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Loans
 3 Months Ended
Mar. 31, 2023
Loans [Abstract]  
Loans
Note 4 – Loans


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

(in thousands)
  
March 31
2023
    
December 31
2022
  
Hotel/motel
  
$
348,876
    
$
343,640
  
Commercial real estate residential
    
385,328
      
372,914
  
Commercial real estate nonresidential
    
750,498
      
762,349
  
Dealer floorplans
    
75,443
      
77,533
  
Commercial other
    
316,955
      
312,422
  
Commercial loans
    
1,877,100
      
1,868,858
  
                 
Real estate mortgage
    
846,435
      
824,996
  
Home equity lines
    
124,096
      
120,540
  
Residential loans
    
970,531
      
945,536
  
                 
Consumer direct
    
157,158
      
157,504
  
Consumer indirect
    
772,570
      
737,392
  
Consumer loans
    
929,728
      
894,896
  
                 
Loans and lease financing
  
$
3,777,359
    
$
3,709,290
  


The loan portfolios presented above are net of unearned fees and unamortized premiums. Unearned fees included above totaled $1.1 million as of March 31, 2023 and $1.0 million as of December 31, 2022 while the unamortized premiums on the indirect lending portfolio totaled $29.7 million as of March 31, 2023 and $28.5 million as of December 31, 2022.


CTBI has segregated and evaluates its loan portfolio through nine portfolio segments with similar risk characteristics. CTBI serves customers in small and mid-sized communities in eastern, northeastern, central, and south central Kentucky, southern West Virginia, and northeastern Tennessee.  Therefore, CTBI’s exposure to credit risk is significantly affected by changes in these communities.


Hotel/motel loans are a significant concentration for CTBI, representing approximately 9.2% of total loans.  This industry has unique risk characteristics as it is highly susceptible to changes in the domestic and global economic environments, which can cause the industry to experience substantial volatility.  Additionally, any hotel/motel construction loans would be included in this segment as CTBI’s construction loans are primarily completed as one loan going from construction to permanent financing.  These loans are originated based on the borrower’s ability to service the debt and secondarily based on the fair value of the underlying collateral.


Commercial real estate residential loans are commercial purpose construction and permanent financed loans for commercial purpose 1-4 family/multi-family properties.  These loans are originated based on the borrower’s ability to service the debt and secondarily based on the fair value of the underlying collateral.


Commercial real estate nonresidential loans are secured by nonfarm, nonresidential properties, farmland, and other commercial real estate.  These loans are originated based on the borrower’s ability to service the debt and secondarily based on the fair value of the underlying collateral.  Construction for commercial real estate nonresidential loans are also included in this segment as these loans are generally one loan for construction to permanent financing.


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


Commercial other loans consist of agricultural loans, receivable financing, loans to financial institutions, loans for purchasing or carrying securities, the remaining balance of the loans made under the Paycheck Protection Program (“PPP”) established by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), and other commercial purpose loans.  Commercial loans are underwritten based on the borrower’s ability to service debt from the business’s underlying cash flows.  As a general practice, we obtain collateral such as equipment, or other assets, although such loans may be uncollateralized but guaranteed.


Residential real estate loans are a mixture of fixed rate and adjustable rate first and second lien residential mortgage loans and also include real estate construction loans which are typically for owner-occupied properties.  The terms of the real estate construction loans are generally short-term with permanent financing upon completion.  As a policy, CTBI holds adjustable rate loans and sells the majority of its fixed rate first lien mortgage loans into the secondary market.  Changes in interest rates or market conditions may impact a borrower’s ability to meet contractual principal and interest payments.  Residential real estate loans are secured by real property.


Home equity lines are primarily revolving adjustable rate credit lines secured by real property.


Consumer direct loans are a mixture of fixed rate and adjustable rate products comprised of unsecured loans, consumer revolving credit lines, deposit secured loans, and all other consumer purpose loans.


Consumer indirect loans are primarily consumer 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 $0.2 million at March 31, 2023 and $0.1 million at December 31, 2022.



The following tables present the balance in the ACL for the periods ended March 31, 2023,  December 31, 2022, and March 31, 2022:

   
Three Months Ended
March 31, 2023
  
(in thousands)
  
Beginning
Balance
    
Provision
Charged to
Expense
    
Losses
Charged Off
    
Recoveries
    
Ending
Balance
  
ACL
                              
Hotel/motel
  
$
5,171
    
$
116
    
$
0
    
$
0
    
$
5,287
  
Commercial real estate residential
    
4,894
      
186
      
0
      
77
      
5,157
  
Commercial real estate nonresidential
    
9,419
      
(553
)
    
0
      
144
      
9,010
  
Dealer floorplans
    
1,776
      
(82
)
    
0
      
0
      
1,694
  
Commercial other
    
5,285
      
(416
)
    
(187
)
    
100
      
4,782
  
Real estate mortgage
    
7,932
      
21
      
(40
)
    
4
      
7,917
  
Home equity
    
1,106
      
(64
)
    
0
      
2
      
1,044
  
Consumer direct
    
1,694
      
105
      
(156
)
    
103
      
1,746
  
Consumer indirect
    
8,704
      
1,803
      
(1,382
)
    
921
      
10,046
  
Total
  
$
45,981
    
$
1,116
    
$
(1,765
)
  
$
1,351
    
$
46,683
  

   
Year Ended
December 31, 2022
  
(in thousands)
  
Beginning
Balance
    
Provision
Charged to
Expense
    
Losses
Charged Off
    
Recoveries
    
Ending
Balance
  
ACL
                              
Hotel/motel
  
$
5,080
    
$
307
    
$
(216
)
  
$
0
    
$
5,171
  
Commercial real estate residential
    
3,986
      
951
      
(92
)
    
49
      
4,894
  
Commercial real estate nonresidential
    
8,884
      
(154
)
    
(46
)
    
735
      
9,419
  
Dealer floorplans
    
1,436
      
340
      
0
      
0
      
1,776
  
Commercial other
    
4,422
      
947
      
(1,082
)
    
998
      
5,285
  
Real estate mortgage
    
7,637
      
466
      
(223
)
    
52
      
7,932
  
Home equity
    
866
      
257
      
(37
)
    
20
      
1,106
  
Consumer direct
    
1,951
      
(210
)
    
(609
)
    
562
      
1,694
  
Consumer indirect
    
7,494
      
2,001
      
(3,041
)
    
2,250
      
8,704
  
Total
  
$
41,756
    
$
4,905
    
$
(5,346
)
  
$
4,666
    
$
45,981
  

   
Three Months Ended
March 31, 2022
  
(in thousands)
  
Beginning
Balance
    
Provision
Charged to
Expense
    
Losses
Charged Off
    
Recoveries
    
Ending
Balance
  
ACL
                              
Hotel/motel
  
$
5,080
    
$
(153
)
  
$
(216
)
  
$
0
    
$
4,711
  
Commercial real estate residential
    
3,986
      
110
      
(31
)
    
5
      
4,070
  
Commercial real estate nonresidential
    
8,884
      
174
      
0
      
111
      
9,169
  
Dealer floorplans
    
1,436
      
83
      
0
      
0
      
1,519
  
Commercial other
    
4,422
      
478
      
(157
)
    
101
      
4,844
  
Real estate mortgage
    
7,637
      
97
      
(93
)
    
21
      
7,662
  
Home equity
    
866
      
(33
)
    
(19
)
    
5
      
819
  
Consumer direct
    
1,951
      
(180
)
    
(170
)
    
186
      
1,787
  
Consumer indirect
    
7,494
      
299
      
(634
)
    
569
      
7,728
  
Total
  
$
41,756
    
$
875
    
$
(1,320
)
  
$
998
    
$
42,309
  
 
CTBI derived our ACL balance by using vintage modeling for the consumer and residential portfolios.  Static pool models incorporating losses by credit risk rating were developed to determine credit loss balances for the commercial loan segments.



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


CTBI also has an inherent model risk allocation included in our ACL calculation to allow for certain known model limitations as well as other potential risks not quantified elsewhere.  One limitation is the inability to completely identify revolving line of credit within the commercial other segment.


With the continued impact of global uncertainty, the current historically high rate of inflation, the significant rising rate environment, and the fact that there is no immediate end foreseen, management continues to have a significant event allocation factor to adjust for this uncertainty.


During the quarter ended March 31, 2023, an allocation was made for collateral values in segments with industry concentrations.  With respect to collateral risk, the ACL Committee discussed that the rapid rise in interest rates would result in an increase in capitalization rates used to value income-producing commercial real estate, resulting in lower collateral values and an increased risk of loss.  An increase in such capitalization rates would be expected to correspond to a decrease in the values of income-producing commercial real estate.



Our provision for credit losses was $1.1 million for the first quarter 2023, compared to $1.5 million for the quarter ended December 31, 2022 and $0.9 million for the first quarter 2022.  Our reserve coverage (allowance for credit losses to nonperforming loans) at March 31, 2023 was 382.3%, compared to 300.4% at December 31, 2022 and 309.1% at March 31, 2022.  Our credit loss reserve as a percentage of total loans outstanding at March 31, 2023 remained at 1.24% from December 31, 2022 compared to 1.20% at March 31, 2022.



Refer to Note 1 to the condensed consolidated financial statements for further information regarding our nonaccrual policy.  Nonaccrual loans and loans 90 days past due and still accruing segregated by class of loans for both March 31, 2023 and December 31, 2022 were as follows:

 
March 31, 2023
  
 (in thousands)
  
Nonaccrual Loans
with No ACL
    
Nonaccrual Loans
with ACL
    
90+ and Still
Accruing
    
Total
Nonperforming
Loans
  
                         
Hotel/motel
  
$
0
    
$
0
    
$
0
    
$
0
  
Commercial real estate residential
    
0
      
352
      
55
      
407
  
Commercial real estate nonresidential
    
0
      
1,054
      
790
      
1,844
  
Commercial other
    
0
      
991
      
544
      
1,535
  
Total commercial loans
    
0
      
2,397
      
1,389
      
3,786
  
                                 
Real estate mortgage
    
0
      
3,358
      
4,174
      
7,532
  
Home equity lines
    
0
      
238
      
495
      
733
  
Total residential loans
    
0
      
3,596
      
4,669
      
8,265
  
                                 
Consumer direct
    
0
      
0
      
28
      
28
  
Consumer indirect
    
0
      
0
      
132
      
132
  
Total consumer loans
    
0
      
0
      
160
      
160
  
                                 
Loans and lease financing
  
$
0
    
$
5,993
    
$
6,218
    
$
12,211
  

 
December 31, 2022
  
 (in thousands)
  
Nonaccrual Loans
with No ACL
    
Nonaccrual Loans
with ACL
    
90+ and Still
Accruing
    
Total
Nonperforming
Loans
  
                         
Hotel/motel
  
$
0
    
$
0
    
$
0
    
$
0
  
Commercial real estate residential
    
0
      
355
      
258
      
613
  
Commercial real estate nonresidential
    
0
      
1,116
      
1,947
      
3,063
  
Commercial other
    
0
      
982
      
369
      
1,351
  
Total commercial loans
    
0
      
2,453
      
2,574
      
5,027
  
                                 
Real estate mortgage
    
0
      
4,069
      
4,929
      
8,998
  
Home equity lines
    
0
      
291
      
487
      
778
  
Total residential loans
    
0
      
4,360
      
5,416
      
9,776
  
                                 
Consumer direct
    
0
      
0
      
41
      
41
  
Consumer indirect
    
0
      
0
      
465
      
465
  
Total consumer loans
    
0
      
0
      
506
      
506
  
                                 
Loans and lease financing
  
$
0
    
$
6,813
    
$
8,496
    
$
15,309
  

Discussion of the Nonaccrual Policy


The accrual of interest income on loans 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 the collection of interest is doubtful.  Cash payments received on nonaccrual loans generally are applied against principal, and interest income is only recorded once principal recovery is reasonably assured.  Any loans greater than 90 days past due must be well secured and in the process of collection to continue accruing interest.  See Note 1 to the condensed consolidated financial statements for further discussion on our nonaccrual policy.


The following tables present CTBI’s loan portfolio aging analysis, segregated by class, as of March 31, 2023 and December 31, 2022 (includes loans 90 days past due and still accruing as well):

 
March 31, 2023
  
(in thousands)
  
30-59 Days
Past Due
    
60-89
Days Past
Due
    
90+ Days
Past Due
    
Total Past
Due
    
Current
    
Total Loans
  
Hotel/motel
  
$
0
    
$
0
    
$
0
    
$
0
    
$
348,876
    
$
348,876
  
Commercial real estate residential
    
597
      
663
      
371
      
1,631
      
383,697
      
385,328
  
Commercial real estate nonresidential
    
1,513
      
125
      
1,447
      
3,085
      
747,413
      
750,498
  
Dealer floorplans
    
0
      
0
      
0
      
0
      
75,443
      
75,443
  
Commercial other
    
1,183
      
473
      
1,321
      
2,977
      
313,978
      
316,955
  
Total commercial loans
    
3,293
      
1,261
      
3,139
      
7,693
      
1,869,407
      
1,877,100
  
                                                 
Real estate mortgage
    
1,872
      
2,246
      
6,219
      
10,337
      
836,098
      
846,435
  
Home equity lines
    
761
      
93
      
617
      
1,471
      
122,625
      
124,096
  
Total residential loans
    
2,633
      
2,339
      
6,836
      
11,808
      
958,723
      
970,531
  
                                                 
Consumer direct
    
284
      
13
      
28
      
325
      
156,833
      
157,158
  
Consumer indirect
    
2,006
      
593
      
132
      
2,731
      
769,839
      
772,570
  
Total consumer loans
    
2,290
      
606
      
160
      
3,056
      
926,672
      
929,728
  
                                                 
Loans and lease financing
  
$
8,216
    
$
4,206
    
$
10,135
    
$
22,557
    
$
3,754,802
    
$
3,777,359
  

                    December 31, 2022  
(in thousands)
  
30-59 Days
Past Due
    
60-89
Days Past
Due
    
90+ Days
Past Due
    
Total Past
Due
    
Current
    
Total Loans
  
Hotel/motel
  
$
0
    
$
0
    
$
0
    
$
0
    
$
343,640
    
$
343,640
  
Commercial real estate residential
    
602
      
225
      
574
      
1,401
      
371,513
      
372,914
  
Commercial real estate nonresidential
    
2,549
      
395
      
2,611
      
5,555
      
756,794
      
762,349
  
Dealer floorplans
    
0
      
0
      
0
      
0
      
77,533
      
77,533
  
Commercial other
    
1,029
      
850
      
496
      
2,375
      
310,047
      
312,422
  
Total commercial loans
    
4,180
      
1,470
      
3,681
      
9,331
      
1,859,527
      
1,868,858
  
                                                 
Real estate mortgage
    
869
      
3,402
      
7,067
      
11,338
      
813,658
      
824,996
  
Home equity lines
    
786
      
44
      
740
      
1,570
      
118,970
      
120,540
  
Total residential loans
    
1,655
      
3,446
      
7,807
      
12,908
      
932,628
      
945,536
  
                                                 
Consumer direct
    
555
      
126
      
41
      
722
      
156,782
      
157,504
  
Consumer indirect
    
4,407
      
764
      
465
      
5,636
      
731,756
      
737,392
  
Total consumer loans
    
4,962
      
890
      
506
      
6,358
      
888,538
      
894,896
  
                                                 
Loans and lease financing
  
$
10,797
    
$
5,806
    
$
11,994
    
$
28,597
    
$
3,680,693
    
$
3,709,290
  


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


Hotel/motel loans are a significant concentration for CTBI, representing approximately 9.2% 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.


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.


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


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


Commercial other loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower.  The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value.  Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis.  In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from our customers.  As we underwrite our equipment lease financing in a manner similar to our commercial loan portfolio described below, the risk characteristics for this portfolio mirror that of the commercial loan portfolio. CTBI’s participation in the CARES Act PPP loan program had previously resulted in a new loan segment of unsecured commercial other loans that are 100% guaranteed by the U.S. Small Business Administration (“SBA”). As the balances are now less than $1.0 million, these loans have been collapsed into the commercial other segment.  These loans, which are subject to forgiveness, have maturities of either two or three to five years, depending on when the loans were made.  These loans currently have no allowance for credit losses.


With respect to residential loans that are secured by 1-4 family residences and are generally owner occupied, CTBI generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded.  Home equity loans are typically secured by a subordinate interest in 1-4 family residences. Residential construction loans are handled through the home mortgage area of the bank.  The repayment ability of the borrower and the maximum loan-to-value ratio are calculated using the normal mortgage lending criteria.  Draws are processed based on percentage of completion stages including normal inspection procedures.  Such loans generally convert to term loans after the completion of construction.


Consumer loans are secured by consumer assets such as automobiles or recreational vehicles.  Some consumer loans are unsecured such as small installment loans and certain lines of credit.  Our determination of a borrower’s ability to repay these loans is primarily dependent on the personal income and credit rating of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels.  Repayment can also be impacted by changes in property values on residential properties.  Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

The indirect lending area of the bank is generally responsible for purchasing/funding consumer contracts for new and used automobiles, as well as ATVs and motorcycles.  Our indirect portfolio consists primarily of automobile loans at 94%.  The dealers generate loan applications which are digitally submitted to the indirect loan processing area for decisioning.  Loan approvals, denials, or conditional decisions are based on the overall creditworthiness and repayment ability of the borrowers.  In addition, other factors such as collateral value versus requested loan amount, past installment history related to auto loans, and past previous credit experience with bank and others is taken into consideration.  On occasion, dealers may be required to provide limited or full recourse to qualify an application.  Monitoring of the indirect lending area of the bank is accomplished primarily by consistent review of delinquency and loss ratios within the indirect portfolio by management.  In depth review of the portfolio is presented by the indirect lending manager on a quarterly basis to the Loan Portfolio Risk Management Committee.  Indirect lending is also monitored by the loan review, internal audit, and compliance functions of the bank.  From these reviews, any identified issues are escalated for remediation.  In addition, the indirect lending policy and procedures are consistently updated and strengthened from these reviews.

Credit Quality Indicators:


CTBI categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors.  CTBI also considers the fair value of the underlying collateral and the strength and willingness of the guarantor(s).  CTBI analyzes commercial loans individually by classifying the loans as to credit risk.  Loans classified as loss, doubtful, substandard, or special mention are reviewed quarterly by CTBI for further deterioration or improvement to determine if appropriately classified and valued if deemed impaired.  All other commercial loan reviews are completed every 12 to 18 months.  In addition, during the renewal process of any loan, as well as if a loan becomes past due or if other information becomes available, CTBI will evaluate the loan grade.  CTBI uses the following definitions for risk ratings:

➢
Pass grades include investment grade, low risk, moderate risk, and acceptable risk loans.  The loans range from loans that have no chance of resulting in a loss to loans that have a limited chance of resulting in a loss.  Customers in this grade have excellent to fair credit ratings.  The cash flows are adequate to meet required debt repayments.

➢
Watch graded loans are loans that warrant extra management attention but are not currently criticized.  Loans on the watch list may be potential troubled credits or may warrant “watch” status for a reason not directly related to the asset quality of the credit.  The watch grade is a management tool to identify credits which may be candidates for future classification or may temporarily warrant extra management monitoring.

➢
Other assets especially mentioned (OAEM) reflects loans that are currently protected but are potentially weak.  These loans constitute an undue and unwarranted credit risk but not to the point of justifying a classification of substandard.  The credit risk may be relatively minor yet constitute an unwarranted risk in light of circumstances surrounding a specific asset. Loans in this grade display potential weaknesses which may, if unchecked or uncorrected, inadequately protect CTBI’s credit position at some future date.  The loans may be adversely affected by economic or market conditions.

➢
Substandard grading indicates that the loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged.  These loans have a well-defined weakness or weaknesses that jeopardize the orderly liquidation of the debt with the distinct possibility that CTBI will sustain some loss if the deficiencies are not corrected.

➢
Doubtful graded loans have the weaknesses inherent in the substandard grading with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.  The probability of loss is extremely high, but because of certain important and reasonably specific pending factors which may work to CTBI’s advantage or strengthen the asset(s), its classification as an estimated loss is deferred until its more exact status may be determined.  Pending factors include proposed merger, acquisition, or liquidation procedures, capital injection, perfecting liens on additional collateral, and refinancing plans.


The following tables present the credit risk profile of CTBI’s commercial loan portfolio based on rating category and payment activity, segregated by class of loans and based on last credit decision or year of origination:

March 31, 2023
  
Term Loans Amortized Cost Basis by Origination Year
  
(in thousands)
  
2023
    
2022
    
2021
    
2020
    
2019
    
Prior
    
Revolving
Loans
    
Total
  
Hotel/motel
                                                
 Risk rating:
                                                
Pass
  
$
10,397
    
$
144,932
    
$
28,671
    
$
17,556
    
$
47,870
    
$
47,835
    
$
3,545
    
$
300,806
  
Watch
    
848
      
6,977
      
8,980
      
5,485
      
3,433
      
13,376
      
0
      
39,099
  
OAEM
    
0
      
0
      
7,038
      
0
      
0
      
1,933
      
0
      
8,971
  
Substandard
    
0
      
0
      
0
      
0
      
0
      
0
      
0
      
0
  
Doubtful
    
0
      
0
      
0
      
0
      
0
      
0
      
0
      
0
  
Total hotel/motel
  

11,245
    

151,909
    

44,689
    

23,041
    

51,303
    

63,144
    

3,545
    

348,876
  
                                                                 
Commercial real estate residential
                                                                
 Risk rating:
                                                                
Pass
  

35,101
    

109,784
    

106,509
    

36,768
    

13,441
    

44,088
    

13,828
    

359,519
  
Watch
    
315
      
1,163
      
756
      
1,575
      
632
      
8,446
      
63
      
12,950
  
OAEM
    
0
      
0
      
0
      
0
      
181
      
326
      
28
      
535
  
Substandard
    
79
      
656
      
4,361
      
954
      
179
      
6,095
      
0
      
12,324
  
Doubtful
    
0
      
0
      
0
      
0
      
0
      
0
      
0
      
0
  
Total commercial real estate residential
  

35,495
    

111,603
    

111,626
    

39,297
    

14,433
    

58,955
    

13,919
    

385,328
  
                                                                 
Commercial real estate nonresidential
                                                                
 Risk rating:
                                                                
Pass
  

23,413
    

156,272
    

170,048
    

81,516
    

61,444
    

169,219
    

23,175
    

685,087
  
Watch
    
307
      
3,139
      
5,703
      
10,036
      
7,684
      
10,851
      
1,661
      
39,381
  
OAEM
    
0
      
2,535
      
0
      
0
      
0
      
84
      
0
      
2,619
  
Substandard
    
856
      
1,955
      
2,538
      
4,597
      
3,162
      
9,999
      
0
      
23,107
  
Doubtful
    
0
      
0
      
0
      
0
      
0
      
304
      
0
      
304
  
Total commercial real estate nonresidential
  

24,576
    

163,901
    

178,289
    

96,149
    

72,290
    

190,457
    

24,836
    

750,498
  
                                                                 
Dealer floorplans
                                                                
 Risk rating:
                                                                
Pass
  

0
    

0
    

0
    

0
    

0
    

0
    

75,443
    

75,443
  
Watch
    
0
      
0
      
0
      
0
      
0
      
0
      
0
      
0
  
OAEM
    
0
      
0
      
0
      
0
      
0
      
0
      
0
      
0
  
Substandard
    
0
      
0
      
0
      
0
      
0
      
0
      
0
      
0
  
Doubtful
    
0
      
0
      
0
      
0
      
0
      
0
      
0
      
0
  
Total dealer floorplans
  

0
    

0
    

0
    

0
    

0
    

0
    

75,443
    

75,443
  
                                                                 
Commercial other
                                                                
 Risk rating:
                                                                
Pass
  

22,368
    

64,329
    

57,072
    

32,436
    

7,059
    

24,241
    

85,994
    

293,499
  
Watch
    
372
      
1,177
      
526
      
221
      
177
      
885
      
5,789
      
9,147
  
OAEM
    
0
      
30
      
0
      
0
      
0
      
0
      
66
      
96
  
Substandard
    
386
      
5,405
      
5,143
      
823
      
316
      
690
      
746
      
13,509
  
Doubtful
    
0
      
466
      
129
      
0
      
109
      
0
      
0
      
704
  
Total commercial other
  

23,126
    

71,407
    

62,870
    

33,480
    

7,661
    

25,816
    

92,595
    

316,955
  
                                                                 
Commercial other current period gross charge-offs
     156       20       0       0       0       11       0       187  
                                                                 
Commercial loans
                                                                
 Risk rating:
                                                                
Pass
  

91,279
    

475,317
    

362,300
    

168,276
    

129,814
    

285,383
    

201,985
    

1,714,354
  
Watch
    
1,842
      
12,456
      
15,965
      
17,317
      
11,926
      
33,558
      
7,513
      
100,577
  
OAEM
    
0
      
2,565
      
7,038
      
0
      
181
      
2,343
      
94
      
12,221
  
Substandard
    
1,321
      
8,016
      
12,042
      
6,374
      
3,657
      
16,784
      
746
      
48,940
  
Doubtful
    
0
      
466
      
129
      
0
      
109
      
304
      
0
      
1,008
  
Total commercial loans
  
$
94,442
    
$
498,820
    
$
397,474
    
$
191,967
    
$
145,687
    
$
338,372
    
$
210,338
    
$
1,877,100
  
                                                                 
Total commercial loans current period gross charge-offs
   $
156     $
20     $
0     $
0     $
0     $
11     $
0     $
187  

December 31, 2022
  
Term Loans Amortized Cost Basis by Origination Year
  
(in thousands)
  
2022
    
2021
    
2020
    
2019
    
2018
    
Prior
    
Revolving
Loans
    
Total
  
Hotel/motel
                                                
 Risk rating:
                                                
Pass
  
$
145,262
    
$
36,002
    
$
17,742
    
$
54,328
    
$
13,178
    
$
35,179
    
$
545
    
$
302,236
  
Watch
    
7,921
      
8,996
      
5,523
      
3,453
      
0
      
13,555
      
0
      
39,448
  
OAEM
    
0
      
0
      
0
      
0
      
0
      
1,956
      
0
      
1,956
  
Substandard
    
0
      
0
      
0
      
0
      
0
      
0
      
0
      
0
  
Doubtful
    
0
      
0
      
0
      
0
      
0
      
0
      
0
      
0
  
Total hotel/motel
  

153,183
    

44,998
    

23,265
    

57,781
    

13,178
    

50,690
    

545
    

343,640
  
                                                                 
Commercial real estate residential
                                                                
 Risk rating:
                                                                
Pass
  

119,826
    

110,963
    

38,423
    

15,467
    

10,492
    

36,307
    

14,297
    

345,775
  
Watch
    
1,474
      
898
      
1,675
      
848
      
2,136
      
7,015
      
152
      
14,198
  
OAEM
    
0
      
0
      
0
      
39
      
0
      
0
      
29
      
68
  
Substandard
    
182
      
4,289
      
1,878
      
346
      
3,639
      
2,539
      
0
      
12,873
  
Doubtful
    
0
      
0
      
0
      
0
      
0
      
0
      
0
      
0
  
Total commercial real estate residential
  

121,482
    

116,150
    

41,976
    

16,700
    

16,267
    

45,861
    

14,478
    

372,914
  
                                                                 
Commercial real estate nonresidential
                                                                
 Risk rating:
                                                                
Pass
  

175,220
    

171,311
    

80,932
    

70,848
    

44,099
    

137,575
    

23,166
    

703,151
  
Watch
    
3,331
      
5,765
      
10,090
      
2,178
      
1,962
      
10,022
      
1,550
      
34,898
  
OAEM
    
19
      
0
      
0
      
0
      
0
      
90
      
0
      
109
  
Substandard
    
1,939
      
2,537
      
4,877
      
3,135
      
508
      
10,865
      
25
      
23,886
  
Doubtful
    
0
      
0
      
0
      
0
      
0
      
305
      
0
      
305
  
Total commercial real estate nonresidential
  

180,509
    

179,613
    

95,899
    

76,161
    

46,569
    

158,857
    

24,741
    

762,349
  
                                                                 
Dealer floorplans
                                                                
 Risk rating:
                                                                
Pass
  

0
    

0
    

0
    

0
    

0
    

0
    

77,153
    

77,153
  
Watch
    
0
      
0
      
0
      
0
      
0
      
0
      
380
      
380
  
OAEM
    
0
      
0
      
0
      
0
      
0
      
0
      
0
      
0
  
Substandard
    
0
      
0
      
0
      
0
      
0
      
0
      
0
      
0
  
Doubtful
    
0
      
0
      
0
      
0
      
0
      
0
      
0
      
0
  
Total dealer floorplans
  

0
    

0
    

0
    

0
    

0
    

0
    

77,533
    

77,533
  
                                                                 
Commercial other
                                                                
 Risk rating:
                                                                
Pass
  

78,846
    

60,550
    

34,841
    

8,922
    

2,333
    

23,961
    

77,355
    

286,808
  
Watch
    
1,622
      
393
      
604
      
217
      
159
      
780
      
6,402
      
10,177
  
OAEM
    
30
      
0
      
0
      
0
      
0
      
0
      
30
      
60
  
Substandard
    
6,090
      
5,489
      
885
      
356
      
143
      
758
      
952
      
14,673
  
Doubtful
    
466
      
129
      
0
      
109
      
0
      
0
      
0
      
704
  
Total commercial other
  

87,054
    

66,561
    

36,330
    

9,604
    

2,635
    

25,499
    

84,739
    

312,422
  
                                                                 
Commercial loans
                                                                
 Risk rating:
                                                                
Pass
  

519,154
    

378,826
    

171,938
    

149,565
    

70,102
    

233,022
    

192,516
    

1,715,123
  
Watch
    
14,348
      
16,052
      
17,892
      
6,696
      
4,257
      
31,372
      
8,484
      
99,101
  
OAEM
    
49
      
0
      
0
      
39
      
0
      
2,046
      
59
      
2,193
  
Substandard
    
8,211
      
12,315
      
7,640
      
3,837
      
4,290
      
14,162
      
977
      
51,432
  
Doubtful
    
466
      
129
      
0
      
109
      
0
      
305
      
0
      
1,009
  
Total commercial loans
  
$
542,228
    
$
407,322
    
$
197,470
    
$
160,246
    
$
78,649
    
$
280,907
    
$
202,036
    
$
1,868,858
  


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:

March 31, 2023
  
Term Loans Amortized Cost Basis by Origination Year
  
(in thousands)
  
2023
    
2022
    
2021
    
2020
    
2019
    
Prior
    
Revolving
Loans
    
Total
  
Home equity lines
                                                
Performing
  
$
0
    
$
0
    
$
0
    
$
0
    
$
0
    
$
9,768
    
$
113,595
    
$
123,363
  
Nonperforming
    
0
      
0
      
0
      
0
      
0
      
491
      
242
      
733
  
Total home equity lines
  

0
    

0
    

0
    

0
    

0
    

10,259
    

113,837
    

124,096
  
                                                                 
Mortgage loans
                                                                
Performing
  

34,180
    

182,233
    

173,212
    

129,393
    

61,486
    

258,399
    

0
    

838,903
  
Nonperforming
    
0
      
0
      
167
      
0
      
756
      
6,609
      
0
      
7,532
  
Total mortgage loans
  

34,180
    

182,233
    

173,379
    

129,393
    

62,242
    

265,008
    

0
    

846,435
  
                                                                 
Mortgage loans current period gross charge-offs
     0       0       0       0       0       40       0       40  
                                                                 
Residential loans
                                                                
Performing
  

34,180
    

182,233
    

173,212
    

129,393
    

61,486
    

268,167
    

113,595
    

962,266
  
Nonperforming
    
0
      
0
      
167
      
0
      
756
      
7,100
      
242
      
8,265
  
Total residential loans
  
$
34,180
    
$
182,233
    
$
173,379
    
$
129,393
    
$
62,242
    
$
275,267
    
$
113,837
    
$
970,531
  
                                                                 
Total residential loans current period gross charge-offs
   $
0     $
0     $
0     $
0     $
0     $
40     $
0     $
40  
                                                                 
Consumer direct loans
                                                                
Performing
  
$
18,047
    
$
53,577
    
$
37,333
    
$
21,420
    
$
9,991
    
$
16,762
    
$
0
    
$
157,130
  
Nonperforming
    
0
      
28
      
0
      
0
      
0
      
0
      
0
      
28
  
Total consumer direct loans
  

18,047
    

53,605
    

37,333
    

21,420
    

9,991
    

16,762
    

0
    

157,158
  
                                                                 
Total consumer direct loans current period gross charge-offs
     0       80       34       29       12       1       0       156  
                                                                 
Consumer indirect loans
                                                                
Performing
  

112,812
    

338,385
    

152,303
    

102,696
    

39,298
    

26,944
    

0
    

772,438
  
Nonperforming
    
0
      
16
      
68
      
21
      
7
      
20
      
0
      
132
  
Total consumer indirect loans
  

112,812
    

338,401
    

152,371
    

102,717
    

39,305
    

26,964
    

0
    

772,570
  
                                                                 
Total consumer indirect loans current period gross charge-offs
     0       525       617       153       44       43       0       1,382  
                                                                 
Consumer loans
                                                                
Performing
  

130,859
    

391,962
    

189,636
    

124,116
    

49,289
    

43,706
    

0
    

929,568
  
Nonperforming
    
0
      
44
      
68
      
21
      
7
      
20
      
0
      
160
  
Total consumer loans
  
$
130,859
    
$
392,006
    
$
189,704
    
$
124,137
    
$
49,296
    
$
43,726
    
$
0
    
$
929,728
  
                                                                 
Total consumer loans current period gross charge-offs
   $
0     $
605     $
651     $
182     $
56     $
44     $
0     $
1,538  

December 31, 2022
  
Term Loans Amortized Cost Basis by Origination Year
  
(in thousands)
  
2022
    
2021
    
2020
    
2019
    
2018
    
Prior
    
Revolving
Loans
    
Total
  
Home equity lines
                                                
Performing
  
$
0
    
$
0
    
$
0
    
$
0
    
$
0
    
$
10,195
    
$
109,567
    
$
119,762
  
Nonperforming
    
0
      
0
      
0
      
0
      
0
      
502
      
276
      
778
  
Total home equity lines
  

0
    

0
    

0
    

0
    

0
    

10,697
    

109,843
    

120,540
  
                                                                 
Mortgage loans
                                                                
Performing
  

176,736
    

177,469
    

132,795
    

62,415
    

30,473
    

236,110
    

0
    

815,998
  
Nonperforming
    
0
      
282
      
98
      
791
      
422
      
7,405
      
0
      
8,998
  
Total mortgage loans
  

176,736
    

177,751
    

132,893
    

63,206
    

30,895
    

243,515
    

0
    

824,996
  
                                                                 
Residential loans
                                                                
Performing
  

176,736
    

177,469
    

132,795
    

62,415
    

30,473
    

246,305
    

109,567
    

935,760
  
Nonperforming
    
0
      
282
      
98
      
791
      
422
      
7,907
      
276
      
9,776
  
Total residential loans
  
$
176,736
    
$
177,751
    
$
132,893
    
$
63,206
    
$
30,895
    
$
254,212
    
$
109,843
    
$
945,536
  
                                                                 
Consumer direct loans
                                                                
Performing
  
$
62,239
    
$
42,014
    
$
23,921
    
$
11,166
    
$
6,766
    
$
11,357
    
$
0
    
$
157,463
  
Nonperforming
    
25
      
11
      
5
      
0
      
0
      
0
      
0
      
41
  
Total consumer direct loans
  

62,264
    

42,025
    

23,926
    

11,166
    

6,766
    

11,357
    

0
    

157,504
  
                                                                 
Consumer indirect loans
                                                                
Performing
  

371,079
    

168,513
    

116,267
    

45,748
    

26,247
    

9,073
    

0
    

736,927
  
Nonperforming
    
65
      
251
      
96
      
30
      
1
      
22
      
0
      
465
  
Total consumer indirect loans
  

371,144
    

168,764
    

116,363
    

45,778
    

26,248
    

9,095
    

0
    

737,392
  
                                                                 
Consumer loans
                                                                
Performing
  

433,318
    

210,527
    

140,188
    

56,914
    

33,013
    

20,430
    

0
    

894,390
  
Nonperforming
    
90
      
262
      
101
      
30
      
1
      
22
      
0
      
506
  
Total consumer loans
  
$
433,408
    
$
210,789
    
$
140,289
    
$
56,944
    
$
33,014
    
$
20,452
    
$
0
    
$
894,896
  

* 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 was $3.2 million at March 31, 2023.  The total of consumer mortgage loans secured by real estate properties for which formal foreclosure proceedings have resumed with restricted parameters was $3.3 million at December 31, 2022.


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

 
March 31, 2023
  
(in thousands)
  
Number of
Loans
    
Recorded
Investment
    
Specific
Reserve
  
Hotel/motel
    
2
    
$
8,193
    
$
0
  
Commercial real estate residential
    
3
      
6,380
      
0
  
Commercial real estate nonresidential
    
6
      
11,712
      
0
  
Commercial other
    
2
      
8,043
      
0
  
Total collateral dependent loans
    
13
    
$
34,328
    
$
0
  

 
December 31, 2022
  
(in thousands)
  
Number of
Loans
    
Recorded
Investment
    
Specific
Reserve
  
Hotel/motel
    
1
    
$
1,168
    
$
0
  
Commercial real estate residential
    
4
      
7,786
      
0
  
Commercial real estate nonresidential
    
8
      
14,718
      
200
  
Commercial other
    
2
      
8,926
      
1,000
  
Total collateral dependent loans
    
15
    
$
32,598
    
$
1,200
  

 
March 31, 2022
  
(in thousands)
  
Number of
Loans
    
Recorded
Investment
    
Specific
Reserve
  
Hotel/motel
    
1
    
$
8,348
    
$
0
  
Commercial real estate residential
    
4
      
7,119
      
0
  
Commercial real estate nonresidential
    
11
      
19,827
      
200
  
Commercial other
    
4
      
11,634
      
300
  
Total collateral dependent loans
    
20
    
$
46,928
    
$
500
  


The hotel/motel, commercial real estate residential, and commercial real estate nonresidential segments are all collateralized with real estate.  The two loans listed in the commercial other segment at March 31, 2023 are collateralized by inventory, equipment, and accounts receivable.


Certain loans have been modified where the customer is facing financial difficulty and economic concessions were granted to borrowers consisting of reductions in the interest rates, payment extensions, forgiveness of principal, and forbearances.  Those loans, segregated by class of loans and concession granted, are presented below as of March 31, 2023:

 
Interest Rate Reduction
  
Term Extension
  
(in thousands)
Amortized
Cost at March
31, 2023
  
% of total
  
Amortized
Cost at March
31, 2023
  
% of total
  
Hotel/motel
  
$
0
      
0.00
%
  
$
0
      
0.00
%
Commercial real estate residential
    
358
      
0.09
      
1,369
      
0.36
  
Commercial real estate nonresidential
    
4,506
      
0.60
      
4,715
      
0.63
  
Dealer floorplans
    
0
      
0.00
      
0
      
0.00
  
Commercial other
    
0
      
0.00
      
963
      
0.30
  
Commercial loans
    
4,864
      
0.26
      
7,047
      
0.38
  
                                 
Real estate mortgage
    
59
      
0.01
      
2,446
      
0.29
  
Home equity lines
    
0
      
0.00
      
55
      
0.04
  
Residential loans
    
59
      
0.01
      
2,501
      
0.26
  
                                 
Consumer direct
    
0
      
0.00
      
178
      
0.11
  
Consumer indirect
    
0
      
0.00
      
396
      
0.05
  
Consumer loans
    
0
      
0.00
      
574
      
0.06
  
                                 
Loans and lease financing
  
$
4,923
      
0.13
%
  
$
10,122
      
0.27
%
                                 
 
Combination – Term Extension
and Interest Rate Reduction
  
Payment Change
  
(in thousands)
Amortized
Cost at March
  31, 2023
  
% of total
  
Amortized
Cost at March
31, 2023
  
% of total
  
Hotel/motel
   $
0
      
0.00
%
  
$
0
      
0.00
%
Commercial real estate residential
    
45
      
0.01
      
0
      
0.00
  
Commercial real estate nonresidential
    
0
      
0.00
      
0
      
0.00
  
Dealer floorplans
    
0
      
0.00
      
0
      
0.00
  
Commercial other
    
0
      
0.00
      
111
      
0.04
  
Commercial loans
    
45
      
0.00
      
111
      
0.01
  
                                 
Real estate mortgage
    
217
      
0.03
      
0
      
0.00
  
Home equity lines
    
35
      
0.03
      
60
      
0.05
  
Residential loans
    
252
      
0.03
      
60
      
0.01
  
                                 
Consumer direct
    
0
      
0.00
      
21
      
0.01
  
Consumer indirect
    
0
      
0.00
      
0
      
0.00
  
Consumer loans
    
0
      
0.00
      
21
      
0.00
  
                                 
Loans and lease financing
  
$
297
      
0.01
%
  
$
192
      
0.01
%


The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty:

   
Interest Rate Reduction
  
Term Extension
Loan Type
  
Financial Impact
  
Financial Impact
         
Hotel/motel
           
         
Commercial real estate residential
  
Reduced weighted-average contractual interest rate from 9.6% to 8.0%
  
The weighted-average term was not increased with the changes to this portfolio
         
Commercial real estate nonresidential
  
Reduced weighted-average contractual interest rate from 9.5% to 7.5%
  
The weighted-average term was not increased with the changes to this portfolio
         
Dealer floorplans
           
         
Commercial other
      
Added a weighted-average 1.8 years to life of the loans, which reduced monthly payment amounts to the borrower
               
Real estate mortgage
  
Changed from an adjustable rate to a fixed rate mortgage maintaining the contractual interest rate of 3.0%
  
Added a weighted-average 2.3 years to life of the loans, which reduced monthly payment amounts to the borrower
         
Home equity lines
      
Added a weighted-average 6.67 years to life of the loans, which reduced monthly payment amounts to the borrower
               
Consumer direct
      
Added a weighted-average 0.2 years to the life of the loans
         
Consumer indirect
      
Added a weighted-average 0.3 years to the life of the loans

   
Combination – Term Extension and
Interest Rate Reduction
  
Payment Changes
Loan Type
  
Financial Impact
  
Financial Impact
         
Hotel/motel
           
         
Commercial real estate residential
  
Reduced weighted-average contractual interest rate from 10.8% to 6.5% and increased the weighted-average life by 0.3 years
    
         
Commercial real estate nonresidential
           
         
Dealer floorplans
           
         
Commercial other
      
Provided payment changes that will be added to the end of the original loan term
               
Real estate mortgage
  
Reduced weighted-average contractual interest rate from 7.4% to 6.1% and increased the weighted-average life by 12.9 years
    
         
Home equity lines
  
While the weighted-average contractual interest rate did not change materially from 7.7%, the weighted-average life increased by 5.0 years
  
Provided payment changes that will be added to the end of the original loan term
               
Consumer direct
      
Provided payment changes that will be added to the end of the original loan term
         
Consumer indirect
           



Presented below, segregated by class of loans, are TDRs that occurred during the three months ended March 31, 2022 and the year ended December 31, 2022:

   
Three Months Ended
March 31, 2022
  
   
Pre-Modification Outstanding Balance
  
(in thousands)
  
Number of
Loans
    
Term
Modification
    
Combination
    
Total
Modification
  
Hotel/motel
     0     $
0     $
0     $
0  
Commercial real estate residential
    
2
      
154
      
0
      
154
  
Commercial real estate nonresidential
    
2
      
245
      
0
      
245
  
Commercial other
    
4
      
964
      
0
      
964
  
Total commercial loans
    
8
      
1,363
      
0
      
1,363
  
                                 
Real estate mortgage
    
2
      
0
      
916
      
916
  
Total residential loans
    
2
      
0
      
916
      
916
  
                                 
Total troubled debt restructurings
    
10
    
$
1,363
    
$
916
    
$
2,279
  

   
Three Months Ended
March 31, 2022
  
   
Post-Modification Outstanding Balance
  
(in thousands)
  
Number of
Loans
    
Term
Modification
    
Combination
    
Total
Modification
  
Hotel/motel
     0     $
0     $
0     $
0  
Commercial real estate residential
    
2
      
154
      
0
      
154
  
Commercial real estate nonresidential
    
2
      
244
      
0
      
244
  
Commercial other
    
4
      
963
      
0
      
963
  
Total commercial loans
    
8
      
1,361
      
0
      
1,361
  
                                 
Real estate mortgage
    
2
      
0
      
916
      
916
  
Total residential loans
    
2
      
0
      
916
      
916
  
                                 
Total troubled debt restructurings
    
10
    
$
1,361
    
$
916
    
$
2,277
  

   
Year Ended
December 31, 2022
  
   
Pre-Modification Outstanding Balance
  
(in thousands)
  
Number of
Loans
    
Term
Modification
    
Combination
    
Other
    
Total
Modification
  
Commercial real estate residential
    
6
    
$
659
    
$
0
    
$
 66     $
725
  
Commercial real estate nonresidential
    
8
      
1,206
      
0
       118      
1,324
  
Hotel/motel
     0       0       0       0       0  
Commercial other
    
22
      
12,812
      
0
      
66
      
12,878
  
Total commercial loans
    
36
      
14,677
      
0
      
250
      
14,927
  
                                         
Real estate mortgage
    
5
      
593
      
1,309
      
0
      
1,902
  
Total residential loans
    
5
      
593
      
1,309
      
0
      
1,902
  
                             
         
Total troubled debt restructurings
    
41
    
$
15,270
    
$
1,309
    
$
250
    
$
16,829
  


 
Year Ended
December 31, 2022
  
   
Post-Modification Outstanding Balance
  
(in thousands)
  
Number of
Loans
    
Term
Modification
    
Combination
    
Other
    
Total
Modification
  
Commercial real estate residential
    
6
    
$
659
    
$
0
    
$
 66    
$
725
  
Commercial real estate nonresidential
    
8
      
1,342
      
0
      
118
      
1,460
  
Hotel/motel
     0       0       0       0       0  
Commercial other
    
22
      
12,811
      
0
      
66
      
12,877
  
Total commercial loans
    
36
      
14,812
      
0
      
250
      
15,062
  
                                         
Real estate mortgage
    
5
      
593
      
1,309
      
0
      
1,902
  
Total residential loans
    
5
      
593
      
1,309
      
0
      
1,902
  
                                         
Total troubled debt restructurings
    
41
    
$
15,405
    
$
1,309
    
$
250
    
$
16,964
  


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 due to a borrower’s financial difficulty are closely monitored for delinquency as an early indicator of possible future default.  If a loan to a borrower experiencing financial difficulty subsequently defaults, CTBI evaluates the loan for possible further impairment.  The table below represents the payment status of loans to borrowers experiencing financial difficulty.

   
Past Due Status (Amortized Cost Basis)
  
   
Current
      
30-89
      
90
+
  
Nonaccrual
  
Hotel/motel
  
$
0
    
$
0
    
$
0
    
$
0
  
Commercial real estate residential
    
1,772
      
0
      
0
      
0
  
Commercial real estate nonresidential
    
9,222
      
0
      
0
      
0
  
Dealer floorplans
    
0
      
0
      
0
      
0
  
Commercial other
    
720
      
353
      
0
      
0
  
Real estate mortgage
    
2,663
      
59
      
0
      
0
  
Home equity lines
    
150
      
0
      
0
      
0
  
Consumer direct
    
199
      
0
      
0
      
0
  
Consumer indirect
    
381
      
15
      
0
      
0
  
   
$
15,107
    
$
427
    
$
0
    
$
0
  


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.  During the quarter ended March 31, 2023, there were no loans to borrowers experiencing financial difficulty that 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 class of loans, are loans that were modified as TDRs for the quarter ended March 31, 2022 and the year ended December 31, 2022:


  
Three Months Ended
March 31, 2022
    
Year Ended
December 31, 2022
  
(in thousands)
 
Number of
 Loans
    
Recorded
Balance
    
Number of
Loans
    
Recorded
Balance
  
Commercial:
                        
Hotel/motel
    
0
    
$
0
      
0
    
$
0
  
Residential:
                                
Real estate mortgage
    
0
      
0
      
2
      
751
  
Total defaulted restructured loans
    
0
    
$
0
      
2
    
$
751