SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Securities registered pursuant to Section 12(b) of the Act:

The The Nasdaq Stock Market LLC Global Select Market

Large Accelerated Filer ✓☑

Accelerated Filer ☐

Non-accelerated Filer ☐

Smaller Reporting Company ☐

Emerging Growth Company ☐

Common stock – ~~17,782,752~~17,794,598 shares outstanding at ~~October 31, 2019~~April 30, 2020

Community Trust Bancorp, Inc.

Condensed Consolidated Balance Sheets

*Effective January 1, 2020, the allowance for loan and lease losses became the allowance for credit losses with the implementation of ASU 2016-13, commonly referred to as CECL.

See notes to condensed consolidated financial statements.

Community Trust Bancorp, Inc.

Condensed Consolidated ~~Balance Sheets~~Statements of Income and Comprehensive Income

*Effective January 1, 2020, the provision for loan losses became the provision for credit losses with the implementation of ASU 2016-13, commonly referred to as CECL.

See notes to condensed consolidated financial statements.

~~Community Trust Bancorp, Inc.~~

~~Condensed~~ Consolidated Statements of ~~Income and Comprehensive Income~~Changes in Shareholders’ Equity

~~(unaudited)~~Quarterly

Less: Reclassification adjustments for realized gains (losses) included in net income

See notes to condensed consolidated financial statements.

~~Consolidated Statements of Changes in Shareholders’ Equity~~

~~See notes to condensed consolidated financial statements.~~

~~Consolidated Statements of Changes in Shareholders’ Equity~~

~~See notes to condensed consolidated financial statements.~~

Community Trust Bancorp, Inc.

Condensed Consolidated Statements of Cash Flows

*Effective January 1,2020, the provision for loan losses became the provision for credit losses with the implementation of ASU 2016-13, commonly referred to as CECL.

See notes to condensed consolidated financial statements.

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 ~~September 30, 2019,~~March 31, 2020, the results of operations, other comprehensive income, ~~and~~ changes in shareholders’ equity, ~~for the three~~ and ~~nine months ended September 30, 2019 and 2018, and the~~ cash flows for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018.~~2019. 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 nine months ended September 30, 2019 and 2018~~ and the cash flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ are not necessarily indicative of the results to be expected for the full year. The condensed consolidated balance sheet as of December 31, ~~2018~~2019 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, ~~2018,~~2019, 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 (“CTIC”). 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 –

➢ ~~Leases~~ ~~– In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (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.

In August 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements. This ASU is intended to reduce costs and ease implementation of the leases standard for financial statement preparers. ASU 2018-11 provides a new transition method and a practical expedient for separating components of a contract.

~~Transition: Comparative Reporting at Adoption~~

The amendments in ASU 2018-11 provide entities with an additional (and optional) transition method to adopt the new leases standard. Under this new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption consistent with preparers’ requests. Consequently, an entity’s reporting for the comparative periods presented in the financial statements in which it adopts the new leases standard will continue to be in accordance with current GAAP in Topic 840, ~~Leases~~. An entity that elects this additional (and optional) transition method must provide the required Topic 840 disclosures for all periods that continue to be in accordance with Topic 840. The amendments do not change the existing disclosure requirements in Topic 840 (for example, they do not create interim disclosure requirements that entities previously were not required to provide).

~~Separating Components of a Contract~~

The amendments in ASU 2018-11 provide lessors with a practical expedient, by class of underlying asset, to not separate non-lease components from the associated lease component and, instead, to account for those components as a single component if the non-lease components otherwise would be accounted for under the new revenue guidance (Topic 606) and both of the following are met:

~~The timing and pattern of transfer of the non-lease component(s) and associated lease component are the same.~~

~~The lease component, if accounted for separately, would be classified as an operating lease.~~

An entity electing this practical expedient (including an entity that accounts for the combined component entirely in Topic 606) is required to disclose certain information, by class of underlying asset, as specified in the ASU.

We elected the optional transition method of the modified retrospective approach provided in ASU 2018-11 which was applied on January 1, 2019. CTBI also elected certain relief options offered in ASU 2016-02, including the package of practical expedients, the option not to separate lease and non-lease components, and instead to account for them as a single lease component for all classes of assets, the hindsight practical expedient to allow entities to use hindsight when determining lease term and impairment of right-of-use assets, and the option not to recognize right-of-use assets and lease liabilities that arise from short-term leases (i.e., leases with terms of twelve months or less). Refer to note 6, Leases, below for further information regarding the impact of adoption.

➢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. This ASU is commonly referred to as “CECL” (Current Expected Credit Loss). 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. The standard also included revisions and updates to the required footnote disclosures. Please refer to Note 4 below.

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~~are recorded through an allowance for credit losses rather than as a direct write-down to the security. Management estimates potential losses on unfunded commitments by calculating an anticipated funding rate based on internal data and applies an estimated loss factor to the amounts expected to be funded. CTBI maintains an unfunded commitment allowance as part of other liabilities. The impact of the implementation of ASU No. 2016-13 was an increase of $112 thousand to this allowance and an $84 thousand impact to equity, net of tax.

ASU 2016-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. ~~Early adoption~~CTB elected ASU 2019-04 which allows that accrued interest will continue to be presented separately and not part of amortized cost on loans. The difference in amortized cost basis versus consideration of loan balances impacts the ACL calculation by 1 basis point and is ~~permitted~~considered immaterial. The primary difference is for ~~fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.~~indirect lending premiums. Per ASC 326-20-30-2, if a loan does not share risk characteristics with other pooled loans, then the loan shall be evaluated for expected credit losses on an individual basis. In determining what loans should be evaluated individually, CTBI has established that any loan with a balance of $1.0 million or greater that has one of the following characteristics with be individually evaluated: has a criticized risk rating, is in nonaccrual status, is a troubled debt restructuring (“TDR”), or is 90 days or more past due.

Loans that meet the above criteria will be tested individually for loss exposure on a quarterly basis using a fair market value of the collateral securing the loan less estimated selling costs as compared to the recorded investment of the loan (principal plus interest owed unless in a nonaccrual status). As an alternative, loans that are dependent upon the cash flows from business operations may be tested by determining the net present value of future cash flows discounted by the effective interest rate of the loan over the remaining term of the loan as appropriate. A specific valuation reserve will be established for any individually tested loans that have loss exposure unless a charge-down of the loan balance is more appropriate.

As previously disclosed, CTBI formed an implementation team ~~working through~~to oversee the ~~provisions~~adoption of the ASU ~~2016-13~~ including assessing the impact on its accounting and disclosures. The implementation team was a cross-functional working group comprised of individuals from areas including credit, finance, and operations. The team has established the historical data ~~that will be~~ available and has identified the ~~potential~~ loan segments to be analyzed. Credit losses for loans that no longer share similar risk characteristics are estimated on an individual basis. The team has determined the portfolio methodologies and relevant economic factors to be utilized and ~~will begin~~began running parallel with its current model as part of the monthly fourth quarter 2019 loan portfolio analysis.The team has developed a CECL allowance model which calculates reserves over the life of the loan and is largely driven by historical losses, portfolio characteristics, risk-grading, economic outlook, and other qualitative factors. The methodologies utilize a single economic forecast over a twelve month reasonable and supportable forecast period with immediate reversion to historical losses. CTBI adopted this ASU effective January 1, 2020 using the modified retrospective approach. The effect of adoption was a $3.0 million increase in the allowance for credit losses (formerly referred to as the allowance for loan losses) and a $112 thousand increase in other liabilities for off-balance sheet credit exposure with a related decrease in shareholders’ equity of $2.4 million, net of deferred tax. The table below shows the impact of the adoption of ASU 2016-13 by major loan classifications:

	December 31, 2019 Probable Incurred Losses					January 1, 2020 CECL Adoption
(dollars in thousands)	Amount		% of Portfolio			Amount		% of Portfolio
Allowance for loan and lease losses transitioned to allowance for credit losses:
Commercial	$	21,683		1.30	%	$	21,680		1.30	%
Residential mortgage		5,501		0.61	%		7,319		0.81	%
Consumer direct		1,711		1.16	%		1,671		1.13	%
Consumer indirect		6,201		1.18	%		7,467		1.42	%
Total allowance for loan and lease losses/allowance for credit losses	$	35,096		1.08	%	$	38,137		1.17	%

Reserve for unfunded lending commitments	$	274				$	386

In December 2018, the Office of the Comptroller of the Currency (the “OCC”), the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”), and the FDIC (the “FDIC” and, together with the Federal Reserve Board and the OCC, the “federal banking regulators”) approved a final rule to address changes to credit loss accounting under GAAP, including banking organizations’ implementation of CECL. The final rule provided banking organizations the option to phase in over a three-year period the day-one adverse effects on regulatory capital that may result from the adoption of the new accounting standard.

On March 27, 2020, pursuant to the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), federal banking regulators issued an interim final rule that delays the estimated impact on regulatory capital stemming from the implementation of CECL for a transition period of up to five years (the “CECL IFR”). The CECL IFR provides banking organizations that are required (as of January 1, 2020) to adopt CECL for accounting purposes under U.S. generally accepted accounting principles during 2020 an option to delay an estimate of CECL’s impact on regulatory capital. The capital relief in the CECL IFR is calibrated to approximate the difference in allowances under CECL relative to the incurred loss methodology for the first two years of the transition period. The cumulative difference at the end of the second year of the transition period is then phased in to regulatory capital over a three-year transition period. In this way, the CECL IFR gradually phases in the full effect of CECL on regulatory capital, providing a five-year transition period. CTBI adopted CECL effective January 1, 2020 and chose the option to delay the estimated impact on regulatory capital using the relief options described above.

➢ 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~~years, to be implemented on a prospective basis. ~~Management does not expect~~CTBI adopted ASU 2017-04 ~~to have an~~with no impact on ~~CTBI’s~~our consolidated financial statements.

➢ Changes to the Disclosure Requirements for Fair Value Measurement – In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820)—Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. ASU No. 2018-13 modifies the disclosure requirements on fair value measurements in Topic 820 as follows:

Removals

The following disclosure requirements were removed from Topic 820:

The amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy

The policy for timing of transfers between levels

The valuation processes for Level 3 fair value measurements

Modifications

The following disclosure requirements were modified in Topic 820:

For investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee’s assets and the date when restrictions from redemption might lapse only if the investee has communicated the timing to the entity or announced the timing publicly; and

The amendments clarify that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date.

Additions

The following disclosure requirements were added to Topic 820:

The changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period; and

The range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. For certain unobservable inputs, an entity may disclose other quantitative information (such as the median or arithmetic average) in lieu of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements.

In addition, the amendments eliminate “at a minimum” from the phrase “an entity shall disclose at a minimum” to promote the appropriate exercise of discretion by entities when considering fair value measurement disclosures and to clarify that materiality is an appropriate consideration of entities and their auditors when evaluating disclosure requirements.

CTBI ~~plans to adopt~~adopted ASU 2018-13 effective January 1, 2020 with minimal changes to our current reporting.

➢ Accounting for Costs of Implementing a Cloud Computing Service Agreement– In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which reduces complexity for the accounting for costs of implementing a cloud computing service arrangement. This standard aligns the accounting for implementation costs of hosting arrangements, regardless of whether they convey a license to the hosted software.

The ASU aligns the following requirements for capitalizing implementation costs:

Those incurred in a hosting arrangement that is a service contract, and

Those incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).

This ASU ~~will be~~was effective beginning January 1, 2020 with no significant impact to our consolidated financial statements.

➢Simplifying the Accounting for Income Taxes – In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes. The amendments in this ASU simplify the accounting for income taxes by removing the following exceptions:

1. Exception to the incremental approach for intra period tax allocation when there is a loss from continuing operations and income or a gain from other items (for example, discontinued operations or other comprehensive income);

2. Exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment;

3. Exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary; and

4. Exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year.

The amendments in this ASU also simplify the accounting for income taxes by doing the following:

1. Requiring that an entity recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax;

2. Requiring that an entity evaluate when a step up in the tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and when it should be considered a separate transaction;

3. Specifying that an entity is not required to allocate the consolidated amount of current and deferred tax expense to a legal entity that is not subject to tax in its separate financial statements. However, an entity may elect to do so (on an entity-by-entity basis) for a legal entity that is both not subject to tax and disregarded by the taxing authority;

4. Requiring that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date; and

5. Making minor codification improvements for income taxes related to employee stock ownership plans and investments in qualified affordable housing projects accounted for using the equity method.

For public business entities, the amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. We do not anticipate a significant impact to our consolidated financial statements.

➢Clarifying the Interactions between Topic 321, Topic 323, and Topic 815, a consensus of the FASB Emerging Task Force – In January 2020, the FASB issued ASU 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815). The amendments in this ASU clarify certain interactions between the guidance to account for certain equity securities under Topic 321, the guidance to account for investments under the equity method of accounting in Topic 323, and the guidance in Topic 815, which could change how an entity accounts for an equity security under the measurement alternative or a forward contract or purchased option to purchase securities that, upon settlement of the forward contract or exercise of the purchased option, would be accounted for under the equity method of accounting or the fair value option in accordance with Topic 825, Financial Instruments. These amendments improve current GAAP by reducing diversity in practice and increasing comparability of the accounting for these interactions. For public business entities, the amendments in this ASU are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted for public business entities for periods for which financial statements have not yet been issued. The amendments in this ASU should be applied prospectively. Under a prospective transition, an entity should apply the amendments at the beginning of the interim period that includes the adoption date. We do not anticipate a significant impact to our consolidated financial statements.

➢Facilitation of the Effects of Reference Rate Reform on Financial Reporting – In April 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) —Facilitation of the Effects of Reference Rate Reform on Financial Reporting. In response to concerns about structural risks of interbank offered rates, and, particularly, the risk of cessation of the London Interbank Offered Rate (LIBOR), regulators around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction-based and less susceptible to manipulation. The amendments in this ASU provide optional guidance for a limited time to ease the potential burden in accounting for (or recognizing the effects) of reference rate reform on financial reporting and provide optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. This ASU applies only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. The amendments in this ASU are elective and are effective upon issuance for all entities. The adoption of this ASU is not expected to have material impact on our consolidated financial statements.

Critical Accounting Policies and Estimates

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

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

We have identified the following critical accounting policies:

Investments–Management determines the classification of securities at purchase. We classify debt 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, Investments – Debt Securities, investments in debt securities that are not classified as held-to-maturity shall be classified in one of the following categories and measured at fair value in the statement of financial position:

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

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

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

Gains or losses on disposition of debt securities are computed by specific identification for those securities. Interest and dividend income, adjusted by amortization of purchase premium or discount, is included in earnings.

~~When~~With the ~~fair value~~implementation of CECL, an allowance will be recognized for credit losses relative to available-for-sale securities rather than as a ~~security is below its amortized~~reduction in the 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 extentbasis of the ~~impairment~~security. Subsequent improvements in credit quality or reductions in estimated credit losses will be recognized immediately as a reversal of the ~~security may be different than~~ previously ~~estimated,~~recorded allowance, which ~~could have a material effect on CTBI’s results~~aligns the income statement recognition of ~~operations and financial condition.~~credit losses with the reporting period in which changes occur.

~~Subsequent~~Held-to-maturity (“HTM”) securities will be subject to ~~the January 1, 2018 effective date of ASU 2016-01, ASC 320 applies only to~~CECL. CECL will require an allowance on these held-to-maturity debt securities for lifetime expected credit losses, determined by adjusting historical loss information for current conditions and reasonable and supportable forecasts. The forward-looking evaluation of lifetime expected losses will be performed on a pooled basis for debt securities that share similar risk characteristics. These allowances for expected losses must be made by the holder of the HTM debt security when the security is purchased. At March 31, 2020, CTBI held 0 securities designated as held-to-maturity.

CTBI accounts for equity securities in accordance with ASC 321, Investments – Equity Securities~~, applies to equity securities.~~. ASC 321 requires equity investments (except those accounted for under the equity method and those that result in the consolidation of the investee) to be measured at fair value, with changes in fair values recognized in net income.

Equity securities with a readily determinable fair value are required to be measured at fair value, with changes in fair value recognized through net income. Equity securities without a readily determinable fair value are carried at cost, less any impairment, if any, plus or minus changes resulting from observable price changes for identical or similar investments. ~~An election can be made, as~~As permitted by ASC 321-10-35-2, CTBI can make an irrevocable election to subsequently measure an equity security without a readily determinable fair value, and all identical or similar investments of the same issuer, including future purchases of identical or similar investments of the same issuer, at fair value. ~~Equity securities held by CTBI include securities without readily determinable fair values.~~ CTBI has ~~elected to account~~made this election for ~~these securities at fair value.~~its Visa Class B equity securities. The fair value of these securities was determined by a third party service provider using Level 3 inputs as defined in ASC 820, Fair Value Measurement, and changes in fair value are recognized in income.

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.

The provisions of the CARES Act included an election to not apply the guidance on accounting for troubled debt restructurings to loan modifications, such as extensions or deferrals, related to COVID-19 made between March 1, 2020 and the earlier of (i) December 31, 2020 or (ii) 60 days after the end of the COVID-19 national emergency. The relief can only be applied to modifications for borrowers that were not more than 30 days past due as of December 31, 2019. CTBI elected to adopt these provisions of the CARES Act.

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 Credit Losses –FASB issued ASU 2016-13 in 2016 which introduced the current expected credit losses methodology (CECL) for estimating allowances for credit losses. This accounting change was effective January 1, 2020. CTBI measures expected credit losses of financial assets on a collective (pool) basis using loss-rate methods when the financial assets share similar risk characteristics. Loans that do not share risk characteristics are evaluated on an individual basis. Regardless of an initial measurement method, once it is determined that foreclosure is probable, the allowance for credit losses is measured based on the fair value of the collateral as of the measurement date. As a practical expedient, the fair value of the collateral may be used for a loan when determining the allowance for credit losses for which the repayment is expected to be provided substantially through the operation or sale of the collateral when the borrower is experiencing financial difficulty. The fair value shall be adjusted for selling costs. For collateral-dependent financial assets, the credit loss expected may be zero if the fair value less costs to sell exceed the amortized cost of the loan. Loans shall not be included in both collective assessments and individual assessments.

~~Allowance~~

In the event that collection of principal becomes uncertain, CTBI has policies in place to reverse accrued interest in a timely manner. Therefore, CTBI elected ASU 2019-04 which allows that accrued interest would continue to be presented separately and not part of amortized cost on loan. The methodology used by CTBI is developed using the current loan balance, which is then compared to amortized cost balances to analyze the impact. The difference in amortized cost basis versus consideration of loan balances impacts the allowance for ~~Loan~~credit losses calculation by 1 basis point and ~~Lease Losses~~ – is considered immaterial. The primary difference is for indirect lending premiums.

We maintain an allowance for ~~loan and lease~~credit losses (“~~ALLL”~~ACL”) 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.~~ACL.

We utilize an internal risk grading system for commercial credits. Those ~~larger commercial~~ credits that ~~exhibit probable or observed credit weaknesses~~meet the following criteria are subject to individual ~~review.~~evaluation: the loan has an outstanding bank share balance of $1 million or greater and (i) has a criticized risk rating, (ii) is in nonaccrual status, (iii) is a TDR, or (iv) is 90 days or more past due. 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~~loan segments 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.individual evaluation.

Homogenous loans, such as consumer installment, residential mortgages, and home equity lines are not individually risk graded. The associated ~~ALLL~~ACL for these loans is measured in pools with similar risk characteristics under ASC ~~450,~~ ~~Contingencies~~.326.

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 12 rolling quarters~~With the implementation of ASC 326, weighted average life (“WAL”) calculations were completed as a tool to determine the life of CTBI’s various loan segments. Vintage modeling was used to determine the life of loan losses for ~~our historical loss rate analysis. Factors that we consider~~consumer and residential real estate loans. Static pool modeling was used to determine the life of loan losses for commercial loan segments. Qualitative factors used to derive CTBI’s total ACL 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. With the implementation of ASC 326, forecasting factors including unemployment rates and industry specific forecasts for industries in which our total exposure is 5% of capital or greater are also included as factors in the ACL model. Management continually reevaluates the other subjective factors included in its ~~ALLL~~ACL analysis.

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

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

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 three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ CTBI has not recognized a significant amount of interest expense or penalties in connection with income taxes.

As a bank doing business in Kentucky, CTB is subject to a capital-based Kentucky bank franchise tax and exempt from Kentucky corporate income tax. However, in March 2019, Kentucky enacted HB354, which will transition CTB from the bank franchise tax to a corporate income tax beginning January 1, 2021. The current Kentucky corporate income tax rate is 5%~~. As of March 31, 2019, CTBI recorded a deferred tax liability, net of the federal benefit, of $1.0~~ ~~million due to the enactment of HB354.~~

In April 2019, Kentucky enacted HB458. HB458 allows for combined state income tax filing with CTBI, CTB, and CTIC. CTBI had previously filed a separate company return and generated net operating losses, in which it had maintained a valuation allowance against the related deferred tax asset. HB458 also allows for certain net operating losses to be utilized on a combined return. CTBI expects to file a combined return, beginning in 2021, and to utilize these previously generated losses. The tax benefit recorded in the second quarter 2019 to reverse the valuation allowance on the deferred tax asset for these losses was $~~3.6~~ ~~million.~~

Note 2 – Stock-Based Compensation

CTBI’s compensation expense related to stock option grants was $8$2 thousand and $29 ~~thousand, respectively, for the three and nine months ended September 30, 2019, and $~~11 ~~thousand and $~~74$10 thousand for the three ~~and nine~~ months ended ~~September 30, 2018.~~ March 31, 2020 and 2019, respectively. As of March 31, 2020, there was 0 unrecognized compensation expense related to unvested stock option awards, as all stock option awards have fully vested. There were 0 stock options granted in the first three months of 2020 or 2019.

Restricted stock expense for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 was $~~205~~$226 thousand and $~~616~~$190 thousand, respectively, including $19$21 thousand and $56 ~~thousand in dividends paid for each period. Restricted stock expense for the three and nine months ended September 30, 2018 was $143~~ ~~thousand and $479~~ ~~thousand, respectively, including $~~13 ~~thousand and $~~38$19 thousand in dividends paid for each period. As of ~~September 30, 2019,~~March 31, 2020, there was a total of $9 ~~thousand of unrecognized compensation expense related to unvested stock option awards that will be recognized as expense as the awards vest over a weighted average period of~~ ~~0.3~~ ~~years and a total of $1.6~~$2.2 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 ~~2.7~~3.0 years.

There were 0 ~~stock options granted in the first nine months of both 2019~~21,544 and ~~2018. There were~~ 27,921 ~~and~~ ~~11,320~~ shares of restricted stock granted during the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ 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 2,500 management retention restricted stock award granted in January 2020 which will vest at the end of five years, subject to such management employee’s continued employment. 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~~Debt securities are classified into held-to-maturity and available-for-sale categories. Held-to-maturity (HTM) securities are those that CTBI has the positive intent and ability to hold to maturity and are reported at amortized cost. Available-for-sale (AFS) securities are those that CTBI may decide to sell if needed for liquidity, asset-liability management or other reasons. Available-for-sale securities are reported at fair value, with unrealized gains or losses included as a separate component of equity, net of tax. As of March 31,2020, CTBI had 0 held-to-maturity securities.

~~The amortized cost and fair value of securities at September 30, 2019 are summarized as follows:~~

~~Available-for-Sale~~

(in thousands)
Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses
Fair Value
U.S. Treasury and government agencies $ 193,376 $ 610 $ (619 ) $ 193,367
State and political subdivisions 101,593 3,146 (37 ) 104,702
U.S. government sponsored agency mortgage-backed securities 316,745 4,806 (1,088 ) 320,463
Other debt securities 31,450 0 (6 ) 31,444
Total available-for-sale securities $ 643,164 $ 8,562 $ (1,750 ) $ 649,976

~~Held-to-Maturity~~

(in thousands)
Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses
Fair Value
State and political subdivisions $ 517 $ 0 $ 0 $ 517
Total held-to-maturity securities $ 517 $ 0 $ 0 $ 517

~~The amortized cost and fair value of securities at December 31, 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 $ 219,358 $ 48 $ (1,468 ) $ 217,938
State and political subdivisions 126,280 633 (2,425 ) 124,488
U.S. government sponsored agency mortgage-backed securities 255,969 397 (5,547 ) 250,819
Other debt securities 507 0 (6 ) 501
Total available-for-sale securities $ 602,114 $ 1,078 $ (9,446 ) $ 593,746

~~Held-to-Maturity~~

(in thousands)
Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses
Fair Value
State and political subdivisions $ 649 $ 0 $ 0 $ 649
Total held-to-maturity securities $ 649 $ 0 $ 0 $ 649

The amortized cost and fair value of debt securities at ~~September 30,~~ March 31,2020 are summarized as follows:

Available-for-Sale

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury and government agencies	$	159,199	$	1,009	$	(337	)	$	159,871
State and political subdivisions		96,171		3,068		(43	)		99,196
U.S. government sponsored agency mortgage-backed securities		313,979		8,358		(1,294	)		321,043
Other debt securities		56,565		0		(3,196	)		53,369
Total available-for-sale securities	$	625,914	$	12,435	$	(4,870	)	$	633,479

The amortized cost and fair value of debt securities at December 31,2019 are summarized as follows:

Available-for-Sale

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury and government agencies	$	171,250	$	476	$	(576	)	$	171,150
State and political subdivisions		99,403		2,941		(37	)		102,307
U.S. government sponsored agency mortgage-backed securities		291,874		4,443		(1,072	)		295,245
Other debt securities		31,418		0		(276	)		31,142
Total available-for-sale securities	$	593,945	$	7,860	$	(1,961	)	$	599,844

Held-to-Maturity

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

The amortized cost and fair value of debt securities at March 31,2020 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Available-for-Sale				Held-to-Maturity				Available-for-Sale
(in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	34,370	$	34,394	$	517	$	517	$	82,872	$	83,574
Due after one through five years		88,607		89,169		0		0		20,033		20,371
Due after five through ten years		94,121		94,255		0		0		91,340		91,659
Due after ten years		77,871		80,251		0		0		61,125		63,463
U.S. government sponsored agency mortgage-backed securities		316,745		320,463		0		0		313,979		321,043
Other debt securities		31,450		31,444		0		0		56,565		53,369
Total debt securities	$	643,164	$	649,976	$	517	$	517	$	625,914	$	633,479

~~During the three months ended September 30, 2019, there was~~As of March 31,2020, we had a net securities gain of $14249 thousand ~~thousand. There was a pre-tax loss of $~~2 ~~thousand realized on calls of AFS securities~~, consisting of a pre-tax gain of $1481 thousand ~~thousand~~realized on sales and ~~a pre-tax loss~~calls of $3 ~~thousand,~~AFS securities and an unrealized ~~gain~~loss of $16232 thousand ~~thousand~~ from the fair market value adjustment of equity securities. ~~During the three months ended September 30, 2018, there was a pre-tax loss~~As of $March 231, ~~thousand realized on calls of AFS securities.~~

2019,~~During the nine months ended September 30, 2019, there was~~ we had a net securities gain of $~~574~~356 thousand ~~thousand. There was a pre-tax gain of $~~4 ~~thousand realized on sales and calls of AFS securities~~, consisting of a pre-tax gain of $811 thousand ~~thousand and a pre-tax loss~~realized on sales of $77 ~~thousand,~~AFS securities and an unrealized gain of $~~570~~355 thousand ~~thousand~~ from the fair market value adjustment of equity securities. ~~During the nine months ended September 30, 2018, there was a combined loss of $288~~ ~~thousand realized on sales and calls of AFS securities, consisting of a pre-tax gain of $284~~ ~~thousand and a pre-tax loss of $572~~ ~~thousand.~~

Equity Securities at Fair Value

~~In 2008, Visa distributed~~ ~~9,918~~ shares of Visa Class B restricted stock to CTBI which, upon resolution of certain pending legal matters, will become unrestricted and convertible into Visa Class A shares. Following this distribution, significant concern existed about the ultimate realizable value of these shares, and because CTBI did not have a basis in the stock, the shares were previously not recorded as an asset on CTBI’s balance sheet. In recent years, the concern over the realizable value has stabilized, and in late 2017 and 2018, several sales of Visa Class B shares have occurred. While not traded in observable markets, these sales were reported by several financial institutions in various SEC 8-K and 10-K filings. In 2018, FASB issued a technical correction to its guidance regarding equity securities, ASC 321-10-35-2, allowing an entity to subsequently elect to record an equity security without a readily determinable fair value. In 2018, CTBI made the election permitted by ASC ~~321-10-35-2~~321-10-35-2 to record its Visa Class B shares at fair value. ~~On December 31, 2018, CTBI recorded a $1.2~~ ~~million gain on the recognition of the fair value of~~ ~~9,918~~ ~~Visa Class B shares held in its portfolio.~~ Equity securities at fair value as of ~~September 30, 2019~~March 31,2020 were $1.7 million ~~million,~~, as a result of a $0.2 million decrease in the fair market value ~~increase~~ in the ~~third~~first quarter 2020. The fair market value of equity securities increased $0.4 million in the first quarter 2019.NaN equity securities were sold during the first quarter 2020.

The amortized cost of securities pledged as collateral, to secure public deposits and for other purposes, was $~~237.9~~229.5 million ~~million~~ at ~~September 30, 2019~~March 31,2020 and $~~258.8~~239.1 million ~~million~~ at December 31, ~~2018.~~2019.

The amortized cost of securities sold under agreements to repurchase amounted to $~~259.1~~262.6 million ~~million~~ at ~~September 30, 2019~~March 31,2020 and $~~289.1~~261.5 million ~~million~~ at December 31, ~~2018.~~

2019.

CTBI evaluates its investment portfolio on a quarterly basis for impairment. The analysis performed as of ~~September 30, 2019~~March 31,2020 indicates that all impairment is considered temporary, market and interest rate driven, and not credit-related. The percentage of total debt securities with unrealized losses as of ~~September 30, 2019~~March 31,2020 was ~~38.9%~~31.3% compared to ~~75.7%~~42.8% as of December 31, ~~2018.~~ 2019.The following tables provide the amortized cost, gross unrealized losses, and fair market value, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position as of ~~September 30, 2019~~March 31,2020 that are not deemed to ~~be other-than-temporarily impaired. There were~~have credit losses. As stated above, CTBI had no ~~held-to-maturity~~HTM securities ~~that were deemed to be impaired~~ as of ~~September 30, 2019.~~March 31,2020.

Available-for-Sale

(in thousands)
Amortized
Cost

Gross
Unrealized
Losses
Fair Value
Less Than 12 Months
U.S. Treasury and government agencies $ 25,253 $ (153 ) $ 25,100
State and political subdivisions 8,358 (37 ) 8,321
U.S. government sponsored agency mortgage-backed securities 17,634 (70 ) 17,564
Other debt securities 12,303 (6 ) 12,297
Total <12 months temporarily impaired AFS securities 63,548 (266 ) 63,282

12 Months or More
U.S. Treasury and government agencies 86,397 (466 ) 85,931
State and political subdivisions 0 0 0
U.S. government sponsored agency mortgage-backed securities 104,959 (1,018 ) 103,941
Other debt securities 0 0 0
Total ≥12 months temporarily impaired AFS securities 191,356 (1,484 ) 189,872

Total
U.S. Treasury and government agencies 111,650 (619 ) 111,031
State and political subdivisions 8,358 (37 ) 8,321
U.S. government sponsored agency mortgage-backed securities 122,593 (1,088 ) 121,505
Other debt securities 12,303 (6 ) 12,297
Total temporarily impaired AFS securities $ 254,904 $ (1,750 ) $ 253,154

(in thousands)	Amortized Cost		Gross Unrealized Losses			Fair Value
Less Than 12 Months
U.S. Treasury and government agencies	$	14,713	$	(86	)	$	14,627
State and political subdivisions		1,113		(43	)		1,070
U.S. government sponsored agency mortgage-backed securities		40,026		(570	)		39,456
Other debt securities		56,565		(3,196	)		53,369
Total <12 months impaired AFS securities		112,417		(3,895	)		108,522

12 Months or More
U.S. Treasury and government agencies		51,913		(251	)		51,662
State and political subdivisions		0		0			0
U.S. government sponsored agency mortgage-backed securities		38,762		(724	)		38,038
Other debt securities		0		0			0
Total ≥12 months impaired AFS securities		90,675		(975	)		89,700

Total
U.S. Treasury and government agencies		66,626		(337	)		66,289
State and political subdivisions		1,113		(43	)		1,070
U.S. government sponsored agency mortgage-backed securities		78,788		(1,294	)		77,494
Other debt securities		56,565		(3,196	)		53,369
Total impaired AFS securities	$	203,092	$	(4,870	)	$	198,222

The analysis performed as of December 31, ~~2018~~2019 indicated that all impairment was considered temporary, market and interest rate driven, and not credit-related. The following tables provide the amortized cost, gross unrealized losses, and fair market value, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position as of December 31, ~~2018~~2019 that are not deemed to be other-than-temporarily impaired. There were no held-to-maturity securities that were deemed to be impaired as of December 31, ~~2018.~~2019.

Available-for-Sale

(in thousands)	Amortized Cost		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Losses			Fair Value
Less Than 12 Months
U.S. Treasury and government agencies	$	78,905	$	(271	)	$	78,634	$	25,955	$	(148	)	$	25,807
State and political subdivisions		21,707		(194	)		21,513		8,356		(37	)		8,319
U.S. government sponsored agency mortgage-backed securities		61,940		(377	)		61,563		19,317		(100	)		19,217
Other debt securities		507		(6	)		501		31,418		(276	)		31,142
Total <12 months temporarily impaired AFS securities		163,059		(848	)		162,211		85,046		(561	)		84,485

12 Months or More
U.S. Treasury and government agencies		97,955		(1,197	)		96,758		82,339		(428	)		81,911
State and political subdivisions		51,911		(2,231	)		49,680		0		0			0
U.S. government sponsored agency mortgage-backed securities		147,658		(5,170	)		142,488		91,609		(972	)		90,637
Other debt securities		0		0			0		0		0			0
Total ≥12 months temporarily impaired AFS securities		297,524		(8,598	)		288,926		173,948		(1,400	)		172,548

Total
U.S. Treasury and government agencies		176,860		(1,468	)		175,392		108,294		(576	)		107,718
State and political subdivisions		73,618		(2,425	)		71,193		8,356		(37	)		8,319
U.S. government sponsored agency mortgage-backed securities		209,598		(5,547	)		204,051		110,926		(1,072	)		109,854
Other debt securities		507		(6	)		501		31,418		(276	)		31,142
Total temporarily impaired AFS securities	$	460,583	$	(9,446	)	$	451,137	$	258,994	$	(1,961	)	$	257,033

U.S. Treasury and Government Agencies

The unrealized losses in U.S. Treasury and government agencies were caused by interest rate increases. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than par which will equal amortized cost at maturity. CTBI does not ~~consider those investments to be other-than-temporarily impaired at September 30, 2019, 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.~~cost.

State and Political Subdivisions

The unrealized losses in securities of state and political subdivisions were caused by interest rate increases. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than par which will equal amortized cost at maturity. CTBI does not ~~consider those investments to be other-than-temporarily impaired at September 30, 2019, 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.~~cost.

U.S. Government Sponsored Agency Mortgage-Backed Securities

The unrealized losses in U.S. government sponsored agency mortgage-backed securities were caused by interest rate increases. CTBI expects to recover the amortized cost basis over the term of the securities. CTBI does not consider those investments to be other-than-temporarily impaired at September 30, 2019, 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.~~

cost.

Other Debt Securities

The unrealized losses in other debt securities were caused by interest rate increases. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than par which will equal amortized cost at maturity. CTBI does not ~~consider those investments to be other-than-temporarily impaired at September 30, 2019, 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.~~cost.

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)
September 30
2019

December 31
2018

Commercial construction $ 93,534 $ 82,715
Commercial secured by real estate 1,174,764 1,183,093
Equipment lease financing 651 1,740
Commercial other 388,532 377,198
Real estate construction 62,859 57,160
Real estate mortgage 722,632 722,417
Home equity 110,663 106,299
Consumer direct 149,500 144,289
Consumer indirect 511,650 533,727
Total loans $ 3,214,785 $ 3,208,638

(in thousands)	March 31, 2020
Hotel/motel	$	248,717
Commercial real estate residential		262,065
Commercial real estate nonresidential		771,687
Dealer floorplans		80,828
Commercial other		313,646
Commercial loans		1,676,943

Real estate mortgage		798,891
Home equity lines		111,837
Residential loans		910,728

Consumer direct		145,403
Consumer indirect		554,467
Consumer loans		699,870

Loans and lease financing	$	3,287,541

(in thousands)	December 31, 2019
Commercial construction	$	104,809
Commercial secured by real estate		1,169,975
Equipment lease financing		481
Commercial other		389,683
Real estate construction		63,350
Real estate mortgage		733,003
Home equity		111,894
Consumer direct		148,051
Consumer indirect		527,418
Total loans	$	3,248,664

The segments presented for March 31, 2020 reflect the implementation of ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, while the December totals are presented under the previous incurred loss model. CTB adopted ASC 326 for all financial assets measured at amortized cost and off-balance sheet credit exposures. Results of reporting periods beginning January 1, 2020 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP.

CTBI has segregated and evaluates its loan portfolio through 9 portfolio ~~segments.~~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.

~~Commercial~~Hotel/motel loans are a significant concentration for CTBI, representing approximately 7.5% 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 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 theseprimarily completed as one loan going from construction to permanent financing. These loans are ~~generally short-term with permanent financing upon completion.~~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 ~~include~~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, 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~~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.

~~Equipment lease financing~~Prior to the implementation of ASU No. 2016-13, all commercial real estate loans ~~are fixed or variable leases for commercial purposes.~~were segmented together with construction loans presented separately.

Dealer floorplans have historically been reviewed by management as a separate segment of the commercial loan portfolio although for SEC reporting they were combined within the commercial other segment. With the implementation of ASU No. 2016-13, CTBI segmented dealer floorplans separately as they are a unique product with unique risk factors. The primary unique factor relevant to dealer floorplans is the ability of the borrower to misappropriate funds provided at the point of sale as their floorplan is 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 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~~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.~~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~~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 ~~$1.9~~$1.4 million at ~~September~~ ~~30, 2019~~March 31, 2020 and ~~$2.5~~$1.2 million at December 31, ~~2018.~~2019.

The following tables present the balance in the allowance for credit losses (“ACL”) for the period ended March 31, 2020 and the balance in the allowance for loan and lease losses (“ALLL”) and the recorded investment in loans based on portfolio segment and impairment method as of December 31, 2019 and March 31, 2019:

	March 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 charged to expense		2,381		1,337			2,984			91		1,434			1,099			67			739			2,575			12,707
Losses charged off		0		(51	)		(59	)		0		(359	)		(60	)		0			(369	)		(1,517	)		(2,415	)
Recoveries		0		8			4			0		169			7			1			122			706			1,017
Ending balance	$	5,922	$	4,012		$	11,563		$	1,713	$	6,409		$	7,543		$	890		$	2,163		$	9,230		$	49,445

	December 31, 2019
	Commercial Construction			Commercial Secured by Real Estate			Equipment Lease Financing			Commercial Other			Real Estate Construction			Real Estate Mortgage			Home Equity			Consumer Direct			Consumer Indirect			Total
ALLL
Balance, beginning of year	$	862		$	14,531		$	12		$	4,993		$	512		$	4,433		$	841		$	1,883		$	7,841		$	35,908
Provision charged to expense		497			(137	)		(8	)		3,032			(40	)		414			172			528			361			4,819
Losses charged off		(72	)		(727	)		0			(2,179	)		(100	)		(767	)		(139	)		(1,100	)		(4,652	)		(9,736	)
Recoveries		12			358			0			509			0			152			23			400			2,651			4,105
Balance, end of year	$	1,299		$	14,025		$	4		$	6,355		$	372		$	4,232		$	897		$	1,711		$	6,201		$	35,096

Ending balance:
Individually evaluated for impairment	$	99		$	227		$	0		$	886		$	0		$	0		$	0		$	0		$	0		$	1,212
Collectively evaluated for impairment	$	1,200		$	13,798		$	4		$	5,469		$	372		$	4,232		$	897		$	1,711		$	6,201		$	33,884

Loans
Ending balance:
Individually evaluated for impairment	$	3,010		$	41,379		$	0		$	11,073		$	0		$	2,309		$	0		$	0		$	0		$	57,771
Collectively evaluated for impairment	$	101,799		$	1,128,596		$	481		$	378,610		$	63,350		$	730,694		$	111,894		$	148,051		$	527,418		$	3,190,893

	March 31, 2019
(in thousands)	Commercial Construction		Commercial Secured by Real Estate			Equipment Lease Financing			Commercial Other			Real Estate Construction			Real Estate Mortgage			Home Equity			Consumer Direct			Consumer Indirect			Total
Allowance for loan losses
Beginning balance	$	862	$	14,531		$	12		$	4,993		$	512		$	4,433		$	841		$	1,883		$	7,841		$	35,908
Provision charged to expense		38		287			(2	)		382			(116	)		(278	)		84			(119	)		(86	)		190
Losses charged off		0		(35	)		0			(242	)		0			(120	)		(25	)		(246	)		(1,387	)		(2,055	)
Recoveries		3		17			0			84			0			18			1			117			721			961
Ending balance	$	903	$	14,800		$	10		$	5,217		$	396		$	4,053		$	901		$	1,635		$	7,089		$	35,004

Ending balance:
Individually evaluated for impairment	$	164	$	847		$	0		$	620		$	0		$	0		$	0		$	0		$	0		$	1,631
Collectively evaluated for impairment	$	739	$	13,953		$	10		$	4,597		$	396		$	4,053		$	901		$	1,635		$	7,089		$	33,373

Loans
Ending balance:
Individually evaluated for impairment	$	3,632	$	34,329		$	0		$	10,057		$	0		$	2,337		$	0		$	0		$	0		$	50,355
Collectively evaluated for impairment	$	71,732	$	1,148,475		$	1,354		$	378,003		$	54,013		$	717,955		$	108,018		$	141,855		$	517,972		$	3,139,377

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 inform 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.

Also included in inherent model risk at implementation was the estimated allowance for previously impaired loans that had not been changed on CTBI’s loan system. There were certain loans that met the definition of impaired previously that management did not consider to have significantly different risk characteristics based on the ACL methodology and segmentation, and therefore determined they would no longer require individual analysis. The inherent model risk factor was decreased by $1.6 million as formerly impaired loans that are no longer individually analyzed were reassigned in the first quarter and returned to the appropriate loan segments where the historical loss and other qualitative factors were applied.

As of March 31,2020, CTBI forecasted a significant increase in national unemployment rates and significant declines in hotel/motel, lessors of nonresidential properties and lessors of residential properties industries over the forecast period. The projected economic decline, as well as increased reserves of $2.0 million on individually analyzed loans during the period, were the primary drivers of the increase in the ACL.

Refer to note 1 to the condensed consolidated financial statements for further information regarding our nonaccrual policy. ~~Nonaccrual~~Per ASC 326, nonaccrual loans segregated by class of loans and loans 90 days past due and still accruing segregated by class of loans were as follows:

(in thousands)
September 30
2019

December 31
2018

Commercial:
Commercial construction $ 230 $ 639
Commercial secured by real estate 4,855 4,537
Commercial other 585 797

Residential:
Real estate construction 291 22
Real estate mortgage 4,464 5,395
Home equity 661 477
Consumer:
Consumer direct 4 0
Total nonaccrual loans $ 11,090 $ 11,867

	March 31, 2020
(in thousands)	Nonaccrual Loans with No ACL		Nonaccrual Loan with ACL		90+ and Still Accruing		Total Nonperforming Loans

Hotel/motel	$	0	$	0	$	133	$	133
Commercial real estate residential		206		1,312		4,636		6,154
Commercial real estate nonresidential		0		3,404		7,128		10,532
Dealer floorplans		0		56		0		56
Commercial other		0		6,316		479		6,795
Total commercial loans		206		11,088		12,376		23,670

Real estate mortgage		0		5,286		4,730		10,016
Home equity lines		0		753		435		1,188
Total residential loans		0		6,039		5,165		11,204

Consumer direct		0		0		38		38
Consumer indirect		0		0		465		465
Total consumer loans		0		0		503		503

Loans and lease financing	$	206	$	17,127	$	18,044	$	35,377

(in thousands)	December 31, 2019
Commercial:
Commercial construction	$	230
Commercial secured by real estate		3,759
Commercial other		3,839

Residential:
Real estate construction		634
Real estate mortgage		4,821
Home equity		716
Total nonaccrual loans	$	13,999

2024

The following tables present CTBI’s loan portfolio aging analysis, segregated by class, as of ~~September~~ ~~30, 2019~~March 31, 2020 and December 31, ~~2018:~~2019:

September 30, 2019
(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 $ 118 $ 195 $ 35 $ 348 $ 93,186 $ 93,534 $ 0
Commercial secured by real estate 3,639 2,571 15,706 21,916 1,152,848 1,174,764 11,481
Equipment lease financing 0 0 0 0 651 651 0
Commercial other 1,126 3,235 3,041 7,402 381,130 388,532 2,674
Residential:
Real estate construction 502 115 283 900 61,959 62,859 4
Real estate mortgage 1,124 5,501 8,376 15,001 707,631 722,632 5,434
Home equity 1,053 232 703 1,988 108,675 110,663 264
Consumer:
Consumer direct 732 321 67 1,120 148,380 149,500 67
Consumer indirect 3,085 654 406 4,145 507,505 511,650 406
Total $ 11,379 $ 12,824 $ 28,617 $ 52,820 $ 3,161,965 $ 3,214,785 $ 20,330

March 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	$	133	$	133	$	248,584	$	248,717
Commercial real estate residential		1,514		1,412		6,128		9,054		253,011		262,065
Commercial real estate nonresidential		2,257		4,570		9,924		16,751		754,936		771,687
Dealer floorplans		0		0		0		0		80,828		80,828
Commercial other		1,683		686		6,594		8,963		304,683		313,646
Total commercial loans		5,454		6,668		22,779		34,901		1,642,042		1,676,943

Real estate mortgage		2,561		3,154		7,901		13,616		785,275		798,891
Home equity lines		831		156		733		1,720		110,117		111,837
Total residential loans		3,392		3,310		8,634		15,336		895,392		910,728

Consumer direct		735		589		38		1,362		144,041		145,403
Consumer indirect		4,153		816		465		5,434		549,033		554,467
Total consumer loans		4,888		1,405		503		6,796		693,074		699,870

Loans and lease financing	$	13,734	$	11,383	$	31,916	$	57,033	$	3,230,508	$	3,287,541

	December 31, 2018														December 31, 2019
(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*		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	$	87	$	58	$	698	$	843	$	81,872	$	82,715	$	58	$	118	$	0	$	467	$	585	$	104,224	$	104,809	$	237
Commercial secured by real estate		6,287		1,204		8,776		16,267		1,166,826		1,183,093		4,632		2,734		5,969		12,366		21,069		1,148,906		1,169,975		8,820
Equipment lease financing		0		0		0		0		1,740		1,740		0		0		0		0		0		481		481		0
Commercial other		1,057		94		1,067		2,218		374,980		377,198		581		880		284		6,267		7,431		382,252		389,683		2,586
Residential:
Real estate construction		144		438		28		610		56,550		57,160		6		117		52		634		803		62,547		63,350		0
Real estate mortgage		1,272		5,645		7,607		14,524		707,893		722,417		4,095		774		5,376		10,320		16,470		716,533		733,003		7,088
Home equity		898		365		441		1,704		104,595		106,299		246		1,084		412		736		2,232		109,662		111,894		344
Consumer:
Consumer direct		918		191		74		1,183		143,106		144,289		74		945		230		97		1,272		146,779		148,051		97
Consumer indirect		4,715		975		507		6,197		527,530		533,727		506		4,037		909		447		5,393		522,025		527,418		448
Total	$	15,378	$	8,970	$	19,198	$	43,546	$	3,165,092	$	3,208,638	$	10,198
Loans and lease financing															$	10,689	$	13,232	$	31,334	$	55,255	$	3,193,409	$	3,248,664	$	19,620

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

2125

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

Hotel/motel loans are a significant concentration for CTBI, representing approximately 7.5% 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. 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 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.

~~Equipment lease financing is underwritten~~Prior to the implementation of ASU No. 2016-13, all commercial real estate loans were segmented together with construction loans presented separately.

Dealer floorplans have historically been reviewed by ~~our commercial lenders using the same underwriting standards~~management 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 thatseparate segment of the commercial loan ~~portfolio.~~portfolio although for SEC reporting they were combined within the commercial other segment. With the implementation of ASU No. 2016-13, CTBI segmented dealer floorplans 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.

Dealer floorplans have historically been reviewed by management as a separate segment of the commercial loan portfolio although for SEC reporting they were combined within the commercial other segment. Under the incurred loss model, these loans were included in the commercial other segment. This segment of loans is nearing the threshold of a loan concentration and has unique risk characteristics and as such it will be a segment under the new CECL methodology.

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.

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.

2328

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 asand based on last credit decision or year of ~~September~~ ~~30, 2019~~ ~~and December 31, 2018:~~origination:

(in thousands)
Commercial
Construction

Commercial
Secured by
Real Estate

Equipment
Leases

Commercial
Other
Total
September 30, 2019
Pass $ 88,034 $ 1,037,428 $ 651 $ 356,980 $ 1,483,093
Watch 2,527 55,119 0 13,737 71,383
OAEM 168 29,516 0 5,637 35,321
Substandard 2,805 52,616 0 12,030 67,451
Doubtful 0 85 0 148 233
Total $ 93,534 $ 1,174,764 $ 651 $ 388,532 $ 1,657,481

December 31, 2018
Pass $ 74,222 $ 1,038,309 $ 1,740 $ 327,431 $ 1,441,702
Watch 3,070 71,834 0 28,986 103,890
OAEM 1,594 19,734 0 5,735 27,063
Substandard 3,829 53,125 0 14,970 71,924
Doubtful 0 91 0 76 167
Total $ 82,715 $ 1,183,093 $ 1,740 $ 377,198 $ 1,644,746

	Term Loans Amortized Cost Basis by Origination Year
(in thousands)	2020		2019		2018		2017		2016		Prior		Revolving Loans		Total
Hotel/motel
Risk rating:
Pass	$	8,621	$	71,038	$	41,059	$	53,262	$	23,743	$	35,479	$	74	$	233,276
Special mention		0		0		0		0		0		0		0		0
Substandard		0		0		132		1,113		8,999		5,197		0		15,441
Doubtful		0		0		0		0		0		0		0		0
Total hotel/motel	$	8,621	$	71,038	$	41,191	$	54,375	$	32,742	$	40,676	$	74	$	248,717

Commercial real estate residential
Risk rating:
Pass	$	14,777	$	49,003	$	35,510	$	25,537	$	34,625	$	69,673	$	12,213	$	241,338
Special mention		0		3,102		633		967		451		61		0		5,214
Substandard		446		2,282		3,540		4,169		1,200		3,876		0		15,513
Doubtful		0		0		0		0		0		0		0		0
Total commercial real estate residential	$	15,223	$	54,387	$	39,683	$	30,673	$	36,276	$	73,610	$	12,213	$	262,065

Commercial real estate nonresidential
Risk rating:
Pass	$	35,164	$	128,993	$	99,550	$	102,018	$	113,817	$	220,958	$	30,277	$	730,777
Special mention		0		417		71		5		0		3,303		20		3,816
Substandard		1,737		7,125		1,742		4,008		1,989		20,003		459		37,063
Doubtful		0		0		0		0		0		31		0		31
Total commercial real estate nonresidential	$	36,901	$	136,535	$	101,363	$	106,031	$	115,806	$	244,295	$	30,756	$	771,687

Dealer floorplans
Risk rating:
Pass	$	0	$	0	$	0	$	0	$	0	$	0	$	80,772	$	80,772
Special mention		0		0		0		0		0		0		0		0
Substandard		0		0		0		0		0		0		0		0
Doubtful		0		0		0		0		0		0		56		56
Total dealer floorplans	$	0	$	0	$	0	$	0	$	0	$	0	$	80,828	$	80,828

Commercial other
Risk rating:
Pass	$	44,077	$	49,654	$	40,094	$	20,059	$	10,245	$	30,174	$	102,022	$	296,325
Special mention		0		0		5,062		285		480		51		0		5,878
Substandard		1,840		4,413		308		501		3,451		837		93		11,443
Doubtful		0		0		0		0		0		0		0		0
Total commercial other	$	45,917	$	54,067	$	45,464	$	20,845	$	14,176	$	31,062	$	102,115	$	313,646

Commercial loans
Risk rating:
Pass	$	102,639	$	298,688	$	216,213	$	200,876	$	182,430	$	356,284	$	225,358	$	1,582,488
Special mention		0		3,519		5,766		1,257		931		3,415		20		14,908
Substandard		4,023		13,820		5,722		9,791		15,639		29,913		552		79,460
Doubtful		0		0		0		0		0		31		56		87
Total commercial loans	$	106,662	$	316,027	$	227,701	$	211,924	$	199,000	$	389,643	$	225,986	$	1,676,943

(in thousands)	Commercial Construction		Commercial Secured by Real Estate		Equipment Leases		Commercial Other		Total
December 31, 2019
Pass	$	98,102	$	1,036,573	$	481	$	358,203	$	1,493,359
Watch		3,595		54,338		0		13,618		71,551
OAEM		254		27,964		0		6,065		34,283
Substandard		2,858		51,068		0		11,737		65,663
Doubtful		0		32		0		60		92
Total	$	104,809	$	1,169,975	$	481	$	389,683	$	1,664,948

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 September~~ ~~30, 2019~~ ~~and December 31, 2018:~~class:

(in thousands)
Real Estate
Construction

Real Estate
Mortgage
Home Equity
Consumer
Direct

Consumer
Indirect
Total
September 30, 2019
Performing $ 62,564 $ 712,734 $ 109,738 $ 149,429 $ 511,244 $ 1,545,709
Nonperforming (1) 295 9,898 925 71 406 11,595
Total $ 62,859 $ 722,632 $ 110,663 $ 149,500 $ 511,650 $ 1,557,304

December 31, 2018
Performing $ 57,132 $ 712,927 $ 105,576 $ 144,215 $ 533,221 $ 1,553,071
Nonperforming (1) 28 9,490 723 74 506 10,821
Total $ 57,160 $ 722,417 $ 106,299 $ 144,289 $ 533,727 $ 1,563,892

	Term Loans Amortized Cost Basis by Origination Year
	2020		2019		2018		2017		2016		Prior		Revolving Loans		Total
Home equity lines
Performing	$	0	$	86	$	0	$	0	$	8	$	11,571	$	98,984	$	110,649
Nonperforming		0		0		0		0		0		763		425		1,188
Total home equity lines	$	0	$	86	$	0	$	0	$	8	$	12,334	$	99,409	$	111,837

Mortgage loans
Performing	$	35,151	$	161,387	$	94,854	$	88,911	$	70,449	$	338,123	$	0	$	788,875
Nonperforming		0		348		596		240		509		8,323		0		10,016
Total mortgage loans	$	35,151	$	161,735	$	95,450	$	89,151	$	70,958	$	346,446	$	0	$	798,891

Residential loans
Performing	$	35,151	$	161,473	$	94,854	$	88,911	$	70,457	$	349,694	$	98,984	$	899,524
Nonperforming		0		348		596		240		509		9,086		425		11,204
Total residential loans	$	35,151	$	161,821	$	95,450	$	89,151	$	70,966	$	358,780	$	99,409	$	910,728

Consumer direct loans
Performing	$	15,792	$	54,032	$	29,905	$	16,359	$	10,196	$	19,081	$	0	$	145,365
Nonperforming		0		6		27		4		1		0		0		38
Total consumer direct loans	$	15,792	$	54,038	$	29,932	$	16,363	$	10,197	$	19,081	$	0	$	145,403

Consumer indirect loans
Performing	$	85,017	$	179,367	$	145,511	$	80,000	$	42,101	$	22,006	$	0	$	554,002
Nonperforming		0		190		93		105		35		42		0		465
Total consumer indirect loans	$	85,017	$	179,557	$	145,604	$	80,105	$	42,136	$	22,048	$	0	$	554,467

Consumer loans
Performing	$	100,809	$	233,399	$	175,416	$	96,359	$	52,297	$	41,087	$	0	$	699,367
Nonperforming		0		196		120		109		36		42		0		503
Total consumer loans	$	100,809	$	233,595	$	175,536	$	96,468	$	52,333	$	41,129	$	0	$	699,870

(in thousands)	Real Estate Construction		Real Estate Mortgage		Home Equity		Consumer Direct		Consumer Indirect		Total
December 31, 2019
Performing	$	62,716	$	721,094	$	110,834	$	147,954	$	526,970	$	1,569,568
Nonperforming		634		11,909		1,060		97		448		14,148
Total	$	63,350	$	733,003	$	111,894	$	148,051	$	527,418	$	1,583,716

~~(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 ~~$3.0~~$3.1 million at ~~September~~ ~~30, 2019~~March 31, 2020 compared to ~~$3.3~~$2.4 million at December 31, ~~2018.~~2019.

~~A loan is considered impaired, in~~In accordance with ASC 326-20-30-2, if a loan does not share risk characteristics with other pooled loans in determining the ~~impairment accounting guidance (ASC 310-10-35-16), when based~~allowance for credit losses, the loan shall be evaluated for expected credit losses on ~~current information~~an individual basis. Of the loans that CTBI has individually evaluated, the loans listed below by segment are those that are collateral dependent:

	March 31, 2020
(in thousands)	Number of Loans		Recorded Investment		Specific Reserve
Hotel/motel		3	$	14,712	$	250
Commercial real estate residential		7		5,125		92
Commercial real estate nonresidential		16		25,296		720
Commercial other		5		9,569		957
Total collateral dependent loans		31	$	54,702	$	2,019

The hotel/motel, commercial real estate residential, and ~~events, it is probable CTBI will be unable to collect~~commercial real estate nonresidential segments are all ~~amounts due from~~collateralized with real estate. The 5 loans listed in the ~~borrower in accordance~~commercial other segment are collateralized by various chattel and real estate collateral with ~~the contractual terms~~$5.1 million collateralized by a leasehold mortgage and assignment of lease on commercial property as well as furniture, fixtures, and equipment of the ~~loan. Impaired loans include nonperforming~~leasehold property, $4.1 million primarily collateralized by underground coal mining equipment and junior real estate liens, and the remaining $0.4 million collateralized by a mix of 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 ratereal estate and liens on ~~the loan, payment extensions, forgiveness of principal, forbearance, or other actions intended to maximize collection.~~furniture, fixtures, and equipment.

2431

	December 31, 2019
(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	$	2,836	$	2,837	$	0	$	3,234	$	170
Commercial secured by real estate		40,346		41,557		0		36,976		1,601
Commercial other		7,829		9,489		0		9,889		460
Real estate mortgage		2,309		2,309		0		2,385		85

Loans with a specific valuation allowance:
Commercial construction		174		174		99		215		11
Commercial secured by real estate		1,033		2,176		227		1,678		15
Commercial other		3,244		3,244		886		1,323		29

Totals:
Commercial construction		3,010		3,011		99		3,449		181
Commercial secured by real estate		41,379		43,733		227		38,654		1,616
Commercial other		11,073		12,733		886		11,212		489
Real estate mortgage		2,309		2,309		0		2,385		85
Total	$	57,771	$	61,786	$	1,212	$	55,700	$	2,371

	March 31, 2019
(in thousands)	Recorded Balance		Unpaid Contractual Principal Balance		Specific Allowance		Average Investment in Impaired Loans		*Interest Income Recognized
Loans without a specific valuation allowance:
Commercial construction	$	3,308	$	3,308	$	0	$	3,655	$	46
Commercial secured by real estate		32,407		34,098		0		32,811		347
Commercial other		8,903		10,598		0		8,866		139
Real estate construction		0		0		0		0		0
Real estate mortgage		2,337		2,337		0		2,329		19

Loans with a specific valuation allowance:
Commercial construction		324		324		164		324		3
Commercial secured by real estate		1,922		3,060		847		1,966		10
Commercial other		1,154		1,154		620		1,169		17

Totals:
Commercial construction		3,632		3,632		164		3,979		49
Commercial secured by real estate		34,329		37,158		847		34,777		357
Commercial other		10,057		11,752		620		10,035		156
Real estate mortgage		2,337		2,337		0		2,329		19
Total	$	50,355	$	54,879	$	1,631	$	51,120	$	581

The following table presents impaired loans, the average investment in impaired loans, and interest income recognized on impaired loans for the periods ended September 30, 2019, December 31, 2018, and September 30, 2018:

September 30, 2019
(in thousands)
Recorded
Balance

Unpaid
Contractual
Principal
Balance

Specific
Allowance

Loans without a specific valuation allowance:
Commercial construction $ 2,800 $ 2,800 $ 0
Commercial secured by real estate 38,620 40,134 0
Commercial other 10,690 12,384 0
Real estate mortgage 2,318 2,318 0

Loans with a specific valuation allowance:
Commercial construction 174 174 99
Commercial secured by real estate 1,366 2,863 398
Commercial other 347 347 175

Totals:
Commercial construction 2,974 2,974 99
Commercial secured by real estate 39,986 42,997 398
Commercial other 11,037 12,731 175
Real estate mortgage 2,318 2,318 0
Total $ 56,315 $ 61,020 $ 672

Three Months Ended
September 30, 2019

Nine Months Ended
September 30, 2019

(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 $ 2,959 $ 37 $ 3,344 $ 132
Commercial secured by real estate 39,217 442 35,762 1,192
Commercial other 10,863 92 10,425 380
Real estate mortgage 2,323 23 2,408 64

Loans with a specific valuation allowance:
Commercial construction 174 3 229 9
Commercial secured by real estate 1,397 0 1,892 15
Commercial other 358 6 680 29

Totals:
Commercial construction 3,133 40 3,573 141
Commercial secured by real estate 40,614 442 37,654 1,207
Commercial other 11,221 98 11,105 409
Real estate mortgage 2,323 23 2,408 64
Total $ 57,291 $ 603 $ 54,740 $ 1,821

Year Ended
December 31, 2018

(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 $ 4,100 $ 4,100 $ 0 $ 3,923 $ 171
Commercial secured by real estate 29,645 31,409 0 30,250 1,412
Commercial other 8,285 9,982 0 8,774 530
Real estate construction 0 0 0 106 0
Real estate mortgage 1,882 1,882 0 1,666 41

Loans with a specific valuation allowance:
Commercial construction 127 127 50 42 0
Commercial secured by real estate 1,854 2,983 605 2,051 1
Commercial other 473 473 146 285 16

Totals:
Commercial construction 4,227 4,227 50 3,965 171
Commercial secured by real estate 31,499 34,392 605 32,301 1,413
Commercial other 8,758 10,455 146 9,059 546
Real estate construction 0 0 0 106 0
Real estate mortgage 1,882 1,882 0 1,666 41
Total $ 46,366 $ 50,956 $ 801 $ 47,097 $ 2,171

September 30, 2018
(in thousands)
Recorded
Balance

Unpaid
Contractual
Principal
Balance

Specific
Allowance

Loans without a specific valuation allowance:
Commercial construction $ 2,804 $ 2,804 $ 0
Commercial secured by real estate 31,632 33,538 0
Commercial other 8,268 10,034 0
Real estate mortgage 1,878 1,880 0

Loans with a specific valuation allowance:
Commercial secured by real estate 1,980 3,116 641
Commercial other 321 321 95

Totals:
Commercial construction 2,804 2,804 0
Commercial secured by real estate 33,612 36,654 641
Commercial other 8,589 10,355 95
Real estate mortgage 1,878 1,880 0
Total $ 46,883 $ 51,693 $ 736

Three Months Ended
September 30, 2018

Nine Months Ended
September 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 $ 2,865 $ 26 $ 3,795 $ 132
Commercial secured by real estate 30,216 349 30,588 1,073
Commercial other 8,518 125 8,857 405
Real estate construction 0 0 106 0
Real estate mortgage 1,882 13 1,596 24

Loans with a specific valuation allowance:
Commercial secured by real estate 2,005 0 2,112 1
Commercial other 339 8 220 12

Totals:
Commercial construction 2,865 26 3,795 132
Commercial secured by real estate 32,221 349 32,700 1,074
Commercial other 8,857 133 9,077 417
Real estate construction 0 0 106 0
Real estate mortgage 1,882 13 1,596 24
Total $ 45,825 $ 521 $ 47,274 $ 1,647

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

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

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

During ~~2019,~~ the first quarter of 2020, certain loans were modified in troubled debt restructurings, where economic concessions were granted to borrowers consisting of reductions in the interest rates, payment extensions, forgiveness of principal, and forbearances. Presented below, segregated by class of loans, are troubled debt restructurings that occurred during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ and the year ended December 31, ~~2018:~~2019:

	Three Months Ended September 30, 2019										Three Months Ended March 31, 2020
(in thousands)	Number of Loans		Term Modification		Rate Modification		Combination		Post- Modification Outstanding Balance
Commercial:
Commercial secured by real estate		3	$	270	$	0	$	0	$	270
													Pre- Modification Outstanding Recorded Investment				Post- Modification Outstanding Recorded Investment
(in thousands)											Number of Loans		Term		Total Modification		Term Modification		Total Modification
New troubled debt restructurings
Commercial real estate residential												8	$	4,397	$	4,397	$	4,399	$	4,399
Commercial real estate nonresidential												9		2,345		2,345		2,336		2,336
Commercial other		2		32		0		0		32		5		464		464		399		399
Total commercial loans												22		7,206		7,206		7,134		7,134

Real estate mortgage												1		388		388		388		388
Total residential loans												1		388		388		388		388

Total troubled debt restructurings		5	$	302	$	0	$	0	$	302		23	$	7,594	$	7,594	$	7,522	$	7,522

	Year Ended December 31, 2019
(in thousands)	Number of Loans		Term Modification		Rate Modification		Combination		Post- Modification Outstanding Balance
Commercial:
Commercial secured by real estate		17	$	6,105	$	0	$	679	$	6,784
Commercial other		17		1,565		0		264		1,829
Residential:
Real estate mortgage		1		463		0		0		463
Total troubled debt restructurings		35	$	8,133	$	0	$	943	$	9,076

	Three Months Ended March 31, 2019
(in thousands)	Number of Loans		Term Modification		Rate Modification		Combination		Post- Modification Outstanding Balance
Commercial:
Commercial secured by real estate		5	$	828	$	0	$	642	$	1,470
Commercial other		7		1,122		0		140		1,262
Residential:
Real estate mortgage		1		463		0		0		463
Total troubled debt restructurings		13	$	2,413	$	0	$	782	$	3,195

2833

Nine Months Ended
September 30, 2019

(in thousands)
Number of
Loans

Term
Modification

Rate
Modification
Combination
Post-
Modification
Outstanding
Balance

Commercial:
Commercial secured by real estate 13 $ 4,784 $ 0 $ 679 $ 5,463
Commercial other 13 1,292 0 140 1,432
Residential:
Real estate mortgage 2 463 0 243 706
Total troubled debt restructurings 28 $ 6,539 $ 0 $ 1,062 $ 7,601

Year Ended
December 31, 2018

(in thousands)
Number of
Loans

Term
Modification

Rate
Modification
Combination
Post-
Modification
Outstanding
Balance

Commercial:
Commercial construction 5 $ 2,182 $ 0 $ 15 $ 2,197
Commercial secured by real estate 24 4,004 0 1,383 5,387
Commercial other 8 465 0 0 465
Residential:
Real estate mortgage 3 264 0 704 968
Total troubled debt restructurings 40 $ 6,915 $ 0 $ 2,102 $ 9,017

Three Months Ended
September 30, 2018

(in thousands)
Number of
Loans

Term
Modification

Rate
Modification
Combination
Post-
Modification
Outstanding
Balance

Commercial:
Commercial secured by real estate 6 $ 2,028 $ 0 $ 400 $ 2,428
Residential:
Real estate mortgage 1 264 0 0 264
Total troubled debt restructurings 7 $ 2,292 $ 0 $ 400 $ 2,692

Nine Months Ended
September 30, 2018

(in thousands)
Number of
Loans

Term
Modification

Rate
Modification
Combination
Post-
Modification
Outstanding
Balance

Commercial:
Commercial construction 4 $ 443 $ 0 $ 15 $ 458
Commercial secured by real estate 23 4,587 0 1,383 5,970
Commercial other 8 465 0 0 465
Residential:
Real estate mortgage 1 264 0 0 264
Total troubled debt restructurings 36 $ 5,759 $ 0 $ 1,398 $ 7,157

No charge-offs have resulted from modifications for any of the presented periods. We had $80 ~~thousand in~~ commitments to extend additional credit in the amount of $95 thousand and $82 thousand at March 31, 2020 and December 31, 2019, on loans that were considered troubled debt ~~restructurings at September 30,2019.~~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. There were no defaults as of March 31,2019.

(in thousands)
Three Months Ended
September 30, 2019

Three Months Ended
September 30, 2018

Number of
Loans

Recorded
Balance

Number of
Loans

Recorded
Balance

Commercial:
Commercial construction 1 $ 0 2 $ 147
Commercial secured by real estate 1 30 0 0
Commercial other 1 34 1 6
Total defaulted restructured loans 2 $ 64 3 $ 153

(in thousands)	Three Months Ended March 31, 2020
	Number of Loans		Recorded Investment
Commercial real estate nonresidential		1	$	3,532
Commercial other		2		273
Total defaulted restructured loans		3	$	3,805

(in thousands)	Nine Months Ended September 30, 2019				Nine Months Ended September 30, 2018				Year Ended December 31, 2019
	Number of Loans		Recorded Balance		Number of Loans		Recorded Balance		Number of Loans		Recorded Balance
Commercial:
Commercial construction		0	$	0		2	$	147
Commercial secured by real estate		1		30		1		17		1	$	30
Commercial other		1		34		2		31		1		34

Residential:
Real estate mortgage										1		463
Total defaulted restructured loans		2	$	64		5	$	195		3	$	527

~~Note 5 – Allowance for Loan and Lease Losses~~

The following tables present the balance in the allowance for loan and lease losses (“ALLL”) and the recorded investment in loans based on portfolio segment and impairment method as of September 30, 2019, December 31, 2018 and September 30, 2018:

Three Months Ended
September 30, 2019

(in thousands)
Commercial
Construction

Commercial
Secured by
Real Estate

Equipment
Lease
Financing

Commercial
Other

Real Estate
Construction

Real Estate
Mortgage

Home
Equity

Consumer
Direct

Consumer
Indirect
Total
Allowance for loan losses
Beginning balance $ 799 $ 15,098 $ 7 $ 4,889 $ 358 $ 4,187 $ 933 $ 1,767 $ 6,960 $ 34,998
Provision charged to expense 299 (742 ) (2 ) 1,436 (28 ) 705 32 104 (551 ) 1,253
Losses charged off (1 ) (21 ) 0 (638 ) 0 (384 ) (40 ) (218 ) (1,014 ) (2,316 )
Recoveries 3 40 0 75 0 10 2 82 664 876
Ending balance $ 1,100 $ 14,375 $ 5 $ 5,762 $ 330 $ 4,518 $ 927 $ 1,735 $ 6,059 $ 34,811

Ending balance:
Individually evaluated for impairment $ 99 $ 398 $ 0 $ 175 $ 0 $ 0 $ 0 $ 0 $ 0 $ 672
Collectively evaluated for impairment $ 1,001 $ 13,977 $ 5 $ 5,587 $ 330 $ 4,518 $ 927 $ 1,735 $ 6,059 $ 34,139

Loans
Ending balance:
Individually evaluated for impairment $ 2,974 $ 39,986 $ 0 $ 11,037 $ 0 $ 2,318 $ 0 $ 0 $ 0 $ 56,315
Collectively evaluated for impairment $ 90,560 $ 1,134,778 $ 651 $ 377,495 $ 62,859 $ 720,314 $ 110,663 $ 149,500 $ 511,650 $ 3,158,470

Nine Months Ended
September 30, 2019

(in thousands)
Commercial
Construction

Commercial
Secured by
Real Estate

Equipment
Lease
Financing

Commercial
Other

Real Estate
Construction

Real Estate
Mortgage

Home
Equity

Consumer
Direct

Consumer
Indirect
Total
Allowance for loan losses
Beginning balance $ 862 $ 14,531 $ 12 $ 4,993 $ 512 $ 4,433 $ 841 $ 1,883 $ 7,841 $ 35,908
Provision charged to expense 301 79 (7 ) 2,055 (181 ) 726 181 385 (533 ) 3,006
Losses charged off (72 ) (401 ) 0 (1,703 ) (1 ) (684 ) (99 ) (795 ) (3,413 ) (7,168 )
Recoveries 9 166 0 417 0 43 4 262 2,164 3,065
Ending balance $ 1,100 $ 14,375 $ 5 $ 5,762 $ 330 $ 4,518 $ 927 $ 1,735 $ 6,059 $ 34,811

Ending balance:
Individually evaluated for impairment $ 99 $ 398 $ 0 $ 175 $ 0 $ 0 $ 0 $ 0 $ 0 $ 672
Collectively evaluated for impairment $ 1,001 $ 13,977 $ 5 $ 5,587 $ 330 $ 4,518 $ 927 $ 1,735 $ 6,059 $ 34,139

Loans
Ending balance:
Individually evaluated for impairment $ 2,974 $ 39,986 $ 0 $ 11,037 $ 0 $ 2,318 $ 0 $ 0 $ 0 $ 56,315
Collectively evaluated for impairment $ 90,560 $ 1,134,778 $ 651 $ 377,495 $ 62,859 $ 720,314 $ 110,663 $ 149,500 $ 511,650 $ 3,158,470

Year Ended
December 31, 2018

(in thousands)
Commercial
Construction

Commercial
Secured by
Real Estate

Equipment
Lease
Financing

Commercial
Other

Real Estate
Construction

Real Estate
Mortgage

Home
Equity

Consumer
Direct

Consumer
Indirect
Total
Allowance for loan losses
Beginning balance $ 686 $ 14,509 $ 18 $ 5,039 $ 660 $ 5,688 $ 857 $ 1,863 $ 6,831 $ 36,151
Provision charged to expense 115 786 (6 ) 824 (115 ) (336 ) 39 572 4,288 6,167
Losses charged off 0 (988 ) 0 (1,513 ) (33 ) (1,004 ) (69 ) (997 ) (6,394 ) (10,998 )
Recoveries 61 224 0 643 0 85 14 445 3,116 4,588
Ending balance $ 862 $ 14,531 $ 12 $ 4,993 $ 512 $ 4,433 $ 841 $ 1,883 $ 7,841 $ 35,908

Ending balance:
Individually evaluated for impairment $ 50 $ 605 $ 0 $ 146 $ 0 $ 0 $ 0 $ 0 $ 0 $ 801
Collectively evaluated for impairment $ 812 $ 13,926 $ 12 $ 4,847 $ 512 $ 4,433 $ 841 $ 1,883 $ 7,841 $ 35,107

Loans
Ending balance:
Individually evaluated for impairment $ 4,227 $ 31,499 $ 0 $ 8,758 $ 0 $ 1,882 $ 0 $ 0 $ 0 $ 46,366
Collectively evaluated for impairment $ 78,488 $ 1,151,594 $ 1,740 $ 368,440 $ 57,160 $ 720,535 $ 106,299 $ 144,289 $ 533,727 $ 3,162,272

Three Months Ended
September 30, 2018

(in thousands)
Commercial
Construction

Commercial
Secured by
Real Estate

Equipment
Lease
Financing

Commercial
Other

Real Estate
Construction

Real Estate
Mortgage

Home
Equity

Consumer
Direct

Consumer
Indirect
Total
Allowance for loan losses
Beginning balance $ 740 $ 14,658 $ 17 $ 4,637 $ 618 $ 5,234 $ 866 $ 1,910 $ 7,091 $ 35,771
Provision charged to expense 54 298 (2 ) 82 (44 ) (566 ) (9 ) 59 1,671 1,543
Losses charged off 0 (460 ) 0 (521 ) 0 (136 ) (19 ) (196 ) (1,496 ) (2,828 )
Recoveries 23 142 0 407 0 7 4 133 589 1,305
Ending balance $ 817 $ 14,638 $ 15 $ 4,605 $ 574 $ 4,539 $ 842 $ 1,906 $ 7,855 $ 35,791

Ending balance:
Individually evaluated for impairment $ 0 $ 641 $ 0 $ 95 $ 0 $ 0 $ 0 $ 0 $ 0 $ 736
Collectively evaluated for impairment $ 817 $ 13,997 $ 15 $ 4,510 $ 574 $ 4,539 $ 842 $ 1,906 $ 7,855 $ 35,055

Loans
Ending balance:
Individually evaluated for impairment $ 2,804 $ 33,612 $ 0 $ 8,589 $ 0 $ 1,878 $ 0 $ 0 $ 0 $ 46,883
Collectively evaluated for impairment $ 78,668 $ 1,150,020 $ 1,986 $ 338,056 $ 61,782 $ 720,144 $ 103,805 $ 146,002 $ 530,542 $ 3,131,005

Nine Months Ended
September 30, 2018

(in thousands)
Commercial
Construction

Commercial
Secured by
Real Estate

Equipment
Lease
Financing

Commercial
Other

Real Estate
Construction

Real Estate
Mortgage

Home
Equity

Consumer
Direct

Consumer
Indirect
Total
Allowance for loan losses
Beginning balance $ 686 $ 14,509 $ 18 $ 5,039 $ 660 $ 5,688 $ 857 $ 1,863 $ 6,831 $ 36,151
Provision charged to expense 91 895 (3 ) 98 (58 ) (625 ) 18 402 3,600 4,418
Losses charged off 0 (937 ) 0 (1,078 ) (28 ) (550 ) (38 ) (687 ) (5,013 ) (8,331 )
Recoveries 40 171 0 546 0 26 5 328 2,437 3,553
Ending balance $ 817 $ 14,638 $ 15 $ 4,605 $ 574 $ 4,539 $ 842 $ 1,906 $ 7,855 $ 35,791

Ending balance:
Individually evaluated for impairment $ 0 $ 641 $ 0 $ 95 $ 0 $ 0 $ 0 $ 0 $ 0 $ 736
Collectively evaluated for impairment $ 817 $ 13,997 $ 15 $ 4,510 $ 574 $ 4,539 $ 842 $ 1,906 $ 7,855 $ 35,055

Loans
Ending balance:
Individually evaluated for impairment $ 2,804 $ 33,612 $ 0 $ 8,589 $ 0 $ 1,878 $ 0 $ 0 $ 0 $ 46,883
Collectively evaluated for impairment $ 78,668 $ 1,150,020 $ 1,986 $ 338,056 $ 61,782 $ 720,144 $ 103,805 $ 146,002 $ 530,542 $ 3,131,005

~~Note 6 – Leases~~

~~Effective January 1, 2019, CTBI adopted ASU No. 2016-02,~~ ~~Leases,~~ (Topic 842) and all subsequent ASUs that modified Topic 842. Based on leases outstanding at December 31, 2018, the impact of adoption was recording a lease liability of approximately $16.1 million, a right-of-use asset of approximately $15.5 million, and a cumulative-effect adjustment to retained earnings of approximately $0.5 million, net of a $0.1 million adjustment to our deferred tax liability. CTBI has 1 finance lease for property but no material subleases or leasing arrangements for which it is the lessor of property or equipment.

CTBI has operating leases for banking and ATM locations. These leases have remaining lease terms of 1 year to 45 years, some of which include options to extend the leases for up to 5 years. We evaluated the original lease terms for each operating lease, some of which include options to extend the leases for up to 5 years, using hindsight. These options, some of which include variable costs related to rent escalations based on recent financial indices, such as the Consumer Price Index, where CTBI estimates future rent increases, are included in the calculation of the lease liability and right-of-use asset when management determines it is reasonably certain the option will be exercised. CTBI determines this on each lease by considering all relevant contract-based, asset-based, market-based, and entity-based economic factors. Right-of-use assets and lease liabilities are recognized at lease commencement based on the present value of the remaining lease payments using a discount rate that represents our incremental borrowing rate on a collateralized basis, over a similar term at the lease commencement date. Right-of-use assets are further adjusted for prepaid rent, lease incentives, and initial direct costs, if any.

~~The components of lease expense for the three and nine months ended September 30, 2019 were as follows:~~

(in thousands)
Three Months Ended
September 30, 2019

Nine Months Ended
September 30, 2019

Finance lease cost:
Amortization of right-of-use assets – finance leases $ 13 $ 39
Interest on lease liabilities – finance leases 14 40
Total finance lease cost 27 79

Short-term lease cost 89 228
Operating lease cost 442 1,330

Sublease income 63 194

Total lease cost $ 495 $ 1,443

~~Supplemental cash flow information related to CTBI’s operating and finance leases for the three and nine months ended September 30, 2019 was as follows:~~

(in thousands)
Three Months Ended
September 30, 2019

Nine Months Ended
September 30, 2019

Finance lease – operating cash flows $ 14 $ 40
Finance lease – financing cash flows 3 11
Operating lease – operating cash flows (fixed payments) 408 1,255
New right-of-use assets – operating leases 9 9
Weighted average lease term – financing leases 26.3 years 26.9 years
Weighted average lease term – operating leases 14.1 years 14.3 years
Weighted average discount rate – financing leases 3.70 % 3.70 %
Weighted average discount rate – operating leases 3.45 % 3.00 %

~~Maturities of lease liabilities as of September 30, 2019 are as follows:~~

(in thousands) Operating Leases Finance Leases
2019 $ 409 $ 17
2020 1,655 68
2021 1,671 75
2022 1,657 75
2023 1,578 75
Thereafter 10,914 2,060
Total lease payments 17,884 2,370
Less imputed interest (4,058 ) (910 )
Total $ 13,826 $ 1,460

~~At December 31, 2018, minimum non-cancellable rental payments were as follows:~~

(in thousands)
Operating Lease
Payments

2019 $ 1,999
2020 1,710
2021 1,737
2022 1,760
2023 1,696
Thereafter 13,031
Total $ 21,933

Note 75 – Other Real Estate Owned

Activity for other real estate owned was as follows:

	Three Months Ended September 30						Nine Months Ended September 30						Three Months Ended March 31
(in thousands)	2019			2018			2019			2018			2020			2019
Beginning balance of other real estate owned	$	22,536		$	30,262		$	27,273		$	31,996		$	19,480		$	27,273
New assets acquired		647			849			1,889			3,692			1,625			854
Fair value adjustments		(2,173	)		(670	)		(3,311	)		(1,990	)		(458	)		(447	)
Sale of assets		(1,177	)		(775	)		(6,018	)		(4,032	)		(831	)		(2,710	)
Ending balance of other real estate owned	$	19,833		$	29,666		$	19,833		$	29,666		$	19,816		$	24,970

Carrying costs and fair value adjustments associated with foreclosed properties for the three months ended ~~September~~ ~~30,~~March 31, 2020 and 2019 ~~and 2018~~ were ~~$2.5~~$0.9 million and ~~$1.1~~$0.8 million, respectively.~~Carrying costs and fair value adjustments associated with foreclosed properties for the nine months ended~~ ~~September~~ ~~30,2019~~ ~~and~~ ~~2018~~ ~~were~~ ~~$4.3 million~~ ~~and~~ ~~$3.3 million, respectively.~~ See note 1 for a description of our accounting policies relative to foreclosed properties and other real estate owned.

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

(in thousands)	September 30 2019		December 31 2018		March 31, 2020		December 31, 2019
1-4 family	$	3,204	$	5,253	$	4,158	$	3,630
Agricultural/farmland		0		0		0		0
Construction/land development/other		11,323		15,017		10,197		10,211
Multifamily		88		88		88		88
Non-farm/non-residential		5,218		6,915		5,373		5,551
Total foreclosed properties	$	19,833	$	27,273	$	19,816	$	19,480

Note 86 – Repurchase Agreements

We utilize securities sold under agreements to repurchase to facilitate the needs of our customers and provide additional funding to our balance sheet. Repurchase agreements are transactions whereby we offer to sell to a counterparty an undivided interest in an eligible security at an agreed upon purchase price, and which obligates CTBI to repurchase the security on an agreed upon date at an agreed upon repurchase price plus interest at an agreed upon rate. Securities sold under agreements to repurchase are recorded at the amount of cash received in connection with the transaction and are reflected in the accompanying consolidated balance sheets.

We monitor collateral levels on a continuous basis and maintain records of each transaction specifically describing the applicable security and the counterparty’s fractional interest in that security, and we segregate the security from its general assets in accordance with regulations governing custodial holdings of securities. The primary risk with our repurchase agreements is market risk associated with the securities securing the transactions, as we may be required to provide additional collateral based on fair value changes of the underlying securities. Securities pledged as collateral under repurchase agreements are maintained with our safekeeping agents. The carrying value of investment securities available-for-sale pledged as collateral under repurchase agreements totaled ~~$262.8~~$267.9 million and ~~$285.2~~$264.9 million at ~~September~~March 31, 2020 ~~30, 2019~~ and December 31, ~~2018,~~2019, respectively.

The remaining contractual maturity of the securities sold under agreements to repurchase by class of collateral pledged included in the accompanying consolidated balance sheets as of March 31, 2020~~September~~ ~~30, 2019~~ and December 31, ~~2018~~2019 is presented in the following tables:

September 30, 2019
Remaining Contractual Maturity of the Agreements
(in thousands)
Overnight and
Continuous
Up to 30 days 30-90 days
Greater Than
90 days
Total
Repurchase agreements and repurchase-to-maturity transactions:
U.S. Treasury and government agencies $ 15,873 $ 11,643 $ 0 $ 48,936 $ 76,452
State and political subdivisions 51,888 2,691 0 9,951 64,530
U.S. government sponsored agency mortgage-backed securities 35,765 16,666 0 35,342 87,773
Total $ 103,526 $ 31,000 $ 0 $ 94,229 $ 228,755

December 31, 2018
Remaining Contractual Maturity of the Agreements
(in thousands)
Overnight and
Continuous
Up to 30 days 30-90 days
Greater Than
90 days
Total
Repurchase agreements and repurchase-to-maturity transactions:
U.S. Treasury and government agencies $ 25,346 $ 0 $ 2,548 $ 60,699 $ 88,593
State and political subdivisions 58,864 0 2,995 10,384 72,243
U.S. government sponsored agency mortgage-backed securities 22,076 0 1,877 47,923 71,876
Total $ 106,286 $ 0 $ 7,420 $ 119,006 $ 232,712

	March 31, 2020
	Remaining Contractual Maturity of the Agreements
(in thousands)	Overnight and Continuous		Up to 30 days		30-90 days		Greater Than 90 days		Total
Repurchase agreements and repurchase-to-maturity transactions:
U.S. Treasury and government agencies	$	27,709	$	0	$	0	$	59,403	$	87,112
State and political subdivisions		52,967		0		0		6,926		59,893
U.S. government sponsored agency mortgage-backed securities		33,232		0		0		56,671		89,903
Total	$	113,908	$	0	$	0	$	123,000	$	236,908

	December 31, 2019
	Remaining Contractual Maturity of the Agreements
(in thousands)	Overnight and Continuous		Up to 30 days		30-90 days		Greater Than 90 days		Total
Repurchase agreements and repurchase-to-maturity transactions:
U.S. Treasury and government agencies	$	15,001	$	0	$	3,479	$	58,953	$	77,433
State and political subdivisions		51,193		0		1,768		11,165		64,126
U.S. government sponsored agency mortgage-backed securities		35,480		0		1,996		47,882		85,358
Total	$	101,674	$	0	$	7,243	$	118,000	$	226,917

Note 97 – Fair Market Value of Financial Assets and Liabilities

Fair Value Measurements

ASC 820, Fair Value Measurements, defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. ASC 820 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value but does not expand the use of fair value in any new circumstances. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. In this standard, the FASB clarifies the principle that fair value should be based on the exit price when pricing the asset or liability. In support of this principle, ASC 820 establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy is as follows:

Level 1 Inputs – Quoted prices in active markets for identical assets or liabilities.

Level 2 Inputs – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3 Inputs – Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in determining an exit price for the assets or liabilities.

Recurring Measurements

The following tables present the fair value measurements of assets recognized in the accompanying balance sheets measured at fair value on a recurring basis as of ~~September~~ ~~30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 and indicate the level within the fair value hierarchy of the valuation techniques.

			Fair Value Measurements at September 30, 2019 Using								Fair Value Measurements at March 31, 2020 Using
(in thousands)	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets measured – recurring basis
Available-for-sale securities:
U.S. Treasury and government agencies	$	193,367	$	69,938	$	123,429	$	0	$	159,871	$	70,050	$	89,821	$	0
State and political subdivisions		104,702		0		104,702		0		99,196		0		99,196		0
U.S. government sponsored agency mortgage-backed securities		320,463		0		320,463		0		321,043		0		321,043		0
Other debt securities		31,444		0		31,444		0		53,369		0		53,369		0
Equity securities at fair value		1,743		0		0		1,743		1,721		0		0		1,721
Mortgage servicing rights		2,904		0		0		2,904		2,481		0		0		2,481

			Fair Value Measurements at December 31, 2018 Using								Fair Value Measurements at December 31, 2019 Using
(in thousands)	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets measured – recurring basis
Available-for-sale securities:
U.S. Treasury and government agencies	$	217,938	$	91,028	$	126,910	$	0	$	171,150	$	54,263	$	116,887	$	0
State and political subdivisions		124,488		0		124,488		0		102,307		0		102,307		0
U.S. government sponsored agency mortgage-backed securities		250,819		0		250,819		0		295,245		0		295,245		0
Other debt securities		501		0		501		0		31,142		0		31,142		0
Equity securities at fair value		1,173		0		0		1,173		1,953		0		0		1,953
Mortgage servicing rights		3,607		0		0		3,607		3,263		0		0		3,263

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a recurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy. These valuation methodologies were applied to all of CTBI’s financial assets carried at fair value. CTBI had no liabilities measured and recorded at fair value as of ~~September~~ ~~30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019. There have been no significant changes in the valuation techniques during the quarter ~~or nine months~~ ended ~~September~~ ~~30, 2019.~~March 31, 2020. For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

Available-for-Sale Securities

Securities classified as available-for-sale are reported at fair value on a recurring basis. U.S. Treasury and government agencies are classified as Level 1 of the valuation hierarchy where quoted market prices are available in the active market on which the individual securities are traded.

If quoted market prices are not available, CTBI obtains fair value measurements from an independent pricing service, such as Interactive Data, which utilizes pricing models to determine fair value measurement. CTBI reviews the pricing quarterly to verify the reasonableness of the pricing. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other factors. U.S. Treasury and government agencies, state and political subdivisions, U.S. government sponsored agency mortgage-backed securities, and other debt securities are classified as Level 2 inputs.

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

Equity Securities at Fair Value

As of ~~September~~ ~~30, 2019~~ March 31, 2020 and December 31 ~~2018~~, 2019, the only securities owned by CTBI that were valued using Level 3 criteria are Visa Class B Stock (included in equity securities at fair value). ~~In determining fair~~Fair value for Visa Class B Stock ~~CTBI utilizes the expertise of an independent third party. Accordingly, fair value~~ is determined by ~~the~~an independent third party ~~using an income approach by~~ utilizing assumptions about factors such as quarterly common stock dividend payments, the conversion of the securities to the relevant Class A Stock shares subject to the prevailing conversion rate and conversion date. We have reviewed the assumptions, processes, and conclusions of the third party provider. We have determined these assumptions, processes, and conclusions to be reasonable and appropriate in determining the fair value of this asset. See the table below for inputs and valuation techniques used for Level 3 equity securities.

Mortgage Servicing Rights

Mortgage servicing rights do not trade in an active, open market with readily observable prices. CTBI reports mortgage servicing rights at fair value on a recurring basis with subsequent remeasurement of MSRs based on change in fair value.

In determining fair value, CTBI utilizes the expertise of an independent third party. Accordingly, fair value is determined by the independent third party by utilizing assumptions about factors such as mortgage interest rates, discount rates, mortgage loan prepayment speeds, market trends and industry demand. Due to the nature of the valuation inputs, mortgage servicing rights are classified within Level 3 of the hierarchy. Fair value determinations for Level 3 measurements of mortgage servicing rights are tested for impairment on a quarterly basis where assumptions used are reviewed to ensure the estimated fair value complies with accounting standards generally accepted in the United States. We have reviewed the assumptions, processes, and conclusions of the third party provider. We have determined these assumptions, processes, and conclusions to be reasonable and appropriate in determining the fair value of this asset. See the table below for inputs and valuation techniques used for Level 3 mortgage servicing rights.

~~Transfers between Levels~~

~~There were 0 transfers between Levels 1, 2, and 3 as of~~ ~~September~~ ~~30, 2019.~~

Level 3 Reconciliation

Following is a reconciliation of the beginning and ending balances of recurring fair value measurements, ~~recognized in~~for the ~~accompanying balance sheet~~periods indicated, using significant unobservable (Level 3) ~~inputs~~ ~~for the~~ ~~three~~ ~~and nine months ended~~ ~~September30,2019~~ ~~and~~ ~~2018~~:inputs:

(in thousands)
Three Months Ended
September 30, 2019

Three Months Ended
September 30, 2018

Equity
Securities at
Fair Value

Mortgage
Servicing
Rights

Equity
Securities at
Fair Value

Mortgage
Servicing
Rights

Beginning balance $ 1,727 $ 3,119 $ 0 $ 3,772
Total unrealized gains (losses) Included in net income 16 (325 ) 0 45
Issues 0 139 0 118
Settlements 0 (29 ) 0 (120 )
Ending balance $ 1,743 $ 2,904 $ 0 $ 3,815

Total gains (losses) for the period included in net income attributable to the change in unrealized gains or losses related to assets still held at the reporting date $ 16 $ (325 ) $ 0 $ 45

(in thousands)	Nine Months Ended September 30, 2019					Nine Months Ended September 30, 2018					Three Months Ended March 31, 2020						Three Months Ended March 31, 2019
	Equity Securities at Fair Value		Mortgage Servicing Rights			Equity Securities at Fair Value		Mortgage Servicing Rights			Equity Securities at Fair Value			Mortgage Servicing Rights			Equity Securities at Fair Value		Mortgage Servicing Rights
Beginning balance	$	1,173	$	3,607		$	0	$	3,484		$	1,953		$	3,263		$	1,173	$	3,607
Total unrealized gains (losses) Included in net income		570		(907	)		0		341			(232	)		(818	)		355		(234	)
Issues		0		446			0		329			0			145			0		116
Settlements		0		(242	)		0		(339	)		0			(109	)		0		(99	)
Ending balance	$	1,743	$	2,904		$	0	$	3,815		$	1,721		$	2,481		$	1,528	$	3,390

Total gains (losses) for the period included in net income attributable to the change in unrealized gains or losses related to assets still held at the reporting date	$	570	$	(907	)	$	0	$	341		$	(232	)	$	(818	)	$	355	$	(234	)

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

Noninterest Income

Three Months Ended
September 30

Nine Months Ended
September 30

(in thousands) 2019 2018 2019 2018
Total gains (losses) $ (338 ) $ (75 ) $ (579 ) $ 2

Noninterest Income

	Three Months Ended March 31
(in thousands)	2020			2019
Total gains (losses)	$	(1,159	)	$	22

Nonrecurring Measurements

The following tables present the fair value measurements of assets recognized in the accompanying balance sheets measured at fair value on a nonrecurring basis as of ~~September~~ ~~30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 and indicate the level within the fair value hierarchy of the valuation techniques.

			Fair Value Measurements at September 30, 2019 Using								Fair Value Measurements at March 31, 2020 Using
(in thousands)	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets measured – nonrecurring basis
Impaired loans (collateral dependent)	$	1,235	$	0	$	0	$	1,235
Collateral dependent loans									$	2,870	$	0	$	0	$	2,870
Other real estate owned		5,022		0		0		5,022		1,162		0		0		1,162

			Fair Value Measurements at December 31, 2018 Using								Fair Value Measurements at December 31, 2019 Using
(in thousands)	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets measured – nonrecurring basis
Impaired loans (collateral dependent)	$	747	$	0	$	0	$	747	$	3,217	$	0	$	0	$	3,217
Other real estate owned		6,500		0		0		6,500		12,593		0		0		12,593

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

~~Impaired~~Collateral Dependent Loans ~~(Collateral Dependent)~~

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

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

Loans considered ~~impaired under ASC 310-35,~~ ~~Impairment of a Loan,~~collateral dependent are loans for which ~~based on current information and events, it~~the repayment is ~~probable that~~expected to be provided substantially through the creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans are subject to nonrecurring fair value adjustments to reflect subsequent (i) partial write-downs that are based on the observable market priceoperation or ~~current appraised value~~sale of the collateral ~~or (ii)~~when the ~~full charge-off of the loan carrying value.~~borrower is experiencing financial difficulty in accordance with ASC 326-20-35-5. Quarter-to-date fair value adjustments on ~~impaired~~collateral dependent loans disclosed above were ~~$(0.1)~~$0.8 million ~~for the quarter ended~~ ~~September~~, ~~30, 2019, $0.3~~$0.4 million ~~for the quarter ended December 31, 2018,~~ , and $~~0.1~~0.4 million for the ~~quarter~~quarters ended March ~~September~~ ~~30,~~31, ~~2018.~~2020, ~~Year-to-date fair value adjustments were~~ ~~$0.3 million~~ ~~for the nine months ended~~ ~~September~~ ~~30,2019,$0.3 million~~ ~~for the year ended~~ December 31, ~~2018,~~2019, and March ~~$0.2 million~~ ~~for the nine months ended~~ ~~September~~ ~~30,~~31, ~~2018.~~2019, respectively.

Other Real Estate Owned

In accordance with the provisions of ASC 360, Property, Plant, and Equipment, other real estate owned (“OREO”) is carried at the lower of fair value at acquisition date or current estimated fair value, less estimated cost to sell when the real estate is acquired. Estimated fair value of OREO is based on appraisals or evaluations. OREO is classified within Level 3 of the fair value hierarchy. Long-lived assets are subject to nonrecurring fair value adjustments to reflect subsequent partial write-downs that are based on the observable market price or current appraised value of the collateral. Quarter-to-date fair value adjustments on other real estate owned disclosed above were ~~$2.2 million,~~ $0.4 million, $0.7 million, and ~~$0.8~~$0.4 million for the quarters ended ~~September~~ ~~30, 2019,~~March 31, 2020, December 31, ~~2018,~~2019, and ~~September~~ ~~30, 2018,~~March 31, 2019, respectively.~~Year-to-date fair value adjustments on other real estate owned disclosed above were$2.5 million~~ ~~for the nine months ended~~ ~~September30,2019,$1.8 million~~ ~~for the year ended December~~ ~~31,2018,~~ ~~and~~ ~~$1.8 million~~ ~~for the nine months ended~~ ~~September30,2018.~~

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. Appraisers are selected from the list of approved appraisers maintained by management.

Unobservable (Level 3) Inputs

The following tables present quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements at ~~September~~ ~~30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019.

(in thousands)	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at ~~September 30, 2019~~March 31, 2020	Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Equity securities at fair value	$~~1,743~~1,721	Discount cash flows, computer pricing model	Discount rate	8.0% - 12.0% (10.0%)
			Conversion date	Dec 2022 – Dec 2026 (Dec 2024)

Mortgage servicing rights	$~~2,904~~2,481	Discount cash flows, computer pricing model	Constant prepayment rate	0.0%% - ~~25.6%~~24.7% ~~(14.6%~~(16.7%)
			Probability of default	0.0% - 100.0% ~~(2.5%~~(2.4%)
			Discount rate	10.0% - 11.5% (10.1%)

~~Impaired~~Collateral dependent loans ~~(collateral-dependent)~~	$~~1,235~~2,870	Market comparable properties	Marketability discount	~~(0.1%)~~ 8.0%- ~~99.0%~~88.0% ~~(44.0%~~(41.0%)

Other real estate owned	$~~5,022~~1,162	Market comparable properties	Comparability adjustments	~~9.5%~~10.0% - ~~95.0%~~42.5% ~~(15.2%~~(13.2%)

(in thousands)	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at December 31, ~~2018~~2019	Valuation Technique(s)	Unobservable Input	Range (Weighted Average)
Equity securities at fair value	$~~1,173~~1,953	Discount cash flows, computer pricing model	Discount rate	8.0% - 12.0% (10.0%)
			Conversion date	Dec 2022 – Dec 2026 (Dec 2024)

Mortgage servicing rights	$~~3,607~~3,263	Discount cash flows, computer pricing model	Constant prepayment rate	~~7.0%~~0.0% - ~~28.1%~~24.3% ~~(9.5%~~(11.7%)
			Probability of default	0.0% - 100.0% ~~(2.6%~~(2.7%)
			Discount rate	10.0% - 11.5% (10.1%)

Impaired loans (collateral-dependent)	$~~747~~3,217	Market comparable properties	Marketability discount	~~0.0%~~7.0% - ~~95.1%~~99.0% ~~(41.5%~~(46.0%)

Other real estate owned	$~~6,500~~12,593	Market comparable properties	Comparability adjustments	6.0% - ~~47.6%~~29.8% ~~(14.9%~~(11.3%)

~~Sensitivity~~

Uncertainty of ~~Significant Unobservable Inputs~~Fair Value Measurements

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

Equity Securities at Fair Value

Fair market value for equity securities is derived based on unobservable inputs, such as the discount rate, quarterly dividend payments payable to the Visa Class B common stock and the prevailing conversion rate at the conversion date. The most recent conversion rate of 1.6228 and the most recent dividend rate of ~~0.4057~~0.4868 were used to derive the fair value estimate. Significant increases (decreases) in either of those inputs in isolation would result in a significantly lower (higher) fair value measurement. Generally, a change in the assumption used for discount rate is accompanied by a directionally opposite change in the fair value estimate.

Mortgage Servicing Rights

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

Fair Value of Financial Instruments

The following table presents estimated fair value of CTBI’s financial instruments as of ~~September~~ ~~30, 2019~~March 31, 2020 and indicates the level within the fair value hierarchy of the valuation techniques. In accordance with the prospective adoption of ASU 2016-01, the fair values as of ~~September~~ ~~30, 2019~~March 31, 2020 were measured using an exit price notion.

			Fair Value Measurements at September 30, 2019 Using								Fair Value Measurements at March 31, 2020 Using
(in thousands)	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial assets:
Cash and cash equivalents	$	221,821	$	221,821	$	0	$	0	$	192,702	$	192,702	$	0	$	0
Certificates of deposit in other banks		245		0		245		0		245		0		245		0
Securities available-for-sale		649,976		69,938		580,038		0
Securities held-to-maturity		517		0		517		0
Debt securities available-for-sale										633,479		70,050		563,429		0
Equity securities at fair value		1,743		0		0		1,743		1,721		0		0		1,721
Loans held for sale		1,943		1,987		0		0		1,403		1,433		0		0
Loans, net		3,179,974		0		0		3,241,555		3,238,096		0		0		3,341,686
Federal Home Loan Bank stock		10,794		0		10,794		0		11,354		0		11,354		0
Federal Reserve Bank stock		4,887		0		4,887		0		4,887		0		4,887		0
Accrued interest receivable		15,397		0		15,397		0		14,680		0		14,680		0
Mortgage servicing rights		2,904		0		0		2,904		2,481		0		0		2,481

Financial liabilities:
Deposits	$	3,389,555	$	849,582	$	2,558,188	$	0	$	3,395,108	$	860,844	$	2,580,002	$	0
Repurchase agreements		228,755		0		0		228,833		236,908		0		0		237,008
Federal funds purchased		5,900		0		5,900		0		4,907		0		4,907		0
Advances from Federal Home Loan Bank		421		0		451		0		411		0		463		0
Long-term debt		57,841		0		0		49,382		57,841		0		0		49,382
Accrued interest payable		6,657		0		6,657		0		3,447		0		3,447		0

Unrecognized financial instruments:
Letters of credit	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Commitments to extend credit		0		0		0		0		0		0		0		0
Forward sale commitments		0		0		0		0		0		0		0		0

The following table presents estimated fair value of CTBI’s financial instruments as of December 31, ~~2018~~2019 and indicates the level within the fair value hierarchy of the valuation techniques.

			Fair Value Measurements at December 31, 2018 Using								Fair Value Measurements at December 31, 2019 Using
(in thousands)	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial assets:
Cash and cash equivalents	$	141,450	$	141,450	$	0	$	0	$	264,683	$	264,683	$	0	$	0
Certificates of deposit in other banks		3,920		0		3,914		0		245		0		245		0
Securities available-for-sale		593,746		91,028		502,718		0
Securities held-to-maturity		649		0		649		0
Debt securities available-for-sale										599,844		54,263		545,581		0
Debt securities held-to-maturity										517		0		517		0
Equity securities at fair value		1,173		0		0		1,173		1,953		0		0		1,953
Loans held for sale		2,461		2,518		0		0		1,167		1,191		0		0
Loans, net		3,172,730		0		0		3,175,908		3,213,568		0		0		3,283,876
Federal Home Loan Bank stock		14,713		0		14,713		0		10,474		0		10,474		0
Federal Reserve Bank stock		4,887		0		4,887		0		4,887		0		4,887		0
Accrued interest receivable		14,432		0		14,432		0		14,836		0		14,836		0
Mortgage servicing rights		3,607		0		0		3,607		3,263		0		0		3,263

Financial liabilities:
Deposits	$	3,305,950	$	803,316	$	2,513,084	$	0	$	3,405,572	$	865,760	$	2,560,271	$	0
Repurchase agreements		232,712		0		0		232,796		226,917		0		0		226,921
Federal funds purchased		1,180		0		1,180		0		7,906		0		7,906		0
Advances from Federal Home Loan Bank		436		0		468		0		415		0		446		0
Long-term debt		59,341		0		0		44,166		57,841		0		0		49,382
Accrued interest payable		2,902		0		2,902		0		2,839		0		2,839		0

Unrecognized financial instruments:
Letters of credit	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
Commitments to extend credit		0		0		0		0		0		0		0		0
Forward sale commitments		0		0		0		0		0		0		0		0

Note 108 – Earnings Per Share

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

Three Months Ended
September 30

Nine Months Ended
September 30

(in thousands except per share data) 2019 2018 2019 2018
Numerator:
Net income $ 15,269 $ 16,106 $ 48,532 $ 43,519

Denominator:
Basic earnings per share:
Weighted average shares 17,726 17,691 17,720 17,683
Diluted earnings per share:
Effect of dilutive stock options and restricted stock grants 17 19 13 17
Adjusted weighted average shares 17,743 17,710 17,733 17,700

Earnings per share:
Basic earnings per share $ 0.86 $ 0.91 $ 2.74 $ 2.46
Diluted earnings per share 0.86 0.91 2.74 2.46

	Three Months Ended March 31
(in thousands except per share data)	2020		2019
Numerator:
Net income	$	6,579	$	14,939

Denominator:
Basic earnings per share:
Weighted average shares		17,752		17,712
Diluted earnings per share:
Effect of dilutive stock options and restricted stock grants		11		11
Adjusted weighted average shares		17,763		17,723

Earnings per share:
Basic earnings per share	$	0.37	$	0.84
Diluted earnings per share		0.37		0.84

Options to purchase 20,000 common shares at a weighted average price of $32.27 were excluded from the diluted calculations above for the three months ended March 31, 2020, because the exercise prices on the options were greater than the average market price for the period. There were 0 options to purchase common shares that were excluded from the diluted calculations above for the three ~~and~~ ~~nine~~months ended ~~September~~ ~~30, 2019 and 2018.~~March 31, 2019. In addition to in-the-money stock options, unvested restricted stock grants were also used in the calculation of diluted earnings per share based on the treasury method.

Note 119 – Accumulated Other Comprehensive Income

Unrealized gains on AFS securities

Amounts reclassified from accumulated other comprehensive income (AOCI) and the affected line items in the statements of income during the three ~~and~~ ~~nine~~months ended ~~September~~ ~~30, 2019~~March 31, 2020 and ~~2018~~2019 were:

Amounts Reclassified from AOCI
(in thousands)
Three Months Ended
September 30

Nine Months Ended
September 30

2019 2018 2019 2018
Affected line item in the statements of income
Securities gains (losses) $ (2 ) $ (2 ) $ 4 $ 149
Tax expense (benefit) (1 ) 0 1 32
Total reclassifications out of AOCI $ (1 ) $ (2 ) $ 3 $ 117

	Amounts Reclassified from AOCI
(in thousands)	Three Months Ended March 31
	2020		2019
Affected line item in the statements of income
Securities gains	$	481	$	1
Tax expense		125		0
Total reclassifications out of AOCI	$	356	$	1

❖	Results of Operations and Financial Condition

❖	Liquidity and Market Risk

❖	Interest Rate Risk

❖	Capital Resources

❖	Impact of Inflation, Changing Prices, and Economic Conditions

❖	Stock Repurchase Program

❖	Critical Accounting Policies and Estimates

Our Business

Community Trust Bancorp, Inc. (“CTBI”) is a bank holding company headquartered in Pikeville, Kentucky. Currently, we own one commercial bank, Community Trust Bank, Inc. (“CTB”) and one trust company, Community Trust and Investment Company, Inc. (“CTIC”). Through our subsidiaries, we have seventy-nine banking locations in eastern, northeastern, central, and south central Kentucky, southern West Virginia, and northeastern Tennessee, four trust offices across Kentucky, and one trust office in northeastern Tennessee. At ~~September 30, 2019,~~March 31, 2020, we had total consolidated assets of ~~$4.3~~$4.4 billion and total consolidated deposits, including repurchase agreements, of $3.6 billion. Total shareholders’ equity at ~~September 30, 2019~~March 31, 2020 was ~~$605.5~~$612.9 million. Trust assets under management, which are excluded from CTBI’s total consolidated assets, at ~~September 30, 2019,~~March 31, 2020, were ~~$2.2~~$2.0 billion. Trust assets under management include CTB’s investment portfolio totaling $0.6 billion.

Through its subsidiaries, CTBI engages in a wide range of commercial and personal banking and trust and wealth management activities, which include accepting time and demand deposits; making secured and unsecured loans to corporations, individuals and others; providing cash management services to corporate and individual customers; issuing letters of credit; renting safe deposit boxes; and providing funds transfer services. The lending activities of CTB include making commercial, construction, mortgage, and personal loans. Lease-financing, lines of credit, revolving lines of credit, term loans, and other specialized loans, including asset-based financing, are also available. Our corporate subsidiaries act as trustees of personal trusts, as executors of estates, as trustees for employee benefit trusts, as paying agents for bond and stock issues, as investment agent, as depositories for securities, and as providers of full service brokerage and insurance services. For further information, see Item 1 of our annual report on Form 10-K for the year ended December 31, ~~2018.~~2019.

COVID-19, the CARES Act, and Related Regulatory Actions

Impact of COVID-19

On January 30, 2020, the World Health Organization (“WHO”) announced that the outbreak of the novel coronavirus disease 2019 (COVID-19) constituted a public health emergency of international concern. On March 11, 2020, the WHO declared COVID-19 to be a global pandemic. The health concerns relating to the COVID-19 outbreak and related governmental actions taken to reduce the spread of the virus have significantly impacted the global economy (including the states and local economies in which we operate), disrupted supply chains, lowered equity market valuations, and created significant volatility and disruption in financial markets. The outbreak has resulted in authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place or total lock-down orders, and business limitations and shutdowns. Such measures have significantly contributed to rising unemployment and negatively impacted consumer and business spending. As a result, the demand for CTBI’s products and services has been, and will continue to be, significantly impacted.

Interest Rates

On March 3, 2020, the Federal Open Market Committee reduced the target federal funds rate by 50 basis points to 1.00% to 1.25%. This rate was further reduced to a target range of 0% to 0.25% on March 16, 2020. These reductions in interest rates and other effects of the COVID-19 outbreak are likely to negatively impact CTBI’s net interest income and noninterest income.

The CARES Act and the Paycheck Protection Program

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law, providing an approximately $2 trillion stimulus package that includes direct payments to individual taxpayers, economic stimulus to significantly impacted industry sectors, emergency funding for hospitals and providers, small business loans, increased unemployment benefits, and a variety of tax incentives.

4946

For small businesses, eligible nonprofits and certain others, the CARES Act established a Paycheck Protection Program (“PPP”), which is administered by the Small Business Administration (“SBA”). On April 24, 2020, the Paycheck Protection Program and Health Care Enhancement Act was enacted. Among other things, this legislation amends the initial CARES Act program by raising the appropriation level for PPP loans from $349 billion to $670 billion. CTB is actively participating in assisting its customers with applications for resources through the program. PPP loans have a two-year term and earn interest at 1%. CTB anticipates that the majority of these loans will ultimately be forgiven by the SBA in accordance with the terms of the program. As of May 3, 2020, CTB has approved or closed 2,462 PPP loans representing $268.3 million in funding. Under the terms of the PPP program, the loans are fully guaranteed by the U.S. government.

Paycheck Protection Program Lending Facility

To provide liquidity to small business lenders and the broader credit markets, to help stabilize the financial system, and to provide economic relief to small businesses nationwide, the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) authorized each of the Federal Reserve Banks to participate in the Paycheck Protection Program Lending Facility (the “PPPL Facility”), pursuant to the Federal Reserve Act. Under the PPPL Facility, each of the Federal Reserve Banks will extend non-recourse loans to eligible financial institutions such as CTB to fund loans guaranteed by the SBA under the PPP. CTB has until September 30, 2020 to access funds under the PPPL Facility, unless otherwise extended by the Federal Reserve and the Department of the Treasury.

Loan Modifications and Troubled Debt Restructurings

On April 7, 2020, the Federal Reserve Board, the Office of the Comptroller of the Currency (the “OCC”), and the Federal Deposit Insurance Corporation (the “FDIC” and, together with the Federal Reserve Board and the OCC, the “federal banking regulators”) issued a revised Interagency Statement on Loan Modifications and Reporting for Financial Institutions, which, among other things, encouraged financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations because of the effects of COVID-19, and stated that institutions generally do not need to categorize COVID-19-related modifications as troubled debt restructurings as long as the loans were not 30 days past due at December 31, 2019 and that the agencies will not direct supervised institutions to automatically categorize all COVID-19 related loan modifications as troubled debt restructurings.

Regulatory Capital

Current Expected Credit Loss (“CECL”) Methodology. On March 27, 2020, federal banking regulators issued an interim final rule that delays the estimated impact on regulatory capital stemming from the implementation of Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments - Credit Losses (Topic 326) for a transition period of up to five years (the “CECL IFR”). The CECL IFR provides banking organizations that are required (as of January 1, 2020) to adopt CECL for accounting purposes under U.S. generally accepted accounting principles during 2020 an option to delay an estimate of CECL’s impact on regulatory capital. The capital relief in the CECL IFR is calibrated to approximate the difference in allowances under CECL relative to the incurred loss methodology for the first two years of the transition period. The cumulative difference at the end of the second year of the transition period is then phased in to regulatory capital over a three-year transition period. In this way, the CECL IFR gradually phases in the full effect of CECL on regulatory capital, providing a five-year transition period. CTBI adopted CECL effective January 1, 2020 and chose the option to delay the estimated impact on regulatory capital using the relief options described above. See “Critical Accounting Policies and Estimates – Allowance for Credit Losses” of this MD&A for additional information relating to CECL.

Community Bank Leverage Ratio. On April 6, 2020, federal banking regulators issued two interim final rules that make changes to the community bank leverage ratio (“CBLR”) framework and implementing certain directives of the CARES Act. Under the existing CBLR framework, which became effective as of January 1, 2020, community banks and holding companies (which would include CTB and CTBI) that satisfy certain qualifying criteria, including having less than $10 billion in average total consolidated assets and a leverage ratio (referred to as the “community bank leverage ratio”) of greater than 9%, were eligible to opt-in to the CBLR framework. The community bank leverage ratio is the ratio of a banking organization’s Tier 1 capital to its average total consolidated assets, both as reported on the banking organization’s applicable regulatory filings. The first of the April 2020 interim final rules provides that, as of the second quarter 2020, banking organizations with leverage ratios of 8% or greater (and that meet the other existing qualifying criteria) may elect to use the CBLR framework. It also establishes a two-quarter grace period for qualifying community banking organizations whose leverage ratios fall below the 8% CBLR requirement, so long as the banking organization maintains a leverage ratio of 7% or greater. The second interim final rule provides a transition from the temporary 8% CBLR requirement to a 9% CBLR requirement. It establishes a minimum CBLR of 8% for the second through fourth quarters of 2020, 8.5% for 2021, and 9% thereafter, and maintains a two-quarter grace period for qualifying community banking organizations whose leverage ratios fall no more than 100 basis points below the applicable CBLR requirement. Notwithstanding these changes, CTBI intends to continue with the existing layered ratio structure. Under either framework, CTBI and CTB would be considered well-capitalized under the applicable guidelines.

PPPL Facility. On April 9, 2020, in order to facilitate use of the PPPL Facility, federal banking regulators issued an interim final rule to modify the Basel III regulatory capital rules applicable to banking organizations to allow those organizations participating in the PPPL Facility to neutralize the regulatory capital effects of participating in the program. Specifically, the agencies have clarified that banking organizations, including CTBI and CTB, are permitted to assign a zero percent risk weight to covered loans pledged to the PPPL Facility for purposes of determining risk-weighted assets and the leverage ratio.

Results of Operations and Financial Condition

We reported earnings for the ~~third~~first quarter ~~2019~~2020 of ~~$15.3~~$6.6 million, or ~~$0.86~~$0.37 per basic share, compared to ~~$18.3~~$16.0 million, or ~~$1.03~~$0.90 per basic share, earned during the ~~second~~fourth quarter 2019 and ~~$16.1~~$14.9 million, or ~~$0.91~~$0.84 per basic share, earned during the ~~third~~first quarter ~~2018. Earnings~~2019. The decrease in earnings was impacted by a $12.7 million charge to earnings for the ~~nine months ended September 30, 2019 were $48.5 million, or $2.74 per basic share, compared to $43.5 million, or $2.46 per basic share, earned~~provision for credit losses. The substantial increase in provision for credit losses (formerly provision for loan losses) during the ~~nine~~quarter was primarily attributable to the current COVID-19 pandemic and its expected impact on future net charge-offs. Specifically, increases in the allowance for credit losses (“ACL”) were recognized in allocations related to concentrations of credit in various loan portfolio segments severely impacted by the economic impact of the pandemic, as well as a substantial increase in forecasted reserves due to the current and expected increases in unemployment in the nation and in our market footprint. The following table presents the five industry concentrations that saw increased allocations during the quarter ended March 31, 2020 as a response to increased loss potential due to the COVID-19 pandemic:

	At March 31, 2020 (in millions)						Industry Concentration Allocation (in basis points)
Segment	Industry Concentration Balance Outstanding		Total Anticipated Credit Loss Allocation		Total Industry Concentration Component		Pre- COVID- 19		Post- COVID- 19		Increase in Allocation
Agriculture	$	69.3	$	1.7	$	0.6		60.00		80.00		20.00
Bank holding corporations		38.2		0.6		0.2		10.00		40.00		30.00
Hotel/motel		240.8		5.9		2.4		35.00		100.00		65.00
Lessors of non-residential buildings		228.5		3.9		1.8		30.00		80.00		50.00
Lessors of residential buildings / dwellings		231.5		3.8		1.4		30.00		60.00		30.00

Table excludes those loans that meet the criteria to be individually evaluated.

The impact of this change in the model was an increase in forecasted reserves of approximately $3.5 million. Additionally, the increase in allocation relative to the unemployment rate qualitative factor was 22 basis points or approximately $7.3 million in additionally forecasted reserves.

As stated above, CTBI adopted CECL effective January 1, 2020. The effect of adoption was a $3.0 million increase in the allowance for credit losses (formerly referred to as the allowance for loan losses).

We at Community Trust Bancorp, Inc. are committed to serving the needs of our customers in an ever changing environment. We recognize that COVID-19 is causing major concerns for the communities we serve and our entire country. With this in mind, Community Trust Bank, Inc. has instituted multiple relief actions in an effort to assist our customers during this very difficult time. CTBI’s management team has activated its Pandemic Response Team, with representation from all areas of our company, which meets daily to discuss the current situation, safety, and needs of our customers and employees. We are working diligently with our customers as we all continue to battle COVID-19. Included in the relief actions the bank has implemented are waivers of overdraft/returned item fees and telephone transfer fees for a period of 30 days ending April 22, 2020, suspension of residential foreclosure actions through May 18, 2020, and several loan assistance programs designed to assist those customers who are experiencing, or, are likely to experience, financial difficulties directly related to COVID-19 causing loss of individual income and/or household income. At April 30, 2020, we had 2,837 COVID-19 loan deferrals totaling $681.7 million, consisting of 733 commercial loan deferrals totaling $576.6 million, 446 residential loan deferrals totaling $59.2 million, and 1,558 consumer loan deferrals totaling $32.1 million, in addition to 100 serviced loan deferrals, pursuant to Freddie Mac guidelines, totaling $13.7 million. All of the consumer and mortgage loans were modified for a term of three months ~~ended September 30, 2018.~~while 96.8% of the commercial loans were modified for a term of three months. The consumer and mortgage loans consisted of 100% principal and interest deferrals. In the commercial loan portfolio, 540 loans totaling $429.1 million were principal and interest deferrals, 181 loans totaling $145.0 million were principal only deferrals, 11 loans totaling $1.3 million were interest only deferrals, and one loan of $1.2 million had an interest rate floor reduction to 4.25% from the previous floor of 5% and the contractual principal and interest payment was lowered by $5 thousand for a period of twelve months. These loan deferrals and modifications have been executed consistent with the guidelines of the CARES Act. Pursuant to the CARES Act, these loan deferrals are not included in our nonperforming loans disclosed below. We are also participating in the Paycheck Protection Program (PPP) stemming from the CARES Act passed by Congress as a stimulus response to the potential economic impacts of COVID-19. As of May 3, 2020, we had 2,462 PPP loans authorized by the Small Business Administration totaling $268.3 million. Of these, 2,317 loans totaling $125.1 million were under $350 thousand, 132 loans totaling $97.5 million were between $350 thousand and $2.0 million, and 13 loans totaling $45.7 million were over $2.0 million. We have closed 1,748 of these loans for a total amount of $237.8 million. Our company has also taken many steps to protect the safety of our employees and customers by temporarily adjusting branch operations, decreasing lobby usage, encouraging drive-thru and ATM use along with internet banking, having employees work remotely or work split-shifts when possible, implementing social distancing guidelines, and consolidating operations. Mrs. Hale stated, “While we have altered our operations to protect our customers and employees, we want to thank all of our employees and say how proud we are of their commitment to maintaining a high level of service to all of our customers during these challenging times.”

Quarterly Highlights

❖	Net interest income for the quarter of ~~$36.5~~$36.2 million was ~~$0.5~~$0.1 million, or ~~1.4%~~0.3%, below prior quarter but $0.3 million, or 0.7%, above ~~prior~~first quarter ~~and $0.4 million, or 1.1%, above third quarter 2018.~~2019.

❖

Provision for ~~loan~~credit losses for the quarter ended ~~September 30, 2019 decreased $0.3~~March 31, 2020 increased $10.9 million from prior quarter and ~~$0.3~~$12.5 million from prior year same ~~quarter.~~quarter as a result of the economic impact of the COVID-19 pandemic and the adoption of CECL, as disclosed above.

❖	Our loan portfolio increased ~~$22.6~~$38.9 million, an annualized ~~2.8%~~4.8%, during the quarter and ~~$6.1~~$97.8 million, or ~~an annualized 0.3%~~3.1%, from ~~December~~March 31, ~~2018.~~2019.

❖

Net loan charge-offs for the quarter ended ~~September 30, 2019~~March 31, 2020 were $1.4 million, or ~~0.18%~~0.17% of average loans annualized, compared to ~~$1.6 million, or 0.20%, experienced for the second quarter 2019 and~~ $1.5 million, or 0.19%, experienced for the ~~third~~fourth quarter ~~2018.~~2019 and $1.1 million, or 0.14%, for the first quarter 2019.

❖

Nonperforming loans at ~~$31.4~~$35.4 million increased ~~$7.4 million from June 30, 2019 and $9.4~~$1.8 million from December 31, ~~2018.~~2019 and $10.0 million from March 31, 2019. While ~~both~~ the ~~30-89 days past due and nonaccrual loan categories decreased for the quarter, our~~ loans 90+ days past due category decreased $1.6 million, the nonaccrual loan category increased ~~$9.3~~$3.3 million during the quarter. All categories increased from ~~prior quarter and $12.3 million from prior year same quarter.~~March 31, 2019. Nonperforming assets at ~~$51.3~~$55.2 million increased ~~$4.7 million from June 30, 2019 and $1.9~~$2.1 million from December 31, ~~2018.~~2019 and $4.8 million from March 31, 2019.

❖	Deposits, including repurchase agreements, ~~increased $52.1~~decreased $0.5 million, an annualized ~~5.6%~~0.1%, during the quarter ~~and $79.6~~but increased $11.4 million, or ~~an annualized 3.0%~~0.3%, from ~~December~~March 31, ~~2018.~~2019.

❖

Noninterest income for the quarter ended ~~September 30, 2019~~March 31, 2020 of ~~$12.4~~$11.5 million was a ~~$0.1~~$1.9 million, ~~increase over~~or 13.8%, decrease from prior quarter ~~but~~and a ~~decrease of $0.3~~$0.6 million, or ~~2.2%~~5.3%, decrease from prior year same ~~quarter~~.

quarter.

❖	Noninterest expense for the quarter ended ~~September 30, 2019~~March 31, 2020 of ~~$29.9~~$28.2 million decreased ~~$0.1~~$1.0 million, or ~~0.5%~~3.6%, from prior quarter, ~~but increased $1.8~~and $0.9 million, or ~~6.3%~~3.0%, from prior year same quarter.

❖

The variance in income tax expense from prior quarter is a result of the $3.6 million reversal of the valuation allowance on our deferred tax asset for CTBI’s net operating losses, as a result of the enactment of Kentucky HB458, which is discussed in further detail in the Critical Accounting Policies and Estimates section below.

Provision for loan losses

Average earning assets

Yield on average earning assets,

tax equivalent*

Net interest margin, tax equivalent*

*Yield on average earning assets and net interest margin were computed on a tax equivalent basis using a 21% tax rate.

Secured by real estate

Real estate construction

*Regulatory approval is required and has been obtained to hold these properties beyond the initial period of 5 years. Additional approval may be required to continue to hold these properties should they not be liquidated during the extension period, which is typically one year. To the extent we are not able to sell a foreclosed property in 10 years, we will be required to relinquish ownership of that property.

Liquidity and Market Risk

Impact of Inflation, Changing Prices, and Economic Conditions

Stock Repurchase Program

Critical Accounting Policies and Estimates

As a bank doing business in Kentucky, CTB is subject to a capital-based Kentucky bank franchise tax and exempt from Kentucky corporate income tax. However, in March 2019, Kentucky enacted HB354, which will transition CTB from the bank franchise tax to a corporate income tax beginning January 1, 2021. The current Kentucky corporate income tax rate is 5%. As of March 31, 2019, CTBI recorded a deferred tax liability, net of the federal benefit, of $1.0 million due to the enactment of HB354.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

PART II - OTHER INFORMATION

~~Financial institutions, including CTBI, must transition from LIBOR to an alternative reference rate.~~COVID-19-Related Risk

~~LIBOR will cease~~Since March 13, 2020, the United States has been operating under a state of emergency declared by President Trump in response to ~~exist~~the spread of COVID-19. COVID-19 and related governmental responses have affected economic and financial market conditions as ~~a published rate after 2021.~~ well as the operations, results, and prospects of companies across many industries.

The ~~Federal Reserve through~~coronavirus pandemic has caused increased volatility in financial markets and the Alternative Reference Rate Committee has recommended a replacement benchmark rate, the Secured Overnight Financing Rate. All loans extending beyond 2021 will need to be managed to ensure appropriate benchmark rate replacements are provided forpossibility of prolonged adverse economic conditions. These changes in economic and ~~adopted. Failure to identify and negotiate a replacement benchmark rate and/or update data processing systems~~financial market conditions could result in ~~future~~decreases in demand for products, decreases in market value of loans and securities, impairments of intangible assets (such as goodwill), decreases in income due to interest rate ~~risk not being mitigated~~declines, and increases in customer delinquencies and defaults.There is uncertainty around the duration and breadth of the COVID-19 pandemic, and as ~~intended~~a result the ultimate impact on our business, financial condition or ~~interest being miscalculated, which could adversely impact CTBI’s~~operating results cannot be reasonably estimated at this time. While we expect the impacts of COVID-19 to have an adverse effect on our business, financial condition, and results of operations, we are unable to predict the extent or nature of these impacts at this time. Public health officials have recommended and mandated precautions to mitigate the spread of COVID-19, including prohibitions on congregating in heavily populated areas and shelter-in-place orders or similar measures. As a result, we have temporarily adjusted branch operations, decreased lobby usage, encouraged drive-thru and ATM use along with internet banking, had employees work remotely or work split-shifts when possible, implemented social distancing guidelines, and consolidated operations.

Loan and Credit Losses. To combat the spread of COVID-19, and, in some cases, in response to governmental mandates to close non-essential businesses, many businesses have ceased or substantially reduced operations for an indeterminate period. In addition, individuals may have been laid off, furloughed, or be unable to work as a result of reduced business operations. These situations could lead to a material change in the credit quality of our loan portfolio.

Industry Concentration. Certain industries have been or are likely to be more impacted by COVID-19 than others. The impact to the agriculture industry, bank holding companies, the hotel/motel industry, lessors of non-residential buildings, and lessors of residential buildings/dwellings could lead to significant deterioration in our asset quality.

Small and Mid-Size Business Concentration. It is expected that small and mid-size businesses, many of which rely on continuing cash flow to fund day-to-day operations, may be particularly hard hit by forced closures and other preventative measures taken by federal, state, or local governments. Although government programs have sought, and may further seek, to provide relief to these types of entities, there can be no assurance that these programs will succeed. Also, governments may continue to adopt regulations or promulgate executive orders that restrict or limit banks’ ability to take certain actions with these customers that they would otherwise take in the ordinary course—such as following standard collection and foreclosure procedures. At the same time, it may be the case that more customers are expected to draw on existing lines of credit or seek additional loans to help finance their business operations.

Capital and Liquidity. Market volatility and prolonged periods of economic stress may affect our capital and liquidity. In addition, these factors may limit access to capital markets. Risks to credit portfolios and/or increased draws on outstanding lines of credit could affect capital and liquidity at, and/or result in decreased income or increased losses for, our bank subsidiary. Changes to our capital and liquidity could lead to the need to cease or reduce dividend payments and any formal or informal actions regulators may take to address capital and liquidity concerns.

Suspension of Mortgage and Other Loan Payments and Foreclosures. The federal government signed into law on March 27, 2020 Title IV of the CARES Act, which provides that individuals with single-family, federally backed mortgages may request a 180-day mortgage forbearance (which can be extended another 180 days) due to COVID-19-related difficulties. It is possible that other states or federal regulators take similar measures. The bank has implemented relief actions for our customers including suspension of residential foreclosure actions through May 18, 2020 and several loan assistance programs designed to assist those customers who are experiencing, or, are likely to experience, financial difficulties directly related to COVID-19 causing loss of individual income and/or household income. At April 30, 2020, we had 2,837 COVID-19 loan deferrals totaling $681.7 million. We are also participating in the Paycheck Protection Program (PPP) stemming from the CARES Act passed by Congress as a stimulus response to the potential economic impacts of COVID-19. As of ~~September 30, 2019, CTBI~~May 3, 2020, we had ~~approximately $28.6 million in variable rate~~2,462 PPP loans and $48.8 million in available-for-sale securities with interest rates tied to LIBOR, substantially all of which have maturity dates beyond December 31, 2021. In addition, CTBI has debentures outstanding inauthorized by the ~~principal amount of $57.8 million which mature in 2037 and bear interest at a rate tied to LIBOR.~~Small Business Administration totaling $268.3 million.

~~Moreover, financial institution contracts linked~~Real Estate Market and Real Estate Lending. In addition to ~~LIBOR are widespread~~the actions described above, there is risk that COVID-19 significantly affects the U.S. commercial and ~~intertwined with numerous financial products and services. The downstream effect of unwinding or transitioning such contracts could cause instability and negatively impact financial~~residential real estate markets and, ~~individual institutions. The uncertainty surrounding~~accordingly, our real estate lending business in other ways, including through low U.S. mortgage rates (which reached an all-time low during the ~~transition from LIBOR could adversely affect~~first quarter), decreasing property values (which, among other effects, may both increase the ~~U.S. financial system more broadly.~~risk of defaults and reduce the value of real estate collateral, thereby diminishing recovery in the event of default), and reduced demand for commercial and multifamily real estate and increased vacancies if businesses fail or close locations.

Catastrophes, including Pandemics and Contagious Illnesses. The length of the COVID-19 outbreak is unknown and unpredictable and there is a potential for additional waves of COVID-19 or new strains of coronavirus even after COVID-19 appears contained in an area.

Cybersecurity. We face increased cybersecurity risks due to employees working remotely. Increased levels of remote access create additional opportunities for cybercriminals to exploit vulnerabilities, and employees may be more susceptible to phishing and social engineering attempts due to increased stress caused by the crisis and from balancing family and work responsibilities at home. Cybercriminals may also prey on fears about COVID-19, and take advantage of the current environment in which legitimate information regarding COVID-19 is being frequently and widely disseminated, such as by including malware in emails that appear to include documents providing legitimate information for protecting oneself from COVID-19. In addition, technological resources may be strained due to the number of remote users.

Changes in Consumer Behavior. Consumers affected by COVID-19 may continue to demonstrate changed behavior even after the crisis is over. For example, consumers may decrease discretionary spending on a permanent or long-term basis, certain industries may take longer to recover (particularly those that rely on travel or large gatherings) as consumers may be hesitant to return to full social interaction, and temporary closures of bank branches could result in consumers becoming more comfortable with technology and devaluing face-to-face interaction.

Reliance on Vendors and Other Companies. We rely on vendors and other third parties to provide critical systems and services. COVID-19 presents heightened or novel risks with respect to continuity of critical services. These risks include the possibility of closure or business interruption. In addition, although in most regions subject to a stay-at-home order the definition of essential services generally includes businesses that provide essential services to banks, the definitions vary by state and may result in some vendors not being able to work from their offices.

Changes to Interest Rates. In response to COVID-19, the Federal Reserve reduced the Federal Funds Rate to zero percent in March 2020. The outlook for the remainder of 2020 is uncertain, and there is a possibility that the Federal Reserve keeps interest rates low or even uses negative interest rates if economic conditions warrant. The sudden decrease in interest rates and any risks associated with the possibility of an extended period of operations in a zero- or negative-rate environment, has the potential for significantly decreased profitability.

Other Impacts on Financial Condition. A prolonged pandemic event may have a number of effects on our financial condition. Decreases in our stock price and cash flow projections as a result of COVID-19 could result in goodwill impairment. In addition, a period of prolonged losses or decreased earnings could result in the expiration of deferred tax assets (“DTA”) before we have the opportunity to use some or all of the benefit of the DTA. Changes in our assessment of whether the full benefit of DTAs may be realized could impact our regulatory capital. We may also be at risk of being required to recognize other-than-temporary impairments and/or reduce other comprehensive income.

Impact to Investment Management Business Lines. Volatile market conditions caused by COVID-19 could reduce the value of assets under management and/or cause clients to withdraw funds.

LIBOR Transition Planning. Banking institutions have been planning for the transition away from LIBOR in advance of December 31, 2021, the date that LIBOR is generally expected to cease to exist, although the U.K. Financial Conduct Authority has expressed that it and the Bank of England are assessing the impacts of COVID-19 on progress to meet the expected deadline. It remains unclear, however, whether the cessation of LIBOR will be delayed due to COVID-19 or what form any delay may take, and there are no assurances that there will be a delay. It is also unclear what the duration and severity of COVID-19 will be, and whether this will impact LIBOR transition planning. COVID-19 may also slow regulators’ and others’ efforts to develop and implement alternative reference rates, which could make LIBOR transition planning more difficult, particularly if the cessation of LIBOR is not delayed but alternatives do not develop.

(1) On March 9, 2020, the Board of Directors of CTBI approved an increase to its stock repurchase program of up to an additional 1,000,000 shares of CTBI’s outstanding common stock. At the time the increase was approved, there were 67,370 shares remaining under CTBI’s existing stock repurchase program, which began in December 1998 with the authorization to acquire up to 500,000 shares and was increased by an additional 1,000,000 shares in July 2000 and May 2003. As of March 31, 2020, a total of 2,465,294 shares have been repurchased through this program.

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended ~~September 30, 2019~~
	March 31, 2020
	Or

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _____________ to _____________

Kentucky	61-0979818
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)


346 North Mayo Trail P.O. Box 2947 Pikeville, Kentucky	41502
(Address of principal executive offices)	(Zip code)

~~ctbi~~CTBI	~~NASDAQ~~ The The Nasdaq Stock Market LLC Global Select Market
(Trading symbol)	(Name of exchange on which registered)

(dollars in thousands)	(unaudited) March 31 2020			December 31 2019
Assets:
Cash and due from banks	$	67,728		$	58,680
Interest bearing deposits		124,974			206,003
Federal funds sold		0			0
Cash and cash equivalents		192,702			264,683

Certificates of deposit in other banks		245			245
Debt securities available-for-sale at fair value (amortized cost of $625,914 and $593,945, respectively)		633,479			599,844
Debt securities held-to-maturity at amortized cost (fair value of $0 and $517, respectively)		0			517
Equity securities at fair value		1,721			1,953
Loans held for sale		1,403			1,167

Loans		3,287,541			3,248,664
Allowance for credit losses*		(49,445	)		(35,096	)
Net loans		3,238,096			3,213,568

Premises and equipment, net		43,568			44,046
Right-of-use asset		14,210			14,550
Federal Home Loan Bank stock		11,354			10,474
Federal Reserve Bank stock		4,887			4,887
Goodwill		65,490			65,490
Bank owned life insurance		69,609			69,269
Mortgage servicing rights		2,481			3,263
Other real estate owned		19,816			19,480
Accrued interest receivable		14,680			14,836
Other assets		38,904			37,731
Total assets	$	4,352,645		$	4,366,003

Liabilities and shareholders’ equity:
Deposits:
Noninterest bearing	$	860,844		$	865,760
Interest bearing		2,534,264			2,539,812
Total deposits		3,395,108			3,405,572

Repurchase agreements		236,908			226,917
Federal funds purchased		4,907			7,906
Advances from Federal Home Loan Bank		411			415
Long-term debt		57,841			57,841
Deferred taxes		2,719			5,110
Operating lease liability		13,400			13,729
Finance lease liability		1,453			1,456
Accrued interest payable		3,447			2,839
Other liabilities		23,529			29,332
Total liabilities		3,739,723			3,751,117

Shareholders’ equity:
Preferred stock, 300,000 shares authorized and unissued		-			-
Common stock, $5 par value, shares authorized 25,000,000; shares outstanding 2020 – 17,787,274; 2019 – 17,793,165		88,936			88,966
Capital surplus		224,277			224,907
Retained earnings		294,223			296,760
Accumulated other comprehensive income, net of tax		5,486			4,253
Total shareholders’ equity		612,922			614,886

Total liabilities and shareholders’ equity	$	4,352,645		$	4,366,003

(dollars in thousands)	(unaudited) September 30 2019			December 31 2018
Assets:
Cash and due from banks	$	68,472		$	64,632
Interest bearing deposits		153,349			75,718
Federal funds sold		0			1,100
Cash and cash equivalents		221,821			141,450

Certificates of deposit in other banks		245			3,920
Securities available-for-sale at fair value (amortized cost of $643,164 and $602,114, respectively)		649,976			593,746
Securities held-to-maturity at amortized cost (fair value of $517 and $649, respectively)		517			649
Equity securities at fair value		1,743			1,173
Loans held for sale		1,943			2,461

Loans		3,214,785			3,208,638
Allowance for loan and lease losses		(34,811	)		(35,908	)
Net loans		3,179,974			3,172,730

Premises and equipment, net		44,223			45,291
Right-of-use asset		14,702			0
Federal Home Loan Bank stock		10,794			14,713
Federal Reserve Bank stock		4,887			4,887
Goodwill		65,490			65,490
Bank owned life insurance		68,929			67,076
Mortgage servicing rights		2,904			3,607
Other real estate owned		19,833			27,273
Other assets		49,682			57,150
Total assets	$	4,337,663		$	4,201,616

Liabilities and shareholders’ equity:
Deposits:
Noninterest bearing	$	849,582		$	803,316
Interest bearing		2,539,973			2,502,634
Total deposits		3,389,555			3,305,950

Repurchase agreements		228,755			232,712
Federal funds purchased		5,900			1,180
Advances from Federal Home Loan Bank		421			436
Long-term debt		57,841			59,341
Deferred taxes		4,286			3,363
Operating lease liability		13,826			0
Finance lease liability		1,460			0
Other liabilities		30,101			34,484
Total liabilities		3,732,145			3,637,466

Shareholders’ equity:
Preferred stock, 300,000 shares authorized and unissued		-			-
Common stock, $5 par value, shares authorized 25,000,000; shares outstanding 2019 – 17,777,251; 2018 – 17,732,853		88,886			88,665
Capital surplus		224,210			223,161
Retained earnings		287,493			258,935
Accumulated other comprehensive income (loss), net of tax		4,929			(6,611	)
Total shareholders’ equity		605,518			564,150

Total liabilities and shareholders’ equity	$	4,337,663		$	4,201,616

	Three Months Ended
	March 31
(in thousands except per share data)	2020		2019
Interest income:
Interest and fees on loans, including loans held for sale	$	40,465	$	40,910
Interest and dividends on securities
Taxable		3,046		3,163
Tax exempt		527		678
Interest and dividends on Federal Reserve Bank and Federal Home Loan Bank stock		140		296
Interest on Federal Reserve Bank deposits		496		786
Other, including interest on federal funds sold		25		56
Total interest income		44,699		45,889

Interest expense:
Interest on deposits		6,942		8,075
Interest on repurchase agreements and federal funds purchased		1,004		1,156
Interest on advances from Federal Home Loan Bank		0		39
Interest on long-term debt		509		636
Total interest expense		8,455		9,906

Net interest income		36,244		35,983
Provision for credit losses*		12,707		190
Net interest income after provision for credit losses		23,537		35,793

Noninterest income:
Service charges on deposit accounts		5,916		6,120
Gains on sales of loans, net		483		330
Trust and wealth management income		2,884		2,575
Loan related fees		95		573
Bank owned life insurance		573		558
Brokerage revenue		372		261
Securities gains		249		356
Other noninterest income		949		1,397
Total noninterest income		11,521		12,170

Noninterest expense:
Officer salaries and employee benefits		2,751		3,374
Other salaries and employee benefits		12,280		12,585
Occupancy, net		1,985		2,051
Equipment		721		739
Data processing		1,978		1,763
Bank franchise tax		1,812		1,715
Legal fees		477		430
Professional fees		569		531
Advertising and marketing		634		792
FDIC insurance		147		177
Other real estate owned provision and expense		869		771
Repossession expense		135		377
Amortization of limited partnership investments		888		777
Other noninterest expense		2,975		3,001
Total noninterest expense		28,221		29,083

Income before income taxes		6,837		18,880
Income taxes		258		3,941
Net income		6,579		14,939

Other comprehensive income:
Unrealized holding gains on securities available-for-sale:
Unrealized holding gains arising during the period		2,147		6,124
Less: Reclassification adjustments for realized gains included in net income		481		1
Tax expense		433		1,286
Other comprehensive income, net of tax		1,233		4,837
Comprehensive income	$	7,812	$	19,776

Basic earnings per share	$	0.37	$	0.84
Diluted earnings per share	$	0.37	$	0.84

Weighted average shares outstanding-basic		17,752		17,712
Weighted average shares outstanding-diluted		17,763		17,723

(in thousands except per share and share amounts)	Common Shares			Common Stock			Capital Surplus			Retained Earnings			Accumulated Other Comprehensive Income (Loss), Net of Tax			Total
Balance, December 31, 2018		17,732,853		$	88,665		$	223,161		$	258,935		$	(6,611	)	$	564,150
Implementation of ASU 2016-02											(480	)		0			(480	)
Balance, January 1, 2019		17,732,853			88,665			223,161			258,455			(6,611	)		563,670
Net income											14,939						14,939
Other comprehensive income, net of tax of $1,286														4,837			4,837
Cash dividends declared ($0.36 per share)											(6,378	)					(6,378	)
Issuance of common stock		19,065			95			163									258
Vesting of restricted stock		(12,186	)		(61	)		61									0
Issuance of restricted stock		27,921			140			(140	)								0
Forfeiture of restricted stock		(59	)		0			0									0
Stock-based compensation								181									181
Balance, March 31, 2019		17,767,594		$	88,839		$	223,426		$	267,016		$	(1,774	)	$	577,507

	September 30, 2019
(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	$	118	$	195	$	35	$	348	$	93,186	$	93,534	$	0
Commercial secured by real estate		3,639		2,571		15,706		21,916		1,152,848		1,174,764		11,481
Equipment lease financing		0		0		0		0		651		651		0
Commercial other		1,126		3,235		3,041		7,402		381,130		388,532		2,674
Residential:
Real estate construction		502		115		283		900		61,959		62,859		4
Real estate mortgage		1,124		5,501		8,376		15,001		707,631		722,632		5,434
Home equity		1,053		232		703		1,988		108,675		110,663		264
Consumer:
Consumer direct		732		321		67		1,120		148,380		149,500		67
Consumer indirect		3,085		654		406		4,145		507,505		511,650		406
Total	$	11,379	$	12,824	$	28,617	$	52,820	$	3,161,965	$	3,214,785	$	20,330

	Year Ended December 31, 2018
(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	$	4,100	$	4,100	$	0	$	3,923	$	171
Commercial secured by real estate		29,645		31,409		0		30,250		1,412
Commercial other		8,285		9,982		0		8,774		530
Real estate construction		0		0		0		106		0
Real estate mortgage		1,882		1,882		0		1,666		41

Loans with a specific valuation allowance:
Commercial construction		127		127		50		42		0
Commercial secured by real estate		1,854		2,983		605		2,051		1
Commercial other		473		473		146		285		16

Totals:
Commercial construction		4,227		4,227		50		3,965		171
Commercial secured by real estate		31,499		34,392		605		32,301		1,413
Commercial other		8,758		10,455		146		9,059		546
Real estate construction		0		0		0		106		0
Real estate mortgage		1,882		1,882		0		1,666		41
Total	$	46,366	$	50,956	$	801	$	47,097	$	2,171

	September 30, 2018
(in thousands)	Recorded Balance		Unpaid Contractual Principal Balance		Specific Allowance
Loans without a specific valuation allowance:
Commercial construction	$	2,804	$	2,804	$	0
Commercial secured by real estate		31,632		33,538		0
Commercial other		8,268		10,034		0
Real estate mortgage		1,878		1,880		0

Loans with a specific valuation allowance:
Commercial secured by real estate		1,980		3,116		641
Commercial other		321		321		95

Totals:
Commercial construction		2,804		2,804		0
Commercial secured by real estate		33,612		36,654		641
Commercial other		8,589		10,355		95
Real estate mortgage		1,878		1,880		0
Total	$	46,883	$	51,693	$	736

	Three Months Ended September 30, 2018				Nine Months Ended September 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	$	2,865	$	26	$	3,795	$	132
Commercial secured by real estate		30,216		349		30,588		1,073
Commercial other		8,518		125		8,857		405
Real estate construction		0		0		106		0
Real estate mortgage		1,882		13		1,596		24

Loans with a specific valuation allowance:
Commercial secured by real estate		2,005		0		2,112		1
Commercial other		339		8		220		12

Totals:
Commercial construction		2,865		26		3,795		132
Commercial secured by real estate		32,221		349		32,700		1,074
Commercial other		8,857		133		9,077		417
Real estate construction		0		0		106		0
Real estate mortgage		1,882		13		1,596		24
Total	$	45,825	$	521	$	47,274	$	1,647

(in thousands)	Operating Leases			Finance Leases
2019	$	409		$	17
2020		1,655			68
2021		1,671			75
2022		1,657			75
2023		1,578			75
Thereafter		10,914			2,060
Total lease payments		17,884			2,370
Less imputed interest		(4,058	)		(910	)
Total	$	13,826		$	1,460

(in thousands)	Operating Lease Payments
2019	$	1,999
2020		1,710
2021		1,737
2022		1,760
2023		1,696
Thereafter		13,031
Total	$	21,933

(dollars in thousands)							Change 2019 vs. 2018												Change 2020 vs. 2019
Nine Months Ended September 30	2019			2018			Amount			Percent
Three Months Ended March 31													2020			2019			Amount			Percent
Net interest income	$	108,529		$	105,875		$	2,654			2.5	%	$	36,244		$	35,983		$	261			0.7	%
Provision for loan losses		3,006			4,418			(1,412	)		(32.0	)
Provision for credit losses														12,707			190			12,517			6,282.6	%
Noninterest income		36,811			39,713			(2,902	)		(7.3	)		11,521			12,170			(649	)		(5.3	)
Noninterest expense		88,995			89,226			(231	)		(0.3	)		28,221			29,083			(862	)		(3.0	)
Income taxes		4,807			8,425			(3,618	)		(42.9	)		258			3,941			(3,683	)		(93.5	)
Net income	$	48,532		$	43,519		$	5,013			11.5	%	$	6,579		$	14,939		$	(8,360	)		(56.0	)%

Average earning assets	$	4,032,753		$	3,905,673		$	127,080			3.3	%	$	4,093,833		$	3,966,483		$	127,350			3.2	%

Yield on average earning assets, tax equivalent*		4.65	%		4.34	%		0.31	%		7.1	%		4.41	%		4.71	%		(0.30	)%		(6.5	)%
Cost of interest bearing funds		1.46	%		0.97	%		0.49	%		50.3	%		1.19	%		1.43	%		(0.24	)%		(16.3	)%
Net interest margin, tax equivalent*		3.62	%		3.65	%		(0.03	)%		(0.8	)%		3.58	%		3.70	%		(0.12	)%		(3.4	)%

Pay Date	Record Date	Amount Per Share		Record Date	Amount Per Share
April 1, 2020				March 15, 2020	$	0.38
January 1, 2020				December 15, 2019	$	0.38
October 1, 2019	September 15, 2019	$	0.38	September 15, 2019	$	0.38
July 1, 2019	June 15, 2019	$	0.36	June 15, 2019	$	0.36
April 1, 2019	March 15, 2019	$	0.36	March 15, 2019	$	0.36
January 1, 2019	December 15, 2018	$	0.36	December 15, 2018	$	0.36
October 1, 2018	September 15, 2018	$	0.36
July 1, 2018	June 15, 2018	$	0.33

Period	Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced plan or programs (1)		Maximum number of shares that may be purchased under the plans or programs (1)
January 2020		0	$	--				67,370
February 2020		0		--				67,370
March 2020		32,664		--		32,664		1,034,706
Total		32,664	$	33.64		32,664		1,034,706

Item 3.	Defaults Upon Senior Securities	None

Item 4.	Mine Safety Disclosure	Not applicable

Item 5.	Other Information:
	CTBI’s Principal Executive Officer and Principal Financial Officer have furnished to the SEC the certifications with respect to this Form 10-Q that are required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002

Item 6.	Exhibits:
	(1) Certifications Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Exhibit 31.1 Exhibit 31.2
	(2) Certifications Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Exhibit 32.1 Exhibit 32.2
	(3) XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL	Exhibit 101.INS
	(4) XBRL Taxonomy Extension Schema Document	Exhibit 101.SCH
	(5) XBRL Taxonomy Extension Calculation Linkbase	Exhibit 101.CAL
	(6) XBRL Taxonomy Extension Definition Linkbase	Exhibit 101.DEF
	(7) XBRL Taxonomy Extension Label Linkbase	Exhibit 101.LAB
	(8) XBRL Taxonomy Extension Presentation Linkbase	Exhibit 101.PRE
	(9) Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)	Exhibit 104

	COMMUNITY TRUST BANCORP, INC.

Date: ~~November~~May 8, ~~2019~~2020	By:

	/s/ Jean R. Hale
	Jean R. Hale
	Chairman, President, and Chief Executive Officer

	/s/ Kevin J. Stumbo
	Kevin J. Stumbo
	Executive Vice President, Chief Financial Officer,
	and Treasurer