Securities

9 Months Ended

Sep. 30, 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 September 30, 2020, CTBI had no held-to-maturity securities.

The amortized cost and fair value of debt securities at September 30, 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	$	85,095	$	535	$	(249	)	$	85,381
State and political subdivisions		124,997		6,334		(26	)		131,305
U.S. government sponsored agency mortgage-backed securities		665,331		11,783		(240	)		676,874
Other debt securities		56,496		0		(967	)		55,529
Total available-for-sale securities	$	931,919	$	18,652	$	(1,482	)	$	949,089

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 September 30, 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	$	10,746	$	10,775
Due after one through five years		17,907		18,451
Due after five through ten years		93,860		95,061
Due after ten years		87,579		92,399
U.S. government sponsored agency mortgage-backed securities		665,331		676,874
Other debt securities		56,496		55,529
Total debt securities	$	931,919	$	949,089

During the three months ended September 30, 2020, we had a net securities gain of $142 thousand, consisting of a pre-tax gain of $23 thousand realized on sales and calls of AFS securities and an unrealized gain of $119 thousand from the fair market value adjustment of equity securities. During the three months ended September 30, 2019, we had a net securities gain of $14 thousand, consisting of a pre-tax loss of $2 thousand realized on calls of AFS securities and an unrealized gain of $16 thousand from the fair market value adjustment of equity securities.

During the nine months ended September 30, 2020, we had a net securities gain of $1.3 million, consisting of a pre-tax gain of $1.0 million realized on sales and calls of AFS securities and an unrealized gain of $0.3 million from the fair market value adjustment of equity securities.  During the nine months ended September 30, 2019, we had a net securities gain of $574 thousand, consisting of a pre-tax gain of $4 thousand realized on sales and calls of AFS securities and an unrealized gain of $570 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 September 30, 2020 were $2.2 million, as a result of a $0.1 million increase in the fair market value in the third quarter 2020.  The fair market value of equity securities increased $16 thousand in the third quarter 2019.  No equity securities were sold during the three or nine months ended September 30, 2020 and 2019.

The amortized cost of securities pledged as collateral, to secure public deposits and for other purposes, was $348.4 million at September 30, 2020 and $239.1 million at December 31, 2019.

The amortized cost of securities sold under agreements to repurchase amounted to $383.2 million at September 30,2020 and $261.5 million at December 31, 2019.

CTBI evaluates its investment portfolio on a quarterly basis for impairment.  The analysis performed as of September 30, 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 September 30,2020 was 21.8% 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 September 30, 2020 that are not deemed to have credit losses.  As stated above, CTBI had no HTM securities as of September 30, 2020.

Available-for-Sale

(in thousands)	Amortized Cost		Gross Unrealized Losses			Fair Value
Less Than 12 Months
U.S. Treasury and government agencies	$	5,870	$	(8	)	$	5,862
State and political subdivisions		2,670		(26	)		2,644
U.S. government sponsored agency mortgage-backed securities		68,751		(182	)		68,569
Other debt securities		30,170		(322	)		29,848
Total <12 months impaired AFS securities		107,461		(538	)		106,923
12 Months or More
U.S. Treasury and government agencies		60,681		(241	)		60,440
State and political subdivisions		0		0			0
U.S. government sponsored agency mortgage-backed securities		14,300		(58	)		14,242
Other debt securities		26,326		(645	)		25,681
Total ≥12 months impaired AFS securities		101,307		(944	)		100,363
Total
U.S. Treasury and government agencies		66,551		(249	)		66,302
State and political subdivisions		2,670		(26	)		2,644
U.S. government sponsored agency mortgage-backed securities		83,051		(240	)		82,811
Other debt securities		56,496		(967	)		55,529
Total impaired AFS securities	$	208,768	$	(1,482	)	$	207,286

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.