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Section 1: 10-Q (CTBI JUNE 30, 2018 FORM 10-Q)

 


UNITED STATES
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 June 30, 2018
   
 
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
(Registrants 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 
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 
No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

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

Yes
   No

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

Common stock – 17,729,210 shares outstanding at July 31, 2018
 
 


 
 


 
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. Community Trust Bancorp, Inc.’s (“CTBI”) 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; and the resolution of legal  proceedings and related matters.  In addition, the banking industry in general is subject to various monetary, operational, and fiscal policies and regulations, which include, but are not limited to, those determined by the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Consumer Financial Protection Bureau, and state regulators, whose policies, regulations, and enforcement actions 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, 2017 for further information in this regard.

 


 
Community Trust Bancorp, Inc.
Condensed Consolidated Balance Sheets

(dollars in thousands)
 
(unaudited)
June 30
2018
   
December 31
2017
 
Assets:
           
Cash and due from banks
 
$
54,987
   
$
47,528
 
Interest bearing deposits
   
143,398
     
127,746
 
Cash and cash equivalents
   
198,385
     
175,274
 
                 
Certificates of deposit in other banks
   
5,635
     
9,800
 
Securities available-for-sale at fair value (amortized cost of $597,020 and $590,199, respectively)
   
585,764
     
585,761
 
Securities held-to-maturity at amortized cost (fair value of $660 and $660, respectively)
   
659
     
659
 
Loans held for sale
   
1,093
     
1,033
 
                 
Loans
   
3,169,042
     
3,122,940
 
Allowance for loan and lease losses
   
(35,771
)
   
(36,151
)
Net loans
   
3,133,271
     
3,086,789
 
                 
Premises and equipment, net
   
46,483
     
46,318
 
Federal Home Loan Bank stock
   
17,927
     
17,927
 
Federal Reserve Bank stock
   
4,887
     
4,887
 
Goodwill
   
65,490
     
65,490
 
Bank owned life insurance
   
63,867
     
65,354
 
Mortgage servicing rights
   
3,772
     
3,484
 
Other real estate owned
   
30,262
     
31,996
 
Other assets
   
47,691
     
41,459
 
Total assets
 
$
4,205,186
   
$
4,136,231
 
                 
Liabilities and shareholders’ equity:
               
Deposits:
               
Noninterest bearing
 
$
819,525
   
$
790,930
 
Interest bearing
   
2,489,883
     
2,472,933
 
Total deposits
   
3,309,408
     
3,263,863
 
                 
Repurchase agreements
   
248,781
     
243,814
 
Federal funds purchased
   
7,978
     
7,312
 
Advances from Federal Home Loan Bank
   
802
     
845
 
Long-term debt
   
59,341
     
59,341
 
Deferred taxes
   
3,030
     
4,434
 
Other liabilities
   
33,671
     
25,923
 
Total liabilities
   
3,663,011
     
3,605,532
 
                 
Shareholders’ equity:
               
Preferred stock, 300,000 shares authorized and unissued
   
-
     
-
 
Common stock, $5 par value, shares authorized 25,000,000; shares outstanding 2018 – 17,725,313; 2017 – 17,692,912
   
88,626
     
88,465
 
Capital surplus
   
222,486
     
221,472
 
Retained earnings
   
239,955
     
224,268
 
Accumulated other comprehensive loss, net of tax
   
(8,892
)
   
(3,506
)
Total shareholders’ equity
   
542,175
     
530,699
 
                 
Total liabilities and shareholders’ equity
 
$
4,205,186
   
$
4,136,231
 

See notes to condensed consolidated financial statements.

 


Community Trust Bancorp, Inc.
Condensed Consolidated Statements of Income and Comprehensive Income
(unaudited)

   
Three Months Ended
   
Six Months Ended
 
   
June 30
   
June 30
 
(in thousands except per share data)
 
2018
   
2017
   
2018
   
2017
 
Interest income:
                       
Interest and fees on loans, including loans held for sale
 
$
37,791
   
$
34,880
   
$
74,368
   
$
68,355
 
Interest and dividends on securities
                               
Taxable
   
2,422
     
2,230
     
4,892
     
4,260
 
Tax exempt
   
706
     
721
     
1,403
     
1,470
 
Interest and dividends on Federal Reserve Bank and Federal Home Loan Bank stock
   
328
     
283
     
661
     
559
 
Interest on Federal Reserve Bank deposits
   
713
     
239
     
1,152
     
455
 
Other, including interest on federal funds sold
   
65
     
58
     
129
     
80
 
Total interest income
   
42,025
     
38,411
     
82,605
     
75,179
 
                                 
Interest expense:
                               
Interest on deposits
   
5,585
     
3,181
     
10,457
     
6,122
 
Interest on repurchase agreements
   
723
     
411
     
1,358
     
749
 
Interest on advances from Federal Home Loan Bank
   
2
     
165
     
4
     
168
 
Interest on long-term debt
   
567
     
414
     
1,047
     
810
 
Total interest expense
   
6,877
     
4,171
     
12,866
     
7,849
 
                                 
Net interest income
   
35,148
     
34,240
     
69,739
     
67,330
 
Provision for loan losses
   
1,929
     
2,764
     
2,875
     
3,993
 
Net interest income after provision for loan losses
   
33,219
     
31,476
     
66,864
     
63,337
 
                                 
Noninterest income:
                               
Service charges on deposit accounts
   
6,480
     
6,199
     
12,701
     
12,159
 
Gains on sales of loans, net
   
304
     
251
     
583
     
507
 
Trust and wealth management income
   
2,856
     
2,649
     
5,814
     
5,235
 
Loan related fees
   
919
     
773
     
2,063
     
1,778
 
Bank owned life insurance
   
793
     
526
     
2,557
     
1,050
 
Brokerage revenue
   
440
     
423
     
723
     
735
 
Securities gains (losses)
   
2
     
18
     
(286
)
   
10
 
Other noninterest income
   
1,946
     
1,472
     
2,895
     
2,416
 
Total noninterest income
   
13,740
     
12,311
     
27,050
     
23,890
 
                                 
Noninterest expense:
                               
Officer salaries and employee benefits
   
3,220
     
2,663
     
6,434
     
5,927
 
Other salaries and employee benefits
   
12,202
     
11,381
     
24,607
     
23,041
 
Occupancy, net
   
2,043
     
1,972
     
4,159
     
3,999
 
Equipment
   
727
     
748
     
1,444
     
1,534
 
Data processing
   
1,634
     
1,757
     
3,270
     
3,546
 
Bank franchise tax
   
1,577
     
1,521
     
3,278
     
3,041
 
Legal fees
   
428
     
385
     
902
     
827
 
Professional fees
   
495
     
551
     
997
     
1,047
 
Advertising and marketing
   
876
     
708
     
1,608
     
1,393
 
FDIC insurance
   
279
     
315
     
593
     
607
 
Other real estate owned provision and expense
   
1,315
     
1,827
     
2,254
     
2,743
 
Repossession expense
   
304
     
227
     
713
     
428
 
Amortization of limited partnership investments
   
716
     
604
     
1,216
     
1,209
 
Other noninterest expense
   
6,623
     
2,907
     
9,645
     
5,868
 
Total noninterest expense
   
32,439
     
27,566
     
61,120
     
55,210
 
                                 
Income before income taxes
   
14,520
     
16,221
     
32,794
     
32,017
 
Income taxes
   
2,921
     
4,680
     
5,381
     
9,199
 
Net income
   
11,599
     
11,541
     
27,413
     
22,818
 
                                 
Other comprehensive income (loss):
                               
Unrealized holding gains (losses) on securities available-for-sale:
                               
Unrealized holding gains (losses) arising during the period
   
(1,811
)
   
1,630
     
(7,309
)
   
2,745
 
Less: Reclassification adjustments for realized gains included in net income
   
2
     
18
     
151
     
10
 
Tax expense (benefit)
   
(381
)
   
564
     
(1,567
)
   
957
 
Unrealized holding gains (losses) on securities available-for-sale, net of tax
   
(1,432
)
   
1,048
     
(5,893
)
   
1,778
 
Implementation of ASU 2016-01
   
0
     
0
     
507
     
0
 
Other comprehensive income (loss), net of tax
   
(1,432
)
   
1,048
     
(5,386
)
   
1,778
 
Comprehensive income
 
$
10,167
   
$
12,589
   
$
22,027
   
$
24,596
 
                                 
Basic earnings per share
 
$
0.66
   
$
0.65
   
$
1.55
   
$
1.29
 
Diluted earnings per share
 
$
0.66
   
$
0.65
   
$
1.55
   
$
1.29
 
                                 
Weighted average shares outstanding-basic
   
17,687
     
17,626
     
17,679
     
17,621
 
Weighted average shares outstanding-diluted
   
17,703
     
17,645
     
17,695
     
17,641
 
                                 
Dividends declared per share
 
$
0.33
   
$
0.32
   
$
0.66
   
$
0.64
 

See notes to condensed consolidated financial statements.
 


Community Trust Bancorp, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)

   
Six Months Ended
 
   
June 30
 
(in thousands)
 
2018
   
2017
 
Cash flows from operating activities:
           
Net income
 
$
27,413
   
$
22,818
 
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
   
1,918
     
2,023
 
Deferred taxes
   
163
     
123
 
Stock-based compensation
   
400
     
302
 
Provision for loan losses
   
2,875
     
3,993
 
Write-downs of other real estate owned and other repossessed assets
   
1,320
     
1,987
 
Gains on sale of mortgage loans held for sale
   
(583
)
   
(507
)
Securities (gains) losses
   
286
     
(10
)
Gain on debt repurchase
   
0
     
(560
)
(Gains) losses on sale of assets, net
   
(69
)
   
10
 
Proceeds from sale of mortgage loans held for sale
   
26,254
     
22,859
 
Funding of mortgage loans held for sale
   
(25,731
)
   
(25,732
)
Amortization of securities premiums and discounts, net
   
2,407
     
1,551
 
Change in cash surrender value of bank owned life insurance
   
(2,191
)
   
(708
)
Mortgage servicing rights:
               
 Fair value adjustments
   
(77
)
   
301
 
 New servicing assets created
   
(211
)
   
(172
)
Changes in:
               
 Other assets
   
(6,288
)
   
(1,966
)
 Other liabilities
   
8,179
     
2,756
 
Net cash provided by operating activities
   
36,065
     
29,068
 
                 
Cash flows from investing activities:
               
Certificates of deposit in other banks:
               
 Purchase of certificates of deposit
   
0
     
(11,515
)
 Maturity of certificates of deposit
   
4,165
     
235
 
Securities available-for-sale (AFS):
               
 Purchase of AFS securities
   
(131,770
)
   
(77,344
)
 Proceeds from the sales of AFS securities
   
57,079
     
3,261
 
 Proceeds from prepayments and maturities of AFS securities
   
64,535
     
70,304
 
Securities held-to-maturity (HTM):
               
 Proceeds from maturities of HTM securities
   
0
     
8
 
Change in loans, net
   
(49,769
)
   
(151,624
)
Purchase of premises and equipment
   
(2,083
)
   
(1,187
)
Proceeds from sale and retirement of premises and equipment
   
23
     
25
 
Proceeds from sale of other real estate and repossessed assets
   
928
     
1,128
 
Proceeds from settlement of bank owned life insurance
   
3,678
     
0
 
Net cash used in investing activities
   
(53,214
)
   
(166,709
)
                 
Cash flows from financing activities:
               
Change in deposits, net
   
45,545
     
24,302
 
Change in repurchase agreements and federal funds purchased, net
   
5,633
     
8,547
 
Proceeds from Federal Home Loan Bank advances
   
0
     
100,000
 
Payments on advances from Federal Home Loan Bank
   
(43
)
   
(50
)
Repurchase of long-term debt
   
0
     
(1,440
)
Issuance of common stock
   
800
     
708
 
Dividends paid
   
(11,675
)
   
(11,312
)
Net cash provided by financing activities
   
40,260
     
120,755
 
Net increase (decrease) in cash and cash equivalents
   
23,111
     
(16,886
)
Cash and cash equivalents at beginning of period
   
175,274
     
144,716
 
Cash and cash equivalents at end of period
 
$
198,385
     
127,830
 
                 
Supplemental disclosures:
               
Income taxes paid
 
$
5,100
   
$
6,400
 
Interest paid
   
10,898
     
6,912
 
Non-cash activities:
               
Loans to facilitate the sale of other real estate owned and repossessed assets
   
2,406
     
1,574
 
Common stock dividends accrued, paid in subsequent quarter
   
202
     
204
 
Real estate acquired in settlement of loans
   
2,843
     
1,434
 
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 adjustments) necessary, to present fairly the condensed consolidated financial position as of June 30, 2018, the results of operations for the three and six months ended June 30, 2018 and 2017 and the cash flows for the six months ended June 30, 2018 and 2017.  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 and six months ended June 30, 2018 and 2017 and the cash flows for the six months ended June 30, 2018 and 2017 are not necessarily indicative of the results to be expected for the full year.  The condensed consolidated balance sheet as of December 31, 2017 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, 2017, 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. (“CTB”) 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

Ø Financial Instruments – Overall – In January 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2016-01, Financial Instruments – Overall (Subtopic 825-10).   The amendments in this Update require all equity investments to be measured at fair value with changes in the fair value recognized through net income (other than those accounted for under equity method of accounting or those that result in consolidation of the investee).  The amendments in this Update also require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments.  In addition, the amendments in this Update eliminate the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet for public business entities.  Public business entities will be required to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.  This Update is the final version of Proposed ASU 2013-220—Financial Instruments—Overall (Subtopic 825-10) and Proposed ASU 2013-221—Financial Instruments—Overall (Subtopic 825-10).  For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  The amendments should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the year of adoption.  The amendments related to equity securities without readily determinable fair values (including disclosure requirements) should be applied prospectively to equity investments that exist as of the date of adoption.  At December 31, 2017, we had $25 million in equity securities with a net unrealized loss of $0.6 million.  Accordingly, an adjustment has been made as a cumulative effect adjustment to our consolidated balance sheet effective January 1, 2018.  Note 8 below has been modified to reflect the changes in disclosure and the use of a notional exit price.
Ø Leases – In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842).   ASU 2016-02 establishes a right of use model that requires a lessee to record a right of use asset and a lease liability for all leases with terms longer than 12 months.  Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.  For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases.  A lease will be treated as a sale if it transfers all of the risks and rewards, as well as control of the underlying asset, to the lessee.  If risks and rewards are conveyed without the transfer of control, the lease is treated as a financing. If the lessor does not convey risks and rewards or control, an operating lease results.  The amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years for public business entities.  Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements, with certain practical expedients available.  Early adoption is permitted.  CTBI has an implementation team working through the provisions of ASU 2016-02 including reviewing all leases to assess the impact on its accounting and disclosures.  CTBI does not anticipate a significant increase in leasing activity between now and the date of adoption.  We have calculated the minimum and maximum net present value of all potential lease payments to be between $10.1 million and $20.3 million.  We have determined the renewal periods reasonably expected to be exercised.  We are now in the process of determining the amount to recognize as right of use assets and the corresponding lease liabilities.

Ø Revenue from Contracts with Customers – In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers.  The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  The guidance also specifies the accounting for some costs to obtain or fulfill a contract with a customer, as well as enhanced disclosure requirements.  In August 2015, the FASB issued ASU 2015-14 which deferred the effective date of ASU 2014-09 to fiscal years, and interim reporting periods within those fiscal years, beginning after December 15, 2017.  In March 2016, the FASB issued ASU 2016-08 which clarified the revenue recognition implementation guidance on principal versus agent considerations and is effective during the same period as ASU 2014-09.  In April 2016, the FASB issued ASU 2016-10 which clarified the revenue recognition guidance regarding the identification of performance obligations and the licensing implementation and is effective during the same period as ASU 2014-09.  In May 2016, the FASB issued ASU 2016-12 which narrowly amended the revenue recognition guidance regarding collectability, noncash consideration, presentation of sales tax, and transition.  ASU 2016-12 is effective during the same period as ASU 2014-09.  We adopted these Updates effective January 1, 2018 with no material change to the timing or amounts of income recognized, as the majority of the revenues earned by CTBI are not within the scope of ASU 2014-09.

Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606”), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services to customers.  The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

The majority of our revenue-generating transactions are not subject to ASC 606, including revenue generated from financial instruments, such as our loans, letters of credit, derivatives and investment securities, as well as revenue related to our mortgage servicing activities, as these activities are subject to other generally accepted accounting principles (“GAAP”) discussed elsewhere within our disclosures.  Descriptions of our revenue-generating activities that are within the scope of ASC 606, which are presented in our income statements as components of noninterest income are as follows:

·
Service charges on deposit accounts represents general service fees for monthly account maintenance and activity- or transaction-based fees and consist of transaction-based revenue, time-based revenue (service period), item-based revenue or some other individual attribute-based revenue.  Revenue is recognized when our performance obligation is completed which is generally monthly for account maintenance services or when a transaction has been completed.  Payment for such performance obligations is generally received at the time the performance obligations are satisfied.

·
Trust and wealth management income represents monthly or quarterly fees due from wealth management customers as consideration for managing the customers’ assets.  Wealth management and trust services include custody of assets, investment management, escrow services, fees for trust services, and similar fiduciary activities.  Revenue is recognized when our performance obligation is completed each month or quarter, which is generally the time that payment is received.

·
Brokerage revenue is transaction based and collected upon the settlement of the transaction.  Other sales, such as life insurance, generate commissions from other third parties.  These fees are generally collected monthly.

·
Other noninterest income primarily includes items such as letter of credit fees, gains on sale of loans held for sale and servicing fees related to mortgage and commercial loans, none of which are subject to the requirements of ASC 606.

Ø Accounting for Credit Losses – In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.  The provisions of ASU 2016-13 were issued to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments that are not accounted for at fair value through net income, including loans held for investment, held-to-maturity debt securities, trade and other receivables, net investment in leases and other commitments to extend credit held by a reporting entity at each reporting date.  This ASU requires that financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis.  The amendments in ASU 2016-13 eliminate the probable incurred loss recognition in current GAAP and reflect an entity’s current estimate of all expected credit losses.  The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets.

For purchased financial assets with a more-than-insignificant amount of credit deterioration since origination (“PCD assets”) that are measured at amortized cost, the initial allowance for credit losses is added to the purchase price rather than being reported as a credit loss expense.  Subsequent changes in the allowance for credit losses on PCD assets are recognized through the statement of income as a credit loss expense.

Credit losses relating to available-for-sale debt securities will be recorded through an allowance for credit losses rather than as a direct write-down to the security.

ASU 2016-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.  Early adoption is permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. CTBI has an implementation team working through the provisions of ASU 2016-13 including assessing the impact on its accounting and disclosures.  The team has established the historical data that will be available and has identified the potential loan segments to be analyzed.  We are continuing data analysis, including the analysis of historical charge-off and recovery data.

Ø Statement of Cash Flows – In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. Stakeholders indicated that there is diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other Topics.  This ASU addresses the following eight specific cash flow issues: Debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (including bank-owned life insurance policies); distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle.  The amendments in this Update apply to all entities that are required to present a statement of cash flows under Topic 230.  This Update is the final version of Proposed Accounting Standards Update EITF-15F—Statement of Cash Flows—Classification of Certain Cash Receipts and Cash Payments (Topic 230), which has been deleted.  The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.  The amendments in this Update should be applied using a retrospective transition method to each period presented.  If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable.  We adopted this ASU effective January 1, 2018 with no material impact on CTBI’s consolidated financial statements.

Ø Simplifying the Test for Goodwill Impairment – In January 2017, the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350) – Simplifying the Test for Goodwill Impairment.  These amendments eliminate Step 2 from the goodwill impairment test.  The amendments also eliminate the requirements from any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test.  An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary.  The guidance is effective for fiscal years beginning after December 15, 2019, and interim periods with those fiscal years.  ASU 2017-04 should be implemented on a prospective basis.  Management does not expect ASU 2017-04 to have an impact on CTBI’s consolidated financial statements.

Ø Receivables – Nonrefundable Fees and Other Costs: Premium Amortization on Purchased Callable Debt Securities – In April 2017, the FASB issued ASU No. 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities.  The ASU shortens the amortization period for certain callable debt securities held at a premium to the earliest call date.  However, the amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity.  The amendments are effective for public business entities for fiscal periods beginning after December 15, 2018, including interim periods within those fiscal periods.  Entities are required to apply the amendments on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption.  We adopted this ASU effective January 1, 2018 with no material impact on CTBI’s consolidated financial statements.

Ø Income Statement—Reporting Comprehensive Income – In February 2018, the FASB issued ASU No. 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220).  On December 22, 2017, the U.S. federal government enacted a tax bill, the Tax Cuts and Jobs Act of 2017.  The guidance in GAAP requires deferred tax liabilities and assets to be adjusted for the effect of a change in tax laws or rates with the effect included in income from continuing operations in the reporting period that includes the enactment date.  That guidance was applicable even in situations in which the related income tax effects of items in accumulated other comprehensive income were originally recognized in other comprehensive income (rather than in net income).  Because the adjustment of deferred taxes due to the reduction of the historical corporate income tax rate to the newly enacted corporate income tax rate of 21 percent was required to be included in income from continuing operations, the tax effects of items within accumulated other comprehensive income (referred to as stranded tax effects for purposes of this Update) did not reflect the appropriate tax rate.  The amendments in this ASU requires a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the newly enacted federal corporate income tax rate.  The amount of the reclassification is the difference between the historical corporate income tax rate and the newly enacted 21 percent corporate income tax rate.  Consequently, the amendments in this Update eliminate the stranded tax effects associated with the change in the federal corporate income tax rate in the Tax Cuts and Jobs Act of 2017 and improve the usefulness of information reported to financial statement users.  The amendments in this Update are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years.  Early adoption is permitted for public business entities for reporting periods for which financial statements have not yet been issued by applying retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act of 2017 is recognized.  We elected to early adopt this ASU, and therefore, have adjusted our consolidated financial statements effective December 31, 2017 with minimal effect to our financial position.

Ø Income Taxes—Amendments to SEC Paragraphs – The FASB issued ASU 2018-05, Income Taxes (Topic 740) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 118 in March 2018.  ASU 2018-05 amends the Accounting Standards Codification to incorporate various SEC paragraphs pursuant to the issuance of SAB 118.  SAB 118 addresses the application of generally accepted accounting principles in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Cuts and Jobs Act.  We do not, nor do we expect to have, any situations where we do not have the necessary information available, prepared, and analyzed in reasonable detail to complete the accounting for the tax effects of the Tax Cuts and Jobs Act.

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.

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 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.

Beginning in January 1, 2018, upon adoption of ASU 2016-01, equity securities with readily determinable fair values are stated at fair value with realized and unrealized gains and losses reported in net income.  For periods prior to January 1, 2018, equity securities were classified as available-for-sale and stated at fair value with unrealized gains and losses reported as a separate component of accumulated other comprehensive income, net of tax.  Equity securities without a readily determinable fair value are recorded at cost less impairment, if any, adjusted for subsequent observable price changes.

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.  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 310-10-35, 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 nonaccrual 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, the estimated fair value of the collateral less costs to sell is then transferred to other real estate owned or other repossessed assets, and a charge-off is taken for any remaining balance.  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.  Foreclosure proceedings are normally initiated after 120 days.  When the foreclosed property has been legally assigned to CTBI, the fair value less estimated costs to sell is transferred to other real estate owned and the remaining balance is taken as a charge-off.

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 use twelve rolling quarters for our historical loss rate analysis.  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, trends in loan losses, industry concentrations and their relative strengths, amount of unsecured loans, and underwriting exceptions.  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 fair market value less expected sales costs.  Additionally, periodic updated appraisals are obtained on unsold foreclosed properties.  When an updated appraisal reflects a fair market value below the current book value, a charge is booked to current earnings to reduce the property to its new fair 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 through the income statement.

Income Taxes – Income tax expense is based on the taxes due on the consolidated tax return plus deferred taxes based on the expected future tax benefits and consequences of temporary differences between carrying amounts and tax bases of assets and liabilities, using enacted tax rates.  Any interest and penalties incurred in connection with income taxes are recorded as a component of income tax expense in the consolidated financial statements.  During the six months ended June 30, 2018 and 2017, CTBI has not recognized a significant amount of interest expense or penalties in connection with income taxes.

Note 2 – Stock-Based Compensation

CTBI’s compensation expense related to stock option grants was $10 thousand and $63 thousand, respectively, for the three and six months ended June 30, 2018, compared to $14 thousand and $28 thousand, respectively, for the three and six months ended June 30, 2017.  Restricted stock expense for the three and six months ended June 30, 2018 was $154 thousand and $337 thousand, respectively, including $13 thousand and $25 thousand in dividends paid for each period.  Restricted stock expense for the three and six months ended June 30, 2017 was $142 thousand and $274 thousand, respectively, including $13 thousand and $27 thousand in dividends paid for each period.  As of June 30, 2018, there was a total of $0.1 million 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 1.4 years and a total of $1.4 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 2.8 years.

There were no stock options granted in the first six months of 2018 and 2017, and there were no restricted stock grants made during the three months ended June 30, 2018 and 2017.  There were 11,320 and 23,668 shares of restricted stock granted during six months ended June 30, 2018 and 2017, respectively.  The restricted stock was issued pursuant to the terms of CTBI’s 2015 Stock Ownership Incentive Plan.  The restrictions on the restricted stock will lapse ratably over four years, except for a 5,000 management retention restricted stock award granted in 2017 which will cliff vest at the end of five years.  However, in the event of certain participant employee termination events occurring within 24 months of a change in control of CTBI or the death of the participant, the restrictions will lapse, and in the event of the participant’s disability, the restrictions will lapse on a pro rata basis.  The Compensation Committee will have discretion to review and revise restrictions applicable to a participant’s restricted stock in the event of the participant’s retirement.

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 June 30, 2018 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
 
$
249,625
   
$
29
   
$
(2,881
)
 
$
246,773
 
State and political subdivisions
   
129,628
     
875
     
(3,014
)
   
127,489
 
U.S. government sponsored agency mortgage-backed securities
   
217,260
     
194
     
(6,454
)
   
211,000
 
Other debt securities
   
507
     
0
     
(5
)
   
502
 
Total debt securities
   
597,020
     
1,098
     
(12,354
)
   
585,764
 
CRA investment funds
   
0
     
0
     
0
     
0
 
Total available-for-sale securities
 
$
597,020
   
$
1,098
   
$
(12,354
)
 
$
585,764
 
Held-to-Maturity

(in thousands)
 
Amortized Cost
   
Gross Unrealized Gains
   
Gross Unrealized Losses
   
Fair Value
 
State and political subdivisions
 
$
659
   
$
1
   
$
0
   
$
660
 
Total held-to-maturity securities
 
$
659
   
$
1
   
$
0
   
$
660
 

The amortized cost and fair value of securities at December 31, 2017 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
 
$
211,574
   
$
170
   
$
(1,172
)
 
$
210,572
 
State and political subdivisions
   
144,159
     
2,017
     
(1,161
)
   
145,015
 
U.S. government sponsored agency mortgage-backed securities
   
208,959
     
357
     
(4,007
)
   
205,309
 
Other debt securities
   
507
     
0
     
0
     
507
 
Total debt securities
   
565,199
     
2,544
     
(6,340
)
   
561,403
 
CRA investment funds
   
25,000
     
76
     
(718
)
   
24,358
 
Total available-for-sale securities
 
$
590,199
   
$
2,620
   
$
(7,058
)
 
$
585,761
 

Held-to-Maturity

(in thousands)
 
Amortized Cost
   
Gross Unrealized Gains
   
Gross Unrealized Losses
   
Fair Value
 
State and political subdivisions
 
$
659
   
$
1
   
$
0
   
$
660
 
Total held-to-maturity securities
 
$
659
   
$
1
   
$
0
   
$
660
 
 
The amortized cost and fair value of securities at June 30, 2018 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
 
$
45,792
   
$
45,586
   
$
0
   
$
0
 
Due after one through five years
   
133,474
     
131,738
     
659
     
660
 
Due after five through ten years
   
66,356
     
65,169
     
0
     
0
 
Due after ten years
   
133,631
     
131,769
     
0
     
0
 
U.S. government sponsored agency mortgage-backed securities
   
217,260
     
211,000
     
0
     
0
 
Other debt securities
   
507
     
502
     
0
     
0
 
Total securities
 
$
597,020
   
$
585,764
   
$
659
   
$
660
 

During the three months ended June 30, 2018, there was a net gain of $2 thousand realized on sales and calls of AFS securities, consisting of a pre-tax gain of $3 thousand and a pre-tax loss of $1 thousand.  During the three months ended June 30, 2017, there was a net gain of $18 thousand realized on sales and calls of AFS securities, consisting of a pre-tax gain of $30 thousand and a pre-tax loss of $12 thousand.

During the six months ended June 30, 2018, there was a combined loss of $286 thousand realized on sales and calls of AFS securities, consisting of a pre-tax gain of $284 thousand and a pre-tax loss of $570 thousand.  This combined loss included a loss of $436 thousand from the sale of CTBI’s CRA investment funds in the first quarter of 2018.  During the six months ended June 30, 2017, there was a combined gain of $10 thousand realized on sales and calls of AFS securities, consisting of a pre-tax gain of $29 thousand and a pre-tax loss of $19 thousand.

The amortized cost of securities pledged as collateral, to secure public deposits and for other purposes, was $237.7 million at June 30, 2018 and $225.7 million at December 31, 2017.

The amortized cost of securities sold under agreements to repurchase amounted to $295.7 million at June 30, 2018 and $296.4 million at December 31, 2017.

CTBI evaluates its investment portfolio on a quarterly basis for impairment.  The analysis performed as of June 30, 2018 indicates that all impairment is considered temporary, market and interest rate driven, and not credit-related.  The percentage of total investments with unrealized losses as of June 30, 2018 was 81.2% compared to 69.5% as of December 31, 2017.  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 June 30, 2018 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 June 30, 2018.

Available-for-Sale

(in thousands)
 
Amortized Cost
   
Gross Unrealized Losses
   
Fair Value
 
Less Than 12 Months
                 
U.S. Treasury and government agencies
 
$
170,250
   
$
(2,091
)
 
$
168,159
 
State and political subdivisions
   
55,441
     
(1,492
)
   
53,949
 
U.S. government sponsored agency mortgage-backed securities
   
73,073
     
(1,599
)
   
71,474
 
Other debt securities
   
507
     
(5
)
   
502
 
Total <12 months temporarily impaired AFS securities
   
299,271
     
(5,187
)
   
294,084
 
                         
12 Months or More
                       
U.S. Treasury and government agencies
   
44,226
     
(790
)
   
43,436
 
State and political subdivisions
   
18,219
     
(1,522
)
   
16,697
 
U.S. government sponsored agency mortgage-backed securities
   
127,030
     
(4,855
)
   
122,175
 
Other debt securities
   
0
     
0
     
0
 
Total ≥12 months temporarily impaired AFS securities
   
189,475
     
(7,167
)
   
182,308
 
                         
Total
                       
U.S. Treasury and government agencies
   
214,476
     
(2,881
)
   
211,595
 
State and political subdivisions
   
73,660
     
(3,014
)
   
70,646
 
U.S. government sponsored agency mortgage-backed securities
   
200,103
     
(6,454
)
   
193,649
 
Other debt securities
   
507
     
(5
)
   
502
 
Total temporarily impaired AFS securities
 
$
488,746
   
$
(12,354
)
 
$
476,392
 
 
The analysis performed as of December 31, 2017 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, 2017 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, 2017.

Available-for-Sale

(in thousands)
 
Amortized Cost
   
Gross Unrealized Losses
   
Fair Value
 
Less Than 12 Months
                 
U.S. Treasury and government agencies
 
$
136,688
   
$
(840
)
 
$
135,848
 
State and political subdivisions
   
34,283
     
(416
)
   
33,867
 
U.S. government sponsored agency mortgage-backed securities
   
62,768
     
(643
)
   
62,125
 
Total debt securities
   
233,739
     
(1,899
)
   
231,840
 
CRA investment funds
   
7,500
     
(105
)
   
7,395
 
Total <12 months temporarily impaired AFS securities
   
241,239
     
(2,004
)
   
239,235
 
                         
12 Months or More
                       
U.S. Treasury and government agencies
   
23,885
     
(332
)
   
23,553
 
State and political subdivisions
   
16,930
     
(745
)
   
16,185
 
U.S. government sponsored agency mortgage-backed securities
   
117,827
     
(3,364
)
   
114,463
 
Total debt securities
   
158,642
     
(4,441
)
   
154,201
 
CRA investment funds
   
15,000
     
(613
)
   
14,387
 
Total ≥12 months temporarily impaired AFS securities
   
173,642
     
(5,054
)
   
168,588
 
                         
Total
                       
U.S. Treasury and government agencies
   
160,573
     
(1,172
)
   
159,401
 
State and political subdivisions
   
51,213
     
(1,161
)
   
50,052
 
U.S. government sponsored agency mortgage-backed securities
   
180,595
     
(4,007
)
   
176,588
 
Total debt securities
   
392,381
     
(6,340
)
   
386,041
 
CRA investment funds
   
22,500
     
(718
)
   
21,782
 
Total temporarily impaired AFS securities
 
$
414,881
   
$
(7,058
)
 
$
407,823
 

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 consider those investments to be other-than-temporarily impaired at June 30, 2018, because CTBI does not intend to sell the investments and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost, which may be maturity.

State and Political Subdivisions

The unrealized losses in securities of state and political subdivisions were caused by interest rate increases.  The contractual terms of those investments do not permit the issuer to settle the securities at a price less than par which will equal amortized cost at maturity.  CTBI does not consider those investments to be other-than-temporarily impaired at June 30, 2018, because 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, which may be maturity.

U.S. Government Sponsored Agency Mortgage-Backed Securities

The unrealized losses in U.S. government sponsored agency mortgage-backed securities were caused by interest rate increases.  CTBI expects to recover the amortized cost basis over the term of the securities.  CTBI does not consider those investments to be other-than-temporarily impaired at June 30, 2018, because (i) the decline in market value is attributable to changes in interest rates and not credit quality, (ii) CTBI does not intend to sell the investments, and (iii) it is not more likely than not we will be required to sell the investments before recovery of their amortized cost, which may be maturity.

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 consider those investments to be other-than-temporarily impaired at June 30, 2018, because CTBI does not intend to sell the investments and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost, which may be maturity.

Note 4 – Loans

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

 
(in thousands)
 
June 30
2018
   
December 31
2017
 
Commercial construction
 
$
81,196
   
$
76,479
 
Commercial secured by real estate
   
1,191,711
     
1,188,680
 
Equipment lease financing
   
2,354
     
3,042
 
Commercial other
   
352,410
     
351,034
 
Real estate construction
   
64,817
     
67,358
 
Real estate mortgage
   
720,696
     
709,570
 
Home equity
   
102,432
     
99,356
 
Consumer direct
   
145,376
     
137,754
 
Consumer indirect
   
508,050
     
489,667
 
Total loans
 
$
3,169,042
   
$
3,122,940
 

CTBI has segregated and evaluates its loan portfolio through nine portfolio segments. 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 or variable 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 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 $1.1 million at June 30, 2018 and $1.0 million at December 31, 2017.

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)
 
June 30
2018
   
December 31
2017
 
Commercial:
           
Commercial construction
 
$
573
   
$
1,207
 
Commercial secured by real estate
   
5,921
     
7,028
 
Commercial other
   
682
     
934
 
                 
Residential:
               
Real estate construction
   
43
     
318
 
Real estate mortgage
   
7,169
     
8,243
 
Home equity
   
424
     
389
 
Total nonaccrual loans
 
$
14,812
   
$
18,119
 
 
The following tables present CTBI’s loan portfolio aging analysis, segregated by class, as of June 30, 2018 and December 31, 2017:

   
June 30, 2018
 
(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
 
$
0
   
$
32
   
$
588
   
$
620
   
$
80,576
   
$
81,196
   
$
15
 
Commercial secured by real estate
   
9,973
     
984
     
8,146
     
19,103
     
1,172,608
     
1,191,711
     
3,242
 
Equipment lease financing
   
0
     
0
     
0
     
0
     
2,354
     
2,354
     
0
 
Commercial other
   
951
     
503
     
430
     
1,884
     
350,526
     
352,410
     
219
 
Residential:
                                                       
Real estate construction
   
241
     
47
     
83
     
371
     
64,446
     
64,817
     
74
 
Real estate mortgage
   
1,025
     
5,290
     
8,246
     
14,561
     
706,135
     
720,696
     
3,082
 
Home equity
   
999
     
123
     
365
     
1,487
     
100,945
     
102,432
     
179
 
Consumer:
                                                       
Consumer direct
   
875
     
177
     
56
     
1,108
     
144,268
     
145,376
     
57
 
Consumer indirect
   
3,464
     
841
     
321
     
4,626
     
503,424
     
508,050
     
321
 
Total
 
$
17,528
   
$
7,997
   
$
18,235
   
$
43,760
   
$
3,125,282
   
$
3,169,042
   
$
7,189
 

   
December 31, 2017
 
(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
 
$
138
   
$
0
   
$
1,238
   
$
1,376
   
$
75,103
   
$
76,479
   
$
31
 
Commercial secured by real estate
   
4,047
     
1,599
     
8,514
     
14,160
     
1,174,520
     
1,188,680
     
2,665
 
Equipment lease financing
   
430
     
0
     
0
     
430
     
2,612
     
3,042
     
0
 
Commercial other
   
835
     
77
     
652
     
1,564
     
349,470
     
351,034
     
87
 
Residential:
                                                       
Real estate construction
   
224
     
202
     
223
     
649
     
66,709
     
67,358
     
223
 
Real estate mortgage
   
2,064
     
5,029
     
11,605
     
18,698
     
690,872
     
709,570
     
6,293
 
Home equity
   
595
     
178
     
428
     
1,201
     
98,155
     
99,356
     
167
 
Consumer:
                                                       
Consumer direct
   
983
     
148
     
62
     
1,193
     
136,561
     
137,754
     
62
 
Consumer indirect
   
4,085
     
1,399
     
648
     
6,132
     
483,535
     
489,667
     
648
 
Total
 
$
13,401
   
$
8,632
   
$
23,370
   
$
45,403
   
$
3,077,537
   
$
3,122,940
   
$
10,176
 

*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 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 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.

Equipment lease financing is underwritten by our commercial lenders using the same underwriting standards as would be applied to a secured commercial loan requesting 100% financing.  The pricing for equipment lease financing is comparable to that of borrowers with similar quality commercial credits with similar collateral.  Maximum terms of equipment leasing are determined by the type and expected life of the equipment to be leased.  Residual values are determined by appraisals or opinion letters from industry experts.  Leases must be in conformity with our consolidated annual tax plan.  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.

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. 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:

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 June 30, 2018 and December 31, 2017:

 (in thousands)
 
Commercial Construction
   
Commercial Secured by Real Estate
   
Equipment Leases
   
Commercial Other
   
Total
 
June 30, 2018
                             
Pass
 
$
72,673
   
$
1,042,821
   
$
2,354
   
$
308,248
   
$
1,426,096
 
Watch
   
3,584
     
84,787
     
0
     
29,211
     
117,582
 
OAEM
   
1,325
     
11,120
     
0
     
3,115
     
15,560
 
Substandard
   
3,614
     
52,889
     
0
     
11,639
     
68,142
 
Doubtful
   
0
     
94
     
0
     
197
     
291
 
Total
 
$
81,196
   
$
1,191,711
   
$
2,354
   
$
352,410
   
$
1,627,671
 
                                         
December 31, 2017
                                       
Pass
 
$
67,846
   
$
1,053,701
   
$
3,005
   
$
305,655
   
$
1,430,207
 
Watch
   
3,323
     
65,182
     
0
     
29,008
     
97,513
 
OAEM
   
1,304
     
22,401
     
37
     
3,206
     
26,948
 
Substandard
   
3,828
     
47,223
     
0
     
12,947
     
63,998
 
Doubtful
   
178
     
173
     
0
     
218
     
569
 
Total
 
$
76,479
   
$
1,188,680
   
$
3,042
   
$
351,034
   
$
1,619,235
 

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, as of June 30, 2018 and December 31, 2017:

(in thousands)
 
Real Estate Construction
   
Real Estate Mortgage
   
Home Equity
   
Consumer Direct
   
Consumer
Indirect
   
Total
 
June 30, 2018
                                   
Performing
 
$
64,700
   
$
710,445
   
$
101,829
   
$
145,319
   
$
507,729
   
$
1,530,022
 
Nonperforming (1)
   
117
     
10,251
     
603
     
57
     
321
     
11,349
 
Total
 
$
64,817
   
$
720,696
   
$
102,432
   
$
145,376
   
$
508,050
   
$
1,541,371
 
                                                 
December 31, 2017
                                               
Performing
 
$
66,817
   
$
695,034
   
$
98,800
   
$
137,692
   
$
489,019
   
$
1,487,362
 
Nonperforming (1)
   
541
     
14,536
     
556
     
62
     
648
     
16,343
 
Total
 
$
67,358
   
$
709,570
   
$
99,356
   
$
137,754
   
$
489,667
   
$
1,503,705
 

(1)  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 are in process totaled $4.5 million at June 30, 2018 compared to $3.7 million at December 31, 2017.

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 June 30, 2018, December 31, 2017, and June 30, 2017:

   
June 30, 2018
 
(in thousands)
 
Recorded Balance
   
Unpaid Contractual Principal Balance
   
Specific Allowance
 
Loans without a specific valuation allowance:
                 
Commercial construction
 
$
4,299
   
$
4,299
   
$
0
 
Commercial secured by real estate
   
29,718
     
31,653
     
0
 
Commercial other
   
8,606
     
10,250
     
0
 
Real estate mortgage
   
1,621
     
1,621
     
0
 
                         
Loans with a specific valuation allowance:
                       
Commercial secured by real estate
   
2,156
     
3,277
     
807
 
Commercial other
   
343
     
343
     
100
 
                         
Totals:
                       
Commercial construction
   
4,299
     
4,299
     
0
 
Commercial secured by real estate
   
31,874
     
34,930
     
807
 
Commercial other
   
8,949
     
10,593
     
100
 
Real estate mortgage
   
1,621
     
1,621
     
0
 
Total
 
$
46,743
   
$
51,443
   
$
907
 

   
Three Months Ended
   
Six Months Ended
 
   
June 30, 2018
   
June 30, 2018
 
(in thousands)
 
Average Investment in Impaired Loans
   
*Interest Income Recognized
   
Average Investment in Impaired Loans
   
*Interest Income Recognized
 
Loans without a specific valuation allowance:
                       
Commercial construction
 
$
4,353
   
$
69
   
$
4,261
   
$
106
 
Commercial secured by real estate
   
29,982
     
372
     
30,774
     
724
 
Commercial other
   
8,722
     
128
     
9,027
     
280
 
Real estate construction
   
0
     
0
     
159
     
0
 
Real estate mortgage
   
1,621
     
11
     
1,453
     
11
 
                                 
Loans with a specific valuation allowance:
                               
Commercial secured by real estate
   
2,199
     
1
     
2,166
     
1
 
Commercial other
   
321
     
4
     
161
     
4
 
                                 
Totals:
                               
Commercial construction
   
4,353
     
69
     
4,261
     
106
 
Commercial secured by real estate
   
32,181
     
373
     
32,940
     
725
 
Commercial other
   
9,043
     
132
     
9,188
     
284
 
Real estate construction
   
0
     
0
     
159
     
0
 
Real estate mortgage
   
1,621
     
11
     
1,453
     
11
 
Total
 
$
47,198
   
$
585
   
$
48,001
   
$
1,126
 
 
   
Year Ended
December 31, 2017
 
(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
 
$
4,431
   
$
4,439
   
$
0
   
$
4,835
   
$
200
 
Commercial secured by real estate
   
28,480
     
30,365
     
0
     
27,753
     
1,344
 
Equipment lease financing
   
0
     
0
     
0
     
34
     
0
 
Commercial other
   
9,481
     
11,252
     
0
     
10,444
     
539
 
Real estate construction
   
318
     
318
     
0
     
534
     
0
 
Real estate mortgage
   
1,564
     
1,570
     
0
     
1,591
     
36
 
                                         
Loans with a specific valuation allowance:
                                       
Commercial construction
   
153
     
173
     
25
     
155
     
0
 
Commercial secured by real estate
   
2,985
     
4,095
     
966
     
3,932
     
8
 
Commercial other
   
0
     
0
     
0
     
65
     
0
 
                                         
Totals:
                                       
Commercial construction
   
4,584
     
4,612
     
25
     
4,990
     
200
 
Commercial secured by real estate
   
31,465
     
34,460
     
966
     
31,685
     
1,352
 
Equipment lease financing
   
0
     
0
     
0
     
34
     
0
 
Commercial other
   
9,481
     
11,252
     
0
     
10,509
     
539
 
Real estate construction
   
318
     
318
     
0
     
534
     
0
 
Real estate mortgage
   
1,564
     
1,570
     
0
     
1,591
     
36
 
Total
 
$
47,412
   
$
52,212
   
$
991