unearned income and deferred loan origination costs [Line Items]
Loans, net of unearned income and deferred origination costs	79,899,000	82,292,000
Consumer Direct [Member]
Major classification of loans, net of unearned income and deferred loan origination costs [Line Items]
Loans, net of unearned income and deferred origination costs	119,191,000	122,581,000
Consumer Indirect [Member]
Major classification of loans, net of unearned income and deferred loan origination costs [Line Items]
Loans, net of unearned income and deferred origination costs	$ 280,462,000	$ 281,477,000

XML

Loans

3 Months Ended

Mar. 31, 2013

Loans [Abstract]

Loans

Note 4 – Loans

Major classifications of loans, net of unearned income and deferred loan origination costs, are summarized as follows:

(in thousands)	March 31 2013		December 31 2012
Commercial construction	$	102,303	$	119,447
Commercial secured by real estate		847,807		807,213
Equipment lease financing		9,944		9,246
Commercial other		375,409		376,348
Real estate construction		51,978		55,041
Real estate mortgage		696,321		696,928
Home equity		79,899		82,292
Consumer direct		119,191		122,581
Consumer indirect		280,462		281,477
Total loans	$	2,563,314	$	2,550,573

CTBI has segregated and evaluates its loan portfolio through nine portfolio segments. The nine segments are commercial construction, commercial secured by real estate, equipment lease financing, commercial other, real estate construction, real estate mortgage, home equity, consumer direct, and consumer indirect. CTBI serves customers in small and mid-sized communities in eastern, northeastern, central, and south central Kentucky, southern West Virginia, and northeastern Tennessee. Therefore, CTBI's exposure to credit risk is significantly affected by changes in these communities.

Commercial construction loans are for the purpose of erecting or rehabilitating buildings or other structures for commercial purposes, including any infrastructure necessary for development. Included in this category are improved property, land development, and tract development loans. The terms of these loans are generally short-term with permanent financing upon completion.

Commercial real estate loans include loans secured by nonfarm, nonresidential properties, 1-4 family/ multi-family properties, farmland, and other commercial real estate. These loans are originated based on the borrower's ability to service the debt and secondarily based on the fair value of the underlying collateral.

Equipment lease financing loans are fixed, variable, and tax exempt leases for commercial purposes.

Commercial other loans consist of commercial check loans, agricultural loans, receivable financing, floorplans, loans to financial institutions, loans for purchasing or carrying securities, and other commercial purpose loans. Commercial loans are underwritten based on the borrower's ability to service debt from the business's underlying cash flows. As a general practice, we obtain collateral such as real estate, equipment, or other assets, although such loans may be uncollateralized but guaranteed.

Real estate construction loans are typically for owner-occupied properties. The terms of these loans are generally short-term with permanent financing upon completion.

Residential real estate loans are a mixture of fixed rate and adjustable rate first and second lien residential mortgage loans. As a policy, CTBI holds adjustable rate loans and sells the majority of its fixed rate first lien mortgage loans into the secondary market. Changes in interest rates or market conditions may impact a borrower's ability to meet contractual principal and interest payments. Residential real estate loans are secured by real property.

Home equity lines are revolving adjustable rate credit lines secured by real property.

Consumer direct loans are fixed rate products comprised of unsecured loans, consumer revolving credit lines, deposit secured loans, and all other consumer purpose loans.

Consumer indirect loans are fixed rate loans secured by automobiles, trucks, vans, and recreational vehicles originated at the selling dealership underwritten and purchased by CTBI's indirect lending department. Both new and used products are financed. Only dealers who have executed dealer agreements with CTBI participate in the indirect lending program.

Not included in the loan balances above were loans held for sale in the amount of $1.4 million at March 31, 2013 and $22.5 million at December 31, 2012. The amount of capitalized fees and costs under ASC 310-20, included in the above loan totals were $0.2 million and $0.4 million at March 31, 2013 and December 31, 2012, respectively.

Refer to note 1 to the condensed consolidated financial statements for further information regarding our nonaccrual policy. Nonaccrual loans segregated by class of loans were as follows:

(in thousands)	March 31 2013	December 31 2012
Commercial:
Commercial construction	$6,196	$5,955
Commercial secured by real estate	6,256	5,572
Commercial other	1,344	1,655
Residential:
Real estate construction	635	315
Real estate mortgage	3,763	3,153
Home equity	143	141
Total nonaccrual loans	$18,337	$16,791

The following tables present CTBI's loan portfolio aging analysis, segregated by class, as of March 31, 2013 and December 31, 2012:

	March 31, 2013
(in thousands)	30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Total Past Due		Current		Total Loans		90+ and Accruing*
Commercial:
Commercial construction	$	617	$	16	$	8,599	$	9,232	$	93,071	$	102,303	$	2,532
Commercial secured by real estate		6,619		7,111		9,129		22,859		824,948		847,807		4,475
Equipment lease financing		0		0		0		0		9,944		9,944		0
Commercial other		1,776		1,398		5,101		8,275		367,134		375,409		3,827
Residential:
Real estate construction		195		272		866		1,333		50,645		51,978		232
Real estate mortgage		1,822		2,394		6,698		10,914		685,407		696,321		3,635
Home equity		1,118		119		497		1,734		78,165		79,899		374
Consumer:
Consumer direct		851		247		79		1,177		118,014		119,191		79
Consumer indirect		1,860		546		379		2,785		277,677		280,462		379
Total	$	14,858	$	12,103	$	31,348	$	58,309	$	2,505,005	$	2,563,314	$	15,533

	December 31, 2012
(in thousands)	30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Total Past Due		Current		Total Loans		90+ and Accruing*
Commercial:
Commercial construction	$	1,413	$	312	$	9,598	$	11,323	$	108,124	$	119,447	$	3,778
Commercial secured by real estate		9,733		1,633		10,456		21,822		785,391		807,213		5,943
Equipment lease financing		0		0		0		0		9,246		9,246		0
Commercial other		259		1,142		5,164		6,565		369,783		376,348		3,867
Residential:
Real estate construction		248		572		511		1,331		53,710		55,041		196
Real estate mortgage		2,765		4,029		7,138		13,932		682,996		696,928		4,511
Home equity		921		102		565		1,588		80,704		82,292		441
Consumer:
Consumer direct		1,360		336		98		1,794		120,787		122,581		98
Consumer indirect		2,772		907		381		4,060		277,417		281,477		381
Total	$	19,471	$	9,033	$	33,911	$	62,415	$	2,488,158	$	2,550,573	$	19,215

*90+ and Accruing are also included in 90+ Days Past Due column.

The risk characteristics of CTBI's material portfolio segments are as follows:

Commercial real estate loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. Management monitors and evaluates commercial real estate loans based on collateral and risk grade criteria.

Commercial loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

With respect to residential loans that are secured by 1-4 family residences and are generally owner occupied, CTBI generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. Home equity loans are typically secured by a subordinate interest in 1-4 family residences, and consumer loans are secured by consumer assets such as automobiles or recreational vehicles. Some consumer loans are unsecured such as small installment loans and certain lines of credit. Repayment of these loans is primarily dependent on the personal income and credit rating of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Repayment can also be impacted by changes in property values on residential properties. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

Credit Quality Indicators:

CTBI categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. CTBI also considers the fair value of the underlying collateral and the strength and willingness of the guarantor(s). CTBI analyzes commercial loans individually by classifying the loans as to credit risk. Loans classified as loss, doubtful, substandard, or special mention are reviewed quarterly by CTBI for further deterioration or improvement to determine if appropriately classified and valued if deemed impaired. All other commercial loan reviews are completed every 12 to 18 months. In addition, during the renewal process of any loan, as well as if a loan becomes past due or if other information becomes available, CTBI will evaluate the loan grade. CTBI uses the following definitions for risk ratings:

Ø Pass grades include investment grade, low risk, moderate risk, and acceptable risk loans. The loans range from loans that have no chance of resulting in a loss to loans that have a limited chance of resulting in a loss. Customers in this grade have excellent to fair credit ratings. The cash flows are adequate to meet required debt repayments.

Ø Watch graded loans are loans that warrant extra management attention but are not currently criticized. Loans on the watch list may be potential troubled credits or may warrant "watch" status for a reason not directly related to the asset quality of the credit. The watch grade is a management tool to identify credits which may be candidates for future classification or may temporarily warrant extra management monitoring.

Ø Other assets especially mentioned (OAEM) reflects loans that are currently protected but are potentially weak. These loans constitute an undue and unwarranted credit risk but not to the point of justifying a classification of substandard. The credit risk may be relatively minor yet constitute an unwarranted risk in light of circumstances surrounding a specific asset. Loans in this grade display potential weaknesses which may, if unchecked or uncorrected, inadequately protect CTBI's credit position at some future date. The loans may be adversely affected by economic or market conditions.

Ø Substandard grading indicates that the loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged. These loans have a well-defined weakness or weaknesses that jeopardize the orderly liquidation of the debt with the distinct possibility that CTBI will sustain some loss if the deficiencies are not corrected.

Ø Doubtful graded loans have the weaknesses inherent in the substandard grading with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The probability of loss is extremely high, but because of certain important and reasonably specific pending factors which may work to CTBI's advantage or strengthen the asset(s), its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors include proposed merger, acquisition, or liquidation procedures, capital injection, perfecting liens on additional collateral, and refinancing plans.

The following tables present the credit risk profile of CTBI's commercial loan portfolio based on rating category and payment activity, segregated by class of loans, as of March 31, 2013 and December 31, 2012:

(in thousands)	Commercial Construction		Commercial Secured by Real Estate		Equipment Leases		Commercial Other		Total
March 31, 2013
Pass	$	74,898	$	704,073	$	9,944	$	327,158	$	1,116,073
Watch		14,142		85,439		0		29,830		129,411
OAEM		56		13,769		0		974		14,799
Substandard		7,011		39,387		0		16,336		62,734
Doubtful		6,196		5,139		0		1,111		12,446
Total	$	102,303	$	847,807	$	9,944	$	375,409	$	1,335,463
December 31, 2012
Pass	$	92,140	$	665,764	$	9,246	$	328,646	$	1,095,796
Watch		12,915		79,517		0		28,760		121,192
OAEM		1,054		16,532		0		2,816		20,402
Substandard		7,383		40,021		0		14,878		62,282
Doubtful		5,955		5,379		0		1,248		12,582
Total	$	119,447	$	807,213	$	9,246	$	376,348	$	1,312,254

The following tables present the credit risk profile of the CTBI's residential real estate and consumer loan portfolios based on performing or nonperforming status, segregated by class, as of March 31, 2013 and December 31, 2012:

(in thousands)	Real Estate Construction		Real Estate Mortgage		Home Equity		Consumer Direct		Consumer Indirect		Total
March 31, 2013
Performing	$	51,111	$	688,923	$	79,382	$	119,112	$	280,083	$	1,218,611
Nonperforming (1)		867		7,398		517		79		379		9,240
Total	$	51,978	$	696,321	$	79,899	$	119,191	$	280,462	$	1,227,851
December 31, 2012
Performing	$	54,530	$	689,264	$	81,710	$	122,483	$	281,096	$	1,229,083
Nonperforming (1)		511		7,664		582		98		381		9,236
Total	$	55,041	$	696,928	$	82,292	$	122,581	$	281,477	$	1,238,319

(1) A loan is considered nonperforming if it is 90 days or more past due and/or on nonaccrual.

A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-10-35-16), when based on current information and events, it is probable CTBI will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include nonperforming commercial loans but also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance, or other actions intended to maximize collection.

The following table presents impaired loans, the average investment in impaired loans, and interest income recognized on impaired loans for the periods ended March 31, 2013, December 31, 2012, and March 31, 2012:

	March 31, 2013
(in thousands)	Recorded Balance		Unpaid Contractual Principal Balance		Specific Allowance		Average Investment in Impaired Loans		*Interest Income Recognized
Loans without a specific valuation allowance:
Commercial construction	$	5,155	$	5,609	$	0	$	5,225	$	74
Commercial secured by real estate		33,765		34,586		0		33,908		297
Commercial other		15,779		17,920		0		15,435		154
Real estate mortgage		657		657		0		658		7
Loans with a specific valuation allowance:
Commercial construction		6,073		7,303		1,911		6,075		0
Commercial secured by real estate		4,158		4,276		1,192		4,166		0
Commercial other		867		2,188		322		868		0
Totals:
Commercial construction		11,228		12,912		1,911		11,300		74
Commercial secured by real estate		37,923		38,862		1,192		38,074		297
Commercial other		16,646		20,108		322		16,303		154
Real estate mortgage		657		657		0		658		7
Total	$	66,454	$	72,539	$	3,425	$	66,335	$	532

	December 31, 2012
(in thousands)	Recorded Balance		Unpaid Contractual Principal Balance		Specific Allowance		Average Investment in Impaired Loans		*Interest Income Recognized
Loans without a specific valuation allowance:
Commercial construction	$	3,692	$	4,146	$	0	$	4,249	$	97
Commercial secured by real estate		35,046		35,818		0		35,542		1,337
Commercial other		13,285		15,484		0		11,083		416
Real estate mortgage		695		695		0		481		30
Loans with a specific valuation allowance:
Commercial construction		5,703		6,933		1,820		6,585		0
Commercial secured by real estate		3,067		3,189		1,090		3,243		0
Commercial other		1,010		2,331		338		1,441		0
Totals:
Commercial construction		9,395		11,079		1,820		10,834		97
Commercial secured by real estate		38,113		39,007		1,090		38,785		1,337
Commercial other		14,295		17,815		338		12,524		416
Real estate mortgage		695		695		0		481		30
Total	$	62,498	$	68,596	$	3,248	$	62,624	$	1,880

	March 31, 2012
(in thousands)	Recorded Balance		Unpaid Contractual Principal Balance		Specific Allowance		Average Investment in Impaired Loans		*Interest Income Recognized
Loans without a specific valuation allowance:
Commercial construction	$	4,594	$	4,595	$	0	$	4,683	$	18
Commercial secured by real estate		36,312		37,778		0		36,506		332
Commercial other		6,696		7,406		0		6,785		16
Real estate mortgage		279		279		0		280		3
Loans with a specific valuation allowance:
Commercial construction		5,912		6,764		2,180		5,809		0
Commercial secured by real estate		3,382		3,508		1,246		3,385		0
Commercial other		2,791		5,391		1,104		2,829		0
Totals:
Commercial construction		10,506		11,359		2,180		10,492		18
Commercial secured by real estate		39,694		41,286		1,246		39,891		332
Commercial other		9,487		12,797		1,104		9,614		16
Real estate mortgage		279		279		0		280		3
Total	$	59,966	$	65,721	$	4,530	$	60,277	$	369

*Cash basis interest is substantially the same as interest income recognized.

Included in certain loan categories of impaired loans are certain loans and leases that have been modified in a troubled debt restructuring, where economic concessions have been granted to borrowers who have experienced financial difficulties. These concessions typically result from our loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. Modifications of terms for our loans and their inclusion as troubled debt restructurings are based on individual facts and circumstances. Loan modifications that are included as troubled debt restructurings may involve either an increase or reduction of the interest rate, extension of the term of the loan, or deferral of principal and/or interest payments, regardless of the period of the modification. All of the loans identified as troubled debt restructuring were modified due to financial stress of the borrower. In order to determine if a borrower is experiencing financial difficulty, an evaluation is performed to determine the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under CTBI's internal underwriting policy.

When we modify loans and leases in a troubled debt restructuring, we evaluate any possible impairment similar to other impaired loans based on the present value of expected future cash flows, discounted at the contractual interest rate of the original loan or lease agreement, or use the current fair value of the collateral, less selling costs for collateral dependent loans. If we determined that the value of the modified loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized through an allowance estimate or a charge-off to the allowance. In periods subsequent to modification, we evaluate all troubled debt restructuring, including those that have payment defaults, for possible impairment and recognize impairment through the allowance.

During 2013, certain loans were modified in troubled debt restructurings, where economic concessions were granted to borrowers consisting of reductions in the interest rates, payment extensions, forgiveness of principal, and forbearances. Presented below, segregated by class of loans, are troubled debt restructurings that occurred during the three months ended March 31, 2013 and 2012 and the year ended December 31, 2012:

	Three Months Ended March 31, 2013
(in thousands)	Number of Loans		Post-Modification Outstanding Balance		Net Charge-offs Resulting from Modification
Commercial:
Commercial construction		3	$	2,110	$	0
Commercial secured by real estate		5		605		0
Commercial other		9		5,585		0
Total troubled debt restructurings		17	$	8,300	$	0

	Year Ended December 31, 2012
(in thousands)	Number of Loans		Post-Modification Outstanding Balance		Net Charge-offs Resulting from Modification
Commercial:
Commercial construction		5	$	557	$	0
Commercial secured by real estate		11		4,506		0
Commercial other		23		3,233		0
Residential:
Real estate mortgage		1		391		0
Total troubled debt restructurings		40	$	8,687	$	0

	Three Months Ended March 31, 2012
(in thousands)	Number of Loans		Post-Modification Outstanding Balance		Net Charge-offs Resulting from Modification
Commercial:
Commercial construction		0	$	0	$	0
Commercial secured by real estate		3		1,665		0
Commercial other		1		48		0
Total troubled debt restructurings		4	$	1,713	$	0

Loans retain their accrual status at the time of their modification. As a result, if a loan is on nonaccrual at the time it is modified, it stays as nonaccrual, and if a loan is on accrual at the time of the modification, it generally stays on accrual. Commercial and consumer loans modified in a troubled debt restructuring are closely monitored for delinquency as an early indicator of possible future default. If loans modified in a troubled debt restructuring subsequently default, CTBI evaluates the loan for possible further impairment. The allowance for loan losses may be increased, adjustments may be made in the allocation of the allowance, or partial charge-offs may be taken to further write-down the carrying value of the loan. Presented below, segregated by class of loans, are loans that were modified as troubled debt restructurings which have subsequently defaulted. CTBI considers a loan in default when it is 90 days or more past due or transferred to nonaccrual.

(in thousands)	Three Months Ended March 31, 2013
	Number of Loans		Recorded Balance
Commercial:
Commercial construction		2	$	328
Commercial secured by real estate		2		662
Commercial other		1		12
Total defaulted restructured loans		5	$	1,002

(in thousands)	Three Months Ended March 31, 2012
	Number of Loans		Recorded Balance
Commercial:
Commercial construction		0	$	0
Commercial secured by real estate		3		370
Commercial other		2		32
Total defaulted restructured loans		5	$	402

XML

Loans, Troubled Debt Restructurings Segregated by Class (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		12 Months Ended
	Mar. 31, 2013 Loan	Mar. 31, 2012 Loan	Dec. 31, 2012 Loan
Financing Receivable, Modifications [Line Items]
Number of troubled debt restructuring that occurred during the period	17	4	40
Post-modification outstanding balance	$ 8,300	$ 1,713	$ 8,687
Net charge-offs resulting from modification	0	0	0
Defaulted restructured loans, number of loans	5	5
Defaulted Restructured loans, recorded investment	1,002	402
Commercial Construction [Member]
Financing Receivable, Modifications [Line Items]
Number of troubled debt restructuring that occurred during the period	3	0	5
Post-modification outstanding balance	2,110	0	557
Net charge-offs resulting from modification	0	0	0
Defaulted restructured loans, number of loans	2	0
Defaulted Restructured loans, recorded investment	328	0
Commercial Secured by Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Number of troubled debt restructuring that occurred during the period	5	3	11
Post-modification outstanding balance	605	1,665	4,506
Net charge-offs resulting from modification	0	0	0
Defaulted restructured loans, number of loans	2	3
Defaulted Restructured loans, recorded investment	662	370
Commercial Other [Member]
Financing Receivable, Modifications [Line Items]
Number of troubled debt restructuring that occurred during the period	9	1	23
Post-modification outstanding balance	5,585	48	3,233
Net charge-offs resulting from modification	0	0	0
Defaulted restructured loans, number of loans	1	2
Defaulted Restructured loans, recorded investment	12	32
Real Estate Mortgage [Member]
Financing Receivable, Modifications [Line Items]
Number of troubled debt restructuring that occurred during the period			1
Post-modification outstanding balance			391
Net charge-offs resulting from modification			$ 0

XML

Loans, Impaired Loans, Average Investments in Impaired Loans, and Interest Income Recognized on Impaired Loans (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				12 Months Ended
	Mar. 31, 2013		Mar. 31, 2012		Dec. 31, 2012
Total impaired loans [Abstract]
Recorded balance	$ 66,454		$ 59,966		$ 62,498
Unpaid Contractual Principal Balance	72,539		65,721		68,596
Specific Allowance	3,425		4,530		3,248
Average investment in impaired loans	66,335		60,277		62,624
Interest Income Recognized	532	[1]	369	[1]	1,880	[1]
Commercial Construction [Member]
Loans without a specific valuation allowance [Abstract]
Recorded Balance	5,155		4,594		3,692
Unpaid Contractual Principal Balance	5,609		4,595		4,146
Specific Allowance	0		0		0
Average Investment in Impaired Loans	5,225		4,683		4,249
Interest Income Recognized	74	[1]	18	[1]	97	[1]
Loans with a specific valuation allowance [Abstract]
Recorded Balance	6,073		5,912		5,703
Unpaid Contractual Principal Balance	7,303		6,764		6,933
Specific Allowance	1,911		2,180		1,820
Average Investment in Impaired Loans	6,075		5,809		6,585
Interest income recognized	0	[1]	0	[1]	0	[1]
Total impaired loans [Abstract]
Recorded balance	11,228		10,506		9,395
Unpaid Contractual Principal Balance	12,912		11,359		11,079
Specific Allowance	1,911		2,180		1,820
Average investment in impaired loans	11,300		10,492		10,834
Interest Income Recognized	74	[1]	18	[1]	97	[1]
Commercial Secured by Real Estate [Member]
Loans without a specific valuation allowance [Abstract]
Recorded Balance	33,765		36,312		35,046
Unpaid Contractual Principal Balance	34,586		37,778		35,818
Specific Allowance	0		0		0
Average Investment in Impaired Loans	33,908		36,506		35,542
Interest Income Recognized	297	[1]	332	[1]	1,337	[1]
Loans with a specific valuation allowance [Abstract]
Recorded Balance	4,158		3,382		3,067
Unpaid Contractual Principal Balance	4,276		3,508		3,189
Specific Allowance	1,192		1,246		1,090
Average Investment in Impaired Loans	4,166		3,385		3,243
Interest income recognized	0	[1]	0	[1]	0	[1]
Total impaired loans [Abstract]
Recorded balance	37,923		39,694		38,113
Unpaid Contractual Principal Balance	38,862		41,286		39,007
Specific Allowance	1,192		1,246		1,090
Average investment in impaired loans	38,074		39,891		38,785
Interest Income Recognized	297	[1]	332		1,337	[1]
Commercial Other [Member]
Loans without a specific valuation allowance [Abstract]
Recorded Balance	15,779		6,696		13,285
Unpaid Contractual Principal Balance	17,920		7,406		15,484
Specific Allowance	0		0		0
Average Investment in Impaired Loans	15,435		6,785		11,083
Interest Income Recognized	154	[1]	16	[1]	416	[1]
Loans with a specific valuation allowance [Abstract]
Recorded Balance	867		2,791		1,010
Unpaid Contractual Principal Balance	2,188		5,391		2,331
Specific Allowance	322		1,104		338
Average Investment in Impaired Loans	868		2,829		1,441
Interest income recognized	0	[1]	0	[1]	0	[1]
Total impaired loans [Abstract]
Recorded balance	16,646		9,487		14,295
Unpaid Contractual Principal Balance	20,108		12,797		17,815
Specific Allowance	322		1,104		338
Average investment in impaired loans	16,303		9,614		12,524
Interest Income Recognized	154	[1]	16		416	[1]
Real Estate Mortgage [Member]
Loans without a specific valuation allowance [Abstract]
Recorded Balance	657		279		695
Unpaid Contractual Principal Balance	657		279		695
Specific Allowance	0		0		0
Average Investment in Impaired Loans	658		280		481
Interest Income Recognized	7	[1]	3	[1]	30	[1]
Total impaired loans [Abstract]
Recorded balance	657		279		695
Unpaid Contractual Principal Balance	657		279		695
Specific Allowance	0		0		0
Average investment in impaired loans	658		280		481
Interest Income Recognized	$ 7	[1]	$ 3	[1]	$ 30	[1]

[1] Cash basis interest is substantially the same as interest income recognized.

XML

Allowance for Loan and Lease Losses (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		12 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Dec. 31, 2012
Allowance for loan losses [Roll Forward]
Beginning balance	$ 33,245	$ 33,171	$ 33,171
Provision charged to expense	1,559	1,160	9,450
Losses charged off	2,188	2,126	12,590
Recoveries	777	967	3,214
Ending balance	33,393	33,172	33,245
Allowance for Loan Losses Ending balance: [Abstract]
Individually evaluated for impairment	3,425	4,530	3,248
Collectively evaluated for impairment	29,968	28,642	29,997
Loans Ending balance: [Abstract]
Individually evaluated for impairment	66,454	59,966	62,498
Collectively evaluated for impairment	2,496,860	2,482,202	2,488,075
Commercial Construction [Member]
Allowance for loan losses [Roll Forward]
Beginning balance	4,033	4,023	4,023
Provision charged to expense	(212)	42	1,009
Losses charged off	0	18	1,034
Recoveries	6	19	35
Ending balance	3,827	4,066	4,033
Allowance for Loan Losses Ending balance: [Abstract]
Individually evaluated for impairment	1,911	2,180	1,820
Collectively evaluated for impairment	1,916	1,886	2,213
Loans Ending balance: [Abstract]
Individually evaluated for impairment	11,228	10,506	9,395
Collectively evaluated for impairment	91,075	103,655	110,052
Commercial Secured by Real Estate [Member]
Allowance for loan losses [Roll Forward]
Beginning balance	13,541	11,753	11,753
Provision charged to expense	484	1,280	3,520
Losses charged off	365	96	2,035
Recoveries	22	40	303
Ending balance	13,682	12,977	13,541
Allowance for Loan Losses Ending balance: [Abstract]
Individually evaluated for impairment	1,192	1,246	1,090
Collectively evaluated for impairment	12,490	11,731	12,451
Loans Ending balance: [Abstract]
Individually evaluated for impairment	37,923	39,694	38,113
Collectively evaluated for impairment	809,884	767,215	769,100
Commercial Other [Member]
Allowance for loan losses [Roll Forward]
Beginning balance	5,469	5,608	5,608
Provision charged to expense	(155)	718	2,330
Losses charged off	332	612	3,233
Recoveries	169	251	764
Ending balance	5,151	5,965	5,469
Allowance for Loan Losses Ending balance: [Abstract]
Individually evaluated for impairment	322	1,104	338
Collectively evaluated for impairment	4,829	4,861	5,131
Loans Ending balance: [Abstract]
Individually evaluated for impairment	16,646	9,487	14,295
Collectively evaluated for impairment	358,763	372,459	362,053
Equipment Lease Financing [Member]
Allowance for loan losses [Roll Forward]
Beginning balance	126	112	112
Provision charged to expense	2	(7)	14
Losses charged off	0	0	0
Recoveries	0	0	0
Ending balance	128	105	126
Allowance for Loan Losses Ending balance: [Abstract]
Individually evaluated for impairment	0	0	0
Collectively evaluated for impairment	128	105	126
Loans Ending balance: [Abstract]
Individually evaluated for impairment	0	0	0
Collectively evaluated for impairment	9,944	8,219	9,246
Real Estate Construction [Member]
Allowance for loan losses [Roll Forward]
Beginning balance	376	354	354
Provision charged to expense	(4)	155	183
Losses charged off	0	171	189
Recoveries	0	6	28
Ending balance	372	344	376
Allowance for Loan Losses Ending balance: [Abstract]
Individually evaluated for impairment	0	0	0
Collectively evaluated for impairment	372	344	376
Loans Ending balance: [Abstract]
Individually evaluated for impairment	0	0	0
Collectively evaluated for impairment	51,978	52,558	55,041
Real Estate Mortgage [Member]
Allowance for loan losses [Roll Forward]
Beginning balance	4,767	4,302	4,302
Provision charged to expense	334	71	1,437
Losses charged off	131	190	1,123
Recoveries	10	57	151
Ending balance	4,980	4,240	4,767
Allowance for Loan Losses Ending balance: [Abstract]
Individually evaluated for impairment	0	0	0
Collectively evaluated for impairment	4,980	4,240	4,767
Loans Ending balance: [Abstract]
Individually evaluated for impairment	657	279	695
Collectively evaluated for impairment	695,664	648,059	696,233
Home Equity [Member]
Allowance for loan losses [Roll Forward]
Beginning balance	563	562	562
Provision charged to expense	50	29	238
Losses charged off	47	46	248
Recoveries	5	1	11
Ending balance	571	546	563
Allowance for Loan Losses Ending balance: [Abstract]
Individually evaluated for impairment	0	0	0
Collectively evaluated for impairment	571	546	563
Loans Ending balance: [Abstract]
Individually evaluated for impairment	0	0	0
Collectively evaluated for impairment	79,899	83,498	82,292
Consumer Direct [Member]
Allowance for loan losses [Roll Forward]
Beginning balance	1,102	917	917
Provision charged to expense	165	(117)	892
Losses charged off	314	146	1,245
Recoveries	145	192	538
Ending balance	1,098	846	1,102
Allowance for Loan Losses Ending balance: [Abstract]
Individually evaluated for impairment	0	0	0
Collectively evaluated for impairment	1,098	846	1,102
Loans Ending balance: [Abstract]
Individually evaluated for impairment	0	0	0
Collectively evaluated for impairment	119,191	121,645	122,581
Consumer Indirect [Member]
Allowance for loan losses [Roll Forward]
Beginning balance	3,268	5,540	5,540
Provision charged to expense	895	(1,011)	(173)
Losses charged off	999	847	3,483
Recoveries	420	401	1,384
Ending balance	3,584	4,083	3,268
Allowance for Loan Losses Ending balance: [Abstract]
Individually evaluated for impairment	0	0	0
Collectively evaluated for impairment	3,584	4,083	3,268
Loans Ending balance: [Abstract]
Individually evaluated for impairment	0	0	0
Collectively evaluated for impairment	$ 280,462	$ 324,894	$ 281,477

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Other Real Estate Owned (Details) (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Mar. 31, 2011
Activity for other real estate owned [Roll Forward]
Beginning balance of other real estate owned	$ 47,537,000	$ 56,965,000
New assets acquired	2,047,000	5,370,000
Capitalized costs	0	90,000
Fair value adjustments	(1,146,000)	(179,000)
Sale of assets	(2,718,000)	(3,092,000)
Ending balance of other real estate owned	45,720,000	59,154,000
Foreclosed properties	45,200,000	58,600,000
Other real estate owned not acquired through foreclosure	500,000
Carrying cost and fair value adjusments for foreclosed properties	$ 1,840,000	$ 790,000	$ 850,000

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Securities

3 Months Ended

Mar. 31, 2013

Securities [Abstract]

Securities

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 March 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	$	61,100	$	435	$	(272	)	$	61,263
State and political subdivisions		115,724		4,949		(225	)		120,448
U.S. government sponsored agency mortgage-backed securities		428,787		11,992		(309	)		440,470
Total debt securities		605,611		17,376		(806	)		622,181
Marketable equity securities		55,000		606		(277	)		55,329
Total available-for-sale securities	$	660,611	$	17,982	$	(1,083	)	$	677,510

Held-to-Maturity

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury and government agencies	$	480	$	0	$	(7	)	$	473
State and political subdivisions		1,182		1		0			1,183
Total held-to-maturity securities	$	1,662	$	1	$	(7	)	$	1,656

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 March 31, 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	$	7,602	$	7,653	$	0	$	0
Due after one through five years		23,004		24,051		0		0
Due after five through ten years		107,594		109,952		1,182		1,183
Due after ten years		38,624		40,055		480		473
U.S. government sponsored agency mortgage-backed securities		428,787		440,470		0		0
Total debt securities		605,611		622,181		1,662		1,656
Marketable equity securities		55,000		55,329		0		0
Total securities	$	660,611	$	677,510	$	1,662	$	1,656

There were no sales of securities and no gains or losses realized as of March 31, 2013 or 2012.

The amortized cost of securities pledged as collateral, to secure public deposits and for other purposes, was $258.6 million at March 31, 2013 and $262.4 million at December 31, 2012.

The amortized cost of securities sold under agreements to repurchase amounted to $237.0 million at March 31, 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 March 31, 2013 indicates that all impairment is considered temporary, market driven, and not credit-related. The percentage of total investments with unrealized losses as of March 31, 2013 was 22.2% compared to 14.8% as of December 31, 2012. 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 March 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	$	48,078	$	(272	)	$	47,806
State and political subdivisions		17,012		(212	)		16,800
U.S. government sponsored agency mortgage-backed securities		55,489		(309	)		55,180
Total debt securities		120,579		(793	)		119,786
Marketable equity securities		30,000		(277	)		29,723
Total <12 months temporarily impaired AFS securities		150,579		(1,070	)		149,509
12 Months or More
State and political subdivisions		1,106		(13	)		1,093
Total ≥12 months temporarily impaired AFS securities		1,106		(13	)		1,093
Total
U.S. Treasury and government agencies		48,078		(272	)		47,806
State and political subdivisions		18,118		(225	)		17,893
U.S. government sponsored agency mortgage-backed securities		55,489		(309	)		55,180
Total debt securities		121,685		(806	)		120,879
Marketable equity securities		30,000		(277	)		29,723
Total temporarily impaired AFS securities	$	151,685	$	(1,083	)	$	150,602

Held-to-Maturity

(in thousands)	Amortized Cost		Gross Unrealized Losses			Fair Value
Less Than 12 Months
U.S. Treasury and government agencies	$	480	$	(7	)	$	473
Total temporarily impaired HTM securities	$	480	$	(7	)	$	473

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 <12 months temporarily impaired AFS securities		89,265		(485	)		88,780
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
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

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Earnings Per Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Numerator [Abstract]
Net income	$ 11,820	$ 11,869
Basic earnings per share [Abstract]
Weighted average shares (in shares)	15,539,000	15,407,000
Diluted earnings per share [Abstract]
Effect of dilutive stock options (in shares)	53,000	49,000
Adjusted weighted average shares (in shares)	15,592,000	15,456,000
Earnings per share [Abstract]
Basic earnings per share (in dollars per share)	$ 0.76	$ 0.77
Diluted earnings per share (in dollars per share)	$ 0.76	$ 0.77
Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Options excluded from diluted calculations (in shares)	88,246	248,555

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Condensed Consolidated Balance Sheets (unaudited) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Assets:
Cash and due from banks	$ 54,589	$ 73,451
Interest bearing deposits	111,128	127,438
Federal funds sold	2,227	6,671
Cash and cash equivalents	167,944	207,560
Certificates of deposit in other banks	9,320	5,336
Securities available-for-sale at fair value (amortized cost of $660,611 and $583,858, respectively)	677,510	603,343
Securities held-to-maturity at amortized cost (fair value of $1,656 and $1,659, respectively)	1,662	1,662
Loans held for sale	1,449	22,486
Loans	2,563,314	2,550,573
Allowance for loan losses	(33,393)	(33,245)
Net loans	2,529,921	2,517,328
Premises and equipment, net	53,491	54,321
Federal Home Loan Bank stock	25,673	25,673
Federal Reserve Bank stock	4,886	4,885
Goodwill	65,490	65,490
Core deposit intangible (net of accumulated amortization of $7,765 and $7,712, respectively)	850	904
Bank owned life insurance	53,166	44,893
Mortgage servicing rights	2,652	2,364
Other real estate owned	45,720	47,537
Other assets	32,361	31,882
Total assets	3,672,095	3,635,664
Deposits
Noninterest bearing	619,819	606,448
Interest bearing	2,313,761	2,297,400
Total deposits	2,933,580	2,903,848
Repurchase agreements	213,573	210,120
Federal funds purchased and other short-term borrowings	15,272	12,314
Advances from Federal Home Loan Bank	1,387	1,429
Long-term debt	61,341	61,341
Other liabilities	40,308	46,268
Total liabilities	3,265,461	3,235,320
Shareholders' equity:
Preferred stock, 300,000 shares authorized and unissued	0	0
Common stock, $5 par value, shares authorized 25,000,000; shares outstanding 2013 - 15,653,090; 2012 - 15,612,935	78,266	78,065
Capital surplus	161,520	160,670
Retained earnings	155,864	148,944
Accumulated other comprehensive income, net of tax	10,984	12,665
Total shareholders' equity	406,634	400,344
Total liabilities and shareholders' equity	$ 3,672,095	$ 3,635,664

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2013

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 1 - Summary of Significant Accounting Policies

In the opinion of management, the unaudited condensed consolidated financial statements include all adjustments (which consist of normal recurring accruals) necessary, to present fairly the condensed consolidated financial position as of March 31, 2013, the results of operations for the three months ended March 31, 2013 and 2012, and the cash flows for the three months ended March 31, 2013 and 2012. In accordance with accounting principles generally accepted in the United States of America for interim financial information, these statements do not include certain information and footnote disclosures required by accounting principles generally accepted in the United States of America for complete annual financial statements. The results of operations for the three months ended March 31, 2013 and 2012, and the cash flows for the three months ended March 31, 2013 and 2012, are not necessarily indicative of the results to be expected for the full year. The condensed consolidated balance sheet as of December 31, 2012 has been derived from the audited consolidated financial statements of Community Trust Bancorp, Inc. ("CTBI") for that period. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended December 31, 2012, included in our annual report on Form 10-K.

Principles of Consolidation – The unaudited condensed consolidated financial statements include the accounts of CTBI and its separate and distinct, wholly owned subsidiaries Community Trust Bank, Inc. (the "Bank") and Community Trust and Investment Company. All significant intercompany transactions have been eliminated in consolidation.

Reclassifications – Certain reclassifications considered to be immaterial have been made in the prior year condensed consolidated financial statements to conform to current year classifications. These reclassifications had no effect on net income.

New Accounting Standards –

ØTesting Goodwill for Impairment – In July 2012, the FASB issued ASU 2012-02, Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment. Under these amendments, an entity would not be required to calculate the fair value of an indefinite-lived intangible asset unless the entity determines, based on qualitative assessment, that it is not more likely than not that the indefinite-lived intangible asset is impaired. The amendments include a number of events and circumstances for an entity to consider in conducting the qualitative assessment. ASU 2012-02 is effective for annual and interim indefinite-lived intangible asset impairment tests performed for fiscal years beginning after September 15, 2012. Adoption of this ASU did not have a material effect on our consolidated financial statements.

ØAmounts Reclassified Out of Other Comprehensive Income – In February 2013, the FASB issued ASU No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into net income. The amendments in the ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP. The new amendments will require an organization to:

- Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income - but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period; and

- Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense.

The amendments apply to all public and private companies that report items of other comprehensive income. Public companies are required to comply with these amendments for all reporting periods (interim and annual). The amendments are effective for reporting periods beginning after December 15, 2012, for public companies. The adoption of ASU No. 2013-02 did not have a material impact on CTBI's consolidated financial statements.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires the appropriate application of certain accounting policies, many of which require us to make estimates and assumptions about future events and their impact on amounts reported in our consolidated financial statements and related notes. Since future events and their impact cannot be determined with certainty, the actual results will inevitably differ from our estimates. Such differences could be material to the consolidated financial statements.

We believe the application of accounting policies and the estimates required therein are reasonable. These accounting policies and estimates are constantly reevaluated, and adjustments are made when facts and circumstances dictate a change. Historically, we have found our application of accounting policies to be appropriate, and actual results have not differed materially from those determined using necessary estimates.

Our accounting policies are described above. We have identified the following critical accounting policies:

Investments –Management determines the classification of securities at purchase. We classify securities into held-to-maturity, trading, or available-for-sale categories. Held-to-maturity securities are those which we have the positive intent and ability to hold to maturity and are reported at amortized cost. In accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 320, Investment Securities, investments in debt securities that are not classified as held-to-maturity and equity securities that have readily determinable fair values shall be classified in one of the following categories and measured at fair value in the statement of financial position:

a. Trading securities. Securities that are bought and held principally for the purpose of selling them in the near term (thus held for only a short period of time) shall be classified as trading securities. Trading generally reflects active and frequent buying and selling, and trading securities are generally used with the objective of generating profits on short-term differences in price.

b. Available-for-sale securities. Investments not classified as trading securities (nor as held-to-maturity securities) shall be classified as available-for-sale securities.

We do not have any securities that are classified as trading securities. Available-for-sale securities are reported at fair value, with unrealized gains and losses included as a separate component of shareholders' equity, net of tax. If declines in fair value are other than temporary, the carrying value of the securities is written down to fair value as a realized loss with a charge to income for the portion attributable to credit losses and a charge to other comprehensive income for the portion that is not credit related.

Gains or losses on disposition of securities are computed by specific identification for all securities except for shares in mutual funds, which are computed by average cost. Interest and dividend income, adjusted by amortization of purchase premium or discount, is included in earnings.

When the fair value of a security is below its amortized cost, and depending on the length of time the condition exists and the extent the fair market value is below amortized cost, additional analysis is performed to determine whether an other than temporary impairment condition exists. Available-for-sale and held-to-maturity securities are analyzed quarterly for possible other than temporary impairment. The analysis considers (i) whether we have the intent to sell our securities prior to recovery and/or maturity and (ii) whether it is more likely than not that we will not have to sell our securities prior to recovery and/or maturity. Often, the information available to conduct these assessments is limited and rapidly changing, making estimates of fair value subject to judgment. If actual information or conditions are different than estimated, the extent of the impairment of the security may be different than previously estimated, which could have a material effect on the CTBI's results of operations and financial condition.

Loans –Loans with the ability and the intent to be held until maturity and/or payoff are reported at the carrying value of unpaid principal reduced by unearned interest, an allowance for loan and lease losses, and unamortized deferred fees or costs. Income is recorded on the level yield basis. Interest accrual is discontinued when management believes, after considering economic and business conditions, collateral value, and collection efforts, that the borrower's financial condition is such that collection of interest is doubtful. Any loan greater than 90 days past due must be well secured and in the process of collection to continue accruing interest. Cash payments received on nonaccrual loans generally are applied against principal, and interest income is only recorded once principal recovery is reasonably assured. Loans are not reclassified as accruing until principal and interest payments remain current for a period of time, generally six months, and future payments appear reasonably certain. Included in certain loan categories of impaired loans are troubled debt restructurings that were classified as impaired. A restructuring of a debt constitutes a troubled debt restructuring if the creditor for economic or legal reasons related to the debtor's financial difficulties grants a concession to the debtor that it would not otherwise consider.

Loan origination and commitment fees and certain direct loan origination costs are deferred and the net amount amortized over the estimated life of the related loans, leases, or commitments as a yield adjustment.

Allowance for Loan and Lease Losses –We maintain an allowance for loan and lease losses ("ALLL") at a level that is appropriate to cover estimated credit losses on individually evaluated loans determined to be impaired, as well as estimated credit losses inherent in the remainder of the loan and lease portfolio. Since arriving at an appropriate ALLL involves a high degree of management judgment, we use an ongoing quarterly analysis to develop a range of estimated losses. In accordance with accounting principles generally accepted in the United States, we use our best estimate within the range of potential credit loss to determine the appropriate ALLL. Credit losses are charged and recoveries are credited to the ALLL.

We utilize an internal risk grading system for commercial credits. Those larger commercial credits that exhibit probable or observed credit weaknesses are subject to individual review. The borrower's cash flow, adequacy of collateral coverage, and other options available to CTBI, including legal remedies, are evaluated. The review of individual loans includes those loans that are impaired as defined by ASC 310-35, Impairment of a Loan. We evaluate the collectability of both principal and interest when assessing the need for loss provision. Historical loss rates are analyzed and applied to other commercial loans not subject to specific allocations. The ALLL allocation for this pool of commercial loans is established based on the historical average, maximum, minimum, and median loss ratios.

A loan is considered impaired when, based on current information and events, it is probable that CTBI will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

Homogenous loans, such as consumer installment, residential mortgages, and home equity lines are not individually risk graded. The associated ALLL for these loans is measured under ASC 450, Contingencies.

When any secured commercial loan is considered uncollectable, whether past due or not, a current assessment of the value of the underlying collateral is made. If the balance of the loan exceeds the fair value of the collateral, the loan is placed on non-accrual and the loan is charged down to the value of the collateral less estimated cost to sell or a specific reserve equal to the difference between book value of the loan and the fair value assigned to the collateral is created until such time as the loan is foreclosed. When the foreclosed collateral has been legally assigned to CTBI, a charge off is taken, if necessary, in order that the remaining balance reflects the fair value estimated less costs to sell of the collateral then transferred to other real estate owned or other repossessed assets. When any unsecured commercial loan is considered uncollectable the loan is charged off no later than at 90 days past due.

All closed-end consumer loans (excluding conventional 1-4 family residential loans and installment and revolving loans secured by real estate) are charged off no later than 120 days (5 monthly payments) delinquent. If a loan is considered uncollectable, it is charged off earlier than 120 days delinquent. For conventional 1-4 family residential loans and installment and revolving loans secured by real estate, when a loan is 90 days past due, a current assessment of the value of the real estate is made. If the balance of the loan exceeds the fair value of the property, the loan is placed on nonaccrual and foreclosure proceedings are initiated. When the foreclosed property has been legally assigned to CTBI, a charge-off is taken with the remaining balance, reflecting the fair value less estimated costs to sell, transferred to other real estate owned.

Historical loss rates for loans are adjusted for significant factors that, in management's judgment, reflect the impact of any current conditions on loss recognition. We generally review the historical loss rates over eight quarters and four quarters on a rolling average basis. Factors that we consider include delinquency trends, current economic conditions and trends, strength of supervision and administration of the loan portfolio, levels of underperforming loans, level of recoveries to prior year's charge-offs, trend in loan losses, industry concentrations and their relative strengths, amount of unsecured loans and underwriting exceptions. Based upon management's judgment, "best case," "worst case," and "most likely" scenarios are determined. The total of each of these weighted factors is then applied against the applicable portion of the portfolio and the ALLL is adjusted accordingly to approximate the most likely scenario. Management continually reevaluates the other subjective factors included in its ALLL analysis.

Other Real Estate Owned – When foreclosed properties are acquired, appraisals are obtained and the properties are booked at the current market value less expected sales costs. Additionally, periodic updated appraisals are obtained on unsold foreclosed properties. When an updated appraisal reflects a market value below the current book value, a charge is booked to current earnings to reduce the property to its new market value less expected sales costs. Our policy for determining the frequency of periodic reviews is based upon consideration of the specific properties and the known or perceived market fluctuations in a particular market and is typically between 12 and 18 months but generally not more than 24 months. All revenues and expenses related to the carrying of other real estate owned are recognized by a charge to income.

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Fair Market Value of Financial Assets and Liabilities, Estimated Fair Value Of Financial Instruments and Indication of Level Within Fair Value Hierarachy of Valuation Techniques (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Financial assets: [Abstract]
Securities available-for-sale	$ 677,510	$ 603,343
Mortgage servicing rights	2,652	2,364
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Financial assets: [Abstract]
Cash and cash equivalents	167,944	207,560
Certificates of deposits in other banks	0	0
Securities available-for-sale	55,329	45,626
Securities held-to-maturity	0	0
Loans held for sale	1,495	22,960
Loans, net	0	0
Federal Home Loan Bank stock	0	0
Federal Reserve Bank stock	0	0
Accrued interest receivable	0	0
Mortgage servicing rights	0	0
Financial liabilities: [Abstract]
Deposits	619,819	606,448
Repurchase agreements	0	0
Federal funds purchased	0	0
Advances from Federal Home Loan Bank	0	0
Long-term debt	0	0
Accrued interest payable	0	0
Unrecognized financial instruments: [Abstract]
Letters of credit	0	0
Commitments to extend credit	0	0
Forward sale commitments	0	0
Significant Other Observable Inputs (Level 2) [Member]
Financial assets: [Abstract]
Cash and cash equivalents	0	0
Certificates of deposits in other banks	9,335	5,370
Securities available-for-sale	622,181	557,717
Securities held-to-maturity	1,656	1,659
Loans held for sale	0	0
Loans, net	0	0
Federal Home Loan Bank stock	25,673	25,673
Federal Reserve Bank stock	4,886	4,885
Accrued interest receivable	13,545	12,790
Mortgage servicing rights	0	0
Financial liabilities: [Abstract]
Deposits	2,313,712	2,297,632
Repurchase agreements	0	0
Federal funds purchased	15,272	12,314
Advances from Federal Home Loan Bank	1,668	1,719
Long-term debt	0	0
Accrued interest payable	1,477	1,309
Unrecognized financial instruments: [Abstract]
Letters of credit	0	0
Commitments to extend credit	0	0
Forward sale commitments	0	0
Significant Unobservable Inputs (Level 3) [Member]
Financial assets: [Abstract]
Cash and cash equivalents	0	0
Certificates of deposits in other banks	0	0
Securities available-for-sale	0	0
Securities held-to-maturity	0	0
Loans held for sale	0	0
Loans, net	2,542,905	2,540,272
Federal Home Loan Bank stock	0	0
Federal Reserve Bank stock	0	0
Accrued interest receivable	0	0
Mortgage servicing rights	2,652	2,364
Financial liabilities: [Abstract]
Deposits	0	0
Repurchase agreements	213,556	210,008
Federal funds purchased	0	0
Advances from Federal Home Loan Bank	0	0
Long-term debt	31,227	31,185
Accrued interest payable	0	0
Unrecognized financial instruments: [Abstract]
Letters of credit	0	0
Commitments to extend credit	0	0
Forward sale commitments	0	0
Carrying Amount [Member]
Financial assets: [Abstract]
Cash and cash equivalents	167,944	207,560
Certificates of deposits in other banks	9,320	5,336
Securities available-for-sale	677,510	603,343
Securities held-to-maturity	1,662	1,662
Loans held for sale	1,449	22,486
Loans, net	2,529,921	2,517,328
Federal Home Loan Bank stock	25,673	25,673
Federal Reserve Bank stock	4,886	4,885
Accrued interest receivable	13,545	12,970
Mortgage servicing rights	2,652	2,364
Financial liabilities: [Abstract]
Deposits	2,933,580	2,903,848
Repurchase agreements	213,573	210,120
Federal funds purchased	15,272	12,314
Advances from Federal Home Loan Bank	1,387	1,429
Long-term debt	61,341	61,341
Accrued interest payable	1,477	1,309
Unrecognized financial instruments: [Abstract]
Letters of credit	0	0
Commitments to extend credit	0	0
Forward sale commitments	$ 0	$ 0

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Summary of Significant Accounting Policies (Details)	3 Months Ended
	Mar. 31, 2013
Significant Accounting Policies details [Line Items]
Charge off threshold for unsecured commercial loans considered uncollectible	90 days
Charge off threshold for closed-end consumer loans and uncollectible loans	120 days
Number of monthly payments before loan charge off	5
Minimum [Member]
Significant Accounting Policies details [Line Items]
Historical loan loss review period (in quarters)	4
Other real estate owned frequency of period reviews	24 months
Maximum [Member]
Significant Accounting Policies details [Line Items]
Historical loan loss review period (in quarters)	8
Other real estate owned frequency of period reviews	12 months

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Securities (Details) (USD $)	Mar. 31, 2013	Dec. 31, 2012
Available-for-Sale [Abstract]
Amortized Cost	$ 660,611,000	$ 583,858,000
Gross Unrealized Gains	17,982,000	19,970,000
Gross Unrealized Losses	(1,083,000)	(485,000)
Fair Value	677,510,000	603,343,000
Held-to-Maturity [Abstract]
Amortized Cost	1,662,000	1,662,000
Gross Unrealized Gains	1,000	1,000
Gross Unrealized Losses	(7,000)	(4,000)
Fair Value	1,656,000	1,659,000
Available-for-Sale, Amortized Cost [Abstract]
Due in one year or less	7,602,000
Due after one through five years	23,004,000
Due after five through ten years	107,594,000
Due after ten years	38,624,000
U.S. government sponsored agency mortgage-backed securities	428,787,000
Total debt securities	605,611,000
Marketable equity securities	55,000,000
Total securities	660,611,000
Available-for-Sale, Fair Value [Abstract]
Due in one year or less	7,653,000
Due after one through five years	24,051,000
Due after five through ten years	109,952,000
Due after ten years	40,055,000
U.S. government sponsored agency mortgage-backed securities	440,470,000
Total debt securities	622,181,000
Marketable equity securities	55,329,000
Total securities	677,510,000
Held-to-Maturity, Amortized Cost [Abstract]
Due in one year or less	0
Due after one through five years	0
Due after five through ten years	1,182,000
Due after ten years	480,000
U.S. government sponsored agency mortgage-backed securities	0
Total debt securities	1,662,000
Marketable equity securities	0
Total securities	1,662,000
Held-to-Maturity, Fair Value [Abstract]
Due in one year or less	0
Due after one through five years	0
Due after five through ten years	1,183,000
Due after ten years	473,000
U.S. government sponsored agency mortgage-backed securities	0
Total debt securities	1,656,000
Marketable equity securities	0
Total securities	1,656,000
Securities pledged as collateral to secure public deposit and for other purposes	258,600,000	262,400,000
Amortized cost of securities sold under agreements to repurchase	237,000,000	237,300,000
Percentage of total investment with unrealized losses (in hundredths)	22.20%	14.80%
Available-for-Sale, Amortized Cost [Abstract]
Less Than 12 Months	150,579,000	89,265,000
Total	151,685,000	89,265,000
Available-for-Sale, Gross Unrealized Losses [Abstract]
Less Than 12 Months	(1,070,000)	(485,000)
Total	(1,083,000)	(485,000)
Available-for-Sale, Fair Value [Abstract]
Less Than 12 Months	149,509,000	88,780,000
Total	150,602,000	88,780,000
Held-to-Maturity, Amortized Cost [Abstract]
Less Than 12 Months	480,000	480,000
Held-to-Maturity, Gross Unrealized Losses [Abstract]
Less Than 12 Months	(7,000)	(4,000)
Held-to-Maturity, Fair Value [Abstract]
Less Than 12 Months	473,000	476,000
U.S. Treasury and government agencies [Member]
Available-for-Sale [Abstract]
Amortized Cost	61,100,000	60,625,000
Gross Unrealized Gains	435,000	463,000
Gross Unrealized Losses	(272,000)	(173,000)
Fair Value	61,263,000	60,915,000
Held-to-Maturity [Abstract]
Amortized Cost	480,000	480,000
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(7,000)	(4,000)
Fair Value	473,000	476,000
Available-for-Sale, Amortized Cost [Abstract]
Less Than 12 Months	48,078,000	47,576,000
Total	48,078,000	47,576,000
Available-for-Sale, Gross Unrealized Losses [Abstract]
Less Than 12 Months	(272,000)	(173,000)
Total	(272,000)	(173,000)
Available-for-Sale, Fair Value [Abstract]
Less Than 12 Months	47,806,000	47,403,000
Total	47,806,000	47,403,000
Held-to-Maturity, Amortized Cost [Abstract]
Less Than 12 Months	480,000	480,000
Held-to-Maturity, Gross Unrealized Losses [Abstract]
Less Than 12 Months	(7,000)	(4,000)
Held-to-Maturity, Fair Value [Abstract]
Less Than 12 Months	473,000	476,000
State and political subdivisions [Member]
Available-for-Sale [Abstract]
Amortized Cost	115,724,000	107,987,000
Gross Unrealized Gains	4,949,000	5,369,000
Gross Unrealized Losses	(225,000)	(135,000)
Fair Value	120,448,000	113,221,000
Held-to-Maturity [Abstract]
Amortized Cost	1,182,000	1,182,000
Gross Unrealized Gains	1,000	1,000
Gross Unrealized Losses	0	0
Fair Value	1,183,000	1,183,000
Available-for-Sale, Amortized Cost [Abstract]
Less Than 12 Months	17,012,000	11,126,000
12 Months or More	1,106,000
Total	18,118,000	11,126,000
Available-for-Sale, Gross Unrealized Losses [Abstract]
Less Than 12 Months	(212,000)	(135,000)
12 Months or More	(13,000)
Total	(225,000)	(135,000)
Available-for-Sale, Fair Value [Abstract]
Less Than 12 Months	16,800,000	10,991,000
12 Months or More	1,093,000
Total	17,893,000	10,991,000
U.S. government sponsored agency mortgage-backed securities [Member]
Available-for-Sale [Abstract]
Amortized Cost	428,787,000	370,246,000
Gross Unrealized Gains	11,992,000	13,347,000
Gross Unrealized Losses	(309,000)	(12,000)
Fair Value	440,470,000	383,581,000
Available-for-Sale, Amortized Cost [Abstract]
Less Than 12 Months	55,489,000	10,563,000
Total	55,489,000	10,563,000
Available-for-Sale, Gross Unrealized Losses [Abstract]
Less Than 12 Months	(309,000)	(12,000)
Total	(309,000)	(12,000)
Available-for-Sale, Fair Value [Abstract]
Less Than 12 Months	55,180,000	10,551,000
Total	55,180,000	10,551,000
Debt securities [Member]
Available-for-Sale [Abstract]
Amortized Cost	605,611,000	538,858,000
Gross Unrealized Gains	17,376,000	19,179,000
Gross Unrealized Losses	(806,000)	(320,000)
Fair Value	622,181,000	557,717,000
Available-for-Sale, Amortized Cost [Abstract]
Less Than 12 Months	120,579,000	69,265,000
12 Months or More	1,106,000
Total	121,685,000	69,265,000
Available-for-Sale, Gross Unrealized Losses [Abstract]
Less Than 12 Months	(793,000)	(320,000)
12 Months or More	(13,000)
Total	(806,000)	(320,000)
Available-for-Sale, Fair Value [Abstract]
Less Than 12 Months	119,786,000	68,945,000
12 Months or More	1,093,000
Total	120,879,000	68,945,000
Marketable equity securities [Member]
Available-for-Sale [Abstract]
Amortized Cost	55,000,000	45,000,000
Gross Unrealized Gains	606,000	791,000
Gross Unrealized Losses	(277,000)	(165,000)
Fair Value	55,329,000	45,626,000
Available-for-Sale, Amortized Cost [Abstract]
Less Than 12 Months	30,000,000	20,000,000
Total	30,000,000	20,000,000
Available-for-Sale, Gross Unrealized Losses [Abstract]
Less Than 12 Months	(277,000)	(165,000)
Total	(277,000)	(165,000)
Available-for-Sale, Fair Value [Abstract]
Less Than 12 Months	29,723,000	19,835,000
Total	$ 29,723,000	$ 19,835,000

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2013

Stock-Based Compensation [Abstract]

Stock-Based Compensation

Note 2 – Stock-Based Compensation

CTBI's compensation expense related to stock option grants was $3 thousand and $19 thousand for the three months ended March 31, 2013 and 2012, respectively. Restricted stock expense for the first three months of 2013 and 2012 was $161 thousand and $157 thousand, respectively, including $31 thousand and $30 thousand, respectively, in dividends paid for each period. As of March 31, 2013, there was a total of $17 thousand of unrecognized compensation expense related to unvested stock option awards that will be recognized as expense as the awards vest over a weighted average period of 1.6 years and a total of $1.3 million of unrecognized compensation expense related to restricted stock grants that will be recognized as expense as the awards vest over a weighted average period of 1.5 years.

There were 10,822 shares and 331 shares of restricted stock granted during the three months ended March 31, 2013 and 2012. The restrictions on the restricted stock granted in 2013 and 2012 will lapse over four years. However, in the event of a change in control of CTBI or the death of the participant, the restrictions will lapse. In the event of the disability of the participant, the restrictions will lapse on a pro rata basis. The Compensation Committee of the Board of Directors will have discretion to review and revise restrictions applicable to a participant's restricted stock in the event of the participant's retirement. There were 1,500 options granted to purchase shares of CTBI common stock during the three months ended March 31, 2013. There were no options granted to purchase shares of CTBI common stock during the three months ended March 31, 2012.

The fair values of options granted during the three months ended March 31, 2013, were established at the date of grant using a Black-Scholes option pricing model with the weighted average assumptions as follows:

	Three Months Ended
	March 31
	2013
Expected dividend yield		3.74	%
Risk-free interest rate		1.33	%
Expected volatility		39.11	%
Expected term (in years)		7.5
Weighted average fair value of options	$	9.05

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Condensed Consolidated Balance Sheets (unaudited) (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Assets:
Securities available-for-sale at fair value (amortized cost)	$ 660,611	$ 583,858
Securities held-to-maturity at amortized cost (fair value)	1,656	1,659
Core deposit intangible (accumulated amortization)	$ 7,765	$ 7,712
Shareholders' equity:
Preferred stock, shares authorized (in shares)	300,000	300,000
Preferred stock, shares unissued (in shares)	300,000	300,000
Common stock, par value (in dollars per share)	$ 5	$ 5
Common stock, shares authorized (in shares)	25,000,000	25,000,000
Common stock, shares outstanding (in shares)	15,653,090	15,612,935

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Loans (Tables)

3 Months Ended

Mar. 31, 2013

Loans [Abstract]

Summary of major classification of loans net of unearned income and deferred loan origination cost

Major classifications of loans, net of unearned income and deferred loan origination costs, are summarized as follows:

(in thousands)	March 31 2013		December 31 2012
Commercial construction	$	102,303	$	119,447
Commercial secured by real estate		847,807		807,213
Equipment lease financing		9,944		9,246
Commercial other		375,409		376,348
Real estate construction		51,978		55,041
Real estate mortgage		696,321		696,928
Home equity		79,899		82,292
Consumer direct		119,191		122,581
Consumer indirect		280,462		281,477
Total loans	$	2,563,314	$	2,550,573

Nonaccrual loans segregated by class of loans

Refer to note 1 to the condensed consolidated financial statements for further information regarding our nonaccrual policy. Nonaccrual loans segregated by class of loans were as follows:

(in thousands)	March 31 2013	December 31 2012
Commercial:
Commercial construction	$6,196	$5,955
Commercial secured by real estate	6,256	5,572
Commercial other	1,344	1,655
Residential:
Real estate construction	635	315
Real estate mortgage	3,763	3,153
Home equity	143	141
Total nonaccrual loans	$18,337	$16,791

Bank's loan portfolio aging analysis, segregated by class

The following tables present CTBI's loan portfolio aging analysis, segregated by class, as of March 31, 2013 and December 31, 2012:

	March 31, 2013
(in thousands)	30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Total Past Due		Current		Total Loans		90+ and Accruing*
Commercial:
Commercial construction	$	617	$	16	$	8,599	$	9,232	$	93,071	$	102,303	$	2,532
Commercial secured by real estate		6,619		7,111		9,129		22,859		824,948		847,807		4,475
Equipment lease financing		0		0		0		0		9,944		9,944		0
Commercial other		1,776		1,398		5,101		8,275		367,134		375,409		3,827
Residential:
Real estate construction		195		272		866		1,333		50,645		51,978		232
Real estate mortgage		1,822		2,394		6,698		10,914		685,407		696,321		3,635
Home equity		1,118		119		497		1,734		78,165		79,899		374
Consumer:
Consumer direct		851		247		79		1,177		118,014		119,191		79
Consumer indirect		1,860		546		379		2,785		277,677		280,462		379
Total	$	14,858	$	12,103	$	31,348	$	58,309	$	2,505,005	$	2,563,314	$	15,533

	December 31, 2012
(in thousands)	30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Total Past Due		Current		Total Loans		90+ and Accruing*
Commercial:
Commercial construction	$	1,413	$	312	$	9,598	$	11,323	$	108,124	$	119,447	$	3,778
Commercial secured by real estate		9,733		1,633		10,456		21,822		785,391		807,213		5,943
Equipment lease financing		0		0		0		0		9,246		9,246		0
Commercial other		259		1,142		5,164		6,565		369,783		376,348		3,867
Residential:
Real estate construction		248		572		511		1,331		53,710		55,041		196
Real estate mortgage		2,765		4,029		7,138		13,932		682,996		696,928		4,511
Home equity		921		102		565		1,588		80,704		82,292		441
Consumer:
Consumer direct		1,360		336		98		1,794		120,787		122,581		98
Consumer indirect		2,772		907		381		4,060		277,417		281,477		381
Total	$	19,471	$	9,033	$	33,911	$	62,415	$	2,488,158	$	2,550,573	$	19,215

*90+ and Accruing are also included in 90+ Days Past Due column.

Credit risk profile of the bank's commercial loan portfolio based on rating category and payment activity, segregated by class of loans

The following tables present the credit risk profile of CTBI's commercial loan portfolio based on rating category and payment activity, segregated by class of loans, as of March 31, 2013 and December 31, 2012:

(in thousands)	Commercial Construction		Commercial Secured by Real Estate		Equipment Leases		Commercial Other		Total
March 31, 2013
Pass	$	74,898	$	704,073	$	9,944	$	327,158	$	1,116,073
Watch		14,142		85,439		0		29,830		129,411
OAEM		56		13,769		0		974		14,799
Substandard		7,011		39,387		0		16,336		62,734
Doubtful		6,196		5,139		0		1,111		12,446
Total	$	102,303	$	847,807	$	9,944	$	375,409	$	1,335,463
December 31, 2012
Pass	$	92,140	$	665,764	$	9,246	$	328,646	$	1,095,796
Watch		12,915		79,517		0		28,760		121,192
OAEM		1,054		16,532		0		2,816		20,402
Substandard		7,383		40,021		0		14,878		62,282
Doubtful		5,955		5,379		0		1,248		12,582
Total	$	119,447	$	807,213	$	9,246	$	376,348	$	1,312,254

Credit risk profile of residential real estate and consumer loan portfolio based on performing and nonperforming status segregated by class [Table Text Block]

The following tables present the credit risk profile of the CTBI's residential real estate and consumer loan portfolios based on performing or nonperforming status, segregated by class, as of March 31, 2013 and December 31, 2012:

(in thousands)	Real Estate Construction		Real Estate Mortgage		Home Equity		Consumer Direct		Consumer Indirect		Total
March 31, 2013
Performing	$	51,111	$	688,923	$	79,382	$	119,112	$	280,083	$	1,218,611
Nonperforming (1)		867		7,398		517		79		379		9,240
Total	$	51,978	$	696,321	$	79,899	$	119,191	$	280,462	$	1,227,851
December 31, 2012
Performing	$	54,530	$	689,264	$	81,710	$	122,483	$	281,096	$	1,229,083
Nonperforming (1)		511		7,664		582		98		381		9,236
Total	$	55,041	$	696,928	$	82,292	$	122,581	$	281,477	$	1,238,319

(1) A loan is considered nonperforming if it is 90 days or more past due and/or on nonaccrual.

Impaired loans, average investment in impaired loans, and interest income recognized on impaired loans

The following table presents impaired loans, the average investment in impaired loans, and interest income recognized on impaired loans for the periods ended March 31, 2013, December 31, 2012, and March 31, 2012:

	March 31, 2013
(in thousands)	Recorded Balance		Unpaid Contractual Principal Balance		Specific Allowance		Average Investment in Impaired Loans		*Interest Income Recognized
Loans without a specific valuation allowance:
Commercial construction	$	5,155	$	5,609	$	0	$	5,225	$	74
Commercial secured by real estate		33,765		34,586		0		33,908		297
Commercial other		15,779		17,920		0		15,435		154
Real estate mortgage		657		657		0		658		7
Loans with a specific valuation allowance:
Commercial construction		6,073		7,303		1,911		6,075		0
Commercial secured by real estate		4,158		4,276		1,192		4,166		0
Commercial other		867		2,188		322		868		0
Totals:
Commercial construction		11,228		12,912		1,911		11,300		74
Commercial secured by real estate		37,923		38,862		1,192		38,074		297
Commercial other		16,646		20,108		322		16,303		154
Real estate mortgage		657		657		0		658		7
Total	$	66,454	$	72,539	$	3,425	$	66,335	$	532

	December 31, 2012
(in thousands)	Recorded Balance		Unpaid Contractual Principal Balance		Specific Allowance		Average Investment in Impaired Loans		*Interest Income Recognized
Loans without a specific valuation allowance:
Commercial construction	$	3,692	$	4,146	$	0	$	4,249	$	97
Commercial secured by real estate		35,046		35,818		0		35,542		1,337
Commercial other		13,285		15,484		0		11,083		416
Real estate mortgage		695		695		0		481		30
Loans with a specific valuation allowance:
Commercial construction		5,703		6,933		1,820		6,585		0
Commercial secured by real estate		3,067		3,189		1,090		3,243		0
Commercial other		1,010		2,331		338		1,441		0
Totals:
Commercial construction		9,395		11,079		1,820		10,834		97
Commercial secured by real estate		38,113		39,007		1,090		38,785		1,337
Commercial other		14,295		17,815		338		12,524		416
Real estate mortgage		695		695		0		481		30
Total	$	62,498	$	68,596	$	3,248	$	62,624	$	1,880

	March 31, 2012
(in thousands)	Recorded Balance		Unpaid Contractual Principal Balance		Specific Allowance		Average Investment in Impaired Loans		*Interest Income Recognized
Loans without a specific valuation allowance:
Commercial construction	$	4,594	$	4,595	$	0	$	4,683	$	18
Commercial secured by real estate		36,312		37,778		0		36,506		332
Commercial other		6,696		7,406		0		6,785		16
Real estate mortgage		279		279		0		280		3
Loans with a specific valuation allowance:
Commercial construction		5,912		6,764		2,180		5,809		0
Commercial secured by real estate		3,382		3,508		1,246		3,385		0
Commercial other		2,791		5,391		1,104		2,829		0
Totals:
Commercial construction		10,506		11,359		2,180		10,492		18
Commercial secured by real estate		39,694		41,286		1,246		39,891		332
Commercial other		9,487		12,797		1,104		9,614		16
Real estate mortgage		279		279		0		280		3
Total	$	59,966	$	65,721	$	4,530	$	60,277	$	369

*Cash basis interest is substantially the same as interest income recognized.

Troubled debt restructuring

During 2013, certain loans were modified in troubled debt restructurings, where economic concessions were granted to borrowers consisting of reductions in the interest rates, payment extensions, forgiveness of principal, and forbearances. Presented below, segregated by class of loans, are troubled debt restructurings that occurred during the three months ended March 31, 2013 and 2012 and the year ended December 31, 2012:

	Three Months Ended March 31, 2013
(in thousands)	Number of Loans		Post-Modification Outstanding Balance		Net Charge-offs Resulting from Modification
Commercial:
Commercial construction		3	$	2,110	$	0
Commercial secured by real estate		5		605		0
Commercial other		9		5,585		0
Total troubled debt restructurings		17	$	8,300	$	0

	Year Ended December 31, 2012
(in thousands)	Number of Loans		Post-Modification Outstanding Balance		Net Charge-offs Resulting from Modification
Commercial:
Commercial construction		5	$	557	$	0
Commercial secured by real estate		11		4,506		0
Commercial other		23		3,233		0
Residential:
Real estate mortgage		1		391		0
Total troubled debt restructurings		40	$	8,687	$	0

	Three Months Ended March 31, 2012
(in thousands)	Number of Loans		Post-Modification Outstanding Balance		Net Charge-offs Resulting from Modification
Commercial:
Commercial construction		0	$	0	$	0
Commercial secured by real estate		3		1,665		0
Commercial other		1		48		0
Total troubled debt restructurings		4	$	1,713	$	0

Summary of defaulted restructured loans

Loans retain their accrual status at the time of their modification. As a result, if a loan is on nonaccrual at the time it is modified, it stays as nonaccrual, and if a loan is on accrual at the time of the modification, it generally stays on accrual. Commercial and consumer loans modified in a troubled debt restructuring are closely monitored for delinquency as an early indicator of possible future default. If loans modified in a troubled debt restructuring subsequently default, CTBI evaluates the loan for possible further impairment. The allowance for loan losses may be increased, adjustments may be made in the allocation of the allowance, or partial charge-offs may be taken to further write-down the carrying value of the loan. Presented below, segregated by class of loans, are loans that were modified as troubled debt restructurings which have subsequently defaulted. CTBI considers a loan in default when it is 90 days or more past due or transferred to nonaccrual.

(in thousands)	Three Months Ended March 31, 2013
	Number of Loans		Recorded Balance
Commercial:
Commercial construction		2	$	328
Commercial secured by real estate		2		662
Commercial other		1		12
Total defaulted restructured loans		5	$	1,002

(in thousands)	Three Months Ended March 31, 2012
	Number of Loans		Recorded Balance
Commercial:
Commercial construction		0	$	0
Commercial secured by real estate		3		370
Commercial other		2		32
Total defaulted restructured loans		5	$	402

XML

Document and Entity Information	3 Months Ended
	Mar. 31, 2013	Apr. 30, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	COMMUNITY TRUST BANCORP INC /KY/
Entity Central Index Key	0000350852
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		15,661,375
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q1
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2013

XML

Allowance for Loan and Lease Losses (Tables)

3 Months Ended

Mar. 31, 2013

Allowance for Loan and Lease Losses [Abstract]

Activity in the allowance for loan and lease losses

The following tables present the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of March 31, 2013, December 31, 2012 and March 31, 2012:

	March 31, 2013
(in thousands)	Commercial Construction			Commercial Secured by Real Estate		Equipment Lease Financing		Commercial Other			Real Estate Construction			Real Estate Mortgage		Home Equity		Consumer Direct		Consumer Indirect		Total
Allowance for loan losses
Beginning balance	$	4,033		$	13,541	$	126	$	5,469		$	376		$	4,767	$	563	$	1,102	$	3,268	$	33,245
Provision charged to expense		(212	)		484		2		(155	)		(4	)		334		50		165		895		1,559
Losses charged off		0			365		0		332			0			131		47		314		999		2,188
Recoveries		6			22		0		169			0			10		5		145		420		777
Ending balance	$	3,827		$	13,682	$	128	$	5,151		$	372		$	4,980	$	571	$	1,098	$	3,584	$	33,393
Ending balance:
Individually evaluated for impairment	$	1,911		$	1,192	$	0	$	322		$	0		$	0	$	0	$	0	$	0	$	3,425
Collectively evaluated for impairment	$	1,916		$	12,490	$	128	$	4,829		$	372		$	4,980	$	571	$	1,098	$	3,584	$	29,968
Loans
Ending balance:
Individually evaluated for impairment	$	11,228		$	37,923	$	0	$	16,646		$	0		$	657	$	0	$	0	$	0	$	66,454
Collectively evaluated for impairment	$	91,075		$	809,884	$	9,944	$	358,763		$	51,978		$	695,664	$	79,899	$	119,191	$	280,462	$	2,496,860

	December 31, 2012
(in thousands)	Commercial Construction		Commercial Secured by Real Estate		Equipment Lease Financing		Commercial Other		Real Estate Construction		Real Estate Mortgage		Home Equity		Consumer Direct		Consumer Indirect			Total
Allowance for loan losses
Balance, beginning of year	$	4,023	$	11,753	$	112	$	5,608	$	354	$	4,302	$	562	$	917	$	5,540		$	33,171
Provision charged to expense		1,009		3,520		14		2,330		183		1,437		238		892		(173	)		9,450
Losses charged off		1,034		2,035		0		3,233		189		1,123		248		1,245		3,483			12,590
Recoveries		35		303		0		764		28		151		11		538		1,384			3,214
Balance, end of year	$	4,033	$	13,541	$	126	$	5,469	$	376	$	4,767	$	563	$	1,102	$	3,268		$	33,245
Ending balance:
Individually evaluated for impairment	$	1,820	$	1,090	$	0	$	338	$	0	$	0	$	0	$	0	$	0		$	3,248
Collectively evaluated for impairment	$	2,213	$	12,451	$	126	$	5,131	$	376	$	4,767	$	563	$	1,102	$	3,268		$	29,997
Loans
Ending balance:
Individually evaluated for impairment	$	9,395	$	38,113	$	0	$	14,295	$	0	$	695	$	0	$	0	$	0		$	62,498
Collectively evaluated for impairment	$	110,052	$	769,100	$	9,246	$	362,053	$	55,041	$	696,233	$	82,292	$	122,581	$	281,477		$	2,488,075

	March 31, 2012
(in thousands)	Commercial Construction		Commercial Secured by Real Estate		Equipment Lease Financing			Commercial Other		Real Estate Construction		Real Estate Mortgage		Home Equity		Consumer Direct			Consumer Indirect			Total
Allowance for loan losses
Beginning balance	$	4,023	$	11,753	$	112		$	5,608	$	354	$	4,302	$	562	$	917		$	5,540		$	33,171
Provision charged to expense		42		1,280		(7	)		718		155		71		29		(117	)		(1,011	)		1,160
Losses charged off		18		96		0			612		171		190		46		146			847			2,126
Recoveries		19		40		0			251		6		57		1		192			401			967
Ending balance	$	4,066	$	12,977	$	105		$	5,965	$	344	$	4,240	$	546	$	846		$	4,083		$	33,172
Ending balance:
Individually evaluated for impairment	$	2,180	$	1,246	$	0		$	1,104	$	0	$	0	$	0	$	0		$	0		$	4,530
Collectively evaluated for impairment	$	1,886	$	11,731	$	105		$	4,861	$	344	$	4,240	$	546	$	846		$	4,083		$	28,642
Loans
Ending balance:
Individually evaluated for impairment	$	10,506	$	39,694	$	0		$	9,487	$	0	$	279	$	0	$	0		$	0		$	59,966
Collectively evaluated for impairment	$	103,655	$	767,215	$	8,219		$	372,459	$	52,558	$	648,059	$	83,498	$	121,645		$	324,894		$	2,482,202

XML

Condensed Consolidated Statements of Income and Other Comprehensive Income (unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Interest income:
Interest and fees on loans, including loans held for sale	$ 32,848	$ 35,052
Interest and dividends on securities
Taxable	2,895	2,771
Tax exempt	558	477
Interest and dividends on Federal Reserve Bank and Federal Home Loan Bank stock	348	364
Other, including interest on federal funds sold	127	162
Total interest income	36,776	38,826
Interest expense:
Interest on deposits	3,019	4,471
Interest on repurchase agreements and other short-term borrowings	263	338
Interest on advances from Federal Home Loan Bank	7	11
Interest on long-term debt	290	1,000
Total interest expense	3,579	5,820
Net interest income	33,197	33,006
Provision for loan losses	1,559	1,160
Net interest income after provision for loan losses	31,638	31,846
Noninterest income:
Service charges on deposit accounts	5,767	5,872
Gains on sales of loans, net	1,397	617
Trust income	2,000	1,613
Loan related fees	948	1,287
Bank owned life insurance	421	428
Other noninterest income	1,387	1,370
Total noninterest income	11,920	11,187
Noninterest expense:
Officer salaries and employee benefits	2,551	2,356
Other salaries and employee benefits	10,431	10,457
Occupancy, net	1,927	1,853
Equipment	978	918
Data processing	1,813	1,579
Bank franchise tax	1,123	1,155
Legal fees	606	601
Professional fees	382	260
FDIC insurance	602	657
Other real estate owned provision and expense	1,839	790
Other noninterest expense	4,047	5,124
Total noninterest expense	26,299	25,750
Income before income taxes	17,259	17,283
Income taxes	5,439	5,414
Net income	11,820	11,869
Unrealized holding gains on securities available-for-sale:
Unrealized holding gains arising during the period	(2,586)	(2,202)
Tax benefit	(905)	(771)
Other comprehensive income, net of tax	(1,681)	(1,431)
Comprehensive income	$ 10,139	$ 10,438
Basic earnings per share (in dollars per share)	$ 0.76	$ 0.77
Diluted earnings per share (in dollars per share)	$ 0.76	$ 0.77
Weighted average shares outstanding-basic (in shares)	15,539	15,407
Weighted average shares outstanding-diluted (in shares)	15,592	15,456
Dividends declared per share (in dollars per share)	$ 0.315	$ 0.310

XML

Earnings Per Share

3 Months Ended

Mar. 31, 2013

Earnings Per Share [Abstract]

Earnings Per Share

Note 7 – Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share:

	Three Months Ended
	March 31
(in thousands except per share data)	2013		2012
Numerator:
Net income	$	11,820	$	11,869
Denominator:
Basic earnings per share:
Weighted average shares		15,539		15,407
Diluted earnings per share:
Effect of dilutive stock options		53		49
Adjusted weighted average shares		15,592		15,456
Earnings per share:
Basic earnings per share	$	0.76	$	0.77
Diluted earnings per share		0.76		0.77

Options to purchase 88,246 common shares were excluded from the diluted calculations above for the three months ended March 31, 2013, because the exercise prices on the options were greater than the average market price for the period. Unvested restricted stock grants were also used in the calculation of diluted earnings per share based on the treasury method. Options to purchase 248,555 common shares were excluded from the diluted calculations above for the three months ended March 31, 2012.

XML

Other Real Estate Owned

3 Months Ended

Mar. 31, 2013

Other Real Estate Owned [Abstract]

Other Real Estate Owned

Note 6 – Other Real Estate Owned

Activity for other real estate owned was as follows:

(in thousands)	March 31, 2013			March 31, 2012
Beginning balance of other real estate owned	$	47,537		$	56,965
New assets acquired		2,047			5,370
Capitalized costs		0			90
Fair value adjustments		(1,146	)		(179	)
Sale of assets		(2,718	)		(3,092	)
Ending balance of other real estate owned	$	45,720		$	59,154

Foreclosed properties at March 31, 2013 and 2012 were $45.2 million and $58.6 million, respectively. Also included in other real estate owned are two properties totaling $0.5 million which were not acquired through foreclosure. Carrying costs and fair value adjustments associated with foreclosed properties at March 31, 2013, 2012 and 2011, respectively, were $1.84 million, $0.79 million, and $0.85 million.

XML

Stock-Based Compensation (Details) (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock based compensation expense	$ 164,000	$ 146,000
Dividend paid on stock based compensation	31,000	30,000
Options granted to purchase shares of CTBI common stock (in shares)	1,500	0
Black-Scholes option pricing model, weighted average assumptions [Abstract]
Expected dividend yield (in hundredths)	3.74%
Risk-free interest rate (in hundredths)	1.33%
Expected volatility (in hundredths)	39.11%
Expected term (in years)	7 years 6 months
Weighted average fair value of options granted (dollars per share)	$ 9.05
Stock options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock based compensation expense	3,000	19,000
Unrecognized compensation expense related to unvested stock option awards	17,000
Unrecognized compensation expense, weighted average period	1 year 7 months 6 days
Restricted stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock based compensation expense	161,000	157,000
Unrecognized compensation expense, weighted average period	1 year 6 months
Unrecognized compensation expense related to restricted stock grants	$ 1,300,000
Granted (in shares)	10,822	331
Period of restrictions on stock	4 years	4 years

XML

Other Real Estate Owned (Tables)

3 Months Ended

Mar. 31, 2013

Other Real Estate Owned [Abstract]

Activity for other real estate owned

Activity for other real estate owned was as follows:

(in thousands)	March 31, 2013			March 31, 2012
Beginning balance of other real estate owned	$	47,537		$	56,965
New assets acquired		2,047			5,370
Capitalized costs		0			90
Fair value adjustments		(1,146	)		(179	)
Sale of assets		(2,718	)		(3,092	)
Ending balance of other real estate owned	$	45,720		$	59,154

XML

Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2013

Stock-Based Compensation [Abstract]

Schedule of weighted average assumptions used for estimating the grant-date fair value of each option grant

The fair values of options granted during the three months ended March 31, 2013, were established at the date of grant using a Black-Scholes option pricing model with the weighted average assumptions as follows:

	Three Months Ended
	March 31
	2013
Expected dividend yield		3.74	%
Risk-free interest rate		1.33	%
Expected volatility		39.11	%
Expected term (in years)		7.5
Weighted average fair value of options	$	9.05

XML

Fair Market Value of Financial Assets and Liabilities

3 Months Ended

Mar. 31, 2013

Fair Market Value of Financial Assets and Liabilities [Abstract]

Fair Market Value of Financial Assets and Liabilities

Note 8 – Fair Value of Financial Assets and Liabilities

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. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. 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.

Recurring Measurements

The following tables present the fair value measurements of assets recognized in the accompanying balance sheets measured at fair value on a recurring basis as of March 31, 2013 and December 31, 2012 and indicates the level within the fair value hierarchy of the valuation techniques.

(in thousands)			Fair Value Measurements at March 31, 2013 Using
	Fair Value		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	$	61,263	$	0	$	61,263	$	0
State and political subdivisions		120,448		0		120,448		0
U.S. government sponsored agency mortgage-backed securities		440,470		0		440,470		0
Marketable equity securities		55,329		55,329		0		0
Mortgage servicing rights		2,652		0		0		2,652

(in thousands)			Fair Value Measurements at December 31, 2012 Using
	Fair Value		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	$	60,915	$	0	$	60,915	$	0
State and political subdivisions		113,221		0		113,221		0
U.S. government sponsored agency mortgage-backed securities		383,581		0		383,581		0
Marketable equity securities		45,626		45,626		0		0
Mortgage servicing rights		2,364		0		0		2,364

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a recurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy. These valuation methodologies were applied to all of CTBI's financial assets carried at fair value. CTBI had no liabilities measured at fair value as of March 31, 2013 and December 31, 2012. There have been no significant changes in the valuation techniques during the quarter ended March 31, 2013. For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

Available-for-Sale Securities

Securities classified as available-for-sale are reported at fair value on a recurring basis. CTBI's CRA investment funds and Federated GNMA trust 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 data 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, and U.S. government sponsored agency mortgage-backed securities are classified as Level 2 inputs.

In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. Fair value determinations for Level 3 measurements are estimated on a quarterly basis where assumptions used are reviewed to ensure the estimated fair value complies with accounting standards generally accepted in the United States. As of March 31, 2013, CTBI does not own any securities classified as Level 3 inputs.

Mortgage Servicing Rights

Mortgage servicing rights do not trade in an active, open market with readily observable prices. CTBI reports mortgage servicing rights 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. Accordingly, fair value is determined by the independent third party by utilizing assumptions about factors such as mortgage interest rates, discount rates, mortgage loan prepayment speeds, market trends and industry demand. Due to the nature of the valuation inputs, mortgage servicing rights are classified within Level 3 of the hierarchy. Fair value determinations for Level 3 measurements of mortgage servicing rights are tested for impairment on a quarterly basis where assumptions used are reviewed to ensure the estimated fair value complies with accounting standards generally accepted in the United States. See the table below for inputs and valuation techniques used for Level 3 mortgage servicing rights.

Transfers between Levels

There were no transfers between Levels 1, 2, and 3 as of March 31, 2013.

Level 3 Reconciliation

Following is a reconciliation of the beginning and ending balances of recurring fair value measurements recognized in the accompanying balance sheet using significant unobservable (Level 3) inputs for the three months ended March 31, 2013 and 2012:

(in thousands)	Three Months Ended March 31, 2013
	Marketable Equity Securities		Mortgage Servicing Rights
Beginning balance	$	0	$	2,364
Total recognized gains (losses)
Included in net income		0		117
Issues		0		357
Settlements		0		(186	)
Ending balance	$	0	$	2,652
Total gains for the period included in net income attributable to the change in unrealized gains or losses related to assets still held at the reporting date	$	0	$	117

(in thousands)	Three Months Ended March 31, 2012
	Marketable Equity Securities		Mortgage Servicing Rights
Beginning balance	$	211	$	2,282
Total recognized gains (losses)
Included in net income		0		341
Issues		0		151
Settlements		0		(134	)
Ending balance	$	211	$	2,640
Total gains for the period included in net income attributable to the change in unrealized gains or losses related to assets still held at the reporting date	$	0	$	341

Realized and unrealized gains and losses for items reflected in the tables above are included in net income in the consolidated statements of income as follows:

(in thousands)	Three Months Ended March 31, 2013
	Noninterest Income			Noninterest Expense
Total gains	$	(69	)	$	0

(in thousands)	Three Months Ended March 31, 2012
	Noninterest Income		Noninterest Expense
Total gains	$	207	$	0

Nonrecurring Measurements

The following table presents the fair value measurements of assets recognized in the accompanying balance sheets measured at fair value on a nonrecurring basis as of March 31, 2013 and December 31, 2012 and indicates the level within the fair value hierarchy of the valuation techniques.

(in thousands)			Fair Value Measurements at March 31, 2013 Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets measured – nonrecurring basis
Impaired loans (collateral dependent)	$	2,326	$	0	$	0	$	2,326
Other real estate/assets owned		4,365		0		0		4,365

(in thousands)			Fair Value Measurements at December 31, 2012 Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets measured – nonrecurring basis
Impaired loans (collateral dependent)	$	5,465	$	0	$	0	$	5,465
Other real estate/assets owned		13,892		0		0		13,892

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying balance sheet, as well as the general classification of such assets pursuant to the valuation hierarchy. For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

Impaired Loans (Collateral Dependent)

The estimated fair value of collateral-dependent impaired loans is based on the appraised fair value of the collateral, less estimated cost to sell. Collateral-dependent impaired loans are classified within Level 3 of the fair value hierarchy.

CTBI considers the appraisal or evaluation as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value. Appraisals of the collateral underlying collateral-dependent loans are obtained when the loan is determined to be collateral-dependent and subsequently as deemed necessary by the Chief Credit Officer. Appraisals are reviewed for accuracy and consistency by the Chief Credit Officer. Appraisers are selected from the list of approved appraisers maintained by management. The appraised values are reduced by discounts to consider lack of marketability and estimated cost to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral. These discounts and estimates are developed by the Chief Credit Officer by comparison to historical results.

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 (1) partial write-downs that are based on the observable market price or current appraised value of the collateral or (2) the full charge-off of the loan carrying value. Quarter-to-date fair value adjustments on impaired loans were $0.5 million, $0.5 million, and $0.1 million for the quarters ended March 31, 2013, December 31, 2012 and March 31, 2012, respectively.

Other Real Estate Owned

In accordance with the provisions of ASC 360, Property, Plant, and Equipment, other real estate owned (OREO) is carried at the lower of fair value at acquisition date or current estimated fair value, less estimated cost to sell when the real estate is acquired. Estimated fair value of OREO is based on appraisals or evaluations. OREO is classified within Level 3 of the fair value hierarchy. 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. Quarter-to-date fair value adjustments on other real estate/assets owned were $1.1 million, $1.8 million, and $0.2 million for the quarters ended March 31, 2013, December 31, 2012, and March 31, 2012, respectively.

Appraisals of OREO are obtained when the real estate is acquired and subsequently as deemed necessary by the Chief Credit Officer. Appraisers are selected from the list of approved appraisers maintained by management.

Unobservable (Level 3) Inputs

The following tables present quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements at March 31, 2013 and December 31, 2012.

(in thousands)	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at March 31, 2013		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Mortgage servicing rights	$	2,652	Discount cash flows, computer pricing model	Constant prepayment rate		11.4% - 21.4% (15.1%)
				Probability of default		0.55% - 4.71% (2.73%)
				Discount rate	Not applicable (10.5%)
Impaired loans (collateral-dependent)	$	2,326	Market comparable properties	Marketability discount		5.0% - 10.0% (7.0%)
Other real estate/assets owned	$	4,365	Market comparable properties	Comparability adjustments (%)		5.0% - 57.0% (24.0%)

(in thousands)	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at December 31, 2012		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Mortgage servicing rights	$	2,364	Discount cash flows, computer pricing model	Constant prepayment rate		8.5% - 25.0% (16.3%)
				Probability of default		1.02% - 4.81% (2.65%)
				Discount rate	Not applicable (10.5%)
Impaired loans (collateral-dependent)	$	5,465	Market comparable properties	Marketability discount		5.0% - 10.0% (7.0%)
Other real estate/assets owned	$	13,892	Market comparable properties	Comparability adjustments (%)		5.0% - 35.0% (13.0%)

Sensitivity of Significant Unobservable Inputs

The following is a discussion of the sensitivity of significant unobservable inputs, the interrelationships between those inputs and other unobservable inputs used in recurring fair value measurement and of how those inputs might magnify or mitigate the effect of changes in the unobservable inputs on the fair value measurement.

Mortgage Servicing Rights

Market value for mortgage servicing rights is derived based on unobservable inputs, such as prepayment speeds of the underlying loans generated using the Andrew Davidson Prepayment Model, FHLMC/FNMA guidelines, the weighted-average life of the loan, the discount rate, the weighted average coupon, and the weighted average default rate. Significant increases (decreases) in either of those inputs in isolation would result in a significantly lower (higher) fair value measurement. Generally, a change in the assumption used for prepayment speeds is accompanied by a directionally opposite change in the assumption for interest rates.

Fair Value of Financial Instruments

The following table presents estimated fair value of CTBI's financial instruments as of March 31, 2013 and indicates the level within the fair value hierarchy of the valuation techniques.

(in thousands)			Fair Value Measurements at March 31, 2013 Using
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial assets:
Cash and cash equivalents	$	167,944	$	167,944	$	0	$	0
Certificates of deposit in other banks		9,320		0		9,335		0
Securities available-for-sale		677,510		55,329		622,181		0
Securities held-to-maturity		1,662		0		1,656		0
Loans held for sale		1,449		1,495		0		0
Loans, net		2,529,921		0		0		2,542,905
Federal Home Loan Bank stock		25,673		0		25,673		0
Federal Reserve Bank stock		4,886		0		4,886		0
Accrued interest receivable		13,545		0		13,545		0
Mortgage servicing rights		2,652		0		0		2,652
Financial liabilities:
Deposits	$	2,933,580	$	619,819	$	2,313,712	$	0
Repurchase agreements		213,573		0		0		213,556
Federal funds purchased		15,272		0		15,272		0
Advances from Federal Home Loan Bank		1,387		0		1,668		0
Long-term debt		61,341		0		0		31,227
Accrued interest payable		1,477		0		1,477		0
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 table presents estimated fair value of CTBI's financial instruments as of December 31, 2012 and indicates the level within the fair value hierarchy of the valuation techniques.

(in thousands)			Fair Value Measurements at December 31, 2012 Using
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial assets:
Cash and cash equivalents	$	207,560	$	207,560	$	0	$	0
Certificates of deposit in other banks		5,336		0		5,370		0
Securities available-for-sale		603,343		45,626		557,717		0
Securities held-to-maturity		1,662		0		1,659		0
Loans held for sale		22,486		22,960		0		0
Loans, net		2,517,328		0		0		2,540,272
Federal Home Loan Bank stock		25,673		0		25,673		0
Federal Reserve Bank stock		4,885		0		4,885		0
Accrued interest receivable		12,970		0		12,790		0
Mortgage servicing rights		2,364		0		0		2,364
Financial liabilities:
Deposits	$	2,903,848	$	606,448	$	2,297,632	$	0
Repurchase agreements		210,120		0		0		210,008
Federal funds purchased		12,314		0		12,314		0
Advances from Federal Home Loan Bank		1,429		0		1,719		0
Long-term debt		61,341		0		0		31,185
Accrued interest payable		1,309		0		1,309		0
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 for similar instruments.

Securities held-to-maturity – 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.

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.

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2013

Summary of Significant Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation – The unaudited condensed consolidated financial statements include the accounts of CTBI and its separate and distinct, wholly owned subsidiaries Community Trust Bank, Inc. (the "Bank") and Community Trust and Investment Company. All significant intercompany transactions have been eliminated in consolidation.

Reclassifications

Reclassifications – Certain reclassifications considered to be immaterial have been made in the prior year condensed consolidated financial statements to conform to current year classifications. These reclassifications had no effect on net income.

New Accounting Standards

New Accounting Standards –

ØTesting Goodwill for Impairment – In July 2012, the FASB issued ASU 2012-02, Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment. Under these amendments, an entity would not be required to calculate the fair value of an indefinite-lived intangible asset unless the entity determines, based on qualitative assessment, that it is not more likely than not that the indefinite-lived intangible asset is impaired. The amendments include a number of events and circumstances for an entity to consider in conducting the qualitative assessment. ASU 2012-02 is effective for annual and interim indefinite-lived intangible asset impairment tests performed for fiscal years beginning after September 15, 2012. Adoption of this ASU did not have a material effect on our consolidated financial statements.

ØAmounts Reclassified Out of Other Comprehensive Income – In February 2013, the FASB issued ASU No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into net income. The amendments in the ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP. The new amendments will require an organization to:

- Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income - but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period; and

- Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense.

The amendments apply to all public and private companies that report items of other comprehensive income. Public companies are required to comply with these amendments for all reporting periods (interim and annual). The amendments are effective for reporting periods beginning after December 15, 2012, for public companies. The adoption of ASU No. 2013-02 did not have a material impact on CTBI's consolidated financial statements.

Critical Accounting Policies and Estimates

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires the appropriate application of certain accounting policies, many of which require us to make estimates and assumptions about future events and their impact on amounts reported in our consolidated financial statements and related notes. Since future events and their impact cannot be determined with certainty, the actual results will inevitably differ from our estimates. Such differences could be material to the consolidated financial statements.

We believe the application of accounting policies and the estimates required therein are reasonable. These accounting policies and estimates are constantly reevaluated, and adjustments are made when facts and circumstances dictate a change. Historically, we have found our application of accounting policies to be appropriate, and actual results have not differed materially from those determined using necessary estimates.

Our accounting policies are described above. We have identified the following critical accounting policies:

Investments

Investments –Management determines the classification of securities at purchase. We classify securities into held-to-maturity, trading, or available-for-sale categories. Held-to-maturity securities are those which we have the positive intent and ability to hold to maturity and are reported at amortized cost. In accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 320, Investment Securities, investments in debt securities that are not classified as held-to-maturity and equity securities that have readily determinable fair values shall be classified in one of the following categories and measured at fair value in the statement of financial position:

a. Trading securities. Securities that are bought and held principally for the purpose of selling them in the near term (thus held for only a short period of time) shall be classified as trading securities. Trading generally reflects active and frequent buying and selling, and trading securities are generally used with the objective of generating profits on short-term differences in price.

b. Available-for-sale securities. Investments not classified as trading securities (nor as held-to-maturity securities) shall be classified as available-for-sale securities.

We do not have any securities that are classified as trading securities. Available-for-sale securities are reported at fair value, with unrealized gains and losses included as a separate component of shareholders' equity, net of tax. If declines in fair value are other than temporary, the carrying value of the securities is written down to fair value as a realized loss with a charge to income for the portion attributable to credit losses and a charge to other comprehensive income for the portion that is not credit related.

Gains or losses on disposition of securities are computed by specific identification for all securities except for shares in mutual funds, which are computed by average cost. Interest and dividend income, adjusted by amortization of purchase premium or discount, is included in earnings.

When the fair value of a security is below its amortized cost, and depending on the length of time the condition exists and the extent the fair market value is below amortized cost, additional analysis is performed to determine whether an other than temporary impairment condition exists. Available-for-sale and held-to-maturity securities are analyzed quarterly for possible other than temporary impairment. The analysis considers (i) whether we have the intent to sell our securities prior to recovery and/or maturity and (ii) whether it is more likely than not that we will not have to sell our securities prior to recovery and/or maturity. Often, the information available to conduct these assessments is limited and rapidly changing, making estimates of fair value subject to judgment. If actual information or conditions are different than estimated, the extent of the impairment of the security may be different than previously estimated, which could have a material effect on the CTBI's results of operations and financial condition.

Loans

Loans –Loans with the ability and the intent to be held until maturity and/or payoff are reported at the carrying value of unpaid principal reduced by unearned interest, an allowance for loan and lease losses, and unamortized deferred fees or costs. Income is recorded on the level yield basis. Interest accrual is discontinued when management believes, after considering economic and business conditions, collateral value, and collection efforts, that the borrower's financial condition is such that collection of interest is doubtful. Any loan greater than 90 days past due must be well secured and in the process of collection to continue accruing interest. Cash payments received on nonaccrual loans generally are applied against principal, and interest income is only recorded once principal recovery is reasonably assured. Loans are not reclassified as accruing until principal and interest payments remain current for a period of time, generally six months, and future payments appear reasonably certain. Included in certain loan categories of impaired loans are troubled debt restructurings that were classified as impaired. A restructuring of a debt constitutes a troubled debt restructuring if the creditor for economic or legal reasons related to the debtor's financial difficulties grants a concession to the debtor that it would not otherwise consider.

Loan origination and commitment fees and certain direct loan origination costs are deferred and the net amount amortized over the estimated life of the related loans, leases, or commitments as a yield adjustment.

Allowance for Loan and Lease Losses

Allowance for Loan and Lease Losses –We maintain an allowance for loan and lease losses ("ALLL") at a level that is appropriate to cover estimated credit losses on individually evaluated loans determined to be impaired, as well as estimated credit losses inherent in the remainder of the loan and lease portfolio. Since arriving at an appropriate ALLL involves a high degree of management judgment, we use an ongoing quarterly analysis to develop a range of estimated losses. In accordance with accounting principles generally accepted in the United States, we use our best estimate within the range of potential credit loss to determine the appropriate ALLL. Credit losses are charged and recoveries are credited to the ALLL.

We utilize an internal risk grading system for commercial credits. Those larger commercial credits that exhibit probable or observed credit weaknesses are subject to individual review. The borrower's cash flow, adequacy of collateral coverage, and other options available to CTBI, including legal remedies, are evaluated. The review of individual loans includes those loans that are impaired as defined by ASC 310-35, Impairment of a Loan. We evaluate the collectability of both principal and interest when assessing the need for loss provision. Historical loss rates are analyzed and applied to other commercial loans not subject to specific allocations. The ALLL allocation for this pool of commercial loans is established based on the historical average, maximum, minimum, and median loss ratios.

A loan is considered impaired when, based on current information and events, it is probable that CTBI will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

Homogenous loans, such as consumer installment, residential mortgages, and home equity lines are not individually risk graded. The associated ALLL for these loans is measured under ASC 450, Contingencies.

When any secured commercial loan is considered uncollectable, whether past due or not, a current assessment of the value of the underlying collateral is made. If the balance of the loan exceeds the fair value of the collateral, the loan is placed on non-accrual and the loan is charged down to the value of the collateral less estimated cost to sell or a specific reserve equal to the difference between book value of the loan and the fair value assigned to the collateral is created until such time as the loan is foreclosed. When the foreclosed collateral has been legally assigned to CTBI, a charge off is taken, if necessary, in order that the remaining balance reflects the fair value estimated less costs to sell of the collateral then transferred to other real estate owned or other repossessed assets. When any unsecured commercial loan is considered uncollectable the loan is charged off no later than at 90 days past due.

All closed-end consumer loans (excluding conventional 1-4 family residential loans and installment and revolving loans secured by real estate) are charged off no later than 120 days (5 monthly payments) delinquent. If a loan is considered uncollectable, it is charged off earlier than 120 days delinquent. For conventional 1-4 family residential loans and installment and revolving loans secured by real estate, when a loan is 90 days past due, a current assessment of the value of the real estate is made. If the balance of the loan exceeds the fair value of the property, the loan is placed on nonaccrual and foreclosure proceedings are initiated. When the foreclosed property has been legally assigned to CTBI, a charge-off is taken with the remaining balance, reflecting the fair value less estimated costs to sell, transferred to other real estate owned.

Historical loss rates for loans are adjusted for significant factors that, in management's judgment, reflect the impact of any current conditions on loss recognition. We generally review the historical loss rates over eight quarters and four quarters on a rolling average basis. Factors that we consider include delinquency trends, current economic conditions and trends, strength of supervision and administration of the loan portfolio, levels of underperforming loans, level of recoveries to prior year's charge-offs, trend in loan losses, industry concentrations and their relative strengths, amount of unsecured loans and underwriting exceptions. Based upon management's judgment, "best case," "worst case," and "most likely" scenarios are determined. The total of each of these weighted factors is then applied against the applicable portion of the portfolio and the ALLL is adjusted accordingly to approximate the most likely scenario. Management continually reevaluates the other subjective factors included in its ALLL analysis.

Other Real Estate Owned

Other Real Estate Owned – When foreclosed properties are acquired, appraisals are obtained and the properties are booked at the current market value less expected sales costs. Additionally, periodic updated appraisals are obtained on unsold foreclosed properties. When an updated appraisal reflects a market value below the current book value, a charge is booked to current earnings to reduce the property to its new market value less expected sales costs. Our policy for determining the frequency of periodic reviews is based upon consideration of the specific properties and the known or perceived market fluctuations in a particular market and is typically between 12 and 18 months but generally not more than 24 months. All revenues and expenses related to the carrying of other real estate owned are recognized by a charge to income.

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Securities (Tables)

3 Months Ended

Mar. 31, 2013

Securities [Abstract]

Amortized cost and fair value of securities

The amortized cost and fair value of securities at March 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	$	61,100	$	435	$	(272	)	$	61,263
State and political subdivisions		115,724		4,949		(225	)		120,448
U.S. government sponsored agency mortgage-backed securities		428,787		11,992		(309	)		440,470
Total debt securities		605,611		17,376		(806	)		622,181
Marketable equity securities		55,000		606		(277	)		55,329
Total available-for-sale securities	$	660,611	$	17,982	$	(1,083	)	$	677,510

Held-to-Maturity

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury and government agencies	$	480	$	0	$	(7	)	$	473
State and political subdivisions		1,182		1		0			1,183
Total held-to-maturity securities	$	1,662	$	1	$	(7	)	$	1,656

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

Amortized cost and fair value of securities by contractual maturity

The amortized cost and fair value of securities at March 31, 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	$	7,602	$	7,653	$	0	$	0
Due after one through five years		23,004		24,051		0		0
Due after five through ten years		107,594		109,952		1,182		1,183
Due after ten years		38,624		40,055		480		473
U.S. government sponsored agency mortgage-backed securities		428,787		440,470		0		0
Total debt securities		605,611		622,181		1,662		1,656
Marketable equity securities		55,000		55,329		0		0
Total securities	$	660,611	$	677,510	$	1,662	$	1,656

Available for sale securities and Held-to-maturity securities, continuous unrealized loss position

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 March 31, 2013 indicates that all impairment is considered temporary, market driven, and not credit-related. The percentage of total investments with unrealized losses as of March 31, 2013 was 22.2% compared to 14.8% as of December 31, 2012. 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 March 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	$	48,078	$	(272	)	$	47,806
State and political subdivisions		17,012		(212	)		16,800
U.S. government sponsored agency mortgage-backed securities		55,489		(309	)		55,180
Total debt securities		120,579		(793	)		119,786
Marketable equity securities		30,000		(277	)		29,723
Total <12 months temporarily impaired AFS securities		150,579		(1,070	)		149,509
12 Months or More
State and political subdivisions		1,106		(13	)		1,093
Total ≥12 months temporarily impaired AFS securities		1,106		(13	)		1,093
Total
U.S. Treasury and government agencies		48,078		(272	)		47,806
State and political subdivisions		18,118		(225	)		17,893
U.S. government sponsored agency mortgage-backed securities		55,489		(309	)		55,180
Total debt securities		121,685		(806	)		120,879
Marketable equity securities		30,000		(277	)		29,723
Total temporarily impaired AFS securities	$	151,685	$	(1,083	)	$	150,602

Held-to-Maturity

(in thousands)	Amortized Cost		Gross Unrealized Losses			Fair Value
Less Than 12 Months
U.S. Treasury and government agencies	$	480	$	(7	)	$	473
Total temporarily impaired HTM securities	$	480	$	(7	)	$	473

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 <12 months temporarily impaired AFS securities		89,265		(485	)		88,780
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
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

XML

Fair Market Value of Financial Assets and Liabilities, Quantitative Information about Level 3 Fair Value Measurements (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2013	Dec. 31, 2012
Mortgage Servicing Rights [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Assets, Fair Value Disclosure	2,652	2,364
Mortgage Servicing Rights [Member] | Minimum [Member]
Fair Value Inputs [Abstract]
Constant prepayment rate (in hundredths)	11.40%	8.50%
Probability of default (in hundredths)	0.55%	1.02%
Mortgage Servicing Rights [Member] | Maximum [Member]
Fair Value Inputs [Abstract]
Constant prepayment rate (in hundredths)	21.40%	25.00%
Probability of default (in hundredths)	4.71%	4.81%
Mortgage Servicing Rights [Member] | Weighted Average [Member]
Fair Value Inputs [Abstract]
Constant prepayment rate (in hundredths)	(15.10%)	16.30%
Probability of default (in hundredths)	(2.73%)	2.65%
Discount rate (in hundredths)	(10.50%)	10.50%
Impaired Loans (Collateral Dependent) [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Assets, Fair Value Disclosure	2,326	5,465
Impaired Loans (Collateral Dependent) [Member] | Minimum [Member]
Fair Value Inputs [Abstract]
Marketability discount (in hundredths)	5.00%	5.00%
Impaired Loans (Collateral Dependent) [Member] | Maximum [Member]
Fair Value Inputs [Abstract]
Marketability discount (in hundredths)	10.00%	10.00%
Impaired Loans (Collateral Dependent) [Member] | Weighted Average [Member]
Fair Value Inputs [Abstract]
Marketability discount (in hundredths)	(7.00%)	7.00%
Other Real Estate/Asset Owned [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Assets, Fair Value Disclosure	4,365	13,892
Other Real Estate/Asset Owned [Member] | Minimum [Member]
Fair Value Inputs [Abstract]
Comparability adjustments (in hundredths)	5.00%	5.00%
Other Real Estate/Asset Owned [Member] | Maximum [Member]
Fair Value Inputs [Abstract]
Comparability adjustments (in hundredths)	57.00%	35.00%
Other Real Estate/Asset Owned [Member] | Weighted Average [Member]
Fair Value Inputs [Abstract]
Comparability adjustments (in hundredths)	(24.00%)	13.00%

XML

Fair Market Value of Financial Assets and Liabilities (Tables)

3 Months Ended

Mar. 31, 2013

Fair Market Value of Financial Assets and Liabilities [Abstract]

Fair value assets measured on recurring basis

The following tables present the fair value measurements of assets recognized in the accompanying balance sheets measured at fair value on a recurring basis as of March 31, 2013 and December 31, 2012 and indicates the level within the fair value hierarchy of the valuation techniques.

(in thousands)			Fair Value Measurements at March 31, 2013 Using
	Fair Value		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	$	61,263	$	0	$	61,263	$	0
State and political subdivisions		120,448		0		120,448		0
U.S. government sponsored agency mortgage-backed securities		440,470		0		440,470		0
Marketable equity securities		55,329		55,329		0		0
Mortgage servicing rights		2,652		0		0		2,652

(in thousands)			Fair Value Measurements at December 31, 2012 Using
	Fair Value		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	$	60,915	$	0	$	60,915	$	0
State and political subdivisions		113,221		0		113,221		0
U.S. government sponsored agency mortgage-backed securities		383,581		0		383,581		0
Marketable equity securities		45,626		45,626		0		0
Mortgage servicing rights		2,364		0		0		2,364

Reconciliation of the beginning and ending balance of recurring fair value measurement using significant unobservable (level 3) inputs

Following is a reconciliation of the beginning and ending balances of recurring fair value measurements recognized in the accompanying balance sheet using significant unobservable (Level 3) inputs for the three months ended March 31, 2013 and 2012:

(in thousands)	Three Months Ended March 31, 2013
	Marketable Equity Securities		Mortgage Servicing Rights
Beginning balance	$	0	$	2,364
Total recognized gains (losses)
Included in net income		0		117
Issues		0		357
Settlements		0		(186	)
Ending balance	$	0	$	2,652
Total gains for the period included in net income attributable to the change in unrealized gains or losses related to assets still held at the reporting date	$	0	$	117

(in thousands)	Three Months Ended March 31, 2012
	Marketable Equity Securities		Mortgage Servicing Rights
Beginning balance	$	211	$	2,282
Total recognized gains (losses)
Included in net income		0		341
Issues		0		151
Settlements		0		(134	)
Ending balance	$	211	$	2,640
Total gains for the period included in net income attributable to the change in unrealized gains or losses related to assets still held at the reporting date	$	0	$	341

Realized and unrealized gains and losses for items included in net income in the consolidated statement of income

Realized and unrealized gains and losses for items reflected in the tables above are included in net income in the consolidated statements of income as follows:

(in thousands)	Three Months Ended March 31, 2013
	Noninterest Income			Noninterest Expense
Total gains	$	(69	)	$	0

(in thousands)	Three Months Ended March 31, 2012
	Noninterest Income		Noninterest Expense
Total gains	$	207	$	0

Fair value measurements of recognized assets measured on nonrecurring basis

The following table presents the fair value measurements of assets recognized in the accompanying balance sheets measured at fair value on a nonrecurring basis as of March 31, 2013 and December 31, 2012 and indicates the level within the fair value hierarchy of the valuation techniques.

(in thousands)			Fair Value Measurements at March 31, 2013 Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets measured – nonrecurring basis
Impaired loans (collateral dependent)	$	2,326	$	0	$	0	$	2,326
Other real estate/assets owned		4,365		0		0		4,365

(in thousands)			Fair Value Measurements at December 31, 2012 Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets measured – nonrecurring basis
Impaired loans (collateral dependent)	$	5,465	$	0	$	0	$	5,465
Other real estate/assets owned		13,892		0		0		13,892

Quantitative information about unobservable inputs used in recurring and nonrecurring level 3 fair value measurments

The following tables present quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements at March 31, 2013 and December 31, 2012.

(in thousands)	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at March 31, 2013		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Mortgage servicing rights	$	2,652	Discount cash flows, computer pricing model	Constant prepayment rate		11.4% - 21.4% (15.1%)
				Probability of default		0.55% - 4.71% (2.73%)
				Discount rate	Not applicable (10.5%)
Impaired loans (collateral-dependent)	$	2,326	Market comparable properties	Marketability discount		5.0% - 10.0% (7.0%)
Other real estate/assets owned	$	4,365	Market comparable properties	Comparability adjustments (%)		5.0% - 57.0% (24.0%)

(in thousands)	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at December 31, 2012		Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Mortgage servicing rights	$	2,364	Discount cash flows, computer pricing model	Constant prepayment rate		8.5% - 25.0% (16.3%)
				Probability of default		1.02% - 4.81% (2.65%)
				Discount rate	Not applicable (10.5%)
Impaired loans (collateral-dependent)	$	5,465	Market comparable properties	Marketability discount		5.0% - 10.0% (7.0%)
Other real estate/assets owned	$	13,892	Market comparable properties	Comparability adjustments (%)		5.0% - 35.0% (13.0%)

Fair value of financial instruments and levels within the fair value hierarchy of the valuation techniques

The following table presents estimated fair value of CTBI's financial instruments as of March 31, 2013 and indicates the level within the fair value hierarchy of the valuation techniques.

(in thousands)			Fair Value Measurements at March 31, 2013 Using
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial assets:
Cash and cash equivalents	$	167,944	$	167,944	$	0	$	0
Certificates of deposit in other banks		9,320		0		9,335		0
Securities available-for-sale		677,510		55,329		622,181		0
Securities held-to-maturity		1,662		0		1,656		0
Loans held for sale		1,449		1,495		0		0
Loans, net		2,529,921		0		0		2,542,905
Federal Home Loan Bank stock		25,673		0		25,673		0
Federal Reserve Bank stock		4,886		0		4,886		0
Accrued interest receivable		13,545		0		13,545		0
Mortgage servicing rights		2,652		0		0		2,652
Financial liabilities:
Deposits	$	2,933,580	$	619,819	$	2,313,712	$	0
Repurchase agreements		213,573		0		0		213,556
Federal funds purchased		15,272		0		15,272		0
Advances from Federal Home Loan Bank		1,387		0		1,668		0
Long-term debt		61,341		0		0		31,227
Accrued interest payable		1,477		0		1,477		0
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 table presents estimated fair value of CTBI's financial instruments as of December 31, 2012 and indicates the level within the fair value hierarchy of the valuation techniques.

(in thousands)			Fair Value Measurements at December 31, 2012 Using
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial assets:
Cash and cash equivalents	$	207,560	$	207,560	$	0	$	0
Certificates of deposit in other banks		5,336		0		5,370		0
Securities available-for-sale		603,343		45,626		557,717		0
Securities held-to-maturity		1,662		0		1,659		0
Loans held for sale		22,486		22,960		0		0
Loans, net		2,517,328		0		0		2,540,272
Federal Home Loan Bank stock		25,673		0		25,673		0
Federal Reserve Bank stock		4,885		0		4,885		0
Accrued interest receivable		12,970		0		12,790		0
Mortgage servicing rights		2,364		0		0		2,364
Financial liabilities:
Deposits	$	2,903,848	$	606,448	$	2,297,632	$	0
Repurchase agreements		210,120		0		0		210,008
Federal funds purchased		12,314		0		12,314		0
Advances from Federal Home Loan Bank		1,429		0		1,719		0
Long-term debt		61,341		0		0		31,185
Accrued interest payable		1,309		0		1,309		0
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

XML

Loans, Nonaccrual Loans Segregated by Class of Loans and Loan Portfolio Aging Analysis, Segregated by Class (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013		Dec. 31, 2012
Nonaccrual loans and loan portfolio aging analysis, segregated by class [Line Items]
Nonaccrual loans segregated by class of loans	$ 18,337		$ 16,791
Bank's Loan portfolio aging analysis, segregated by class [Abstract]
30-59 Days Past Due	14,858		19,471
60-89 Days Past Due	12,103		9,033
90+ Days Past Due	31,348		33,911
Total Past Due	58,309		62,415
Current	2,505,005		2,488,158
Total Loans	2,563,314		2,550,573
90+ and Accruing	15,533	[1]	19,215	[1]
Commercial Construction [Member]
Nonaccrual loans and loan portfolio aging analysis, segregated by class [Line Items]
Nonaccrual loans segregated by class of loans	6,196		5,955
Bank's Loan portfolio aging analysis, segregated by class [Abstract]
30-59 Days Past Due	617		1,413
60-89 Days Past Due	16		312
90+ Days Past Due	8,599		9,598
Total Past Due	9,232		11,323
Current	93,071		108,124
Total Loans	102,303		119,447
90+ and Accruing	2,532	[1]	3,778	[1]
Commercial Secured by Real Estate [Member]
Nonaccrual loans and loan portfolio aging analysis, segregated by class [Line Items]
Nonaccrual loans segregated by class of loans	6,256		5,572
Bank's Loan portfolio aging analysis, segregated by class [Abstract]
30-59 Days Past Due	6,619		9,733
60-89 Days Past Due	7,111		1,633
90+ Days Past Due	9,129		10,456
Total Past Due	22,859		21,822
Current	824,948		785,391
Total Loans	847,807		807,213
90+ and Accruing	4,475	[1]	5,943	[1]
Commercial Other [Member]
Nonaccrual loans and loan portfolio aging analysis, segregated by class [Line Items]
Nonaccrual loans segregated by class of loans	1,344		1,655
Bank's Loan portfolio aging analysis, segregated by class [Abstract]
30-59 Days Past Due	1,776		259
60-89 Days Past Due	1,398		1,142
90+ Days Past Due	5,101		5,164
Total Past Due	8,275		6,565
Current	367,134		369,783
Total Loans	375,409		376,348
90+ and Accruing	3,827	[1]	3,867	[1]
Equipment Lease Financing [Member]
Bank's Loan portfolio aging analysis, segregated by class [Abstract]
30-59 Days Past Due	0		0
60-89 Days Past Due	0		0
90+ Days Past Due	0		0
Total Past Due	0		0
Current	9,944		9,246
Total Loans	9,944		9,246
90+ and Accruing	0	[1]	0	[1]
Real Estate Construction [Member]
Nonaccrual loans and loan portfolio aging analysis, segregated by class [Line Items]
Nonaccrual loans segregated by class of loans	635		315
Bank's Loan portfolio aging analysis, segregated by class [Abstract]
30-59 Days Past Due	195		248
60-89 Days Past Due	272		572
90+ Days Past Due	866		511
Total Past Due	1,333		1,331
Current	50,645		53,710
Total Loans	51,978		55,041
90+ and Accruing	232	[1]	196	[1]
Real Estate Mortgage [Member]
Nonaccrual loans and loan portfolio aging analysis, segregated by class [Line Items]
Nonaccrual loans segregated by class of loans	3,763		3,153
Bank's Loan portfolio aging analysis, segregated by class [Abstract]
30-59 Days Past Due	1,822		2,765
60-89 Days Past Due	2,394		4,029
90+ Days Past Due	6,698		7,138
Total Past Due	10,914		13,932
Current	685,407		682,996
Total Loans	696,321		696,928
90+ and Accruing	3,635	[1]	4,511	[1]
Home Equity [Member]
Nonaccrual loans and loan portfolio aging analysis, segregated by class [Line Items]
Nonaccrual loans segregated by class of loans	143		141
Bank's Loan portfolio aging analysis, segregated by class [Abstract]
30-59 Days Past Due	1,118		921
60-89 Days Past Due	119		102
90+ Days Past Due	497		565
Total Past Due	1,734		1,588
Current	78,165		80,704
Total Loans	79,899		82,292
90+ and Accruing	374	[1]	441	[1]
Consumer Direct [Member]
Bank's Loan portfolio aging analysis, segregated by class [Abstract]
30-59 Days Past Due	851		1,360
60-89 Days Past Due	247		336
90+ Days Past Due	79		98
Total Past Due	1,177		1,794
Current	118,014		120,787
Total Loans	119,191		122,581
90+ and Accruing	79	[1]	98	[1]
Consumer Indirect [Member]
Bank's Loan portfolio aging analysis, segregated by class [Abstract]
30-59 Days Past Due	1,860		2,772
60-89 Days Past Due	546		907
90+ Days Past Due	379		381
Total Past Due	2,785		4,060
Current	277,677		277,417
Total Loans	280,462		281,477
90+ and Accruing	$ 379	[1]	$ 381	[1]

[1] 90+ and Accruing are also included in 90+ Days Past Due column.

XML

Condensed Consolidated Statements of Cash Flows (unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Cash flows from operating activities:
Net income	$ 11,820	$ 11,869
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1,151	1,061
Deferred taxes	905	771
Stock-based compensation	164	146
Excess tax benefits of stock-based compensation	35	336
Provision for loan losses	1,559	1,160
Write-downs of other real estate owned and other repossessed assets	1,146	179
Gains on sale of mortgage loans held for sale	(1,397)	(617)
(Gains)/losses on sale of assets, net	65	(35)
Proceeds from sale of mortgage loans held for sale	59,723	26,731
Funding of mortgage loans held for sale	(37,289)	(27,220)
Amortization of securities premiums and discounts, net	1,086	1,287
Change in cash surrender value of bank owned life insurance	(324)	(344)
Mortgage servicing rights:
Fair value adjustments	69	(207)
New servicing assets created	(357)	(151)
Changes in:
Other assets	(486)	(392)
Other liabilities	(5,968)	10,090
Net cash provided by operating activities	31,902	24,664
Certificates of deposit in other banks:
Purchase of certificates of deposit	(3,984)	(1,117)
Securities available-for-sale (AFS):
Purchase of AFS securities	(109,477)	(123,695)
Proceeds from prepayments and maturities of AFS securities	31,637	33,626
Change in loans, net	(15,881)	8,803
Purchase of premises and equipment	(267)	(1,436)
Proceeds from sale of premises and equipment	0	73
Additional investment in Federal Reserve Bank stock	(1)	(1)
Proceeds from sale of other real estate and other repossessed assets	2,347	2,089
Additional investment in other real estate and other repossessed assets	(5)	(90)
Additional investment in bank owned life insurance	(7,949)	0
Net cash used in investing activities	(103,580)	(81,748)
Cash flows from financing activities:
Change in deposits, net	29,732	69,194
Change in repurchase agreements, federal funds purchased, and other short-term borrowings, net	6,411	15,773
Payments on advances from Federal Home Loan Bank	(42)	(20,047)
Issuance of common stock	883	1,993
Excess tax benefits of stock-based compensation	(35)	(336)
Dividends paid	(4,887)	(4,753)
Net cash provided by financing activities	32,062	61,824
Net increase (decrease) in cash and cash equivalents	(39,616)	4,740
Cash and cash equivalents at beginning of period	207,560	238,481
Cash and cash equivalents at end of period	167,944	243,221
Supplemental disclosures:
Income taxes paid	4,500	3,800
Interest paid	3,411	5,290
Non-cash activities:
Loans to facilitate the sale of other real estate owned and other repossessed assets	318	952
Common stock dividends accrued, paid in subsequent quarter	4,900	4,783
Real estate acquired in settlement of loans	$ 2,047	$ 5,370

XML

Allowance for Loan and Lease Losses

3 Months Ended

Mar. 31, 2013

Allowance for Loan and Lease Losses [Abstract]

Allowance for Loan and Lease Losses

Note 5 – Allowance for Loan and Lease Losses

The following tables present the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of March 31, 2013, December 31, 2012 and March 31, 2012:

	March 31, 2013
(in thousands)	Commercial Construction			Commercial Secured by Real Estate		Equipment Lease Financing		Commercial Other			Real Estate Construction			Real Estate Mortgage		Home Equity		Consumer Direct		Consumer Indirect		Total
Allowance for loan losses
Beginning balance	$	4,033		$	13,541	$	126	$	5,469		$	376		$	4,767	$	563	$	1,102	$	3,268	$	33,245
Provision charged to expense		(212	)		484		2		(155	)		(4	)		334		50		165		895		1,559
Losses charged off		0			365		0		332			0			131		47		314		999		2,188
Recoveries		6			22		0		169			0			10		5		145		420		777
Ending balance	$	3,827		$	13,682	$	128	$	5,151		$	372		$	4,980	$	571	$	1,098	$	3,584	$	33,393
Ending balance:
Individually evaluated for impairment	$	1,911		$	1,192	$	0	$	322		$	0		$	0	$	0	$	0	$	0	$	3,425
Collectively evaluated for impairment	$	1,916		$	12,490	$	128	$	4,829		$	372		$	4,980	$	571	$	1,098	$	3,584	$	29,968
Loans
Ending balance:
Individually evaluated for impairment	$	11,228		$	37,923	$	0	$	16,646		$	0		$	657	$	0	$	0	$	0	$	66,454
Collectively evaluated for impairment	$	91,075		$	809,884	$	9,944	$	358,763		$	51,978		$	695,664	$	79,899	$	119,191	$	280,462	$	2,496,860

	December 31, 2012
(in thousands)	Commercial Construction		Commercial Secured by Real Estate		Equipment Lease Financing		Commercial Other		Real Estate Construction		Real Estate Mortgage		Home Equity		Consumer Direct		Consumer Indirect			Total
Allowance for loan losses
Balance, beginning of year	$	4,023	$	11,753	$	112	$	5,608	$	354	$	4,302	$	562	$	917	$	5,540		$	33,171
Provision charged to expense		1,009		3,520		14		2,330		183		1,437		238		892		(173	)		9,450
Losses charged off		1,034		2,035		0		3,233		189		1,123		248		1,245		3,483			12,590
Recoveries		35		303		0		764		28		151		11		538		1,384			3,214
Balance, end of year	$	4,033	$	13,541	$	126	$	5,469	$	376	$	4,767	$	563	$	1,102	$	3,268		$	33,245
Ending balance:
Individually evaluated for impairment	$	1,820	$	1,090	$	0	$	338	$	0	$	0	$	0	$	0	$	0		$	3,248
Collectively evaluated for impairment	$	2,213	$	12,451	$	126	$	5,131	$	376	$	4,767	$	563	$	1,102	$	3,268		$	29,997
Loans
Ending balance:
Individually evaluated for impairment	$	9,395	$	38,113	$	0	$	14,295	$	0	$	695	$	0	$	0	$	0		$	62,498
Collectively evaluated for impairment	$	110,052	$	769,100	$	9,246	$	362,053	$	55,041	$	696,233	$	82,292	$	122,581	$	281,477		$	2,488,075

	March 31, 2012
(in thousands)	Commercial Construction		Commercial Secured by Real Estate		Equipment Lease Financing			Commercial Other		Real Estate Construction		Real Estate Mortgage		Home Equity		Consumer Direct			Consumer Indirect			Total
Allowance for loan losses
Beginning balance	$	4,023	$	11,753	$	112		$	5,608	$	354	$	4,302	$	562	$	917		$	5,540		$	33,171
Provision charged to expense		42		1,280		(7	)		718		155		71		29		(117	)		(1,011	)		1,160
Losses charged off		18		96		0			612		171		190		46		146			847			2,126
Recoveries		19		40		0			251		6		57		1		192			401			967
Ending balance	$	4,066	$	12,977	$	105		$	5,965	$	344	$	4,240	$	546	$	846		$	4,083		$	33,172
Ending balance:
Individually evaluated for impairment	$	2,180	$	1,246	$	0		$	1,104	$	0	$	0	$	0	$	0		$	0		$	4,530
Collectively evaluated for impairment	$	1,886	$	11,731	$	105		$	4,861	$	344	$	4,240	$	546	$	846		$	4,083		$	28,642
Loans
Ending balance:
Individually evaluated for impairment	$	10,506	$	39,694	$	0		$	9,487	$	0	$	279	$	0	$	0		$	0		$	59,966
Collectively evaluated for impairment	$	103,655	$	767,215	$	8,219		$	372,459	$	52,558	$	648,059	$	83,498	$	121,645		$	324,894		$	2,482,202

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Loans, Credit Risk Profile Based on Rating Category and Payment Activity and on Performing and Nonperforming Status, Segregated by Class (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013		Dec. 31, 2012
Credit risk profile, segregated by class [Line Items]
Commercial loan portfolio based on credit risk profile	$ 1,335,463		$ 1,312,254
Residential real estate and consumer loan portfolio based on performing and nonperforming status	1,227,851		1,238,319
Commercial Construction [Member]
Credit risk profile, segregated by class [Line Items]
Commercial loan portfolio based on credit risk profile	102,303		119,447
Commercial Secured by Real Estate [Member]
Credit risk profile, segregated by class [Line Items]
Commercial loan portfolio based on credit risk profile	847,807		807,213
Commercial Other [Member]
Credit risk profile, segregated by class [Line Items]
Commercial loan portfolio based on credit risk profile	375,409		376,348
Equipment Lease [Member]
Credit risk profile, segregated by class [Line Items]
Commercial loan portfolio based on credit risk profile	9,944		9,246
Real Estate Construction [Member]
Credit risk profile, segregated by class [Line Items]
Residential real estate and consumer loan portfolio based on performing and nonperforming status	51,978		55,041
Real Estate Mortgage [Member]
Credit risk profile, segregated by class [Line Items]
Residential real estate and consumer loan portfolio based on performing and nonperforming status	696,321		696,928
Home Equity [Member]
Credit risk profile, segregated by class [Line Items]
Residential real estate and consumer loan portfolio based on performing and nonperforming status	79,899		82,292
Consumer Direct [Member]
Credit risk profile, segregated by class [Line Items]
Residential real estate and consumer loan portfolio based on performing and nonperforming status	119,191		122,581
Consumer Indirect [Member]
Credit risk profile, segregated by class [Line Items]
Residential real estate and consumer loan portfolio based on performing and nonperforming status	280,462		281,477
Pass [Member]
Credit risk profile, segregated by class [Line Items]
Commercial loan portfolio based on credit risk profile	1,116,073		1,095,796
Pass [Member] | Commercial Construction [Member]
Credit risk profile, segregated by class [Line Items]
Commercial loan portfolio based on credit risk profile	74,898		92,140
Pass [Member] | Commercial Secured by Real Estate [Member]
Credit risk profile, segregated by class [Line Items]
Commercial loan portfolio based on credit risk profile	704,073		665,764
Pass [Member] | Commercial Other [Member]
Credit risk profile, segregated by class [Line Items]
Commercial loan portfolio based on credit risk profile	327,158		328,646
Pass [Member] | Equipment Lease [Member]
Credit risk profile, segregated by class [Line Items]
Commercial loan portfolio based on credit risk profile	9,944		9,246
Watch [Member]
Credit risk profile, segregated by class [Line Items]
Commercial loan portfolio based on credit risk profile	129,411		121,192
Watch [Member] | Commercial Construction [Member]
Credit risk profile, segregated by class [Line Items]
Commercial loan portfolio based on credit risk profile	14,142		12,915
Watch [Member] | Commercial Secured by Real Estate [Member]
Credit risk profile, segregated by class [Line Items]
Commercial loan portfolio based on credit risk profile	85,439		79,517
Watch [Member] | Commercial Other [Member]
Credit risk profile, segregated by class [Line Items]
Commercial loan portfolio based on credit risk profile	29,830		28,760
Watch [Member] | Equipment Lease [Member]
Credit risk profile, segregated by class [Line Items]
Commercial loan portfolio based on credit risk profile	0		0
OAEM [Member]
Credit risk profile, segregated by class [Line Items]
Commercial loan portfolio based on credit risk profile	14,799		20,402
OAEM [Member] | Commercial Construction [Member]
Credit risk profile, segregated by class [Line Items]
Commercial loan portfolio based on credit risk profile	56		1,054
OAEM [Member] | Commercial Secured by Real Estate [Member]
Credit risk profile, segregated by class [Line Items]
Commercial loan portfolio based on credit risk profile	13,769		16,532
OAEM [Member] | Commercial Other [Member]
Credit risk profile, segregated by class [Line Items]
Commercial loan portfolio based on credit risk profile	974		2,816
OAEM [Member] | Equipment Lease [Member]
Credit risk profile, segregated by class [Line Items]
Commercial loan portfolio based on credit risk profile	0		0
Substandard [Member]
Credit risk profile, segregated by class [Line Items]
Commercial loan portfolio based on credit risk profile	62,734		62,282
Substandard [Member] | Commercial Construction [Member]
Credit risk profile, segregated by class [Line Items]
Commercial loan portfolio based on credit risk profile	7,011		7,383
Substandard [Member] | Commercial Secured by Real Estate [Member]
Credit risk profile, segregated by class [Line Items]
Commercial loan portfolio based on credit risk profile	39,387		40,021
Substandard [Member] | Commercial Other [Member]
Credit risk profile, segregated by class [Line Items]
Commercial loan portfolio based on credit risk profile	16,336		14,878
Substandard [Member] | Equipment Lease [Member]
Credit risk profile, segregated by class [Line Items]
Commercial loan portfolio based on credit risk profile	0		0
Doubtful [Member]
Credit risk profile, segregated by class [Line Items]
Commercial loan portfolio based on credit risk profile	12,446		12,582
Doubtful [Member] | Commercial Construction [Member]
Credit risk profile, segregated by class [Line Items]
Commercial loan portfolio based on credit risk profile	6,196		5,955
Doubtful [Member] | Commercial Secured by Real Estate [Member]
Credit risk profile, segregated by class [Line Items]
Commercial loan portfolio based on credit risk profile	5,139		5,379
Doubtful [Member] | Commercial Other [Member]
Credit risk profile, segregated by class [Line Items]
Commercial loan portfolio based on credit risk profile	1,111		1,248
Doubtful [Member] | Equipment Lease [Member]
Credit risk profile, segregated by class [Line Items]
Commercial loan portfolio based on credit risk profile	0		0
Performing [Member]
Credit risk profile, segregated by class [Line Items]
Residential real estate and consumer loan portfolio based on performing and nonperforming status	1,218,611		1,229,083
Performing [Member] | Real Estate Construction [Member]
Credit risk profile, segregated by class [Line Items]
Residential real estate and consumer loan portfolio based on performing and nonperforming status	51,111		54,530
Performing [Member] | Real Estate Mortgage [Member]
Credit risk profile, segregated by class [Line Items]
Residential real estate and consumer loan portfolio based on performing and nonperforming status	688,923		689,264
Performing [Member] | Home Equity [Member]
Credit risk profile, segregated by class [Line Items]
Residential real estate and consumer loan portfolio based on performing and nonperforming status	79,382		81,710
Performing [Member] | Consumer Direct [Member]
Credit risk profile, segregated by class [Line Items]
Residential real estate and consumer loan portfolio based on performing and nonperforming status	119,112		122,483
Performing [Member] | Consumer Indirect [Member]
Credit risk profile, segregated by class [Line Items]
Residential real estate and consumer loan portfolio based on performing and nonperforming status	280,083		281,096
Nonperforming [Member]
Credit risk profile, segregated by class [Line Items]
Residential real estate and consumer loan portfolio based on performing and nonperforming status	9,240	[1]	9,236	[1]
Nonperforming [Member] | Real Estate Construction [Member]
Credit risk profile, segregated by class [Line Items]
Residential real estate and consumer loan portfolio based on performing and nonperforming status	867	[1]	511	[1]
Nonperforming [Member] | Real Estate Mortgage [Member]
Credit risk profile, segregated by class [Line Items]
Residential real estate and consumer loan portfolio based on performing and nonperforming status	7,398	[1]	7,664	[1]
Nonperforming [Member] | Home Equity [Member]
Credit risk profile, segregated by class [Line Items]
Residential real estate and consumer loan portfolio based on performing and nonperforming status	517	[1]	582	[1]
Nonperforming [Member] | Consumer Direct [Member]
Credit risk profile, segregated by class [Line Items]
Residential real estate and consumer loan portfolio based on performing and nonperforming status	79	[1]	98	[1]
Nonperforming [Member] | Consumer Indirect [Member]
Credit risk profile, segregated by class [Line Items]
Residential real estate and consumer loan portfolio based on performing and nonperforming status	$ 379	[1]	$ 381	[1]

[1] A loan is considered nonperforming if it is 90 days or more past due and/or on nonaccrual.

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Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2013

Earnings Per Share [Abstract]

Computation of basic and diluted earnings per share

The following table sets forth the computation of basic and diluted earnings per share:

	Three Months Ended
	March 31
(in thousands except per share data)	2013		2012
Numerator:
Net income	$	11,820	$	11,869
Denominator:
Basic earnings per share:
Weighted average shares		15,539		15,407
Diluted earnings per share:
Effect of dilutive stock options		53		49
Adjusted weighted average shares		15,592		15,456
Earnings per share:
Basic earnings per share	$	0.76	$	0.77
Diluted earnings per share		0.76		0.77