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Loans
 6 Months Ended
Jun. 30, 2021
Loans [Abstract]  
Loans
Note 4 – Loans


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

(in thousands)
  
June 30
2021
    
December 31
2020
  
Hotel/motel
  
$
261,422
    
$
260,699
  
Commercial real estate residential
    
309,627
      
287,928
  
Commercial real estate nonresidential
    
718,338
      
743,238
  
Dealer floorplans
    
67,466
      
69,087
  
Commercial other
    
288,893
      
279,908
  
Commercial unsecured SBA PPP
    
175,983
      
252,667
  
Commercial loans
    
1,821,729
      
1,893,527
  
                 
Real estate mortgage
    
762,649
      
784,559
  
Home equity lines
    
102,551
      
103,770
  
Residential loans
    
865,200
      
888,329
  
                 
Consumer direct
    
151,539
      
152,304
  
Consumer indirect
    
610,025
      
620,051
  
Consumer loans
    
761,564
      
772,355
  
                 
Loans and lease financing
  
$
3,448,493
    
$
3,554,211
  


The loan portfolios presented above are net of unearned fees and unamortized premiums.  Unearned fees included above totaled $11.2 million as of June 30, 2021 and $9.3 million as of December 31, 2020 while the unamortized premiums on the indirect lending portfolio totaled $23.6 million as of June 30, 2021 and $23.8 million as of December 31, 2020.


CTBI has segregated and evaluates its loan portfolio through ten portfolio segments with similar risk characteristics. 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.


Hotel/motel loans are a significant concentration for CTBI, representing approximately 7.6% of total loans. This industry has unique risk characteristics as it is highly susceptible to changes in the domestic and global economic environments, which can cause the industry to experience substantial volatility. Additionally, any hotel/motel construction loans would be included in this segment as CTBI’s construction loans are primarily completed as one loan going from construction to permanent financing. 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.


Commercial real estate residential loans are commercial purpose construction and permanent financed loans for commercial purpose 1-4 family/multi-family properties. 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.


Commercial real estate nonresidential loans are secured by nonfarm, nonresidential 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. Construction for commercial real estate nonresidential loans are also included in this segment as these loans are generally one loan for construction to permanent financing.


Dealer floorplans consist of loans to dealerships to finance inventory and are collateralized under a blanket security agreement and without specific liens on individual units.  This risk is mitigated by the use of periodic inventory audits.  These audits are performed monthly and follow up is required on any out of compliance items identified.  These audits are subject to increasing frequency when fact patterns suggest more scrutiny is required.


 Commercial other loans consist of agricultural loans, receivable financing, 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 equipment, or other assets, although such loans may be uncollateralized but guaranteed.


CTBI’s participation in the Paycheck Protection Program (“PPP”) established by the CARES Act resulted in the creation of a new loan segment of unsecured commercial other loans that are one hundred percent guaranteed by the Small Business Administration (“SBA”).  These loans, which are subject to forgiveness, have maturities of either two or three to five years, depending on when the loan was made.  These loans currently have no allowance for credit losses.


Residential real estate loans are a mixture of fixed rate and adjustable rate first and second lien residential mortgage loans and also include real estate construction loans which are typically for owner-occupied properties.  The terms of the real estate construction loans are generally short-term with permanent financing upon completion.  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 primarily revolving adjustable rate credit lines secured by real property.


Consumer direct loans are a mixture of fixed rate and adjustable 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 $4.9 million at June 30, 2021 and $23.3 million at December 31, 2020.


The following tables present the balance in the allowance for credit losses (“ACL”) for the periods ended June 30, 2021, December 31, 2020, and June 30, 2020:

  
Three Months Ended
June 30, 2021
  
(in thousands)
  
Hotel/
Motel
    
Commercial
Real Estate
Residential
    
Commercial
Real Estate
Nonresidential
    
Dealer
Floorplans
    
Commercial
Other
    
Real Estate
Mortgage
    
Home
Equity
    
Consumer
Direct
    
Consumer
Indirect
    
Total
  
ACL
                                                            
Beginning balance
  
$
6,664
    
$
4,641
    
$
10,813
    
$
1,318
    
$
4,571
    
$
7,143
    
$
750
    
$
1,811
    
$
7,635
    
$
45,346
  
Provision expense (credit)
    
(990
)
    
(845
)
    
(1,798
)
    
(57
)
    
43
      
745
      
(68
)
    
(185
)
    
(1,102
)
    
(4,257
)
Losses charged off
    
0
      
0
      
0
      
0
      
(118
)
    
(186
)
    
(14
)
    
(154
)
    
(476
)
    
(948
)
Recoveries
    
0
      
0
      
293
      
0
      
78
      
6
      
5
      
163
      
1,009
      
1,554
  
Ending balance
  
$
5,674
    
$
3,796
    
$
9,308
    
$
1,261
    
$
4,574
    
$
7,708
    
$
673
    
$
1,635
    
$
7,066
    
$
41,695
  

 
Six Months Ended
June 30, 2021
  
(in thousands)
  
Hotel/
Motel
    
Commercial
Real Estate
Residential
    
Commercial
Real Estate
Nonresidential
    
Dealer
Floorplans
    
Commercial
Other
    
Real Estate
Mortgage
    
Home
Equity
    
Consumer
Direct
    
Consumer
Indirect
    
Total
  
ACL
                                                            
Beginning balance
  
$
6,356
    
$
4,464
    
$
11,086
    
$
1,382
    
$
4,289
    
$
7,832
    
$
844
    
$
1,863
    
$
9,906
    
$
48,022
  
Provision expense (credit)
    
(682
)
    
(646
)
    
(1,933
)
    
(121
)
    
312
      
55
      
(161
)
    
(199
)
    
(3,381
)
    
(6,756
)
Losses charged off
    
0
      
(24
)
    
(151
)
    
0
      
(230
)
    
(194
)
    
(19
)
    
(308
)
    
(1,492
)
    
(2,418
)
Recoveries
    
0
      
2
      
306
      
0
      
203
      
15
      
9
      
279
      
2,033
      
2,847
  
Ending balance
  
$
5,674
    
$
3,796
    
$
9,308
    
$
1,261
    
$
4,574
    
$
7,708
    
$
673
    
$
1,635
    
$
7,066
    
$
41,695
  

 
Year Ended
December 31, 2020
  
(in thousands)
  
Hotel/
Motel
    
Commercial
Real Estate
Residential
    
Commercial
Real Estate
Nonresidential
    
Dealer
Floorplans
    
Commercial
Other
    
Real Estate
Mortgage
    
Home
Equity
    
Consumer
Direct
    
Consumer
Indirect
    
Total
  
ACL
                                                            
Beginning balance, prior to adoption of ASC 326
  
$
3,371
    
$
3,439
    
$
8,515
    
$
802
    
$
5,556
    
$
4,604
    
$
897
    
$
1,711
    
$
6,201
    
$
35,096
  
Impact of adoption of ASC 326
    
170
      
(721
)
    
119
      
820
      
(391
)
    
1,893
      
(75
)
    
(40
)
    
1,265
      
3,040
  
Provision expense (credit)
    
2,858
      
1,772
      
3,303
      
(214
)
    
2,040
      
1,584
      
16
      
609
      
4,079
      
16,047
  
Losses charged off
    
(43
)
    
(182
)
    
(941
)
    
(26
)
    
(3,339
)
    
(321
)
    
(4
)
    
(927
)
    
(4,670
)
    
(10,453
)
Recoveries
    
0
      
156
      
90
      
0
      
423
      
72
      
10
      
510
      
3,031
      
4,292
  
Ending balance
  
$
6,356
    
$
4,464
    
$
11,086
    
$
1,382
    
$
4,289
    
$
7,832
    
$
844
    
$
1,863
    
$
9,906
    
$
48,022
  


 
Three Months Ended
June 30, 2020
  
(in thousands)
  
Hotel/
Motel
    
Commercial
Real Estate
Residential
    
Commercial
Real Estate
Nonresidential
    
Dealer
Floorplans
    
Commercial
Other
    
Real Estate
Mortgage
    
Home
Equity
    
Consumer
Direct
    
Consumer
Indirect
    
Total
  
ACL
                                                            
Beginning balance, prior to adoption of ASC 326
  
$
5,922
    
$
4,012
    
$
11,563
    
$
1,713
    
$
6,409
    
$
7,543
    
$
890
    
$
2,163
    
$
9,230
    
$
49,445
  
Provision expense (credit)
    
210
      
(544
)
    
(34
)
    
(102
)
    
204
      
(112
)
    
(35
)
    
(64
)
    
428
      
(49
)
Losses charged off
    
0
      
(35
)
    
(128
)
    
(26
)
    
(1,993
)
    
(119
)
    
0
      
(261
)
    
(1,247
)
    
(3,809
)
Recoveries
    
0
      
6
      
7
      
0
      
83
      
24
      
1
      
94
      
832
      
1,047
  
Ending balance
  
$
6,132
    
$
3,439
    
$
11,408
    
$
1,585
    
$
4,703
    
$
7,336
    
$
856
    
$
1,932
    
$
9,243
    
$
46,634
  

 
Six Months Ended
June 30, 2020
  
(in thousands)
  
Hotel/
Motel
    
Commercial
Real Estate
Residential
    
Commercial
Real Estate
Nonresidential
    
Dealer
Floorplans
    
Commercial
Other
    
Real Estate
Mortgage
    
Home
Equity
    
Consumer
Direct
    
Consumer
Indirect
    
Total
  
ACL
                                                            
Beginning balance, prior to adoption of ASC 326
  
$
3,371
    
$
3,439
    
$
8,515
    
$
802
    
$
5,556
    
$
4,604
    
$
897
    
$
1,711
    
$
6,201
    
$
35,096
  
Impact of adoption of ASC 326
    
170
      
(721
)
    
119
      
820
      
(391
)
    
1,893
      
(75
)
    
(40
)
    
1,265
      
3,040
  
Provision expense (credit)
    
2,591
      
794
      
2,950
      
(11
)
    
1,637
      
987
      
32
      
673
      
3,005
      
12,658
  
Losses charged off
    
0
      
(86
)
    
(187
)
    
(26
)
    
(2,352
)
    
(179
)
    
0
      
(630
)
    
(2,764
)
    
(6,224
)
Recoveries
    
0
      
13
      
11
      
0
      
253
      
31
      
2
      
218
      
1,536
      
2,064
  
Ending balance
  
$
6,132
    
$
3,439
    
$
11,408
    
$
1,585
    
$
4,703
    
$
7,336
    
$
856
    
$
1,932
    
$
9,243
    
$
46,634
  


CTBI derived its ACL balance by using vintage modeling for the consumer and residential portfolios.  Static pool models incorporating losses by credit risk rating were developed to determine credit loss balances for the commercial loan segments.


Qualitative loss factors are based on CTBI's judgment of delinquency trends, level of nonperforming loans, trend in loan losses, supervision and administration, quality control exceptions, and reasonable and supportable forecasts based on unemployment rates and industry concentrations.  CTBI has determined that twelve months represents a reasonable and supportable forecast period and reverts back to a historical loss rate immediately.   CTBI leverages economic projections from a reputable and independent third party to form its loss driver forecasts over the twelve month forecast period. Other internal and external indicators of economic forecasts are also considered by CTBI when developing the forecast metrics.


CTBI also has an inherent model risk allocation included in its ACL calculation to allow for certain known model limitations as well as other potential risks not quantified elsewhere.  Management has identified the following known model limitations and made adjustments through this portion of the calculation for them:

(1) The inability to completely identify revolving lines of credit within the commercial other segment.  Management had to make assumptions regarding commercial renewals as those renewals are not tracked well by its loan system.

(2) The inability within the model to estimate the value of modifications made under troubled debt restructurings.  Management has manually calculated the estimated impact based on research of modified terms for troubled debt restructurings.


With the continued impact of the global COVID-19 pandemic and the fact that there is no immediate end foreseen, this has been identified as a significant specific event that could impact our customers’ ability to pay.  CTBI added a new factor during the prior year as an allocation to recognize when there are significant events occurring that could impact the loan portfolio.  Management noted that the qualitative factors for current delinquency trends and our levels of nonperforming loans were driving a reduction in the overall calculation for our ACL.  Management was concerned that these factors may have been artificially influenced by the current credit environment and the number of loans that have received payment deferrals. Given this uncertainty, management elected to maintain this significant event qualitative factor to anticipate continued impact of COVID-19 once further deferments are no longer available and SBA Payroll Protection Programs end.


We recovered $4.3 million of our provision for credit losses during the quarter ended June 30, 2021, as a result of improvement in the industry outlook, allowing us to reduce reserves accrued for losses from the pandemic which have not and are not expected to occur.  The reduction in the allowance for credit losses was also a result of improvement seen in our overall loan portfolio metrics.  We also recognized a recapture of allowance for credit losses in the first quarter 2021 and the second quarter 2020 with credits to the provision for credit losses of $2.5 million and $49 thousand, respectively.  Our reserve coverage (allowance for credit losses to nonperforming loans) at June 30, 2021 was 197.2% compared to 215.5% at March 31, 2021 and 129.0% at June 30, 2020.  Our credit loss reserve as a percentage of total loans outstanding at June 30, 2021 was 1.21% (1.27% excluding PPP loans) compared to 1.28% at March 31, 2021 (1.38% excluding PPP loans) and 1.32% at June 30, 2020 (1.43% excluding PPP loans).


Refer to Note 1 to the condensed consolidated financial statements for further information regarding our nonaccrual policy. Nonaccrual loans and loans 90 days past due and still accruing segregated by class of loans for both June 30, 2021 and December 31, 2020 were as follows:

  
June 30, 2021
  
 (in thousands)
  
Nonaccrual Loans
with No ACL
    
Nonaccrual Loans
with ACL
    
90+ and Still
Accruing
    
Total
Nonperforming
Loans
  
                         
Hotel/motel
  
$
0
    
$
1,113
    
$
0
    
$
1,113
  
Commercial real estate residential
    
0
      
1,202
      
1,055
      
2,257
  
Commercial real estate nonresidential
    
3,338
      
1,299
      
3,444
      
8,081
  
Commercial other
    
0
      
611
      
205
      
816
  
Total commercial loans
    
3,338
      
4,225
      
4,704
      
12,267
  
                                 
Real estate mortgage
    
0
      
4,835
      
2,946
      
7,781
  
Home equity lines
    
0
      
465
      
525
      
990
  
Total residential loans
    
0
      
5,300
      
3,471
      
8,771
  
                                 
Consumer direct
    
0
      
0
      
67
      
67
  
Consumer indirect
    
0
      
0
      
41
      
41
  
Total consumer loans
    
0
      
0
      
108
      
108
  
                                 
Loans and lease financing
  
$
3,338
    
$
9,525
    
$
8,283
    
$
21,146
  


 
December 31, 2020
  
 (in thousands)
  
Nonaccrual Loans
with No ACL
    
Nonaccrual Loans
with ACL
    
90+ and Still
Accruing
    
Total
Nonperforming
Loans
  
                         
Hotel/motel
  
$
0
    
$
0
    
$
0
    
$
0
  
Commercial real estate residential
    
0
      
1,225
      
4,776
      
6,001
  
Commercial real estate nonresidential
    
0
      
1,424
      
7,852
      
9,276
  
Commercial other
    
0
      
867
      
269
      
1,136
  
Total commercial loans
    
0
      
3,516
      
12,897
      
16,413
  
                                 
Real estate mortgage
    
0
      
5,346
      
3,420
      
8,766
  
Home equity lines
    
0
      
582
      
392
      
974
  
Total residential loans
    
0
      
5,928
      
3,812
      
9,740
  
                                 
Consumer direct
    
0
      
0
      
71
      
71
  
Consumer indirect
    
0
      
0
      
353
      
353
  
Total consumer loans
    
0
      
0
      
424
      
424
  
                                 
Loans and lease financing
  
$
0
    
$
9,444
    
$
17,133
    
$
26,577
  


The following tables present CTBI’s loan portfolio aging analysis, segregated by class, as of June 30, 2021 and December 31, 2020 (includes loans 90 days past due and still accruing as well):

  
June 30, 2021
  
(in thousands)
  
30-59
Days
Past Due
    
60-89
Days
Past Due
    
90+ Days
Past Due
    
Total
Past Due
    
Current
    
Total
Loans
  
Hotel/motel
  
$
0
    
$
0
    
$
0
    
$
0
    
$
261,422
    
$
261,422
  
Commercial real estate residential
    
580
      
79
      
1,873
      
2,532
      
307,095
      
309,627
  
Commercial real estate nonresidential
    
2,442
      
136
      
7,449
      
10,027
      
708,311
      
718,338
  
Dealer floorplans
    
0
      
0
      
0
      
0
      
67,466
      
67,466
  
Commercial other
    
432
      
152
      
430
      
1,014
      
287,879
      
288,893
  
Commercial unsecured SBA PPP
    
0
      
0
      
0
      
0
      
175,983
      
175,983
  
Total commercial loans
    
3,454
      
367
      
9,752
      
13,573
      
1,808,156
      
1,821,729
  
                                                 
Real estate mortgage
    
1,326
      
3,387
      
6,111
      
10,824
      
751,825
      
762,649
  
Home equity lines
    
296
      
51
      
946
      
1,293
      
101,258
      
102,551
  
Total residential loans
    
1,622
      
3,438
      
7,057
      
12,117
      
853,083
      
865,200
  
                                                 
Consumer direct
    
421
      
60
      
67
      
548
      
150,991
      
151,539
  
Consumer indirect
    
2,252
      
330
      
42
      
2,624
      
607,401
      
610,025
  
Total consumer loans
    
2,673
      
390
      
109
      
3,172
      
758,392
      
761,564
  
                                                 
Loans and lease financing
  
$
7,749
    
$
4,195
    
$
16,918
    
$
28,862
    
$
3,419,631
    
$
3,448,493
  


 
December 31, 2020
  
(in thousands)
  
30-59
Days
Past Due
    
60-89
Days
Past Due
    
90+ Days
Past Due
    
Total
Past Due
    
Current
    
Total
Loans
  
Hotel/motel
  
$
0
    
$
0
    
$
0
    
$
0
    
$
260,699
    
$
260,699
  
Commercial real estate residential
    
722
      
413
      
5,577
      
6,712
      
281,216
      
287,928
  
Commercial real estate nonresidential
    
1,199
      
0
      
8,703
      
9,902
      
733,336
      
743,238
  
Dealer floorplans
    
0
      
0
      
0
      
0
      
69,087
      
69,087
  
Commercial other
    
658
      
136
      
835
      
1,629
      
278,279
      
279,908
  
Commercial unsecured SBA PPP
    
0
      
0
      
0
      
0
      
252,667
      
252,667
  
Total commercial loans
    
2,579
      
549
      
15,115
      
18,243
      
1,875,284
      
1,893,527
  
                                                 
Real estate mortgage
    
1,784
      
3,501
      
6,897
      
12,182
      
772,377
      
784,559
  
Home equity lines
    
509
      
305
      
919
      
1,733
      
102,037
      
103,770
  
Total residential loans
    
2,293
      
3,806
      
7,816
      
13,915
      
874,414
      
888,329
  
                                                 
Consumer direct
    
659
      
87
      
71
      
817
      
151,487
      
152,304
  
Consumer indirect
    
2,960
      
973
      
353
      
4,286
      
615,765
      
620,051
  
Total consumer loans
    
3,619
      
1,060
      
424
      
5,103
      
767,252
      
772,355
  
                                                 
Loans and lease financing
  
$
8,491
    
$
5,415
    
$
23,355
    
$
37,261
    
$
3,516,950
    
$
3,554,211
  


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


Hotel/motel loans are a significant concentration for CTBI, representing approximately 7.6% of total loans.  This industry has unique risk characteristics as it is highly susceptible to changes in the domestic and global economic environments, which can cause the industry to experience substantial volatility.  These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate.  Hotel/motel 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.  Management monitors and evaluates all commercial real estate loans based on collateral and risk grade criteria.  Commercial construction loans generally are made to customers for the purpose of building income-producing properties, and any hotel/motel construction loan would be included in this segment.  Personal guarantees of the principals are generally required.  Such loans are made on a projected cash flow basis and are secured by the project being constructed.  Construction loan draw procedures are included in each specific loan agreement, including required documentation items and inspection requirements.  Construction loans may convert to term loans at the end of the construction period, or may be repaid by the take-out commitment from another financing source.  If the loan is to convert to a term loan, the repayment ability is based on the borrower’s projected cash flow.  Risk is mitigated during the construction phase by requiring proper documentation and inspections whenever a draw is requested.  Loans in amounts greater than $500,000 generally require a performance bond to be posted by the general contractor to assure completion of the project.


Commercial real estate residential loans are commercial purpose construction and permanent financed loans for commercial purpose 1-4 family/multi-family properties.  All commercial real estate loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate.  Management monitors and evaluates all commercial real estate loans based on collateral and risk grade criteria.  Commercial residential construction loans generally are made to customers for the purpose of building income-producing properties.  Personal guarantees of the principals are generally required.  Such loans are made on a projected cash flow basis and are secured by the project being constructed.  Construction loan draw procedures are included in each specific loan agreement, including required documentation items and inspection requirements.  Construction loans may convert to term loans at the end of the construction period, or may be repaid by the take-out commitment from another financing source.  If the loan is to convert to a term loan, the repayment ability is based on the borrower’s projected cash flow.  Risk is mitigated during the construction phase by requiring proper documentation and inspections whenever a draw is requested.  Loans in amounts greater than $500,000 generally require a performance bond to be posted by the general contractor to assure completion of the project.


Commercial real estate nonresidential loans are secured by nonfarm, nonresidential properties, farmland, and other commercial real estate.  Construction for commercial real estate nonresidential loans are also included in this segment as these loans are generally one loan for construction to permanent financing.  All commercial real estate loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate.  Management monitors and evaluates all commercial real estate loans based on collateral and risk grade criteria.  Commercial nonresidential construction loans generally are made to customers for the purpose of building income-producing properties.  Personal guarantees of the principals are generally required.  Such loans are made on a projected cash flow basis and are secured by the project being constructed.  Construction loan draw procedures are included in each specific loan agreement, including required documentation items and inspection requirements.  Construction loans may convert to term loans at the end of the construction period, or may be repaid by the take-out commitment from another financing source.  If the loan is to convert to a term loan, the repayment ability is based on the borrower’s projected cash flow.  Risk is mitigated during the construction phase by requiring proper documentation and inspections whenever a draw is requested.  Loans in amounts greater than $500,000 generally require a performance bond to be posted by the general contractor to assure completion of the project.


Dealer floorplans are segmented separately as they are a unique product with unique risk factors.  CTBI maintains strict processing procedures over its floorplan product with any exceptions requested by a loan officer approved by the appropriate loan committee and the floorplan manager.


Commercial other 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.  As we underwrite our equipment lease financing in a manner similar to our commercial loan portfolio described below, the risk characteristics for this portfolio mirror that of the commercial loan portfolio.


CTBI’s participation in the CARES Act PPP loan program has resulted in a new loan segment of unsecured commercial other loans that are one hundred percent SBA guaranteed.  These loans, which are subject to forgiveness, have maturities of either two or three to five years, depending on when the loans were made.  These loans currently have no allowance for credit losses.


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. Residential construction loans are handled through the home mortgage area of the bank.  The repayment ability of the borrower and the maximum loan-to-value ratio are calculated using the normal mortgage lending criteria.  Draws are processed based on percentage of completion stages including normal inspection procedures.  Such loans generally convert to term loans after the completion of construction.


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.  Our determination of a borrower’s ability to repay 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.


The indirect lending area of the bank generally deals with purchasing/funding consumer contracts with new and used automobile dealers.  The dealers generate consumer loan applications which are forwarded to the indirect loan processing area for approval or denial.  Loan approvals or denials are based on the creditworthiness and repayment ability of the borrower, and on the collateral value.  The dealers may have limited recourse agreements with CTB.

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:

➢
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.

➢
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.

➢
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.

➢
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.

➢
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 and based on last credit decision or year of origination:

June 30, 2021
  
Term Loans Amortized Cost Basis by Origination Year
  
(in thousands)
  
2021
    
2020
    
2019
    
2018
    
2017
    
Prior
    
Revolving
Loans
    
Total
  
Hotel/motel
                                                
Risk rating:
                                                
Pass
  
$
20,997
    
$
11,388
    
$
56,087
    
$
27,773
    
$
34,688
    
$
25,390
    
$
100
    
$
176,423
  
Watch
    
9,398
      
23,610
      
7,198
      
0
      
2,723
      
23,929
              
66,858
  
OAEM
    
0
      
0
      
0
      
0
      
0
      
0
      
0
      
0
  
Substandard
    
0
      
0
      
0
      
3,295
      
1,113
      
13,733
      
0
      
18,141
  
Doubtful
    
0
      
0
      
0
      
0
      
0
      
0
      
0
      
0
  
Total hotel/motel
  
$
30,395
    
$
34,998
    
$
63,285
    
$
31,068
    
$
38,524
    
$
63,052
    
$
100
    
$
261,422
  
                                                                 
Commercial real estate residential
                                                                
Risk rating:
                                                                
Pass
  
$
66,812
    
$
68,379
    
$
35,387
    
$
23,791
    
$
14,006
    
$
55,669
    
$
9,278
    
$
273,322
  
Watch
    
725
      
3,403
      
3,167
      
2,174
      
2,982
      
10,184
      
168
      
22,803
  
OAEM
    
0
      
238
      
0
      
202
      
139
      
0
      
0
      
579
  
Substandard
    
3,892
      
2,556
      
686
      
1,690
      
513
      
3,561
      
25
      
12,923
  
Doubtful
    
0
      
0
      
0
      
0
      
0
      
0
      
0
      
0
  
Total commercial real estate residential
  
$
71,429
    
$
74,576
    
$
39,240
    
$
27,857
    
$
17,640
    
$
69,414
    
$
9,471
    
$
309,627
  
                                                                 
Commercial real estate nonresidential
                                                                
Risk rating:
                                                                
Pass
  
$
92,543
    
$
110,759
    
$
94,095
    
$
63,201
    
$
75,158
    
$
198,595
    
$
21,221
    
$
655,572
  
Watch
    
2,081
      
4,721
      
2,778
      
4,170
      
3,759
      
12,479
      
550
      
30,538
  
OAEM
    
0
      
0
      
0
      
17
      
0
      
283
      
20
      
320
  
Substandard
    
2,322
      
6,362
      
5,413
      
3,282
      
2,432
      
11,861
      
204
      
31,876
  
Doubtful
    
0
      
0
      
0
      
0
      
0
      
32
      
0
      
32
  
Total commercial real estate nonresidential
  
$
96,946
    
$
121,842
    
$
102,286
    
$
70,670
    
$
81,349
    
$
223,250
    
$
21,995
    
$
718,338
  
                                                                 
Dealer floorplans
                                                                
Risk rating:
                                                                
Pass
  
$
0
    
$
0
    
$
0
    
$
0
    
$
0
    
$
0
    
$
67,175
    
$
67,175
  
Watch
    
0
      
0
      
0
      
0
      
0
      
0
      
291
      
291
  
OAEM
    
0
      
0
      
0
      
0
      
0
      
0
      
0
      
0
  
Substandard
    
0
      
0
      
0
      
0
      
0
      
0
      
0
      
0
  
Doubtful
    
0
      
0
      
0
      
0
      
0
      
0
      
0
      
0
  
Total dealer floorplans
  
$
0
    
$
0
    
$
0
    
$
0
    
$
0
    
$
0
    
$
67,466
    
$
67,466
  
                                                                 
Commercial other
                                                                
Risk rating:
                                                                
Pass
  
$
52,159
    
$
56,319
    
$
21,690
    
$
31,443
    
$
11,545
    
$
16,622
    
$
74,684
    
$
264,462
  
Watch
    
1,000
      
1,622
      
1,042
      
6,368
      
613
      
1,294
      
7,766
      
19,705
  
OAEM
    
0
      
0
      
0
      
4
      
0
      
0
      
0
      
4
  
Substandard
    
1,576
      
1,096
      
314
      
231
      
386
      
732
      
387
      
4,722
  
Doubtful
    
0
      
0
      
0
      
0
      
0
      
0
      
0
      
0
  
Total commercial other
  
$
54,735
    
$
59,037
    
$
23,046
    
$
38,046
    
$
12,544
    
$
18,648
    
$
82,837
    
$
288,893
  
                                                                 
Commercial unsecured SBA PPP
                                                                
Risk rating:
                                                                
Pass
  
$
111,815
    
$
64,168
    
$
0
    
$
0
    
$
0
    
$
0
    
$
0
    
$
175,983
  
Watch
    
0
      
0
      
0
      
0
      
0
      
0
      
0
      
0
  
OAEM
    
0
      
0
      
0
      
0
      
0
      
0
      
0
      
0
  
Substandard
    
0
      
0
      
0
      
0
      
0
      
0
      
0
      
0
  
Doubtful
    
0
      
0
      
0
      
0
      
0
      
0
      
0
      
0
  
Total commercial unsecured SBA PPP
  
$
111,815
    
$
64,168
    
$
0
    
$
0
    
$
0
    
$
0
    
$
0
    
$
175,983
  
                                                                 
Commercial loans
                                                                
Risk rating:
                                                                
Pass
  
$
344,326
    
$
311,013
    
$
207,259
    
$
146,208
    
$
135,397
    
$
296,276
    
$
172,458
    
$
1,612,937
  
Watch
    
13,204
      
33,356
      
14,185
      
12,712
      
10,077
      
47,886
      
8,775
      
140,195
  
OAEM
    
0
      
238
      
0
      
223
      
139
      
283
      
20
      
903
  
Substandard
    
7,790
      
10,014
      
6,413
      
8,498
      
4,444
      
29,887
      
616
      
67,662
  
Doubtful
    
0
      
0
      
0
      
0
      
0
      
32
      
0
      
32
  
Total commercial loans
  
$
365,320
    
$
354,621
    
$
227,857
    
$
167,641
    
$
150,057
    
$
374,364
    
$
181,869
    
$
1,821,729
  


December 31, 2020
  
Term Loans Amortized Cost Basis by Origination Year
  
(in thousands)
  
2020
    
2019
    
2018
    
2017
    
2016
    
Prior
    
Revolving
Loans
    
Total
  
Hotel/motel
                                                
Risk rating:
                                                
Pass
  
$
11,507
    
$
70,504
    
$
27,453
    
$
39,651
    
$
6,357
    
$
22,372
    
$
0
    
$
177,844
  
Watch
    
23,951
      
2,506
      
3,366
      
2,102
      
16,740
      
7,422
      
0
      
56,087
  
OAEM
    
0
      
1,993
      
9,576
      
0
      
0
      
0
      
0
      
11,569
  
Substandard
    
0
      
0
      
0
      
1,113
      
8,840
      
5,246
      
0
      
15,199
  
Doubtful
    
0
      
0
      
0
      
0
      
0
      
0
      
0
      
0
  
Total hotel/motel
  
$
35,458
    
$
75,003
    
$
40,395
    
$
42,866
    
$
31,937
    
$
35,040
    
$
0
    
$
260,699
  
                                                                 
Commercial real estate residential
                                                                
Risk rating:
                                                                
Pass
  
$
85,403
    
$
39,238
    
$
29,179
    
$
17,390
    
$
21,272
    
$
46,419
    
$
10,470
    
$
249,371
  
Watch
    
1,714
      
2,214
      
2,438
      
2,962
      
4,520
      
5,306
      
182
      
19,336
  
OAEM
    
1,921
      
1,361
      
323
      
142
      
129
      
0
      
0
      
3,876
  
Substandard
    
4,301
      
606
      
1,991
      
4,076
      
1,108
      
3,263
      
0
      
15,345
  
Doubtful
    
0
      
0
      
0
      
0
      
0
      
0
      
0
      
0
  
Total commercial real estate residential
  
$
93,339
    
$
43,419
    
$
33,931
    
$
24,570
    
$
27,029
    
$
54,988
    
$
10,652
    
$
287,928
  
                                                                 
Commercial real estate nonresidential
                                                                
Risk rating:
                                                                
Pass
  
$
125,205
    
$
97,204
    
$
77,685
    
$
80,416
    
$
100,740
    
$
165,839
    
$
25,524
    
$
672,613
  
Watch
    
5,133
      
3,175
      
5,075
      
6,366
      
3,020
      
11,046
      
601
      
34,416
  
OAEM
    
0
      
887
      
68
      
0
      
0
      
3,382
      
115
      
4,452
  
Substandard
    
7,254
      
6,152
      
3,471
      
2,462
      
1,358
      
10,817
      
215
      
31,729
  
Doubtful
    
0
      
0
      
0
      
0
      
0
      
28
      
0
      
28
  
Total commercial real estate nonresidential
  
$
137,592
    
$
107,418
    
$
86,299
    
$
89,244
    
$
105,118
    
$
191,112
    
$
26,455
    
$
743,238
  
                                                                 
Dealer floorplans
                                                                
Risk rating:
                                                                
Pass
  
$
0
    
$
0
    
$
0
    
$
0
    
$
0
    
$
0
    
$
68,610
    
$
68,610
  
Watch
    
0
      
0
      
0
      
0
      
0
      
0
      
477
      
477
  
OAEM
    
0
      
0
      
0
      
0
      
0
      
0
      
0
      
0
  
Substandard
    
0
      
0
      
0
      
0
      
0
      
0
      
0
      
0
  
Doubtful
    
0
      
0
      
0
      
0
      
0
      
0
      
0
      
0
  
Total dealer floorplans
  
$
0
    
$
0
    
$
0
    
$
0
    
$
0
    
$
0
    
$
69,087
    
$
69,087
  
                                                                 
Commercial other
                                                                
Risk rating:
                                                                
Pass
  
$
75,014
    
$
26,385
    
$
33,825
    
$
13,975
    
$
6,225
    
$
22,733
    
$
78,547
    
$
256,704
  
Watch
    
2,888
      
378
      
1,130
      
555
      
464
      
595
      
7,030
      
13,040
  
OAEM
    
25
      
0
      
5,056
      
181
      
367
      
0
      
124
      
5,753
  
Substandard
    
2,136
      
556
      
318
      
460
      
460
      
411
      
70
      
4,411
  
Doubtful
    
0
      
0
      
0
      
0
      
0
      
0
      
0
      
0
  
Total commercial other
  
$
80,063
    
$
27,319
    
$
40,329
    
$
15,171
    
$
7,516
    
$
23,739
    
$
85,771
    
$
279,908
  
                                                                 
Commercial unsecured SBA PPP
                                                                
Risk rating:
                                                                
Pass
  
$
252,667
    
$
0
    
$
0
    
$
0
    
$
0
    
$
0
    
$
0
    
$
252,667
  
Watch
    
0
      
0
      
0
      
0
      
0
      
0
      
0
      
0
  
OAEM
    
0
      
0
      
0
      
0
      
0
      
0
      
0
      
0
  
Substandard
    
0
      
0
      
0
      
0
      
0
      
0
      
0
      
0
  
Doubtful
    
0
      
0
      
0
      
0
      
0
      
0
      
0
      
0
  
Total commercial unsecured SBA PPP
  
$
252,667
    
$
0
    
$
0
    
$
0
    
$
0
    
$
0
    
$
0
    
$
252,667
  
                                                                 
Commercial loans
                                                                
Risk rating:
                                                                
Pass
  
$
549,796
    
$
233,331
    
$
168,142
    
$
151,432
    
$
134,594
    
$
257,363
    
$
183,151
    
$
1,677,809
  
Watch
    
33,686
      
8,273
      
12,009
      
11,985
      
24,744
      
24,369
      
8,290
      
123,356
  
OAEM
    
1,946
      
4,241
      
15,023
      
323
      
496
      
3,382
      
239
      
25,650
  
Substandard
    
13,691
      
7,314
      
5,780
      
8,111
      
11,766
      
19,737
      
285
      
66,684
  
Doubtful
    
0
      
0
      
0
      
0
      
0
      
28
      
0
      
28
  
Total commercial loans
  
$
599,119
    
$
253,159
    
$
200,954
    
$
171,851
    
$
171,600
    
$
304,879
    
$
191,965
    
$
1,893,527
  


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

June 30, 2021
  
Term Loans Amortized Cost Basis by Origination Year
  
(in thousands)
  
2021
    
2020
    
2019
    
2018
    
2017
    
Prior
    
Revolving
Loans
    
Total
  
Home equity lines
                                                
Performing
  
$
0
    
$
0
    
$
0
    
$
0
    
$
0
    
$
11,211
    
$
90,350
    
$
101,561
  
Nonperforming
    
0
      
0
      
0
      
0
      
0
      
500
      
490
      
990
  
Total home equity lines
  
$
0
    
$
0
    
$
0
    
$
0
    
$
0
    
$
11,711
    
$
90,840
    
$
102,551
  
                                                                 
Mortgage loans
                                                                
Performing
  
$
92,685
    
$
192,722
    
$
91,023
    
$
46,189
    
$
49,610
    
$
282,639
    
$
0
    
$
754,868
  
Nonperforming
    
0
      
0
      
311
      
248
      
260
      
6,962
      
0
      
7,781
  
Total mortgage loans
  
$
92,685
    
$
192,722
    
$
91,334
    
$
46,437
    
$
49,870
    
$
289,601
    
$
0
    
$
762,649
  
                                                                 
Residential loans
                                                                
Performing
  
$
92,685
    
$
192,722
    
$
91,023
    
$
46,189
    
$
49,610
    
$
293,850
    
$
90,350
    
$
856,429
  
Nonperforming
    
0
      
0
      
311
      
248
      
260
      
7,462
      
490
      
8,771
  
Total residential loans
  
$
92,685
    
$
192,722
    
$
91,334
    
$
46,437
    
$
49,870
    
$
301,312
    
$
90,840
    
$
865,200
  
                                                                 
Consumer direct loans
                                                                
Performing
  
$
38,010
    
$
54,089
    
$
24,466
    
$
13,752
    
$
6,099
    
$
15,056
    
$
0
    
$
151,472
  
Nonperforming
    
0
      
9
      
24
      
34
      
0
      
0
      
0
      
67
  
Total consumer direct loans
  
$
38,010
    
$
54,098
    
$
24,490
    
$
13,786
    
$
6,099
    
$
15,056
    
$
0
    
$
151,539
  
                                                                 
Consumer indirect loans
                                                                
Performing
  
$
134,966
    
$
241,380
    
$
105,694
    
$
75,403
    
$
35,235
    
$
17,306
    
$
0
    
$
609,984
  
Nonperforming
    
14
      
5
      
0
      
0
      
11
      
11
      
0
      
41
  
Total consumer indirect loans
  
$
134,980
    
$
241,385
    
$
105,694
    
$
75,403
    
$
35,246
    
$
17,317
    
$
0
    
$
610,025
  
                                                                 
Consumer loans
                                                                
Performing
  
$
172,976
    
$
295,469
    
$
130,160
    
$
89,155
    
$
41,334
    
$
32,362
    
$
0
    
$
761,456
  
Nonperforming
    
14
      
14
      
24
      
34
      
11
      
11
      
0
      
108
  
Total consumer loans
  
$
172,990
    
$
295,483
    
$
130,184
    
$
89,189
    
$
41,345
    
$
32,373
    
$
0
    
$
761,564
  


December 31, 2020
  
Term Loans Amortized Cost Basis by Origination Year
  
(in thousands)
  
2020
    
2019
    
2018
    
2017
    
2016
    
Prior
    
Revolving
Loans
    
Total
  
Home equity lines
                                                
Performing
  
$
0
    
$
0
    
$
0
    
$
0
    
$
23
    
$
12,049
    
$
90,724
    
$
102,796
  
Nonperforming
    
0
      
0
      
0
      
0
      
0
      
585
      
389
      
974
  
Total home equity lines
  
$
0
    
$
0
    
$
0
    
$
0
    
$
23
    
$
12,634
    
$
91,113
    
$
103,770
  
                                                                 
Mortgage loans
                                                                
Performing
  
$
214,629
    
$
119,301
    
$
56,812
    
$
60,915
    
$
48,253
    
$
275,883
    
$
0
    
$
775,793
  
Nonperforming
    
0
      
436
      
303
      
314
      
352
      
7,361
      
0
      
8,766
  
Total mortgage loans
  
$
214,629
    
$
119,737
    
$
57,115
    
$
61,229
    
$
48,605
    
$
283,244
    
$
0
    
$
784,559
  
                                                                 
Residential loans
                                                                
Performing
  
$
214,629
    
$
119,301
    
$
56,812
    
$
60,915
    
$
48,276
    
$
287,932
    
$
90,724
    
$
878,589
  
Nonperforming
    
0
      
436
      
303
      
314
      
352
      
7,946
      
389
      
9,740
  
Total residential loans
  
$
214,629
    
$
119,737
    
$
57,115
    
$
61,229
    
$
48,628
    
$
295,878
    
$
91,113
    
$
888,329
  
                                                                 
Consumer direct loans
                                                                
Performing
  
$
72,677
    
$
32,993
    
$
18,461
    
$
9,157
    
$
6,581
    
$
12,364
    
$
0
    
$
152,233
  
Nonperforming
    
7
      
57
      
0
      
7
      
0
      
0
      
0
      
71
  
Total consumer direct loans
  
$
72,684
    
$
33,050
    
$
18,461
    
$
9,164
    
$
6,581
    
$
12,364
    
$
0
    
$
152,304
  
                                                                 
Consumer indirect loans
                                                                
Performing
  
$
301,494
    
$
135,123
    
$
100,482
    
$
50,665
    
$
23,777
    
$
8,157
    
$
0
    
$
619,698
  
Nonperforming
    
27
      
115
      
118
      
52
      
30
      
11
      
0
      
353
  
Total consumer indirect loans
  
$
301,521
    
$
135,238
    
$
100,600
    
$
50,717
    
$
23,807
    
$
8,168
    
$
0
    
$
620,051
  
                                                                 
Consumer loans
                                                                
Performing
  
$
374,171
    
$
168,116
    
$
118,943
    
$
59,822
    
$
30,358
    
$
20,521
    
$
0
    
$
771,931
  
Nonperforming
    
34
      
172
      
118
      
59
      
30
      
11
      
0
      
424
  
Total consumer loans
  
$
374,205
    
$
168,288
    
$
119,061
    
$
59,881
    
$
30,388
    
$
20,532
    
$
0
    
$
772,355
  

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


The total of consumer mortgage loans secured by real estate properties for which formal foreclosure proceedings began, but have been suspended, was $2.1 million at June 30, 2021.  The total of consumer mortgage loans secured by real estate properties for which formal foreclosure proceedings began, but had been suspended, at December 31, 2020 was $2.9 million.


In accordance with ASC 326-20-30-2, if a loan does not share risk characteristics with other pooled loans in determining the allowance for credit losses, the loan shall be evaluated for expected credit losses on an individual basis. Of the loans that CTBI has individually evaluated, the loans listed below by segment are those that are collateral dependent:

  
June 30, 2021
  
(in thousands)
  
Number of
Loans
    
Recorded
Investment
    
Specific
Reserve
  
Hotel/motel
    
4
    
$
22,540
    
$
600
  
Commercial real estate residential
    
4
      
7,508
      
0
  
Commercial real estate nonresidential
    
12
      
21,837
      
200
  
Commercial other
    
1
      
1,217
      
450
  
Total collateral dependent loans
    
21
    
$
53,102
    
$
1,250
  


 
December 31, 2020
  
(in thousands)
  
Number of
Loans
    
Recorded
Investment
    
Specific
Reserve
  
Hotel/motel
    
5
    
$
26,194
    
$
250
  
Commercial real estate residential
    
4
      
7,833
      
0
  
Commercial real estate nonresidential
    
12
      
24,497
      
200
  
Commercial other
    
1
      
5,050
      
0
  
Total collateral dependent loans
    
22
    
$
63,574
    
$
450
  

 
June 30, 2020
  
(in thousands)
  
Number of
Loans
    
Recorded
Investment
    
Specific
Reserve
  
Hotel/motel
    
3
    
$
14,861
    
$
250
  
Commercial real estate residential
    
3
      
6,398
      
0
  
Commercial real estate nonresidential
    
11
      
22,567
      
200
  
Commercial other
    
3
      
7,440
      
0
  
Total collateral dependent loans
    
20
    
$
51,266
    
$
450
  


One hotel/motel collateral dependent loan for which we received an updated appraisal reflecting continued deterioration of the collateral value resulted in the management determination that a specific reserve of $0.6 million be established.   The commercial other specific reserves increased by $0.5 million based on the review of recent financials for the collateral dependent loan with an updated appraisal ordered for delivery in the third quarter.  The hotel/motel, commercial real estate residential, and commercial real estate nonresidential segments are all collateralized with real estate.  The one loan listed in the commercial other segment at June 30, 2021 is collateralized by various chattel, including surface mining equipment, preparation plant equipment, and a first mortgage on a preparation plant, real estate, and improvements.


Certain loans have been 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 and six months ended June 30, 2021 and 2020 and the year ended December 31, 2020:

  
Three Months Ended
June 30, 2021
  
   
Pre-Modification Outstanding Balance
  
(in thousands)
  
Number of
Loans
    
Term
Modification
    
Combination
    
Total
Modification
  
Hotel/motel
    
0
    
$
0
    
$
0
    
$
0
  
Commercial real estate residential
    
0
      
0
      
0
      
0
  
Commercial real estate nonresidential
    
4
      
2,081
      
136
      
2,217
  
Commercial other
    
2
      
298
      
0
      
298
  
Total commercial loans
    
6
      
2,379
      
136
      
2,515
  
                                 
Real estate mortgage
    
0
      
0
      
0
      
0
  
Total residential loans
    
0
      
0
      
0
      
0
  
                                 
Total troubled debt restructurings
    
6
    
$
2,379
    
$
136
    
$
2,515
  

 
Three Months Ended
June 30, 2021
  
   
Post-Modification Outstanding Balance
  
(in thousands)
  
Number of
Loans
    
Term
Modification
    
Combination
    
Total
Modification
  
Hotel/motel
    
0
    
$
0
    
$
0
    
$
0
  
Commercial real estate residential
    
0
      
0
      
0
      
0
  
Commercial real estate nonresidential
    
4
      
2,086
      
154
      
2,240
  
Commercial other
    
2
      
216
      
0
      
216
  
Total commercial loans
    
6
      
2,302
      
154
      
2,456
  
                                 
Real estate mortgage
    
0
      
0
      
0
      
0
  
Total residential loans
    
0
      
0
      
0
      
0
  
                                 
Total troubled debt restructurings
    
6
    
$
2,302
    
$
154
    
$
2,456
  

 
Six Months Ended
June 30, 2021
  
   
Pre-Modification Outstanding Balance
  
(in thousands)
  
Number of
Loans
    
Term
Modification
    
Combination
    
Total
Modification
  
Hotel/motel
    
0
    
$
0
    
$
0
    
$
0
  
Commercial real estate residential
    
0
      
0
      
0
      
0
  
Commercial real estate nonresidential
    
5
      
2,081
      
420
      
2,501
  
Commercial other
    
2
      
298
      
0
      
298
  
Total commercial loans
    
7
      
2,379
      
420
      
2,799
  
                                 
Real estate mortgage
    
0
      
0
      
0
      
0
  
Total residential loans
    
0
      
0
      
0
      
0
  
                                 
Total troubled debt restructurings
    
7
    
$
2,379
    
$
420
    
$
2,799
  


 
Six Months Ended
June 30, 2021
  
   
Post-Modification Outstanding Balance
  
(in thousands)
  
Number of
Loans
    
Term
Modification
    
Combination
    
Total
Modification
  
Hotel/motel
    
0
    
$
0
    
$
0
    
$
0
  
Commercial real estate residential
    
0
      
0
      
0
      
0
  
Commercial real estate nonresidential
    
5
      
2,086
      
438
      
2,524
  
Commercial other
    
2
      
216
      
0
      
216
  
Total commercial loans
    
7
      
2,302
      
438
      
2,740
  
                                 
Real estate mortgage
    
0
      
0
      
0
      
0
  
Total residential loans
    
0
      
0
      
0
      
0
  
                                 
Total troubled debt restructurings
    
7
    
$
2,302
    
$
438
    
$
2,740
  

 
Year Ended
December 31, 2020
  
   
Pre-Modification Outstanding Balance
  
(in thousands)
  
Number of
Loans
    
Term
Modification
    
Combination
    
Total
Modification
  
Hotel/motel
    
1
    
$
1,113
    
$
0
    
$
1,113
  
Commercial real estate residential
    
12
      
4,694
      
1,809
      
6,503
  
Commercial real estate nonresidential
    
18
      
7,295
      
782
      
8,077
  
Commercial other
    
12
      
637
      
53
      
690
  
Total commercial loans
    
43
      
13,739
      
2,644
      
16,383
  
                                 
Real estate mortgage
    
4
      
1,496
      
0
      
1,496
  
Total residential loans
    
4
      
1,496
      
0
      
1,496
  
                                 
Total troubled debt restructurings
    
47
    
$
15,235
    
$
2,644
    
$
17,879
  

 
Year Ended
December 31, 2020
  
   
Post-Modification Outstanding Balance
  
(in thousands)
  
Number of
Loans
    
Term
Modification
    
Combination
    
Total
Modification
  
Hotel/motel
    
1
    
$
1,113
    
$
0
    
$
1,113
  
Commercial real estate residential
    
12
      
4,696
      
1,809
      
6,505
  
Commercial real estate nonresidential
    
18
      
7,349
      
782
      
8,131
  
Commercial other
    
12
      
571
      
51
      
622
  
Total commercial loans
    
43
      
13,729
      
2,642
      
16,371
  
                                 
Real estate mortgage
    
4
      
1,479
      
0
      
1,479
  
Total residential loans
    
4
      
1,479
      
0
      
1,479
  
                                 
Total troubled debt restructurings
    
47
    
$
15,208
    
$
2,642
    
$
17,850
  


 
Three Months Ended
June 30, 2020
  
   
Pre-Modification Outstanding Balance
  
(in thousands)
  
Number of
Loans
    
Term
Modification
    
Combination
    
Total
Modification
  
Commercial real estate residential
    
3
    
$
196
    
$
1,809
    
$
2,005
  
Commercial real estate nonresidential
    
3
      
419
      
510
      
929
  
Commercial other
    
4
      
115
      
25
      
140
  
Total commercial loans
    
10
      
730
      
2,344
      
3,074
  
                                 
Real estate mortgage
    
1
      
545
      
0
      
545
  
Total residential loans
    
1
      
545
      
0
      
545
  
                                 
Total troubled debt restructurings
    
11
    
$
1,275
    
$
2,344
    
$
3,619
  

 
Three Months Ended
June 30, 2020
  
   
Post-Modification Outstanding Balance
  
(in thousands)
  
Number of
Loans
    
Term
Modification
    
Combination
    
Total
Modification
  
Commercial real estate residential
    
3
    
$
196
    
$
1,809
    
$
2,005
  
Commercial real estate nonresidential
    
3
      
419
      
510
      
929
  
Commercial other
    
4
      
114
      
25
      
139
  
Total commercial loans
    
10
      
729
      
2,344
      
3,073
  
                                 
Real estate mortgage
    
1
      
533
      
0
      
533
  
Total residential loans
    
1
      
533
      
0
      
533
  
                                 
Total troubled debt restructurings
    
11
    
$
1,262
    
$
2,344
    
$
3,606
  

 
Six Months Ended
June 30, 2020
  
   
Pre-Modification Outstanding Balance
  
(in thousands)
  
Number of
Loans
    
Term
Modification
    
Combination
    
Total
Modification
  
Commercial real estate residential
    
11
    
$
4,593
    
$
1,809
    
$
6,402
  
Commercial real estate nonresidential
    
12
      
2,764
      
510
      
3,274
  
Commercial other
    
9
      
579
      
25
      
604
  
Total commercial loans
    
32
      
7,936
      
2,344
      
10,280
  
                                 
Real estate mortgage
    
2
      
933
      
0
      
933
  
Total residential loans
    
2
      
933
      
0
      
933
  
                                 
Total troubled debt restructurings
    
34
    
$
8,869
    
$
2,344
    
$
11,213
  

 
Six Months Ended
June 30, 2020
  
   
Post-Modification Outstanding Balance
  
(in thousands)
  
Number of
Loans
    
Term
Modification
    
Combination
    
Total
Modification
  
Commercial real estate residential
    
11
    
$
4,595
    
$
1,809
    
$
6,404
  
Commercial real estate nonresidential
    
12
      
2,755
      
510
      
3,265
  
Commercial other
    
9
      
513
      
25
      
538
  
Total commercial loans
    
32
      
7,863
      
2,344
      
10,207
  
                                 
Real estate mortgage
    
2
      
921
      
0
      
921
  
Total residential loans
    
2
      
921
      
0
      
921
  
                                 
Total troubled debt restructurings
    
34
    
$
8,784
    
$
2,344
    
$
11,128
  


No charge-offs have resulted from modifications for any of the presented periods.  We had commitments to extend additional credit in the amount of $90 thousand and $85 thousand at June 30, 2021 and December 31, 2020, respectively, on loans that were considered troubled debt restructurings.


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 within the past twelve months which have subsequently defaulted.  CTBI considers a loan in default when it is 90 days or more past due or transferred to nonaccrual.  Presented below, segregated by segment, are troubled debt restructurings for which there was a payment default during the periods indicated and such default was within twelve months of the loan modification.

(in thousands)
  
Three Months Ended
June 30, 2021
  
   
Number of
Loans
    
Recorded
Balance
  
Commercial:
            
Hotel/motel
    
1
    
$
1,113
  
Residential
                
Real estate mortgage
    
1
      
275
  
Total defaulted restructured loans
    
2
    
$
1,388
  

(in thousands)
  
Six Months Ended
June 30, 2021
  
   
Number of
Loans
    
Recorded
Balance
  
Commercial:
            
Hotel/motel
    
1
    
$
1,113
  
Residential
                
Real estate mortgage
    
1
      
275
  
Total defaulted restructured loans
    
2
    
$
1,388
  

(in thousands)
  
Three Months Ended
June 30, 2020
  
   
Number of
Loans
    
Recorded
Balance
  
Commercial:
            
Commercial real estate residential
    
1
    
$
67
  
Commercial other
    
1
      
95
  
Total defaulted restructured loans
    
2
    
$
162
  

(in thousands)
  
Six Months Ended
June 30, 2020
  
   
Number of
Loans
    
Recorded
Balance
  
Commercial:
            
Commercial real estate residential
    
1
    
$
67
  
Commercial other
    
3
      
368
  
Total defaulted restructured loans
    
4
    
$
435