Securities

3 Months Ended

Mar. 31, 2020

Securities [Abstract]

Securities

Note 3 – Securities

Debt 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.  As of March 31, 2020, CTBI had no held-to-maturity securities.

The amortized cost and fair value of debt securities at March 31, 2020 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	$	159,199	$	1,009	$	(337	)	$	159,871
State and political subdivisions		96,171		3,068		(43	)		99,196
U.S. government sponsored agency mortgage-backed securities		313,979		8,358		(1,294	)		321,043
Other debt securities		56,565		0		(3,196	)		53,369
Total available-for-sale securities	$	625,914	$	12,435	$	(4,870	)	$	633,479

The amortized cost and fair value of debt securities at December 31, 2019 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	$	171,250	$	476	$	(576	)	$	171,150
State and political subdivisions		99,403		2,941		(37	)		102,307
U.S. government sponsored agency mortgage-backed securities		291,874		4,443		(1,072	)		295,245
Other debt securities		31,418		0		(276	)		31,142
Total available-for-sale securities	$	593,945	$	7,860	$	(1,961	)	$	599,844

Held-to-Maturity

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
State and political subdivisions	$	517	$	0	$	0	$	517
Total held-to-maturity securities	$	517	$	0	$	0	$	517

The amortized cost and fair value of debt securities at March 31, 2020 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
(in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	82,872	$	83,574
Due after one through five years		20,033		20,371
Due after five through ten years		91,340		91,659
Due after ten years		61,125		63,463
U.S. government sponsored agency mortgage-backed securities		313,979		321,043
Other debt securities		56,565		53,369
Total debt securities	$	625,914	$	633,479

As of March 31, 2020, we had a net securities gain of $249 thousand, consisting of a pre-tax gain of $481 thousand realized on sales and calls of AFS securities and an unrealized loss of $232 thousand from the fair market value adjustment of equity securities.  As of March 31, 2019, we had a net securities gain of $356 thousand, consisting of a pre-tax gain of $1 thousand realized on sales of AFS securities and an unrealized gain of $355 thousand from the fair market value adjustment of equity securities.

Equity Securities at Fair Value

CTBI made the election permitted by ASC 321-10-35-2 to record its Visa Class B shares at fair value.  Equity securities at fair value as of March 31, 2020 were $1.7 million, as a result of a $0.2 million decrease in the fair market value in the first quarter 2020.  The fair market value of equity securities increased $0.4 million in the first quarter 2019.  No equity securities were sold during the first quarter 2020.

The amortized cost of securities pledged as collateral, to secure public deposits and for other purposes, was $229.5 million at March 31, 2020 and $239.1 million at December 31, 2019.

The amortized cost of securities sold under agreements to repurchase amounted to $262.6 million at March 31, 2020 and $261.5 million at December 31, 2019.

CTBI evaluates its investment portfolio on a quarterly basis for impairment.  The analysis performed as of March 31, 2020 indicates that all impairment is considered temporary, market and interest rate driven, and not credit-related.  The percentage of total debt securities with unrealized losses as of March 31, 2020 was 31.3% compared to 42.8% as of December 31, 2019.  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, 2020 that are not deemed to have credit losses.  As stated above, CTBI had no HTM securities as of March 31, 2020.

Available-for-Sale

(in thousands)	Amortized Cost		Gross Unrealized Losses			Fair Value
Less Than 12 Months
U.S. Treasury and government agencies	$	14,713	$	(86	)	$	14,627
State and political subdivisions		1,113		(43	)		1,070
U.S. government sponsored agency mortgage-backed securities		40,026		(570	)		39,456
Other debt securities		56,565		(3,196	)		53,369
Total <12 months impaired AFS securities		112,417		(3,895	)		108,522
12 Months or More
U.S. Treasury and government agencies		51,913		(251	)		51,662
State and political subdivisions		0		0			0
U.S. government sponsored agency mortgage-backed securities		38,762		(724	)		38,038
Other debt securities		0		0			0
Total ≥12 months impaired AFS securities		90,675		(975	)		89,700
Total
U.S. Treasury and government agencies		66,626		(337	)		66,289
State and political subdivisions		1,113		(43	)		1,070
U.S. government sponsored agency mortgage-backed securities		78,788		(1,294	)		77,494
Other debt securities		56,565		(3,196	)		53,369
Total impaired AFS securities	$	203,092	$	(4,870	)	$	198,222

The analysis performed as of December 31, 2019 indicated that all impairment was considered temporary, market and interest rate driven, and not credit-related.  The following tables provide the amortized cost, gross unrealized losses, and fair market value, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position as of December 31, 2019 that are not deemed to be other-than-temporarily impaired.  There were no held-to-maturity securities that were deemed to be impaired as of December 31, 2019.

Available-for-Sale

(in thousands)	Amortized Cost		Gross Unrealized Losses			Fair Value
Less Than 12 Months
U.S. Treasury and government agencies	$	25,955	$	(148	)	$	25,807
State and political subdivisions		8,356		(37	)		8,319
U.S. government sponsored agency mortgage-backed securities		19,317		(100	)		19,217
Other debt securities		31,418		(276	)		31,142
Total <12 months temporarily impaired AFS securities		85,046		(561	)		84,485
12 Months or More
U.S. Treasury and government agencies		82,339		(428	)		81,911
State and political subdivisions		0		0			0
U.S. government sponsored agency mortgage-backed securities		91,609		(972	)		90,637
Other debt securities		0		0			0
Total ≥12 months temporarily impaired AFS securities		173,948		(1,400	)		172,548
Total
U.S. Treasury and government agencies		108,294		(576	)		107,718
State and political subdivisions		8,356		(37	)		8,319
U.S. government sponsored agency mortgage-backed securities		110,926		(1,072	)		109,854
Other debt securities		31,418		(276	)		31,142
Total temporarily impaired AFS securities	$	258,994	$	(1,961	)	$	257,033

U.S. Treasury and Government Agencies

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

State and Political Subdivisions

The unrealized losses in securities of state and political subdivisions were caused by interest rate increases.  The contractual terms of those investments do not permit the issuer to settle the securities at a price less than par which will equal amortized cost at maturity.  CTBI does not intend to sell the investments before recovery of their amortized cost and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost.

U.S. Government Sponsored Agency Mortgage-Backed Securities

The unrealized losses in U.S. government sponsored agency mortgage-backed securities were caused by interest rate increases.  CTBI expects to recover the amortized cost basis over the term of the securities.  CTBI does not intend to sell the investments, and it is not more likely than not we will be required to sell the investments before recovery of their amortized cost.

Other Debt Securities

The unrealized losses in other debt securities were caused by interest rate increases.  The contractual terms of those investments do not permit the issuer to settle the securities at a price less than par which will equal amortized cost at maturity.  CTBI does not intend to sell the investments and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost.