10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the quarterly period ended March 31, 2018

OR

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _____________ to _______________.

Commission file number           1-13661     

STOCK YARDS BANCORP, INC.     

(Exact name of registrant as specified in its charter)

Kentucky	61-1137529
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1040 East Main Street, Louisville, Kentucky 40206     

(Address of principal executive offices including zip code)

(502) 582-2571

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes     ☑               No     ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).                          Yes ☑               No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act:

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

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

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

Yes     ☐               No     ☑

The number of shares of the registrant’s Common Stock, no par value, outstanding as of April 24, 2018 was 22,731,897.

Stock Yards Bancorp, inc. and subsidiary

Index

Item		Page
part I – financial information
Item 1.	Financial Statements
The following consolidated financial statements of Stock Yards Bancorp, Inc. and Subsidiary are submitted herewith:
	Consolidated Balance Sheets March 31, 2018 (Unaudited) and December 31, 2017	3
	Consolidated Statements of Income (Unaudited) for the three months ended March 31, 2018 and 2017	4
	Consolidated Statements of Comprehensive Income (Unaudited) for the three months ended March 31, 2018 and 2017	5
	Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) for the three months ended March 31, 2018 and 2017	6
	Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31, 2018 and 2017	7
	Notes to Consolidated Financial Statements (Unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	43
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	66
Item 4.	Controls and Procedures	66
part II – other information
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	67
Item 6.	Exhibits	67

1

Stock Yards Bancorp, inc. and subsidiary

Index

PART I – FINANCIAL INFORMATION

Glossary of Acronyms and Terms

The following listing provides a comprehensive reference of common acronyms and terms used throughout the document:

ASU	Accounting Standards Update
Bancorp	Stock Yards Bancorp, Inc.
Bank	Stock Yards Bank & Trust Company
BOLI	Bank Owned Life Insurance
BP	Basis Point = 1/100th of one percent
COSO	Committee of Sponsoring Organizations
CRA	Community Reinvestment Act of 1977
Dodd-Frank Act	Dodd-Frank Wall Street Reform and Consumer Protection Act
EPS	Earnings Per Share
FASB	Financial Accounting Standards Board
FDIC	Federal Deposit Insurance Corporation
FHA	Federal Housing Administration
FHLB	Federal Home Loan Bank
FHLMC	Federal Home Loan Mortgage Corporation
FNMA	Federal National Mortgage Association
GNMA	Government National Mortgage Association
LIBOR	London Interbank Offered Rate
MSR	Mortgage Servicing Right
OAEM	Other Assets Especially Mentioned
OREO	Other Real Estate Owned
PSU	Performance Stock Unit
RSU	Restricted Stock Unit
SAR	Stock Appreciation Right
SEC	Securities and Exchange Commission
TDR	Troubled Debt Restructuring
US	GAAP United States Generally Accepted Accounting Principles
VA	U.S. Department of Veterans Affairs
WM&T	Wealth management and Trust

2

Item 1.   Financial Statements

STOCK YARDS BANCORP, INC. AND SUBSIDIARY

Consolidated Balance Sheets

March 31, 2018 (unaudited) and December 31, 2017

(In thousands, except share data)

	March 31,			December 31,
	2018			2017
Assets
Cash and due from banks	$	41,622		$	41,982
Federal funds sold and interest bearing due from banks		15,254			97,266
Cash and cash equivalents		56,876			139,248
Mortgage loans held for sale		4,239			2,964
Securities available-for-sale (amortized cost of $605,670 in 2018 and $577,406 in 2017)		598,081			574,524
Federal Home Loan Bank stock		8,876			7,646
Loans		2,512,388			2,409,570
Less allowance for loan losses		24,203			24,885
Net loans		2,488,185			2,384,685
Premises and equipment, net		41,684			41,655
Bank owned life insurance		32,236			32,049
Accrued interest receivable		8,026			8,369
Other assets		47,277			48,506
Total assets	$	3,285,480		$	3,239,646
Liabilities and Stockholders’ Equity
Deposits:
Non-interest bearing	$	681,936		$	674,697
Interest bearing		1,891,428			1,903,598
Total deposits		2,573,364			2,578,295
Securities sold under agreements to repurchase		67,892			70,473
Federal funds purchased and other short-term borrowings		215,233			161,352
Federal Home Loan Bank advances		49,140			49,458
Accrued interest payable		284			232
Other liabilities		41,865			46,192
Total liabilities		2,947,778			2,906,002
Stockholders’ equity:
Preferred stock, no par value. Authorized 1,000,000 shares; no shares issued or outsanding		-			-
Common stock, no par value. Authorized 40,000,000 shares; issued and outstanding 22,730,380 and 22,679,362 shares in 2018 and 2017, respectively		36,627			36,457
Additional paid-in capital		32,917			31,924
Retained earnings		274,002			267,193
Accumulated other comprehensive loss		(5,844	)		(1,930	)
Total stockholders’ equity		337,702			333,644
Total liabilities and stockholders’ equity	$	3,285,480		$	3,239,646

See accompanying notes to unaudited consolidated financial statements.

3

STOCK YARDS BANCORP, INC., AND SUBSIDIARY

Consolidated Statements of Income (Unaudited)

For the three months ended March 31, 2018 and 2017

	March 31,
(In thousands, except per share data)	2018		2017
Interest income
Loans	$	27,048	$	24,060
Federal funds sold and interest bearing deposits		268		134
Mortgage loans held for sale		35		44
Securities
Taxable		2,138		2,114
Tax-exempt		241		281
Total interest income		29,730		26,633
Interest expense
Deposits		2,077		1,163
Short term borrowing		123		54
Long term debt		235		232
Total interest expense		2,435		1,449
Net interest income		27,295		25,184
Provision for loan losses		735		900
Net interest income after provision for loan losses		26,560		24,284
Non-interest income
Wealth management and trust services		5,500		5,094
Deposit service charges		1,511		1,565
Debit and credit cards		1,508		1,406
Treasury management		947		956
Mortgage banking		576		702
Net investment product sales commissions and fees		404		386
Bank owned life insurance		187		204
Other		290		331
Total non-interest income		10,923		10,644
Non-interest expenses
Compensation		10,970		10,669
Employee benefits		2,633		2,742
Net occupancy and equipment		1,818		1,907
Technology and communication		2,196		1,848
Marketing and business development		646		445
Postage, printing and supplies		391		371
Legal and professional		493		429
FDIC insurance		242		230
Amortization/impairment of investments in tax credit partnerships		-		616
Capital and deposit based taxes		852		764
Other		786		974
Total non-interest expenses		21,027		20,995
Income before income taxes		16,456		13,933
Income tax expense		3,052		3,142
Net income	$	13,404	$	10,791
Net income per share, basic	$	0.59	$	0.48
Net income per share, diluted	$	0.58	$	0.47
Average common shares:
Basic		22,577		22,492
Diluted		22,942		23,002

See accompanying notes to unaudited consolidated financial statements.

4

STOCK YARDS BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Comprehensive Income (Unaudited)

For the three months ended March 31, 2018 and 2017

(In thousands)

	Three months ended
	March 31,
	2018			2017
Net income	$	13,404		$	10,791
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities available for sale:
Unrealized gains (losses) arising during the period, net of tax of $(989) and $370, respectively		(3,718	)		689
Unrealized losses on hedging instruments:
Unrealized gains (losses) arising during the period, net of tax benefit of $82 and $47, respectively		310			85
Other comprehensive income (loss), net of tax		(3,408	)		774
Comprehensive income	$	9,996		$	11,565

See accompanying notes to unaudited consolidated financial statements.

5

STOCK YARDS BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

For the three months ended March 31, 2018 and 2017

(In thousands, except per share data)

													Accumulated
	Common stock						Additional						other
	Number of						paid-in			Retained			comprehensive
	shares			Amount			capital			earnings			income (loss)			Total
Balance December 31, 2016		22,617		$	36,250		$	26,682		$	252,439		$	(1,499	)	$	313,872
Net income		-			-			-			10,791			-			10,791
Other comprehensive income, net of tax		-			-			-			-			774			774
Stock compensation expense		-			-			660			-			-			660
Stock issued for share-based awards, net of withholdings to satisfy employee tax obligations upon award		47			155			1,716			(3,976	)		-			(2,105	)
Cash dividends, $0.19 per share		-			-			-			(4,305	)		-			(4,305	)
Shares cancelled		(3	)		(10	)		(56	)		66			-			-
Balance March 31, 2017		22,661		$	36,395		$	29,002		$	255,015		$	(725	)	$	319,687
Balance December 31, 2017		22,679		$	36,457		$	31,924		$	267,193		$	(1,930	)	$	333,644
Net income		-			-			-			13,404			-			13,404
Other comprehensive income, net of tax		-			-			-			-			(3,408	)		(3,408	)
Adoption of Accounting Standard Update 2018-02											506			(506	)		-
Stock compensation expense		-			-			823			-			-			823
Stock issued for share-based awards, net of withholdings to satisfy employee tax obligations upon award		52			174			205			(1,914	)		-			(1,535	)
Cash dividends, $0.23 per share		-			-			-			(5,226	)		-			(5,226	)
Shares cancelled		(1	)		(4	)		(35	)		39			-			-
Balance March 31, 2018		22,730		$	36,627		$	32,917		$	274,002		$	(5,844	)	$	337,702

See accompanying notes to unaudited consolidated financial statements.

6

STOCK YARDS BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows (Unaudited)

For the three months ended March 31, 2018 and 2017

(In thousands)

	2018			2017
Operating activities:
Net income	$	13,404		$	10,791
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		735			900
Depreciation, amortization and accretion, net		1,326			2,280
Deferred income tax provision		488			25
Gain on sales of mortgage loans held for sale		(314	)		(406	)
Origination of mortgage loans held for sale		(18,245	)		(20,839	)
Proceeds from sale of mortgage loans held for sale		17,284			20,574
Bank owned life insurance income		(187	)		(204	)
(Gain) on the disposal of premises and equipment		(6	)		-
(Gain) on the sale of foreclosed assets		(109	)		-
Stock compensation expense		823			660
Excess tax benefits from share-based compensation arrangements		(316	)		(1,013	)
Decrease (increase) in accrued interest receivable and other assets		25			(1,125	)
(Decrease) Increase in accrued interest payable and other liabilities		(3,978	)		3,947
Net cash provided by operating activities		10,930			15,590
Investing activities:
Purchases of securities available for sale		(199,946	)		(99,988	)
Proceeds from maturities of securities available for sale		171,308			114,297
Purchase of Federal Home Loan Bank stock		(1,230	)		-
Net (increase) decrease in loans		(104,505	)		32,171
Purchases of premises and equipment		(1,111	)		(308	)
Proceeds from disposal of premises and equipment		215			-
Proceeds from sale of foreclosed assets		2,658			1,043
Net cash (used in) provided by investing activities		(132,611	)		47,215
Financing activities:
Net (decrease) increase in deposits		(4,931	)		23,707
Net increase (decrease) in securities sold under agreements to repurchase and federal funds purchased		51,300			(38,293	)
Proceeds from Federal Home Loan Bank advances		30,000			30,000
Repayments of Federal Home Loan Bank advances		(30,318	)		(30,320	)
Repurchase common stock for performing stock units		(156	)		(216	)
Common stock repurchases of restricted shares surrendered for taxes		(1,379	)		(1,889	)
Cash dividends paid		(5,207	)		(4,286	)
Net cash provided by (used in) financing activities		39,309			(21,297	)
Net increase (decrease) in cash and cash equivalents		(82,372	)		41,508
Cash and cash equivalents at beginning of period		139,248			47,973
Cash and cash equivalents at end of period	$	56,876		$	89,481
Supplemental cash flow information:
Income tax payments	$	-		$	-
Cash paid for interest		2,383			1,437
Supplemental non-cash activity:
Transfers from loans to foreclosed assets	$	270		$	-

See accompanying notes to unaudited consolidated financial statements.

7

Stock Yards Bancorp, inc. and subsidiary

Notes to Consolidated Financial Statements (Unaudited)

(1) Summary of Significant Accounting Policies

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all information and footnotes required by U.S. generally accepted accounting principles (US GAAP) for complete financial statements. The consolidated unaudited financial statements of Stock Yards Bancorp, Inc. (“Bancorp”) and its subsidiary reflect all adjustments (consisting only of adjustments of a normal recurring nature) which are, in the opinion of management, necessary for a fair presentation of financial condition and results of operations for the interim periods.

The unaudited consolidated financial statements include the accounts of Stock Yards Bancorp, Inc. and its wholly-owned subsidiary, Stock Yards Bank & Trust Company (“Bank”). Significant inter-company transactions and accounts have been eliminated in consolidation. In preparing the unaudited consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of certain assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of related revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, valuation of available-for sale securities, other real estate owned and income tax assets, and estimated liabilities and expense.

A description of other significant accounting policies is presented in the notes to Consolidated Financial Statements for the year ended December 31, 2017 included in Stock Yards Bancorp, Inc.’s Annual Report on Form 10-K. Certain reclassifications have been made in the prior year financial statements to conform to current year classifications.

Interim results for the three month period ended March 31, 2018 are not necessarily indicative of the results for the entire year.

Critical Accounting Policies

The allowance for loan losses is management’s estimate of probable losses inherent in the loan portfolio as of the balance sheet date. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

Management has identified the accounting policy related to the allowance and provision for loan losses as critical to the understanding of Bancorp’s results of operations and discussed this conclusion with the Audit Committee of the Board of Directors. Since the application of this policy requires significant management assumptions and estimates, it could result in materially different amounts to be reported if conditions or underlying circumstances were to change. The provision for loan losses reflects an allowance methodology driven by risk ratings, historical losses, specific loan loss allocations, and qualitative factors. Assumptions include many factors such as changes in borrowers’ financial condition which can change quickly or historical loss ratios related to certain loan portfolios which may or may not be indicative of future losses. Consistent with Bancorp’s methodology, in the first quarter of 2018, Bancorp extended the historical period used to capture Bancorp’s historical loss ratios from 28 quarters to 32 quarters in order to capture the effects of a full economic cycle. This extension of the historical period was applied to all classes and segments of our portfolio. The expansion of the look-back period for the quantitative historical loss rate caused us to review the overall methodology for the qualitative factors to ensure we were appropriately capturing the risk not addressed in the quantitative historical loss rate. Management reviews the appropriateness of the look-back period annually, and believes the extension of the look-back period is appropriate to capture the impact of a full economic cycle and more accurately represents the current level of risk inherent in the loan portfolio.

8

Stock Yards Bancorp, inc. and subsidiary

As a result of extending the look-back period and making normal updates to other assumptions in the allowance model in the first quarter of 2018, the allowance decreased $682,000.  The change in look-back period was consistent with management’s judgment regarding the risk in the loan portfolio and consistent with internal analysis showing continued strong asset quality related not only in the Company’s loan portfolio, but the Bank’s peer group as well, validating the continuation of the current economic cycle and thus the reasoning to extend the look-back period.  Management will continue to evaluate the appropriateness of the look-back period based on the status of the economic cycle.  To the extent that management’s assumptions prove incorrect, results from operations could be materially affected by a higher or lower provision for loan losses.  The accounting policy related to the allowance for loan losses is applicable to the commercial banking segment of Bancorp.  The impact and any associated risks related to this policy on Bancorp’s business operations are discussed in the “Allowance for Loan Losses” section below.

Bancorp’s allowance calculation includes allocations to loan portfolio segments at March 31, 2018 for qualitative factors including, among other factors, local economic and business conditions in each of our primary markets, quality and experience of lending staff and management, exceptions to lending policies, levels of and trends in past due loans and loan classifications, concentrations of credit such as collateral type, trends in portfolio growth, trends in value of underlying collateral for collateral-dependent loans, effect of other external factors such as the national economic and business trends, quality and depth of the loan review function, and management’s judgement of current trends and potential risks. Bancorp utilizes the sum of all allowance amounts derived as described above as the appropriate level of allowance for loan and lease losses. Changes in criteria used in this evaluation or availability of new information could cause the allowance to be increased or decreased in future periods. In addition, bank regulatory agencies, as part of their examination process, may require adjustments to the allowance for loan and lease losses based on their judgments and estimates.

(2) Securities

The amortized cost, unrealized gains and losses, and fair value of securities available-for-sale follows:

(In thousands)	Amortized		Unrealized
March 31, 2018	cost		Gains		Losses			Fair value
Government sponsored enterprise obligations	$	405,684	$	100	$	(3,373	)	$	402,411
Mortgage-backed securities - government agencies		156,045		155		(4,452	)		151,748
Obligations of states and political subdivisions		43,941		260		(279	)		43,922
Total securities available for sale	$	605,670	$	515	$	(8,104	)	$	598,081
December 31, 2017
U.S. Treasury and other U.S. Government obligations	$	149,996	$	-	$	(12	)	$	149,984
Government sponsored enterprise obligations		214,852		474		(1,482	)		213,844
Mortgage-backed securities - government agencies		163,571		383		(2,447	)		161,507
Obligations of states and political subdivisions		48,987		365		(163	)		49,189
Total securities available for sale	$	577,406	$	1,222	$	(4,104	)	$	574,524

There were no securities classified as held to maturity as of March 31, 2018 or December 31, 2017.

9

Stock Yards Bancorp, inc. and subsidiary

Bancorp sold no securities during the three-month periods ending March 31, 2018 or 2017.

A summary of the available-for-sale investment securities by contractual maturity groupings as of March 31, 2018 is shown below.

(In thousands)
Securities available-for-sale	Amortized cost		Fair value
Due within 1 year	$	230,740	$	230,686
Due after 1 but within 5 years		97,419		96,063
Due after 5 but within 10 years		10,058		9,808
Due after 10 years		111,408		109,776
Mortgage-backed securities – government agencies		156,045		151,748
Total securities available-for-sale	$	605,670	$	598,081

Actual maturities may differ from contractual maturities because some issuers have the right to call or prepay obligations. The investment portfolio includes agency mortgage-backed securities, which are guaranteed by agencies such as the FHLMC, FNMA, and GNMA. These securities differ from traditional debt securities primarily in that they may have uncertain principal payment dates and are priced based on estimated prepayment rates on the underlying collateral.

Bancorp pledges portions of its investment securities portfolio to secure public fund deposits, cash balances of uninsured wealth management and trust accounts, and securities sold under agreements to repurchase. The carrying value of these pledged securities was approximately $340.5 million at March 31, 2018 and $384.7 million at December 31, 2017.

10

Stock Yards Bancorp, inc. and subsidiary

Securities with unrealized losses at March 31, 2018 and December 31, 2017, not recognized in the statements of income are as follows:

(In thousands)	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
March 31, 2018	value		losses			value		losses			value		losses
Government sponsored enterprise obligations	$	340,018	$	(2,188	)	$	48,470	$	(1,185	)	$	388,488	$	(3,373	)
Mortgage-backed securities - government agencies		75,107		(1,669	)		63,083		(2,783	)		138,190		(4,452	)
Obligations of states and political subdivisions		19,582		(192	)		5,242		(87	)		24,824		(279	)
Total temporarily impaired securities	$	434,707	$	(4,049	)	$	116,795	$	(4,055	)	$	551,502	$	(8,104	)
December 31, 2017
U.S. Treasury and U.S. obligations	$	149,984	$	(12	)	$	-	$	-		$	149,984	$	(12	)
Government sponsored enterprise obligations		95,139		(586	)		49,870		(896	)		145,009		(1,482	)
Mortgage-backed securities - government agencies		69,290		(440	)		67,047		(2,007	)		136,337		(2,447	)
Obligations of states and political subdivisions		22,366		(107	)		5,064		(56	)		27,430		(163	)
Total temporarily impaired securities	$	336,779	$	(1,145	)	$	121,981	$	(2,959	)	$	458,760	$	(4,104	)

Applicable dates for determining when securities are in an unrealized loss position are March 31, 2018 and December 31, 2017. As such, it is possible that a security had a market value lower than its amortized cost on other days during the past twelve months, but is not in the “Investments with an Unrealized Loss of less than 12 months” category above.

Unrealized losses on Bancorp’s investment securities portfolio have not been recognized as an expense because the securities are of high credit quality, and the decline in fair values is due to changes in the prevailing interest rate environment since the purchase date. Fair value is expected to recover as securities reach their maturity date and/or the interest rate environment returns to conditions similar to when these securities were purchased. These investments consist of 132 and 117 separate investment positions as of March 31, 2018 and December 31, 2017, respectively. Because management does not intend to sell the investments, and it is not likely that Bancorp will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, Bancorp does not consider these securities to be other-than-temporarily impaired at March 31, 2018.

FHLB stock is an investment held by Bancorp which is not readily marketable and is carried at cost adjusted for identified impairment. No impairment was indicated as of March 31, 2018. Holdings of Federal Home Loan Bank of Cincinnati (FHLB) stock are required for access to FHLB borrowing, and are classified as restricted securities.

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 Stock Yards Bancorp, inc. and subsidiary

(3) Loans

Composition of loans, net of deferred fees and costs, by primary loan portfolio class follows:

(In thousands)	March 31, 2018		December 31, 2017
Commercial and industrial	$	843,478	$	779,014
Construction and development, excluding undeveloped land		215,752		195,912
Undeveloped land		20,120		18,988
Real estate mortgage:
Commercial investment		590,942		594,902
Owner occupied commercial		407,733		398,685
1-4 family residential		272,900		262,110
Home equity - first lien		51,595		57,110
Home equity - junior lien		64,108		63,981
Subtotal: Real estate mortgage		1,387,278		1,376,788
Consumer		45,760		38,868
Total loans	$	2,512,388	$	2,409,570

12

Stock Yards Bancorp, inc. and subsidiary

The following table presents the balance in the recorded investment in loans and allowance for loan losses by portfolio segment and based on impairment evaluation method as of March 31, 2018 and December 31, 2017.

(In thousands)	Type of loan
			Construction
			and development
	Commercial		excluding
	and		undeveloped		Undeveloped		Real estate
March 31, 2018	industrial		land		land		mortgage		Consumer		Total
Loans	$	843,478	$	215,752	$	20,120	$	1,387,278	$	45,760	$	2,512,388
Loans collectively evaluated for impairment	$	839,328	$	215,082	$	19,550	$	1,380,494	$	45,669	$	2,500,123
Loans individually evaluated for impairment	$	4,150	$	670	$	570	$	6,784	$	91	$	12,265
Loans acquired with deteriorated credit quality	$	-	$	-	$	-	$	-	$	-	$	-

				Construction
				and development
	Commercial			excluding
	and			undeveloped		Undeveloped			Real estate
	industrial			land		land			mortgage			Consumer			Total
Allowance for loan losses
At December 31, 2017	$	11,276		$	1,724	$	521		$	11,012		$	352		$	24,885
Provision (credit)		761			296		(39	)		(309	)		26			735
Charge-offs		(1,409	)		-		-			-			(119	)		(1,528	)
Recoveries		10			-		-			4			97			111
At March 31, 2018	$	10,638		$	2,020	$	482		$	10,707		$	356		$	24,203
Allowance for loans collectively evaluated for impairment	$	9,646		$	2,020	$	481		$	10,230		$	356		$	22,733
Allowance for loans individually evaluated for impairment	$	992		$	-	$	1		$	477		$	-		$	1,470
Allowance for loans acquired with deteriorated credit quality	$	-		$	-	$	-		$	-		$	-		$	-

13

Stock Yards Bancorp, inc. and subsidiary

(In thousands)	Type of loan
			Construction
			and development
	Commercial		excluding
	and		undeveloped		Undeveloped		Real estate
December 31, 2017	industrial		land		land		mortgage		Consumer		Total
Loans	$	779,014	$	195,912	$	18,988	$	1,376,788	$	38,868	$	2,409,570
Loans collectively evaluated for impairment	$	777,838	$	195,248	$	18,514	$	1,371,246	$	38,868	$	2,401,714
Loans individually evaluated for impairment	$	1,176	$	664	$	474	$	5,066	$	-	$	7,380
Loans acquired with deteriorated credit quality	$	-	$	-	$	-	$	476	$	-	$	476

				Construction
				and development
	Commercial			excluding
	and			undeveloped			Undeveloped			Real estate
	industrial			land			land			mortgage			Consumer			Total
Allowance for loan losses
At December 31, 2016	$	10,483		$	1,923		$	684		$	10,573		$	344		$	24,007
Provision (credit)		2,373			(199	)		(163	)		383			156			2,550
Charge-offs		(1,782	)		-			-			(98	)		(549	)		(2,429	)
Recoveries		202			-			-			154			401			757
At December 31, 2017	$	11,276		$	1,724		$	521		$	11,012		$	352		$	24,885
Allowance for loans collectively evaluated for impairment	$	11,242		$	1,724		$	521		$	10,998		$	352		$	24,837
Allowance for loans individually evaluated for impairment	$	34		$	-		$	-		$	14		$	-		$	48
Allowance for loans acquired with deteriorated credit quality	$	-		$	-		$	-		$	-		$	-		$	-

The considerations by Bancorp in computing its allowance for loan losses are determined based on the various risk characteristics of each loan segment. Relevant risk characteristics are as follows:

● Commercial and industrial loans: Loans in this category are made to businesses. Generally these loans are secured by assets of the business and repayment is expected from cash flows of the business. A decline in the strength of the business or a weakened economy and resultant decreased consumer and/or business spending may have an effect on the credit quality in this loan category.

● Construction and development, excluding undeveloped land: Loans in this category primarily include owner-occupied and investment construction loans and commercial development projects. In most cases, construction loans require only interest to be paid during construction. Upon completion or stabilization, the construction loans generally convert to permanent financing in the real estate mortgage segment, requiring principal amortization. Repayment of development loans is derived from sale of lots or units. Credit risk is affected by construction delays, cost overruns, market conditions and availability of permanent financing, to the extent such permanent financing is not being provided by Bancorp.

14

Stock Yards Bancorp, inc. and subsidiary

● Undeveloped land: Loans in this category are secured by land acquired for development by the borrower, but for which no development has yet taken place. Credit risk is primarily dependent upon the financial strength of the borrower, but can also be affected by market conditions and time to sell lots at an adequate price in the future. Credit risk is also affected by availability of permanent financing, including to the end user, to the extent such permanent financing is not being provided by Bancorp.  

● Real estate mortgage: Loans in this category are made to and secured by owner-occupied residential real estate, owner-occupied real estate used for business purposes, and income-producing investment properties. For owner occupied residential and owner-occupied commercial real estate, repayment is dependent on financial strength of the borrower. For income-producing investment properties, repayment is dependent on financial strength of tenants, and to a lesser extent the borrowers’ financial strength, once the project is stabilized. Underlying properties are generally located in Bancorp's primary market area. Cash flows of income producing investment properties may be adversely impacted by a downturn in the economy as reflected in increased vacancy rates, which in turn, will have an effect on credit quality and property values. Overall health of the economy, including unemployment rates and real estate prices, has an effect on credit quality in this loan category.

● Consumer: Loans in this category may be either secured or unsecured and repayment is dependent on credit quality of the individual borrower and, if applicable, adequacy of collateral securing the loan. Therefore, overall health of the economy, including unemployment rates as well as home and securities prices, will have a significant effect on credit quality in this loan category.

15

Stock Yards Bancorp, inc. and subsidiary

The following tables present loans individually evaluated for impairment as of March 31, 2018 and December 31, 2017.

(In thousands)			Unpaid				Average
	Recorded		principal		Related		recorded
March 31, 2018	investment		balance		allowance		investment
Loans with no related allowance recorded:
Commercial and industrial	$	212	$	295	$	-	$	677
Construction and development, excluding undeveloped land		670		840		-		667
Undeveloped land		474		506		-		474
Real estate mortgage
Commercial investment		-		-		-		26
Owner occupied commercial		3,437		3,894		-		3,384
1-4 family residential		1,592		1,614		-		1,615
Home equity - first lien		-		-		-		-
Home equity - junior lien		29		29		-		30
Subtotal: Real estate mortgage		5,058		5,537		-		5,055
Consumer		91		91		-		46
Subtotal	$	6,505	$	7,269	$	-	$	6,919
Loans with an allowance recorded:
Commercial and industrial	$	3,938	$	4,616	$	992	$	1,986
Construction and development, excluding undeveloped land		-		-		-		-
Undeveloped land		96		96		1		48
Real estate mortgage
Commercial investment		-		-		-		-
Owner occupied commercial		1,712		1,712		463		856
1-4 family residential		14		14		14		14
Home equity - first lien		-		-		-		-
Home equity - junior lien		-		-		-		-
Subtotal: Real estate mortgage		1,726		1,726		477		870
Consumer		-		-		-		-
Subtotal	$	5,760	$	6,438	$	1,470	$	2,904
Total:
Commercial and industrial	$	4,150	$	4,911	$	992	$	2,663
Construction and development, excluding undeveloped land		670		840		-		667
Undeveloped land		570		602		1		522
Real estate mortgage
Commercial investment		-		-		-		26
Owner occupied commercial		5,149		5,606		463		4,240
1-4 family residential		1,606		1,628		14		1,629
Home equity - first lien		-		-		-		-
Home equity - junior lien		29		29		-		30
Subtotal: Real estate mortgage		6,784		7,263		477		5,925
Consumer		91		91		-		46
Total	$	12,265	$	13,707	$	1,470	$	9,823

16

Stock Yards Bancorp, inc. and subsidiary

(In thousands)			Unpaid				Average
	Recorded		principal		Related		recorded
December 31, 2017	investment		balance		allowance		investment
Loans with no related allowance recorded:
Commercial and industrial	$	1,142	$	2,202	$	-	$	411
Construction and development, excluding undeveloped land		664		834		-		559
Undeveloped land		474		506		-		425
Real estate mortgage
Commercial investment		52		53		-		110
Owner occupied commercial		3,332		3,789		-		1,678
1-4 family residential		1,637		1,657		-		935
Home equity - first lien		-		-		-		-
Home equity - junior lien		31		31		-		186
Subtotal: Real estate mortgage		5,052		5,530		-		2,909
Consumer		-		-		-		-
Subtotal	$	7,332	$	9,072	$	-	$	4,304
Loans with an allowance recorded:
Commercial and industrial	$	34	$	34	$	34	$	1,882
Construction and development, excluding undeveloped land		-		-		-		-
Undeveloped land		-		-		-		48
Real estate mortgage
Commercial investment		-		-		-		-
Owner occupied commercial		-		-		-		-
1-4 family residential		14		14		14		5
Home equity - first lien		-		-		-		-
Home equity - junior lien		-		-		-		-
Subtotal: Real estate mortgage		14		14		14		5
Consumer		-		-		-		46
Subtotal	$	48	$	48	$	48	$	1,981
Total:
Commercial and industrial	$	1,176	$	2,236	$	34	$	2,293
Construction and development, excluding undeveloped land		664		834		-		559
Undeveloped land		474		506		-		473
Real estate mortgage		-		-		-		-
Commercial investment		52		53		-		110
Owner occupied commercial		3,332		3,789		-		1,678
1-4 family residential		1,651		1,671		14		940
Home equity - first lien		-		-		-		-
Home equity - junior lien		31		31		-		186
Subtotal: Real estate mortgage		5,066		5,544		14		2,914
Consumer		-		-		-		46
Total	$	7,380	$	9,120	$	48	$	6,285

Differences between recorded investment amounts and unpaid principal balance amounts less related allowance are due to partial charge-offs which have occurred over the life of certain loans.

17

Stock Yards Bancorp, inc. and subsidiary

Impaired loans include non-accrual loans and accruing loans accounted for as troubled debt restructurings (TDRs), which continue to accrue interest. Non-performing loans include the balance of impaired loans plus any loans over 90 days past due and still accruing interest. Bancorp had no loans past due more than 90 days and still accruing interest at March 31, 2018, compared with $2 thousand at December 31, 2017, and none at March 31, 2017.

The following table presents the recorded investment in non-accrual loans as of March 31, 2018 and December 31, 2017.

(In thousands)	March 31, 2018		December 31, 2017
Commercial and industrial	$	3,321	$	321
Construction and development, excluding undeveloped land		670		664
Undeveloped land		570		474
Real estate mortgage
Commercial investment		-		52
Owner occupied commercial		5,149		3,332
1-4 family residential		1,592		1,637
Home equity - first lien		-		-
Home equity - junior lien		29		31
Subtotal: Real estate mortgage		6,770		5,052
Consumer		91		-
Total	$	11,422	$	6,511

In the course of working with borrowers, Bancorp may elect to restructure the contractual terms of certain loans. Troubled debt restructurings (TDRs) occur when, for economic, legal, or other reasons related to a borrower’s financial difficulties, Bancorp grants a concession to the borrower that it would not otherwise consider.

At March 31, 2018 and December 31, 2017, Bancorp had $843 thousand and $869 thousand of accruing loans classified as TDRs, respectively. Bancorp did not modify and classify any additional loans as TDRs during the three-month period ended March 31, 2018. One commercial loan, with a recorded investment of $38,000 at March 31, 2017 was modified and classified as TDRs in the three-month period ended March 31, 2017. The pre and post-modification balance for this loan was $39,000. The monthly payment amount of this loan was modified to enable the borrower to fulfill the loan agreement. A specific reserve was established for the entire recorded investment of this loan.

No loans classified and reported as troubled debt restructured within the twelve months prior to March 31, 2018 defaulted during the three-month period ended March 31, 2018. Loans accounted for as TDRs include modifications from original terms such as those due to bankruptcy proceedings, certain modifications of amortization periods or extended suspension of principal payments due to customer financial difficulties. Loans accounted for as TDRs are individually evaluated for impairment and, at March 31, 2018, had a total allowance allocation of $94 thousand, compared with $48 thousand at December 31, 2017.

At March 31, 2018 and December 31, 2017, Bancorp did not have any outstanding commitments to lend additional funds to borrowers whose loans have been modified as TDRs.

18

Stock Yards Bancorp, inc. and subsidiary

At March 31, 2018 formal foreclosure proceedings were in process on three consumer mortgage loans with a total recorded investment of $412 thousand, all secured by residential real estate properties. The recorded investments for these properties ranged from $30 thousand to $350 thousand, and these loans were reported as non-accrual as of March 31, 2018.

The following table presents the aging of the recorded investment in loans as of March 31, 2018 and December 31, 2017.

													Recorded
(In thousands)							90 or more						investment
							days past						> 90 days
			30-59 days		60-89 days		due (includes)		Total		Total		and
March 31, 2018	Current		past due		past due		non-accrual)		past due		loans		accruing
Commercial and industrial	$	839,756	$	401	$	-	$	3,321	$	3,722	$	843,478	$	-
Construction and development, excluding undeveloped land		215,082		-		-		670		670		215,752		-
Undeveloped land		19,550		-		-		570		570		20,120		-
Real estate mortgage
Commercial investment		589,916		886		140		-		1,026		590,942		-
Owner occupied commercial		402,382		-		202		5,149		5,351		407,733		-
1-4 family residential		270,048		1,028		232		1,592		2,852		272,900		-
Home equity - first lien		51,595		-		-		-		-		51,595		-
Home equity - junior lien		63,818		61		200		29		290		64,108		-
Subtotal: Real estate mortgage		1,377,759		1,975		774		6,770		9,519		1,387,278		-
Consumer		45,648		20		1		91		112		45,760		-
Total	$	2,497,795	$	2,396	$	775	$	11,422	$	14,593	$	2,512,388	$	-
December 31, 2017
Commercial and industrial	$	776,118	$	2,571	$	4	$	321	$	2,896	$	779,014	$	-
Construction and development, excluding undeveloped land		194,936		-		312		664		976		195,912		-
Undeveloped land		18,514		-		-		474		474		18,988		-
Real estate mortgage
Commercial investment		594,242		608		-		52		660		594,902		-
Owner occupied commercial		394,623		455		275		3,332		4,062		398,685		-
1-4 family residential		259,994		172		307		1,637		2,116		262,110		-
Home equity - first lien		56,938		172		-		-		172		57,110		-
Home equity - junior lien		63,667		87		194		33		314		63,981		2
Subtotal: Real estate mortgage		1,369,464		1,494		776		5,054		7,324		1,376,788		2
Consumer		38,699		86		83		-		169		38,868		-
Total	$	2,397,731	$	4,151	$	1,175	$	6,513	$	11,839	$	2,409,570	$	2

19

Stock Yards Bancorp, inc. and subsidiary

Consistent with regulatory guidance, Bancorp categorizes loans into credit 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. Pass-rated loans included all risk-rated loans other than those classified as other assets especially mentioned, substandard, and doubtful, which are defined below:

● Other assets especially mentioned (“OAEM”): Loans classified as OAEM have potential weaknesses that deserve management's close attention. These potential weaknesses may result in deterioration of repayment prospects for the loan or of Bancorp's credit position at some future date.

● Substandard: Loans classified as substandard are inadequately protected by the paying capacity of the obligor or of collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize repayment of the debt. Default is a distinct possibility if the deficiencies are not corrected.

● Substandard non-performing: Loans classified as substandard non-performing have all the characteristics of substandard loans and have been placed on non-accrual status or have been accounted for as troubled debt restructurings. Loans are placed on non-accrual status when prospects for recovering both principal and accrued interest are considered doubtful or when a default of principal or interest has existed for 90 days or more. While on non-accrual status, payments of interest are applied to reduce the recorded investment in the loan.

● Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or repayment in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

20

Stock Yards Bancorp, inc. and subsidiary

As of March 31, 2018 and December 31, 2017, the internally assigned risk grades of loans by category were as follows:

(In thousands)							Substandard				Total
March 31, 2018	Pass		OAEM		Substandard		non-performing		Doubtful		loans
Commercial and industrial	$	811,544	$	14,275	$	13,509	$	4,150	$	-	$	843,478
Construction and development, excluding undeveloped land		215,082		-		-		670		-		215,752
Undeveloped land		19,520		-		30		570		-		20,120
Real estate mortgage
Commercial investment		588,075		2,741		126		-		-		590,942
Owner occupied commercial		388,799		11,678		2,107		5,149		-		407,733
1-4 family residential		268,441		1,884		969		1,606		-		272,900
Home equity - first lien		51,595		-		-		-		-		51,595
Home equity - junior lien		63,596		101		382		29		-		64,108
Subtotal: Real estate mortgage		1,360,506		16,404		3,584		6,784		-		1,387,278
Consumer		45,553		112		4		91		-		45,760
Total	$	2,452,205	$	30,791	$	17,127	$	12,265	$	-	$	2,512,388
December 31, 2017
Commercial and industrial	$	751,628	$	12,032	$	14,178	$	1,176	$	-	$	779,014
Construction and development, excluding undeveloped land		195,248		-		-		664		-		195,912
Undeveloped land		18,484		-		30		474		-		18,988
Real estate mortgage
Commercial investment		591,232		3,599		19		52		-		594,902
Owner occupied commercial		383,455		8,683		3,215		3,332		-		398,685
1-4 family residential		256,968		2,477		1,014		1,651		-		262,110
Home equity - first lien		57,110		-		-		-		-		57,110
Home equity - junior lien		63,471		247		230		33		-		63,981
Subtotal: Real estate mortgage		1,352,236		15,006		4,478		5,068		-		1,376,788
Consumer		38,747		117		4		-		-		38,868
Total	$	2,356,343	$	27,155	$	18,690	$	7,382	$	-	$	2,409,570

21

Stock Yards Bancorp, inc. and subsidiary

(4) Goodwill and Intangible Assets

US GAAP requires that goodwill and intangible assets with indefinite useful lives not be amortized, but instead be tested for impairment at least annually. Bancorp currently has goodwill in the amount of $682 thousand from the 1996 acquisition of an Indiana bank. No impairment charges have been deemed necessary or recorded to date, as the fair value is substantially in excess of the carrying value.    This goodwill is assigned to the commercial banking segment of Bancorp.

Bancorp recorded a gross core deposit intangible totaling $2.5 million as a result of its 2013 acquisition of THE BANCorp, Inc. This intangible is being amortized over the expected life of the underlying deposits to which the intangible is attributable. At March 31, 2018, the unamortized core deposit intangible was $1.2 million.

Mortgage servicing rights (MSRs) are initially recognized at fair value when mortgage loans are sold with servicing retained. The MSRs are amortized in proportion to and over the period of estimated net servicing income, considering appropriate prepayment assumptions. MSRs are evaluated quarterly for impairment by comparing carrying value to fair value. Estimated fair values of MSRs at March 31, 2018 and December 31, 2017 were $3.5 million and $3.1 million, respectively. Total outstanding principal balances of loans serviced for others were $336.0 million and $344.5 million at March 31, 2018, and December 31, 2017, respectively.

Changes in the net carrying amount of MSRs for the three months ended March 31, 2018 and 2017 are shown in the following table:

	For the three months
	ended March 31,
(In thousands)	2018			2017
Balance at beginning of period	$	875		$	921
Additions for mortgage loans sold		21			42
Amortization		(35	)		(72	)
Balance at end of period	$	861		$	891

22

Stock Yards Bancorp, inc. and subsidiary

(5) Income Taxes

Components of income tax expense from operations were as follows:

	Three months ended
	March 31,
(In thousands)	2018		2017
Current income tax expense
Federal	$	2,436	$	3,003
State		128		114
Total current income tax expense		2,564		3,117
Deferred income tax (benefit) expense
Federal		467		(26	)
State		21		38
Total deferred income tax expense		488		12
Change in valuation allowance		-		13
Total income tax expense	$	3,052	$	3,142

An analysis of the difference between statutory and effective income tax rates for the three months ended March 31, 2018 and 2017 follows:

	Three months ended March 31,
	2018			2017
U.S. federal statutory income tax rate		21.0	%		35.0	%
Excess tax benefits from share-based compensation arrangements		(1.9	)		(7.1	)
Tax credits		(0.4	)		(5.5	)
Tax exempt interest income		(0.5	)		(1.1	)
Increase in cash surrender value of life insurance		(0.4	)		(1.3	)
State income taxes, net of federal benefit		0.7			0.7
Other, net		-			1.9
Effective income tax rate		18.5	%		22.6	%

State income tax expense represents tax owed in Indiana. Kentucky and Ohio state bank taxes are based on capital levels, and are recorded as other non-interest expense.

In December 2017 the Tax Cuts and Jobs Act was enacted and, among other matters, it reduced Bancorp’s marginal federal income tax rate from 35% to 21%. Largely offsetting that decrease the effective tax rate for the three month period ending March 31, 2018 as compared with the year earlier period was affected by substantially lower benefit from excess tax benefits from share-based compensation arrangements and from tax credits.

In December 2017, the U.S. Securities and Exchange Commission (“SEC”) released Staff Accounting Bulletin No. 118 (“SAB 118”) to address any uncertainty or diversity of views in practice in accounting for the income tax effects of tax reform in situations where a registrant does not have the necessary information available, prepared or analyzed in reasonable detail to complete this accounting in the reporting period that includes the enactment date. SAB 118 allows a measurement period not to extend beyond one year from the tax reform’s enactment date to complete the necessary accounting.

23

Stock Yards Bancorp, inc. and subsidiary

In two areas, Bancorp recorded provisional amounts of deferred taxes where the information was not available to complete the accounting: 1) the Company’s deferred tax assets of $565 thousand for temporary differences in certain tax credit investments is awaiting receipt of Schedules K-1 from outside preparers. Management believe the Company used a reasonable estimate to account for this item; however, there may be provisions of the new tax law that could impact the partnerships’ calculation of taxable income, which in effect could affect the Company’s share of taxable income. The final effect will not be known until receipt of Schedules K-1. 2) Bancorp estimated that no reductions are required to deferred tax assets included in the $19 thousand of future deductions for compensation that might be subject to new limitations under Code Sec. 162(m) which, generally, limits to $1 million annual deductions for certain compensation paid to certain executives. There is uncertainty in applying new rules to existing contracts, and Bancorp is seeking clarification before finalizing its analysis. In a third area, the Company recorded no provisional amounts to its deferred tax liability for temporary differences between the tax and financial reporting bases of certain property and equipment items. These cannot be reasonably estimated. Bancorp’s deferred tax liability of $541 thousand for temporary differences between the tax and financial reporting bases of fixed assets is awaiting completion of a cost segregation study to take advantage of additional depreciation deductions available through tax reform. Bancorp will complete and record income tax effects of tax reform during the period the necessary information becomes available. This measurement period will not extend beyond December 22, 2018.

US GAAP provides guidance on financial statement recognition and measurement of tax positions taken, or expected to be taken, in tax returns. If recognized, tax benefits would reduce tax expense and accordingly, increase net income. The amount of unrecognized tax benefits may increase or decrease in the future for various reasons including adding amounts for current year tax positions, expiration of open income tax returns due to statutes of limitation, changes in management’s judgment about the level of uncertainty, status of examination, litigation and legislative activity and addition or elimination of uncertain tax positions. As of March 31, 2018 and December 31, 2017, the gross amount of unrecognized tax benefits was immaterial to the consolidated financial statements of the Company. Federal and state income tax returns are subject to examination for the years after 2013.

(6) Deposits

The composition of the Bank’s deposits outstanding at March 31, 2018 (unaudited) and December 31, 2017 is as follows:

	March 31,		December 31,
(In thousands)	2018		2017
Non-interest bearing demand	$	681,936	$	674,697
Interest bearing deposits:
Interest bearing demand		811,182		833,450
Savings		159,521		152,348
Money market		689,733		682,226
Time deposits of more than $250,000		33,677		38,439
Other time deposits		197,315		197,135
Total time deposits		230,992		235,574
Total interest bearing deposits		1,891,428		1,903,598
Total deposits	$	2,573,364	$	2,578,295

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Stock Yards Bancorp, inc. and subsidiary

Maturities of time deposits of more than $250,000, outstanding at March 31, 2018, are summarized as follows:

(In thousands)	Amount
3 months or less	$	8,509
Over 3 through 6 months		7,865
Over 6 through 12 months		8,082
Over 1 through 3 years		7,756
Over 3 years		1,465
Total	$	33,677

(7) Securities Sold Under Agreements to Repurchase

Securities sold under agreements to repurchase, which represent excess funds from commercial customers as part of a cash management service, totaled $67.9 million and $70.5 million at March 31, 2018 and December 31, 2017, respectively. Bancorp enters into sales of securities under agreement to repurchase at a specified future date. At March 31, 2018, all of these financing arrangements had overnight maturities and were secured by government sponsored enterprise obligations and government agency mortgage-backed securities which were owned and under the control of Bancorp.

(8) Federal Home Loan Bank Advances

Bancorp had outstanding borrowings totaling $49.1 million and $49.5 million at March 31, 2018 and December 31, 2017, respectively, via 14 separate fixed-rate advances. As of March 31, 2018, for two advances totaling $30 million, both of which are non-callable, interest payments are due monthly, with principal due at maturity. For the remaining advances totaling $19.1 million, principal and interest payments are due monthly based on an amortization schedule.

The following is a summary of the contractual maturities and average effective rates of outstanding advances:

(In thousands)	March 31, 2018					December 31, 2017
Year	Advance		Fixed Rate			Advance		Fixed Rate
2018	$	30,000		1.93	%	$	30,000		1.48	%
2020		1,728		2.23			1,741		2.23
2021		270		2.12			288		2.12
2024		2,400		2.36			2,454		2.36
2025		5,019		2.42			5,149		2.42
2026		8,471		1.99			8,564		1.99
2028		1,252		1.49			1,262		1.49
Total	$	49,140		2.01	%	$	49,458		1.74	%

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Stock Yards Bancorp, inc. and subsidiary

In addition to fixed-rate advances listed above, Bancorp had cash management advances from the FHLB of $200 million, and $150 million as of March 31, 2018 and December 31, 2017, respectively. These advances typically mature in the first week following the end of the quarter and are used to manage Bancorp’s overall cash position. Due to the short-term nature of the cash management advances, they were recorded on the consolidated balance sheet within federal funds purchased.

Advances from the FHLB are collateralized by certain commercial and residential real estate mortgage loans under a blanket mortgage collateral agreement and FHLB stock. Bancorp believes these borrowings to be an effective alternative to higher cost time deposits to manage interest rate risk associated with long-term fixed rate loans. At March 31, 2018, the amount of available credit from the FHLB totaled $292.4 million.

(9) Other Comprehensive Income

The following table illustrates activity within the balances in accumulated other comprehensive income (AOCI) by component, and is shown for the three months ended March 31, 2018 and 2017. The table also includes $506 thousand reclassified from AOCI to retained earnings related to the adoption of ASU 2018-02 in the first quarter of 2018. ASU 2018-02 provides for the reclassification of tax effects stranded in other comprehensive income as a result of the 2017 Tax Cuts and Jobs Act into retained earnings. The Tax Reform reduced the US Federal corporate tax rate from 35% to 21% effective January 1, 2018. As a result, Bancorp was required to remeasure its net deferred tax assets at the lower rate and recognize the adjustment through income tax expense in 2017. The adjustment through income tax expense left items presented in AOCI, for which the related income tax effects were originally recognized in other comprehensive income, unadjusted for the new tax rate. The reclassification upon adoption of ASU 2018-02 results in AOCI reflecting the new tax rate.

	Net unrealized			Net unrealized			Minimum
	gains on			gains (losses)			pension
	securities			on cash			liability
(in thousands)	available-for-sale			flow hedges			adjustment			Total
Balance at December 31, 2016	$	(1,211	)	$	(16	)	$	(272	)	$	(1,499	)
Net current period other comprehensive gain (loss)		689			85			-			774
Balance at March 31, 2017	$	(522	)	$	69		$	(272	)	$	(725	)
Balance at December 31, 2017 (1)	$	(1,781	)	$	193		$	(342	)	$	(1,930	)
Net current period other comprehensive income gain (loss)		(3,718	)		310			-			(3,408	)
Adoption of Accounting Standards Update 2018-02		(496	)		41			(51	)		(506	)
Balance at March 31, 2018	$	(5,995	)	$	544		$	(393	)	$	(5,844	)

(1) December 31, 2017 AOCI component balances reflect a correction of incorrectly reported year-end balances in Note 12 of the 2017 Form 10-K, which were presented as $(2,278), $234, and $(392) for securities available-for-sale, cash flow hedges, and minimum pension liability, respectively.  

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Stock Yards Bancorp, inc. and subsidiary

(10) Preferred Stock

Bancorp has a class of preferred stock (no par value; 1,000,000 shares authorized), the relative rights, preferences and other terms of which or any series within the class will be determined by the Board of Directors prior to any issuance. None of this stock has been issued to date.

(11) Net Income Per Share

The following table reflects, for the three months ended March 31, 2018 and 2017, net income (numerator) and average shares outstanding (denominator) for basic and diluted net income per share computations:

	Three months ended
(In thousands, except per share data)	March 31,
	2018		2017
Net income	$	13,404	$	10,791
Average shares outstanding		22,577		22,492
Dilutive securities		365		510
Average shares outstanding including dilutive securities including dilutive securities		22,942		23,002
Net income per share, basic	$	0.59	$	0.48
Net income per share, diluted	$	0.58	$	0.47

As of March 31, 2018, SARs totaling 47,410 granted in March 2017 and January 2018 with strike prices of $40 and $38.30, respectively, were not included in the EPS calculation as they were antidilutive; however they could be dilutive to EPS in the future. 

(12) Defined Benefit Plan

Bancorp sponsors an unfunded, non-qualified, defined benefit retirement plan for three key officers (two current and one retired), and has no plans to increase the number of or benefits to participants. Benefits vest based on 25 years of service and all participants are fully vested. Actuarially determined pension costs are expensed and accrued over the service period, and benefits are paid from Bancorp’s assets. Information about the components of the net periodic benefit cost of the defined benefit plan, recorded in compensation expense, is as follows:

	Three months ended March 31,
(In thousands)	2018		2017
Components of net periodic benefit cost:
Service cost	$	–	$	–
Interest cost (1)		20		18
Expected return on plan assets		–		–
Amortization of prior service cost		–		–
Amortization of net losses (1)		18		16
Net periodic benefit cost	$	38	$	34

(1) Bancorp elected as a practical expedient to use amounts disclosed in the 2017 consolidated financial statements as a basis for estimating quarterly application of components of defined benefit cost.

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Stock Yards Bancorp, inc. and subsidiary

(13) Stock-Based Compensation

The fair value of all awards granted, net of estimated forfeitures, is recognized as compensation expense over the respective service period.

Bancorp currently has one stock-based compensation plan. At Bancorp's 2015 Annual Meeting of Shareholders, shareholders approved the 2015 Omnibus Equity Compensation Plan and authorized the shares available from the expiring 2005 plan for future awards under the 2015 plan. The 2005 Stock Incentive Plan expired in April 2015. No additional shares were made available, however, SARs granted under this plan expire as late as 2025. As of March 31, 2018, there were 174,458 shares available for future awards.

Options, which have not been granted since 2007, generally had a vesting schedule of 20%. The last remaining options were exercised in the first quarter of 2017.

Stock appreciation rights (“SARs”) granted have a vesting schedule of 20% per year and expire ten years after the grant date unless forfeited due to employment termination.

Restricted shares granted to officers vest over five years. All restricted shares have been granted at a price equal to the market value of common stock at the time of grant. For all grants prior to 2015, grantees are entitled to dividend payments during the vesting period. For grants in 2015 and forward, forfeitable dividends are deferred until shares are vested. Fair value of restricted shares is equal to the market value of the shares on the date of grant.

Grants of performance stock units (“PSUs”) vest based upon service and a single three-year performance period which begins January 1 of the first year of the performance period. Because grantees are not entitled to dividend payments during the performance period, the fair value of these PSUs is estimated based upon the fair value of the underlying shares on the date of grant, adjusted for non-payment of dividends. Grants require a one year post-vesting holding periods and the fair value of such grants incorporates a liquidity discount related to the holding period of 4.26%, 5.12% and 4.50% for 2018, 2017, and 2016, respectively.

Grants of restricted stock units (“RSUs”) to directors are time-based and vest 12 months after grant date. Because grantees are entitled to deferred dividend payments at the end of the vesting period, fair value of the RSUs is estimated based on fair value of underlying shares on the date of grant.

Bancorp has recognized stock-based compensation expense, within salaries and employee benefits for employees, and within other non-interest expense for directors, in the consolidated statements of income as follows:

	For three months ended
	March 31,
(In thousands)	2018			2017
Stock-based compensation expense before income taxes	$	823		$	660
Less: deferred tax benefit		(173	)		(231	)
Reduction of net income	$	650		$	429

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Stock Yards Bancorp, inc. and subsidiary

Bancorp expects to record an additional $2.5 million of stock-based compensation expense in 2018 for equity grants outstanding as of March 31, 2018. As of March 31, 2018, Bancorp has $7.4 million of unrecognized stock-based compensation expense that is expected to be recorded as compensation expense over the next five years as awards vest. Bancorp used cash of $156 thousand during the first three months of 2018 for the purchase of shares upon the vesting of restricted stock units. This compares with cash used of $216 thousand during the first three months of 2017 for the purchase of shares upon the vesting of restricted stock units net of cash received for options exercised.

Fair values of Bancorp’s SARs are estimated at the date of grant using the Black-Scholes option pricing model, a leading formula for calculating the value of stock options and SARs. This model requires the input of assumptions, changes to which can materially affect the fair value estimate. The following assumptions were used in SAR valuations at the grant date in each year:

	2018			2017
Dividend yield		2.57	%		2.72	%
Expected volatility		20.60	%		19.47	%
Risk free interest rate		2.82	%		2.29	%
Expected life of SARs (in years)		7.0			7.0

Dividend yield and expected volatility are based on historical information for Bancorp corresponding to the expected life of options and SARs granted. Expected volatility is the volatility of the underlying shares for the expected term on a monthly basis. The risk free interest rate is the implied yield currently available on U.S. Treasury issues with a remaining term equal to the expected life of the options. The expected life of SARs is based on actual experience of past like-term SARs. Bancorp evaluates historical exercise and post-vesting termination behavior when determining the expected life.

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Stock Yards Bancorp, inc. and subsidiary

A summary of stock option and SARs activity and related information for the twelve month period ended December 31, 2017 and the three month period ended March 31, 2018 follows:

														Weighted
								Weighted		Aggregate		Weighted		average
	Options							average		intrinsic		average		remaining
	and SARs			Exercise				exercise		value		fair		contractual
	(In thousands)			price				price		(In thousands)		value		life (In years)
At December 31, 2016
Vested and exercisable		475			$14.02	-	24.56	$	15.72	$	14,820	$	3.16		4.3
Unvested		260			15.24	-	33.08		21.53		6,623		3.43		7.8
Total outstanding		735			14.02	-	33.08		17.78		21,443		3.26		5.5
Granted		46			40.00	-	40.00		40.00		-		6.34
Exercised		(77	)		14.02	-	17.89		15.41		1,855		3.18
Forfeited		-				-			-		-		-
At December 31, 2017
Vested and exercisable		490			14.02	-	33.08		16.46		10,408		3.16		4.0
Unvested		214			15.26	-	40.00		26.46		2,515		4.17		7.7
Total outstanding		704			14.02	-	40.00		19.51		12,923		3.47		5.1
Granted		46			35.90	-	38.30		35.95		-		6.66
Exercised		(17	)		15.24	-	15.58		15.57		362		3.03
Forfeited		-				-			-		-		-
At March 31, 2018
Vested and exercisable		547			14.02	-	40.00		17.43		9,710		3.24		4.3
Unvested		187			19.37	-	40.00		30.05		1,165		4.95		8.3
Total outstanding		734			14.02	-	40.00		20.64	$	10,875		3.68		5.3
Vested year-to-date		74			$15.26	-	40.00	$	23.38	$	914	$	3.77

Intrinsic value for stock options and SARs is defined as the amount by which the current market price of the underlying stock exceeds the exercise or grant price.

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Stock Yards Bancorp, inc. and subsidiary

A summary of activity for the twelve month period ending December 31, 2017 and the three month period ending March 31, 2018 for restricted shares of common stock granted to officers is in the following table:

				Grant date
				weighted-
	Number			average cost
Unvested at December 31, 2016		145,235		$	21.57
Shares awarded		28,625			44.85
Restrictions lapsed and shares released		(46,797	)		19.79
Shares forfeited		(7,691	)		25.18
Unvested at December 31, 2017		119,372		$	27.62
Shares awarded		38,205			36.00
Restrictions lapsed and shares released		(43,385	)		23.57
Shares forfeited		(1,368	)		28.46
Unvested at March 31, 2018		112,824		$	32.16

Bancorp awarded performance-based restricted stock units (“PSUs”) to executive officers of Bancorp, the single three-year performance period for which began January 1 of the award year. The following table outlines the PSU grants.

	Vesting				Expected
Grant	period		Fair		shares to
year	in years		value		be awarded
2016		3	$	22.61		69,161
2017		3		35.66		43,325
2018		3		31.54		50,352

In the first quarter of 2018, Bancorp awarded 6,525 RSUs to directors of Bancorp with a grant date fair value of $247 thousand.

(14) Commitments and Contingent Liabilities

As of March 31, 2018, Bancorp had various commitments outstanding that arose in the normal course of business, including standby letters of credit and commitments to extend credit, which are properly not reflected in the consolidated financial statements. In management’s opinion, at March 31, 2018 commitments to extend credit of $692.4 million, including standby letters of credit of $18.9 million, represent normal banking transactions. Commitments to extend credit were $688.3 million, including letters of credit of $14.8 million, as of December 31, 2017. Commitments to extend credit are an agreement to lend to a customer as long as collateral is available and there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses. Commitments to extend credit are mainly comprised of commercial lines of credit, construction and home equity credit lines and credit cards issued to commercial customers. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Bancorp uses the same credit and collateral policies in making commitments and conditional guarantees as for on-balance sheet instruments. Bancorp evaluates each customer’s creditworthiness on a case by case basis. The amount of collateral obtained is based on management’s credit evaluation of the customer. Collateral held varies but may include accounts receivable, inventory, equipment, and real estate. However, should the commitments be drawn upon and should our customers default on their resulting obligation to us, our maximum exposure to credit loss, without consideration of collateral, is represented by the contractual amount of those instruments. At March 31, 2018, Bancorp has recorded $350 thousand in other liabilities for inherent risks related to unfunded credit commitments.

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Stock Yards Bancorp, inc. and subsidiary

Standby letters of credit and financial guarantees written are conditional commitments issued by Bancorp to guarantee the performance of a customer to a first party. Those guarantees are primarily issued to support customer commercial transactions. Standby letters of credit generally have maturities of one to two years.

As of March 31, 2018, in the normal course of business, there were pending legal actions and proceedings in which claims for damages are asserted. Management, after discussion with legal counsel, believes the ultimate result of these legal actions and proceedings will not have a material adverse effect on the consolidated financial position or results of operations of Bancorp.

(15) Assets and Liabilities Measured and Reported at Fair Value

Bancorp follows the provisions of authoritative guidance for fair value measurements. This guidance is definitional and disclosure oriented and addresses how companies should approach measuring fair value when required by US GAAP. The guidance also prescribes various disclosures about financial statement categories and amounts which are measured at fair value, if such disclosures are not already specified elsewhere in US GAAP. Bancorp adopted ASU 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities, effective January 1, 2018. The most significant change impacting Bancorp was a change in valuation methods for the loan portfolio for fair value reporting. GAAP no longer allows for valuing financial instruments for fair value purposes using an “entrance” pricing methodology. The use of an “exit” price methodology requires greater assumptions regarding life of loan losses and is a more complex calculation, the results of which can be seen below.

Authoritative guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between participants at the measurement date. The guidance also establishes a hierarchy to group assets and liabilities carried at fair value in three levels based upon the markets in which the assets and liabilities trade and the reliability of assumptions used to determine fair value. These levels are:

● Level 1: Valuation is based upon quoted prices for identical instruments traded in active markets.

● Level 2: Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

● Level 3: Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions would reflect internal estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques could include pricing models, discounted cash flows and other similar techniques.

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Stock Yards Bancorp, inc. and subsidiary

Authoritative guidance requires maximum use of observable inputs and minimum use of unobservable inputs in fair value measurements. Where there exists limited or no observable market data, Bancorp derives its own estimates by generally considering characteristics of the asset/liability, the current economic and competitive environment and other factors. For this reason, results cannot be determined with precision and may not be realized on an actual sale or immediate settlement of the asset or liability.

Bancorp’s investment securities available-for-sale and interest rate swaps are recorded at fair value on a recurring basis. Other accounts including mortgage servicing rights, impaired loans and other real estate owned may be recorded at fair value on a non-recurring basis, generally in the application of lower of cost or market adjustments or write-downs of specific assets.

The portfolio of investment securities available-for-sale is comprised of U.S. Treasury and other U.S. government obligations, debt securities of U.S. government-sponsored corporations (including mortgage-backed securities), obligations of state and political subdivisions and corporate equity securities. U.S. Treasury and corporate equity securities are priced using quoted prices of identical securities in an active market. These measurements are classified as Level 1 in the hierarchy above. All other securities are priced using standard industry models or matrices with various assumptions such as yield curves, volatility, prepayment speeds, default rates, time value, credit rating and market prices for similar instruments. These assumptions are generally observable in the market place and can be derived from or supported by observable data. These measurements are classified as Level 2 in the hierarchy above.

Interest rate swaps are valued using primarily Level 2 inputs. Fair value measurements generally based on benchmark forward yield curves and other relevant observable market data. For purposes of potential valuation adjustments to derivative positions, Bancorp evaluates the credit risk of its counterparties as well as its own credit risk. To date, Bancorp has not realized any losses due to counterparty’s inability to perform and the change in value of derivative assets and liabilities attributable to credit risk was not significant during 2018.

Below are the carrying values of assets measured at fair value on a recurring basis.

(In thousands)	Fair value at March 31, 2018
Assets	Total		Level 1		Level 2		Level 3
Investment securities available-for-sale
Government sponsored enterprise obligations	$	402,411	$	-	$	402,411	$	-
Mortgage-backed securities - government agencies		151,748		-		151,748		-
Obligations of states and political subdivisions		43,922		-		43,922		-
Total investment securities available-for-sale		598,081		-		598,081		-
Interest rate swaps		1,987		-		1,987		-
Total assets	$	600,068	$	-	$	600,068	$	-
Liabilities
Interest rate swaps	$	1,275	$	-	$	1,275	$	-

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Stock Yards Bancorp, inc. and subsidiary

(In thousands)	Fair value at December 31, 2017
Assets	Total		Level 1		Level 2		Level 3
Investment securities available-for-sale
U.S. Treasury and other U.S. government obligations	$	149,984	$	149,984	$	-	$	-
Government sponsored enterprise obligations		213,844		-		213,844		-
Mortgage-backed securities - government agencies		161,507		-		161,507		-
Obligations of states and political subdivisions		49,189		-		49,189		-
Total investment securities available-for-sale		574,524		149,984		424,540		-
Interest rate swaps		579		-		579		-
Total assets	$	575,103	$	149,984	$	425,119	$	-
Liabilities
Interest rate swaps	$	259	$	-	$	259	$	-

Bancorp had no financial instruments classified within Level 3 of the valuation hierarchy for assets and liabilities measured at fair value on a recurring basis at March 31, 2018 or December 31, 2017.

MSRs are recorded at fair value upon capitalization, are amortized to correspond with estimated servicing income, and are periodically assessed for impairment based on fair value at the reporting date. Fair value is based on a valuation model that calculates the present value of estimated net servicing income. The model incorporates assumptions that market participants would use in estimating future net servicing income. These measurements are classified as Level 3. At March 31, 2018 and December 31, 2017 there was no valuation allowance for the mortgage servicing rights, as the fair value exceeded the cost. Accordingly, the MSRs are not included in either table below for March 31, 2018 or December 31, 2017. See Note 4 for more information regarding MSRs.

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Stock Yards Bancorp, inc. and subsidiary

For impaired loans in the table below, fair value is calculated as the carrying value of only loans with a specific valuation allowance, less the specific allowance, and the carrying value of collateral dependent loans that have been charged down to their fair value. Fair value of impaired loans was primarily measured based on the value of collateral securing these loans. Impaired loans are classified within Level 3 of the fair value hierarchy. Collateral may be real estate and/or business assets including equipment, inventory, and/or accounts receivable. Bancorp determines the value of real estate collateral based on independent appraisals performed by qualified licensed appraisers. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Appraised values are discounted for costs to sell and may be discounted further based on management’s historical knowledge, changes in market conditions from the date of the most recent appraisal, and/or management’s expertise and knowledge of the customer and the customer’s business. Such discounts by management are subjective and are typically significant unobservable inputs for determining fair value. For other assets, Bancorp relies on both internal and third party assessments of asset value, based on information provided by the borrower, following methodologies similar to those described for real estate. As of March 31, 2018, total impaired collateral dependent loans charged down to their fair value and impaired loans with a valuation allowance were $7.4 million, and the specific allowance totaled $1.5 million, resulting in a fair value of $5.9 million, compared with total collateral dependent loans charged down to their fair value and impaired loans with a valuation allowance of $2.6 million, and the specific allowance allocation totaling $48 thousand, resulting in a fair value of $2.6 million at December 31, 2017. Losses represent charge offs and changes in specific allowances for the periods indicated.

Other real estate owned (“OREO”), which is carried at the lower of cost or fair value, is periodically assessed for impairment based on fair value at the reporting date. Fair value is based on appraisals performed by external parties which use judgments and assumptions that are property-specific and sensitive to changes in the overall economic environment. Appraisals may be further discounted based on management’s historical knowledge and/or changes in market conditions from the date of the most recent appraisal. Many of these inputs are not observable and, accordingly, these measurements are classified as Level 3. For OREO in the table below, fair value is the carrying value of only parcels of OREO which have a carrying value equal to appraised value. Losses represent write-downs which occurred during the period indicated. At March 31, 2018 and December 31, 2017, carrying value of all other real estate owned was $360 thousand and $2.6 million, respectively.

Below are the carrying values of assets measured at fair value on a non-recurring basis.

(In thousands)	Fair value at March 31, 2018								Losses for 3 month
									period ended
	Total		Level 1		Level 2		Level 3		March 31, 2018
Impaired loans	$	5,918	$	-	$	-	$	5,918	$	(1,711	)
Other real estate owned		360		-		-		360		-
Total	$	6,278	$	-	$	-	$	6,278	$	(1,711	)

(in thousands)	Fair value at December 31, 2017								Losses for 3 month
									period ended
	Total		Level 1		Level 2		Level 3		March 31, 2017
Impaired loans	$	2,569	$	-	$	-	$	2,569	$	(452	)
Other real estate owned		2,640		-		-		2,640		-
Total	$	5,209	$	-	$	-	$	5,209	$	(452	)

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Stock Yards Bancorp, inc. and subsidiary

For the securities portfolio, Bancorp monitors the valuation technique used by pricing agencies to ascertain when transfers between levels have occurred. The nature of other assets and liabilities measured at fair value is such that transfers in and out of any level are expected to be rare. For the three months ended March 31, 2018, there were no transfers between Levels 1, 2, or 3. For Level 3 assets measured at fair value on a non-recurring basis as of March 31, 2018, the significant unobservable inputs used in the fair value measurements are presented below.

				Significant	Weighted
	Fair		Valuation	unobservable	average of
(Dollars in thousands)	value		technique	input	input
Impaired loans - collateral dependent	$	5,918	Appraisal	Appraisal discounts		42.2	%
Other real estate owned		360	Appraisal	Appraisal discounts		10.0

(16) Disclosure of Financial Instruments Not Reported at Fair Value

US GAAP requires disclosure of the fair value of financial assets and liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or nonrecurring basis. Carrying amounts, estimated fair values, and placement in the fair value hierarchy of Bancorp’s financial instruments are as follows:

(In thousands)	Carrying
March 31, 2018	amount		Fair value		Level 1		Level 2		Level 3
Financial assets
Cash and short-term investments	$	56,876	$	56,876	$	56,876	$	-	$	-
Mortgage loans held for sale		4,239		4,299		-		4,299		-
Federal Home Loan Bank stock and other securities		8,876		8,876		-		8,876		-
Loans, net		2,488,185		2,487,204		-		-		2,487,204
Accrued interest receivable		8,026		8,026		8,026		-		-
Financial liabilities
Deposits		2,573,364		2,571,032		-		-		2,571,032
Short-term borrowings		283,125		283,125		-		283,125		-
FHLB advances		49,140		47,759		-		47,759		-
Accrued interest payable		284		284		284		-		-

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Stock Yards Bancorp, inc. and subsidiary

(In thousands)	Carrying
December 31, 2017	amount		Fair value		Level 1		Level 2		Level 3
Financial assets
Cash and short-term investments	$	139,248	$	139,248	$	139,248	$	-	$	-
Mortgage loans held for sale		2,964		2,964		-		2,964		-
Federal Home Loan Bank stock and other securities		7,646		7,646		-		7,646		-
Loans, net		2,384,685		2,338,464		-		-		2,338,464
Accrued interest receivable		8,369		8,369		8,369		-		-
Financial liabilities
Deposits		2,578,295		2,576,385		-		-		2,576,385
Short-term borrowings		231,825		231,825		-		231,825		-
FHLB advances		49,458		48,642		-		48,642		-
Accrued interest payable		232		232		232		-		-

Limitations

Fair value estimates are made at a specific point in time based on relevant market information and information about financial instruments. Because no market exists for a significant portion of Bancorp’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Therefore, calculated fair value estimates in many instances cannot be substantiated by comparison to independent markets and, in many cases, may not be realizable in a current sale of the instrument. Changes in assumptions could significantly affect estimates.

(17) Derivative Financial Instruments

Periodically, Bancorp enters into an interest rate swap transaction with a borrower, who desires to hedge exposure to rising interest rates, while at the same time entering into an offsetting interest rate swap, with substantially matching terms, with another approved independent counterparty. These are undesignated derivative instruments and are recognized on the balance sheet at fair value. Because of matching terms of offsetting contracts and collateral provisions mitigating any non-performance risk, changes in fair value subsequent to initial recognition have an insignificant effect on earnings. Exchanges of cash flows related to undesignated interest rate swap agreements for the first three months of 2018 were offsetting and therefore had no effect on Bancorp’s earnings or cash flows.

Interest rate swap agreements derive their value from underlying interest rates. These transactions involve both credit and market risk. Notional amounts are amounts on which calculations, payments, and the value of the derivative are based. Notional amounts do not represent direct credit exposures. Direct credit exposure is limited to the net difference between the calculated amounts to be received and paid, if any. Bancorp is exposed to credit-related losses in the event of nonperformance by counterparties to these agreements. Bancorp mitigates the credit risk of its financial contracts through credit approvals, limits, collateral, and monitoring procedures, and does not expect any counterparties to fail their obligations.

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Stock Yards Bancorp, inc. and subsidiary

At March 31, 2018 and December 31, 2017, Bancorp had outstanding undesignated interest rate swap contracts as follows:

(Dollar amounts in thousands)	Receiving						Paying
	March 31,			December 31,			March 31,		December 31,
	2018			2017			2018		2017
Notional amount	$	54,310		$	54,964		$	54,310	$	54,964
Weighted average maturity (years)		8.5			8.7			8.5		8.7
Fair value	$	(1,275	)	$	(259	)	$	1,298	$	283

In 2016, Bancorp entered into an interest rate swap to hedge cash flows of a $10 million rolling fixed-rate three-month FHLB borrowing. The swap began December 6, 2016 and ends December 6, 2021. In 2015, Bancorp entered into an interest rate swap to hedge cash flows of a $20 million rolling fixed-rate three-month FHLB borrowing. The swap began December 9, 2015 and matures December 6, 2020. For purposes of hedging, rolling fixed rate advances are considered to be floating rate liabilities. Interest rate swaps involve exchange of Bancorp’s floating rate interest payments for fixed rate swap payments on underlying principal amounts. These swaps were designated, and qualified, for cash-flow hedge accounting. For derivative instruments that are designated and qualify as cash flow hedging instruments, the effective portion of gains or losses is reported as a component of other comprehensive income, and is subsequently reclassified into earnings as an adjustment to interest expense in periods in which the hedged forecasted transaction affects earnings.

The following table details Bancorp’s derivative position designated as a cash flow hedge, and the fair values as of March 31, 2018 and December 31, 2017.

(Dollars in thousands)
							Fair value
Notional		Maturity	Receive (variable)	Pay fixed			assets (liabilities)
amount		date	index	swap rate			March 31, 2018		December 31, 2017
$	10,000	12/6/2021	US 3 Month LIBOR		1.89	%	$	266	$	106
	20,000	12/6/2020	US 3 Month LIBOR		1.79	%		423		190
$	30,000				1.82	%	$	689	$	296

(18) Regulatory Matters

Bancorp and the Bank are subject to various capital requirements prescribed by banking regulations and administered by state and federal banking agencies. Under these requirements, Bancorp and the Bank must meet minimum amounts and percentages of Tier 1, common equity Tier 1, and total capital, as defined, to risk weighted assets and Tier 1 capital to average assets. Risk weighted assets are determined by applying certain risk weightings prescribed by regulation to various categories of assets and off-balance sheet commitments. Capital and risk weighted assets may be further subject to qualitative judgments by regulators as to components, risk weighting and other factors. Failure to meet capital requirements can result in certain mandatory, and possibly discretionary, corrective actions prescribed by regulation or determined to be necessary by regulators, which could materially affect the unaudited consolidated financial statements.

In 2013, the Federal Reserve Board and the FDIC approved rules that substantially amended regulatory risk-based capital rules applicable to Bancorp and the Bank. The rules implemented regulatory capital reforms of the Basel Committee on Banking Supervision reflected in "Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems" (Basel III) and changes required by the Dodd-Frank Act. Basel III regulatory capital reforms became effective for Bancorp and the Bank on January 1, 2015, and include new minimum risk-based capital and leverage ratios. Bancorp and the Bank met all capital requirements to which they were subject as of March 31, 2018.

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Stock Yards Bancorp, inc. and subsidiary

The following table sets forth consolidated Bancorp’s and the Bank’s risk based capital amounts and ratios as of March 31, 2018 and December 31, 2017.

(Dollars in thousands)	Actual					Minimum for adequately capitalized					Minimum for well capitalized
March 31, 2018	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk-based capital (1)
Consolidated	$	366,493		13.04	%	$	224,842		8.00	%	NA		NA
Bank		355,611		12.66			224,715		8.00		$	280,893		10.00	%
Common equity tier 1 risk-based capital
Consolidated		341,940		12.16			126,540		4.50		NA		NA
Bank		331,058		11.79			126,358		4.50			182,517		6.50
Tier 1 risk-based capital (1)
Consolidated		341,940		12.16			168,720		6.00		NA		NA
Bank		331,058		11.79			168,477		6.00			224,636		8.00
Leverage (2)
Consolidated		341,940		11.05			123,779		4.00		NA		NA
Bank		331,058		10.71			123,644		4.00			154,556		5.00

(Dollars in thousands)	Actual					Minimum for adequately capitalized					Minimum for well capitalized
December 31, 2017	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk-based capital (1)
Consolidated	$	359,866		13.52	%	$	213,012		8.00	%	NA		NA
Bank		347,840		13.07			212,891		8.00		$	266,114		10.00	%
Common equity tier 1 risk-based capital
Consolidated		334,631		12.57			119,820		4.50		NA		NA
Bank		322,605		12.12			212,891		4.50			172,974		6.50
Tier 1 risk-based capital (1)
Consolidated		334,631		12.57			159,760		6.00		NA		NA
Bank		322,605		12.12			159,668		6.00			212,891		8.00
Leverage (2)
Consolidated		334,631		10.70			125,122		4.00		NA		NA
Bank		322,605		10.32			125,040		4.00			156,300		5.00

(1) Ratio is computed in relation to risk-weighted assets.

(2) Ratio is computed in relation to average assets.

NA Not applicable. Regulatory framework does not define well capitalized for holding companies.

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Stock Yards Bancorp, inc. and subsidiary

(19) Segments

Bancorp’s principal activities include commercial banking and wealth management and trust. Commercial banking provides a full range of loan and deposit products to individual consumers and businesses. Commercial banking also includes Bancorp’s mortgage origination and investment products sales activity. Wealth management and trust provides financial management services including investment management, trust and estate administration, and retirement plan services.

Financial information for each business segment reflects that which is specifically identifiable or allocated based on an internal allocation method. Income taxes are allocated based on the effective federal income tax rate adjusted for any tax exempt activity. All tax exempt activity and provision for loan losses have been allocated to the commercial banking segment. Measurement of performance of business segments is based on the management structure of Bancorp and is not necessarily comparable with similar information for any other financial institution. Information presented is also not necessarily indicative of the segments’ operations if they were independent entities.

Principally, all of the net assets of Stock Yards Bancorp, Inc. are involved in the commercial banking segment. Bancorp has goodwill of $682,000 related to a bank acquisition in 1996 which has been assigned to the commercial banking segment. Assets assigned to the Wealth Management & Trust Group (WM&T) consist of premises and equipment, net of accumulated depreciation.

Selected financial information by business segment for the three month periods ended March 31, 2018 and 2017 follows: 

			Wealth
	Commercial		management
(In thousands)	banking		and trust		Total
Three months ended March 31, 2018
Net interest income	$	27,224	$	71	$	27,295
Provision for loan losses		735		-		735
Wealth management and trust services		-		5,500		5,500
All other non-interest income		5,423		-		5,423
Non-interest expense		17,829		3,198		21,027
Income before income taxes		14,083		2,373		16,456
Income tax expense		2,537		515		3,052
Net income	$	11,546	$	1,858	$	13,404
Segment assets	$	3,283,539	$	1,941	$	3,285,480
Three months ended March 31, 2017
Net interest income	$	25,107	$	77	$	25,184
Provision (credit) for loan losses		900		-		900
Wealth management and trust services		-		5,094		5,094
All other non-interest income		5,500		-		5,550
Non-interest expense		17,948		3,047		20,995
Income before income taxes		11,809		2,124		13,933
Income tax expense		2,384		758		3,142
Net income	$	9,425	$	1,366	$	10,791
Segment assets	$	3,031,318	$	2,025	$	3,033,343

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Stock Yards Bancorp, inc. and subsidiary

(20) Revenue from Contracts with Customers

Bancorp adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers and all related amendments (ASC 606), which creates a single framework for recognizing revenue from contracts with customers that fall within its scope and revises when it is appropriate to recognize a gain (loss) from the transfer of nonfinancial assets, effective January 1, 2018 using the full retrospective method. Bancorp recognizes revenue upon satisfying a performance obligation as services are rendered to a customer. All of Bancorp’s revenue from contracts with customers in the scope of ASC 606 is recognized within non-interest income. The only impact to financial statement presentation was reclassification from expense to contra income costs incurred to obtain and fulfill contracts associated with investment product sales. All periods presented in these financial statements have been restated to reflect the reclassification. The table below presents the Company’s sources of non-interest income for the three months ended March 31, 2018 and March 31, 2017. Items outside the scope of ASC 606 are noted as such.

For the three months ended March 31, 2018
(In thousands)
Revenue by operating segment	Commercial		WM&T		Consolidated
Wealth management and trust services	$	-	$	5,500	$	5,500
Deposit service charges		1,511				1,511
Debit and credit card revenue		1,508				1,508
Treasury management fees		947				947
Mortgage banking revenue (1)		576				576
Investment product sales commissions and fees		404				404
Bank owned life insurance income (1)		187				187
Other income (2)		290				290
Total non-interest income	$	5,423	$	5,500	$	10,923

(1)	Not within the scope of ASC 606
(2)	includes safety box deposit fees of $45 thousand included within the scope of ASC 606

For the three months ended March 31, 2017
(In thousands)
Revenue by operating segment	Commercial		WM&T		Consolidated
Wealth management and trust services	$	-	$	5,094	$	5,094
Deposit service charges		1,565				1,565
Debit and credit card revenue		1,406				1,406
Treasury management fees		956				956
Mortgage banking revenue (1)		702				702
Investment product sales commissions and fees		386				386
Bank owned life insurance income (1)		204				204
Other income (2)		331				331
Total non-interest income	$	5,550	$	5,094	$	10,644

(1)	Not within the scope of ASC 606
(2)	includes safety box deposit fees of $45 thousand included within the scope of ASC 606

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Stock Yards Bancorp, inc. and subsidiary

Revenue sources within the scope of ASC 606 are discussed below.

The Company earns fees from its deposit customers for transactions-based, account management, and overdraft services. Transaction-based fees, which include services such as ATM use fees, stop payments fees, and ACH fees, are recognized at the time the transaction is executed as that is when the company fulfills the performance obligation. Account management fees are earned over the course of a month and charged in the month in which the services are provided. Overdraft fees are recognized at the point in time that the overdraft occurs. Deposit service charges are withdrawn from customer’s account balances.

Treasury management transaction fees are recognized at the time the transaction is executed as that is when the company fulfills the performance obligation.  Account management fees are earned over the course of a month and charged in the month in which the services are provided.  Treasury management fees are withdrawn from customer’s account balances.

The Wealth Management and Trust Group (WM&T) provides customers fiduciary and investment management services as agreed upon in asset management contracts. The contracts require WM&T to provide a series of distinct services for which fees are earned over time. The contracts are cancellable upon demand with fees typically based upon the asset value of investments. Revenue is accrued and recognized monthly based upon month-end asset values and collected from the customer predominately in the following month except for a small percentage of fees collected quarterly. Incentive compensation related to WM&T activities is considered a cost of obtaining the contract. Contracts between WM&T and clients do not permit performance based fees and accordingly, none of the fees earned by WM&T are performance based.

Investment products sales commissions and fees represent the Bank’s share of transaction fees and wrap fees resulting from investment services and programs provided through an agent relationship with a third party broker-dealer. Transaction fees are assessed at the time of the transaction. Those fees are collected and recognized on a monthly basis. Trailing fees are based upon market value and are assessed, collected, and recognized on a quarterly basis. Variable costs considered costs of obtaining the contracts related to investment product sales activities include incentive compensation expense and trading activity charges. The incentive compensation has been reclassified from compensation expense and the trading activity fees from technology and communication in prior years’ presentation to a reduction of income.

Debit and credit card interchange revenue represents fees assessed within the payment card system for acceptance of card based transactions. Interchange fees are assessed as the performance obligation is satisfied, which is at the point in time the card transaction is authorized. Revenue is collected and recognized daily through the payment network settlement process.

Bancorp did not establish any contract assets or liabilities as a result of adopting ASC 606, nor were any recognized during the first quarter of 2018. Trust fees receivable as of March 31, 2018 were $2.2 million compared with $2.2 million as of December 31, 2017.

Bancorp’s revenue on the consolidated statement of income is categorized by product type, which effectively depicts how the nature, timing, and extent of cash flows are affected by economic factors.

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Stock Yards Bancorp, inc. and subsidiary

Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

This item discusses the results of operations for Stock Yards Bancorp, Inc. (“Bancorp” or “Company”), and its subsidiary, Stock Yards Bank & Trust Company (“Bank”) for the three months ended March 31, 2018 and compares this period with the same period of the previous year. Unless otherwise indicated, all references in this discussion to the Bank include Bancorp. In addition, the discussion describes changes in the financial condition of Bancorp and the Bank that have occurred during the first three months of 2018 and 2017. This discussion should be read in conjunction with the consolidated financial statements and accompanying notes presented in Part 1, Item 1 of this report.

This report contains forward-looking statements under the Private Securities Litigation Reform Act that involve risks and uncertainties. Although Bancorp believes assumptions underlying forward-looking statements contained herein are reasonable, any of these assumptions could be inaccurate. Factors that could cause actual results to differ from results discussed in forward-looking statements include, but are not limited to the following: economic conditions both generally and more specifically in markets in which Bancorp and the Bank operate; competition for Bancorp’s customers from other providers of financial services; government legislation and regulation which change from time to time and over which Bancorp has no control; changes in interest rates; material unforeseen changes in liquidity, results of operations, or financial condition of Bancorp’s customers; and other risks detailed in Bancorp’s filings with the Securities and Exchange Commission, all of which are difficult to predict and many of which are beyond the control of Bancorp.

Overview of 2018 through March 31

Bancorp completed the first three months of 2018 with net income of $13.4 million, a 24.2% increase over the comparable period in 2017. The increase is primarily due to higher net interest income driven by exceptional loan growth, higher non-interest income led by wealth management and trust fees, and a lower effective income tax rate resulting from tax reform. Diluted earnings per share for the first three months of 2018 were $0.58, compared with $0.47 for the first three months of 2017. Bancorp's performance for the first three months of 2018 reflected several positive factors, including:

● Exceptional loan growth, which increased the Company’s loan portfolio 4% on a sequential-quarter basis and 11% year over year;

● A higher net interest margin, reflecting both increased rate and volume;

● A continuation of historically strong credit quality metrics;

● Strong growth in wealth management and trust revenue; and

● Tax savings resulting from the Tax Cuts and Jobs Act enacted in December 201

● High returns on average assets and equity.

As is the case with most banks, Bancorp’s primary revenue sources are net interest income and fee income from various financial services provided to customers. Net interest income is the difference between interest income earned on loans, investment securities and other interest earning assets less interest expense on deposit accounts and other interest bearing liabilities. Loan volume and interest rates earned on those loans are critical to overall profitability. Similarly, deposit volume is crucial to funding loans and rates paid on deposits directly impact profitability. New business volume is influenced by economic factors including market interest rates, business spending, consumer confidence and competitive conditions within the marketplace.

Net interest income increased $2.1 million, or 8.4%, for the first three months of 2018, compared with the same period in 2017. Increasing average rates on interest earning assets, along with the impact of increased volumes of loans contributed to higher interest income for the first quarter of 2018, as interest income increased $3.1 million, or 11.6%, over the same period in 2017. Higher funding costs on deposits and borrowings resulted in an increase in interest expense of $986 thousand or 68%, year over year. Bancorp benefited in recent years from historically low costs of funding, so that a modest increase in interest expense results in a significant percentage change over prior periods. Net interest margin increased to 3.79% for the first three months of 2018, compared with 3.63% for the same period of 2017.

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Stock Yards Bancorp, inc. and subsidiary

For the three-month period ended March 31, 2018, Bancorp recorded a $735 thousand provision for loan losses, compared with $900 thousand for the same period in 2017. Key loan quality indicators remained at historically low levels. The provision for loan losses represents a charge to earnings necessary to maintain an allowance for loan losses that, in management’s evaluation, is adequate to provide coverage for the inherent losses on outstanding loans. The allowance for loan losses to total loans was 0.96% as of March 31, 2018, compared with 1.08% as of March 31, 2017. The decline in allowance for loan losses was largely the effect of loan growth in the first quarter of 2018 and charge offs that had been previously reserved, and remained adequate to cover potential losses in the portfolio, in management’s opinion.

Total non-interest income in the first three months of 2018 increased $279 thousand, or 2.6%, compared with the same period in 2017, and comprised 28.6% of total revenues, as compared with 30.0% for the same period in 2017. Continuing the trends of 2017, Bancorp’s Wealth Management and Trust Group led the increase with an 8%, or $406 thousand increase over the same period in 2017. This growth, which reflected primarily the addition of new customer relationships, was exceptionally strong. WM&T revenue growth for the year is expected to moderate to 5%-6%.

Total non-interest expense in the first three months of 2018 increased $32 thousand, or 0.2%, compared with the same period in 2017. Increases in compensation, technology and communication, and marketing and business development were partially offset by a reduction in amortization/impairment of investment in tax credit partnerships due to the sporadic timing of such opportunities, which can cause corresponding expenses and tax benefits to vary widely. Bancorp's efficiency ratio in the first three months of 2018 was 54.9% compared with 58.3% in the same period in 2017. Excluding amortization of the investments in tax credit partnerships, the adjusted efficiency ratio, a non-GAAP measure, would have been 54.9% for both the first three months of 2018 and 2017, respectively. See the Non-GAAP Financial Measures section for details on reconcilement to US GAAP measures.

Bancorp’s effective tax rate decreased to 18.5% in 2018 from 22.6% in 2017. The decrease in the effective tax rate from 2017 to 2018 was largely the result of the reduction of the federal tax rate from 35% to 21% effective January 1, 2018, as a result of the Tax Cuts and Jobs Act enacted on December 22, 2017. The 2017 effective tax rate included significantly more tax savings from stock-based compensation deductions and federal income tax credits included significantly more tax savings from stock-based compensation deductions and federal income tax credits.

The ratio of shareholder’s equity to total assets was 10.28% as of March 31, 2018 compared with 10.30% at December 31, 2017. Tangible common equity (TCE), a non-GAAP measure, is a measure of a company's capital which is useful in evaluating the quality and adequacy of capital. See the Non-GAAP Financial Measures section for details on reconcilement to US GAAP measures. The ratio of tangible common equity to total tangible assets was 10.23% as of March 31, 2018, compared with 10.25% at December 31, 2017. The slight decrease is attributable to asset growth proportionately exceeding capital growth in the first three months of 2018. Capital growth was slowed in part by changes in unrealized losses on securities available for sale and hedging instruments of $3.4 million recorded in other comprehensive income.

The following sections provide more details on subjects presented in this overview.

a) Results Of Operations

Net income of $13.4 million for the three months ended March 31, 2018 increased $2.6 million, or 24.2%, from $10.8 million for the comparable 2017 period. Basic net income per share was $0.59 for the first quarter of 2018, an increase of 22.9% from the $0.48 for the first quarter of 2017. Net income per share on a diluted basis was $0.58 for the first quarter of 2018, an increase of 23.4% from the $0.47 for the same period in 2017. See Note 11 for additional information related to net income per share.

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Stock Yards Bancorp, inc. and subsidiary

Annualized return on average assets and annualized return on average stockholders’ equity were 1.76% and 16.15%, respectively, for the first quarter of 2018, compared with 1.46% and 13.78%, respectively, for the same period in 2017.

Net Interest Income

The following table presents average balance sheets for the three month periods ended March 31, 2018 and 2017 along with the related calculation of tax-equivalent net interest income, net interest margin and net interest spread for the related periods. See the notes following the tables for further explanation.

	Three months ended March 31,
	2018							2017
	Average				Average			Average				Average
(Dollars in thousands)	balances		Interest		rate			balances		Interest		rate
Earning assets:
Federal funds sold and interest bearing deposits	$	71,186	$	268		1.53	%	$	65,304	$	134		0.83	%
Mortgage loans held for sale		2,098		35		6.77			2,943		44		6.06
Securities:
Taxable		373,314		2,027		2.20			431,276		2,042		1.92
Tax-exempt		44,394		296		2.70			54,933		402		2.97
FHLB stock and other securities		7,687		111		5.86			6,347		72		4.60
Loans, net of unearned income		2,432,659		27,086		4.52			2,277,688		24,137		4.30
Total earning assets		2,931,338		29,823		4.13			2,838,491		26,831		3.83
Less allowance for loan losses		25,063							24,379
		2,906,275							2,814,112
Non-earning assets:
Cash and due from banks		39,985							40,085
Premises and equipment		41,891							42,254
Accrued interest receivable and other assets		102,740							102,499
Total assets	$	3,090,891						$	2,998,950
Interest bearing liabilities:
Deposits:
Interest bearing demand deposits	$	817,567	$	623		0.31	%	$	755,494	$	267		0.14	%
Savings deposits		154,607		56		0.15			143,178		14		0.04
Money market deposits		686,699		953		0.56			701,107		544		0.31
Time deposits		234,383		445		0.77			246,800		338		0.56
Securities sold under agreements to repurchase		71,276		33		0.19			68,467		35		0.21
Federal funds purchased and other short term borrowings		26,259		90		1.39			15,625		19		0.49
FHLB advances		49,247		235		1.94			50,866		232		1.85
Total interest bearing liabilities		2,040,038		2,435		0.48			1,981,537		1,449		0.30
Non-interest bearing liabilities:
Non-interest bearing demand deposits		669,929							660,301
Accrued interest payable and other liabilities		44,354							39,430
Total liabilities		2,754,321							2,681,268
Stockholders’ equity		336,570							317,682
Total liabilities and stockholders’ equity	$	3,090,891						$	2,998,950
Net interest income			$	27,388						$	25,382
Net interest spread						3.65	%						3.53	%
Net interest margin						3.79	%						3.63	%

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Stock Yards Bancorp, inc. and subsidiary

Notes to the average balance and interest rate tables:

● Net interest income, the most significant component of the Bank's earnings is total interest income less total interest expense. The level of net interest income is determined by mix and volume of interest earning assets, interest bearing deposits and borrowed funds, and changes in interest rates.

● Net interest spread is the difference between taxable equivalent rates earned on interest earning assets less the rate expensed on interest bearing liabilities.

● Net interest margin represents net interest income on a taxable equivalent basis as a percentage of average interest earning assets. Net interest margin is affected by both interest rate spread and the level of non-interest bearing sources of funds, primarily consisting of demand deposits and stockholders’ equity.

● Interest income on a fully tax equivalent basis includes additional amounts of interest income that would have been earned if investments in certain tax-exempt interest earning assets had been made in assets subject to federal taxes yielding the same after-tax income. Interest income on municipal securities and tax-exempt loans has been calculated on a fully tax equivalent basis using a federal income tax rate of 21% for 2018 and 35% for 2017. Approximate tax equivalent adjustments to interest income were $93 thousand and $198 thousand, respectively, for the three month periods ended March 31, 2018 and 2017.

● Average balances for loans include the principal balance of non-accrual loans and exclude participation loans accounted for as secured borrowings. These participation loans averaged $18 million and $15.9 million, respectively, for the three month periods ended March 31, 2018 and 2017.

Fully taxable equivalent net interest income of $27.4 million for the three months ended March 31, 2018 increased $2.0 million, or 7.9%, from $25.4 million for the same period in 2017. Positive effects of increased average balances on loans, resulting from strong loan growth year over year, and increased interest rates on loans and investments were partially offset by the negative effect of increasing rates on deposit accounts and other funding sources. Net interest spread and net interest margin were 3.65% and 3.79%, respectively, for the first quarter of 2018 and 3.53% and 3.63%, respectively, for the first quarter of 2017. Interest expense remained under rate pressure due to rising deposit costs, but the increase was less than expected. Management expects rate pressure to increase over the balance of 2018, as depositors become more rate sensitive and competition increases. Given these circumstances, the effect of future prime rate increases could be revenue neutral.

Average earning assets increased $92.8 million or 3.3%, to $2.9 billion for the first three months of 2018 as compared with 2017, reflecting increases in the loan portfolio partially offset by decreases in available-for-sale investments. Average interest bearing liabilities increased $58.5 million, or 3.0%, to $2.0 billion for the first three months of 2018, as compared with the same period in 2017, primarily due to increases in the volume of interest bearing demand deposits, savings deposits, securities sold under agreements to repurchase, and federal funds purchased and other short term borrowings, partially offset by decreases in money market deposits, time deposits, and FHLB advances.

Asset/Liability Management and Interest Rate Risk

Managing interest rate risk is fundamental for the financial services industry. The primary objective of interest rate risk management is to neutralize effects of interest rate changes on net income. By considering both on and off-balance sheet financial instruments, management evaluates interest rate sensitivity with the goal of optimizing net interest income within the constraints of prudent capital adequacy, liquidity needs, market opportunities and customer requirements.

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Interest Rate Simulation Sensitivity Analysis

Bancorp uses an earnings simulation model to estimate and evaluate the impact of an immediate change in interest rates on earnings in a one year forecast. The simulation model is designed to reflect dynamics of interest earning assets and interest bearing liabilities. By estimating effects of interest rate increases and decreases, the model can reveal approximate interest rate risk exposure. This simulation model is used by management to gauge approximate results given a specific change in interest rates at a given point in time. The model is therefore a tool to indicate earnings trends in given interest rate scenarios and may not indicate actual expected results.

The March 31, 2018 simulation analysis, which shows minimal interest rate sensitivity, indicates that increases in interest rates of 100 to 200 basis points would have a positive effect on net interest income, and decreases of 100 to 200 basis points in interest rates would have a negative effect on net interest income. If rates rise 200 bps, net interest income increases 2.31%. The relatively small increase in net interest income for the rising rate scenarios is primarily due to variable rate loans and short-term investments repricing more quickly than deposits and short-term borrowings. Asset balances subject to immediate repricing cause an estimated decline in net interest income in down 100 and 200 basis point rate scenarios as rates on non-maturity deposits cannot be lowered sufficiently to offset declining interest income. These estimates are summarized below.

	Net interest income % change
Increase 200 bp		2.31
Increase 100 bp		1.15
Decrease 100 bp		(2.60)
Decrease 200 bp		(9.10)

Approximately 60% of Bancorp’s loan portfolio has fixed rates and 40% of its loan portfolio is priced at variable rates. With the Prime rate currently at 4.75%, virtually all of Bancorp’s variable rate loans now have interest rates at or above their floors. This effect is captured in the simulation analysis above.

Undesignated derivative instruments described in Note 17 to Bancorp’s consolidated financial statements are recognized on the consolidated balance sheet at fair value, with changes in fair value due to changes in prevailing interest rates, recorded in other non-interest income. Because of matching terms of offsetting contracts, in addition to collateral provisions which mitigate the impact of non-performance risk, changes in fair value subsequent to initial recognition have a minimal effect on earnings, and are therefore not included in the simulation analysis results above.

Derivatives designated as cash flow hedges described in Note 17 to Bancorp’s consolidated financial statements are recognized on the consolidated balance sheet at fair value, with changes in fair value due to changes in prevailing interest rates, recorded net of tax in other comprehensive income.

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Provision for Loan Losses

The provision for loan losses represents a charge to earnings necessary to maintain an allowance for loan losses that, in management’s evaluation, is adequate to provide coverage for inherent losses on outstanding loans.  The allowance for loan losses is calculated after considering credit quality factors, and ultimately relies on an overall internal analysis of risk in the loan portfolio. Based on this analysis, the provision for loan losses is determined and recorded.  The provision reflects the results of an allowance methodology that is driven by risk ratings, historical losses, specific loan loss allocations, and qualitative factors.  The 2018 first quarter provision reflected a number of factors, including loan growth and qualitative considerations.  Consistent with Bancorp’s methodology, the historical look-back period was extended from 28 to 32 quarters in order to capture the effects of a full economic cycle.  This expansion of the look-back period was applied to all classes and segments of the portfolio.  The expansion of the look-back period for the historical rates used in the qualitative allocation caused us to review the assumptions within the overall methodology for the qualitative factors to ensure we were appropriately capturing the risk not addressed in the historical loss rates used in the quantitative allocation.  Management believes the expansion of the look-back period is appropriate to ensure capture of the impact of a full economic cycle and more accurately represents the current level of risk in the loan portfolio.  As a result of extending the look-back period and making normal updates to other assumptions in the allowance model in the first quarter of 2018, the allowance decreased $682 thousand.  Bancorp recorded loan loss provision of $735 thousand in the first quarter of 2018 compared with $900 thousand for the same time period in 2017.

Key indicators of loan quality remained consistent with prior years. Bancorp considers the present asset quality metrics to be strong. Recognizing the cyclical nature of the lending business, this trend will most likely normalize over the long term. Non-performing loans increased to $12.3 million at March 31, 2018 from $6.1 million at March 31, 2017, due exclusively to one commercial lending relationship added to non-accrual loans.

Bancorp’s loan portfolio is diversified with no significant concentrations of credit. Geographically, most loans are extended to borrowers in the metropolitan areas of Louisville, Indianapolis and Cincinnati. The adequacy of the allowance is monitored on an ongoing basis and it is the opinion of management that the balance of the allowance for loan losses at March 31, 2018 is adequate to absorb probable losses inherent in the loan portfolio as of the financial statement date.

An analysis of the changes in the allowance for loan losses and selected ratios for the three-month periods ended March 31, 2018 and 2017 follows:

(Dollars in thousands)	Three months ended March 31,
	2018			2017
Balance at the beginning of the period	$	24,885		$	24,007
Provision for loan losses		735			900
Loan charge-offs, net of recoveries		(1,417	)		(426	)
Balance at the end of the period	$	24,203		$	24,481
Average loans, net of unearned income	$	2,450,703		$	2,293,542
Provision for loan losses to average loans (1)		0.03	%		0.04	%
Net loan charge-offs to average loans (1)		0.06	%		0.02	%
Allowance for loan losses to average loans		0.99	%		1.07	%
Allowance for loan losses to period-end loans		0.96	%		1.08	%

(1) Amounts not annualized

Loans are charged off when deemed uncollectible and a loss is identified or after underlying collateral has been liquidated; however, collection efforts may continue and future recoveries may occur. Periodically, loans are partially charged off to net realizable value based upon collateral analysis and collection status. One commercial loan was charged off to its net realizable value in the first quarter of 2018, which resulted in increased net charge offs for the three month period ending March 31, 2018 compared with the same period in 2017. The decline in the allowance in the first quarter of 2018 was mainly due to first quarter loan growth and the commercial charge-off that had been previously reserved, and remained adequate to cover potential losses in the loan portfolio, in management’s opinion.

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An analysis of net charge-offs by loan category for the three month periods ended March 31, 2018 and 2017 follows:

(In thousands)	Three months
	ended March 31,
Net loan charge-offs (recoveries)	2018			2017
Commercial and industrial	$	1,399		$	405
Construction and development, excluding undeveloped land		-			-
Undeveloped land		-			-
Real estate mortgage - commercial investment		(1	)		(1	)
Real estate mortgage - owner occupied commercial		-			-
Real estate mortgage - 1-4 family residential		-			(1	)
Home equity		(3	)		9
Consumer		22			14
Total net loan charge-offs	$	1,417		$	426

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Stock Yards Bancorp, inc. and subsidiary

Non-interest Income and Expenses

The following table sets forth major components of non-interest income and expenses for the three month periods ended March 31, 2018 and 2017.

	Three months
	ended March 31,
(In thousands)	2018		2017		Change			% Change
Non-interest income:
Wealth management and trust services	$	5,500	$	5,094	$	406			8.0	%
Deposit service charges		1,511		1,541		(30	)		(1.9	)
Debit and credit cards		1,508		1,406		102			7.3
Treasury management		947		980		(33	)		(3.4	)
Mortgage banking		576		702		(126	)		(17.9	)
Investment product sales commissions and fees		404		386		18			4.7
Bank owned life insurance		187		204		(17	)		(8.3	)
Other		290		331		(41	)		(12.4	)
Total non-interest income	$	10,923	$	10,644	$	279			2.6	%
Non-interest expenses:
Compensation	$	10,970	$	10,669	$	301			2.8	%
Employee benefits		2,633		2,742		(109	)		(4.0	)
Net occupancy and equipment		1,818		1,907		(89	)		(4.7	)
Technology and communication		2,196		1,848		348			18.8
Marketing and business development		646		445		201			45.2
Postage, printing, and supplies		391		371		20			5.4
Legal and professional		493		429		64			14.9
FDIC insurance		242		230		12			5.2
Amortization/impairment of investment in tax credit partnerships		-		616		(616	)		(100.0	)
Capital and deposit based taxes		852		764		88			11.5
Other		786		974		(188	)		(19.3	)
Total non-interest expenses	$	21,027	$	20,995	$	32			0.2	%

The largest component of non-interest income is wealth management and trust revenue. The magnitude of WM&T revenue distinguishes Bancorp from other community banks of similar asset size. Trust assets under management totaled $2.88 billion at March 31, 2018, a 10.34% increase compared with $2.61 billion at March 31, 2017. Assets under management are stated at market value and while the 2018 increase was the result of both a rising stock market year over year and a continuance of new clients added. WM&T revenue, which constitutes an average of 48% of non-interest income, increased $406 thousand, or 8.0%, for the three months ended March 31, 2018 compared with the same period in 2017. Recurring fees, which generally comprise over 98% of the WM&T revenue, increased $423 thousand, or 8.5%, in the first quarter of 2018, compared with the same time period in 2017. Recurring fees earned for managing accounts are based on a percentage of market value of the assets under management and are typically assessed on a monthly basis. Some revenues of the WM&T department, most notably executor, insurance, and some employee benefit plan-related fees, are non-recurring in nature and the timing of these revenues corresponds with the related administrative activities, and is also based on the market value of assets under management. Total non-recurring fees decreased $17 thousand or 14.1% in the first quarter of 2018 compared with the first quarter of 2017. Contracts between WM&T and their clients do not permit performance based fees and accordingly, none of the fees earned by WM&T are performance based. Management believes the WM&T department will continue to factor significantly in Bancorp’s financial results and provide strategic diversity to revenue streams. Management is optimistic that the WM&T department will deliver growth in 2018, but increased market volatility could affect short-term results.

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Stock Yards Bancorp, inc. and subsidiary

The following table provides information regarding assets under management (AUM) by WM&T as of March 31, 2018 and 2017. This table demonstrates that:

• Approximately 80% of AUM are actively managed.

• Non-managed employee benefit plan accounts consist primarily of participant directed assets.

• The amount of custody and safekeeping accounts is insignificant, and

• The majority of managed assets are in personal trust, agency, and investment advisory accounts.

Assets Under Management by Account Type	March 31, 2018				March 31, 2017
	Assets				Assets
(In thousands)	Managed		Non- managed (1)		Managed		Non- managed (1)
Personal trust accounts	$	577,803	$	77,303	$	554,465	$	96,155
Personal individual retirement acounts		352,105		1,806		317,634		8,909
Corporate retirement accounts		53,935		403,879		53,416		358,177
Investment advisory accounts		1,095,159		18,290		917,003		20,485
Foundation and endowment accounts		193,258		-		208,443		-
Total fiduciary accounts	$	2,272,260	$	501,278	$	2,050,961	$	483,726
Custody and safekeeping accounts		-		109,047		-		79,889
Totals	$	2,272,260	$	610,325	$	2,050,961	$	563,615
Total managed and non-managed assets	$	2,882,585			$	2,614,576

(1) Non-managed assets represent those for which WM&T does not have investment discretion.

The table below presents data regarding WM&T managed assets by class of investment for the periods ending March 31, 2018 and 2017. Managed assets are invested in instruments for which market values can be readily determined, the majority of which are sensitive to market fluctuations. This table demonstrates that:

• Managed assets are invested in instruments for which market values can be readily determined.

• The majority of these instruments are sensitive to market fluctuations.

• The composition of managed assets is divided approximately 62% in equities and 38% in fixed income securities, and this composition is relatively consistent from year to year, and

• The bank has no proprietary mutual funds.

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Managed Assets by Class of Investment
	As of March 31,
(In thousands)	2018		2017
Interest bearing deposits	$	116,146	$	146,171
US Treasury and government agency obligations		44,265		37,604
State, county and municipal obligations		136,972		131,708
Money market mutual funds		8,409		11,454
Equity mutual funds		561,059		486,062
Other mutual funds - fixed, balanced, and municipal		306,731		303,712
Other notes and bonds		135,634		100,609
Common and preferred stocks		837,903		735,875
Real estate mortgages		365		383
Real estate		50,710		45,682
Other miscellaneous assets (1)		74,066		51,701
Total managed assets	$	2,272,260	$	2,050,961

(1) Includes rights, warrants, annuities, insurance policies, unit investment trusts, and oil and gas rights.

The table below provides information regarding fee income earned by Bancorp’s WM&T department for the three-month periods ended March 31, 2018 and 2017. It demonstrates that WM&T fee revenue is earned most significantly from personal trust and investment advisory accounts. Fees are based on AUM and tailored for individual accounts and/or relationships. WM&T uses a fee structure that considers and tailors based on type of account and other factors. For example, fee structures are in place for investment management, irrevocable trusts, revocable trusts, IRA accounts, and accounts holding only fixed income securities. There are also fee structures for estate settlements, which are non-recurring, and retirement plan services which typically consist of a one-time conversion fee with recurring AUM fees to follow. All fees are based on the market value of each account and are tiered based on account size, with larger relationships paying a lower percentage of AUM in fees. Fees are agreed upon at the time the account is opened and these and any subsequent revisions are communicated in writing to the customer. Fees earned are not performance based nor are they based on investment strategy or transactions.

Fiduciary and Related Services Income
	Three months ended March 31,
(In thousands)	2018		2017
Personal trust accounts	$	1,918	$	1,943
Personal individual retirement accounts		873		787
Corporate retirement accounts		379		399
Investment advisory accounts		2,079		1,748
Foundation and endowment accounts		151		132
Custody and safekeeping acounts		56		36
Brokerage and insurance services		23		9
Other		21		40
Total	$	5,500	$	5,094

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Stock Yards Bancorp, inc. and subsidiary

Other Non-interest Income and Non-interest Expense

Deposit service charges decreased $54 thousand, or 3.5%, for the first three months of 2018, as compared with the same period in 2017. Service charge income is driven by transaction volume, which can fluctuate throughout the year. The first quarter decrease is primarily due to a decline in fees earned on overdrawn checking accounts, which decreased by $56 thousand or 5.14%, period to period. Management expects this source of revenue to slowly decline due to anticipated changes in customer behavior, including reduced check volume, and ongoing regulatory restrictions.

Debit and credit card revenue increased $102 thousand, or 7.3%, in the first three months of 2018, as compared with the same period in 2017. Bankcard transaction revenue primarily represents income the Bank derives from customers’ use of debit and credit cards. The increase in the first quarter of 2018 primarily reflected increased volume resulting from commercial credit cards, as this product is still in its early development at the Company. Volume, which is dependent on customer behavior and new accounts, is expected to continue to increase. In contrast, interchange income is based on rates set by service providers in a competitive market. First quarter 2018 interchange income increased 2.86% or $33 thousand compared with the first quarter of 2017. Bancorp expects a slight decrease in interchange rates as service providers gravitate to lower cost options within the market, however, growth in accounts is anticipated to offset the decline in rates.

Treasury management revenue primarily consists of fees earned for cash management services provided to commercial customers. This category has been a growing source of revenue for Bancorp; however, for the first three months of 2018 revenue was essentially flat. Bancorp continues to expect growth in this income category in 2018 based upon an expanding customer base and as more existing customers take advantage of offered services.

Mortgage banking revenue primarily includes gains on sales of mortgage loans. Bancorp’s mortgage banking department originates residential mortgage loans to be sold in the secondary market. Interest rates on the loans sold are locked with the borrower and investor prior to closing the loans, thus Bancorp bears no interest rate risk related to these loans. The department offers conventional, VA and FHA financing, for purchases and refinances, as well as programs for first-time home buyers. Interest rates on mortgage loans directly impact the volume of business transacted by the mortgage banking department. Mortgage banking revenue decreased $126 thousand, or 17.9%, for the first three months of 2018, as compared with the same periods in 2017, primarily due to lower transaction volume. In Bancorp’s primary market of Louisville, Kentucky, the housing inventory was low, contributing to this decline. As interest rates have risen, Bancorp has also experienced a slowing of refinancing activity.

Investment product sales commissions and fees net of variable costs increased $18 thousand, or 4.7%, for the three-month period ended March 31, 2018 as compared with the same period in 2017. The increase corresponds primarily to overall brokerage volume. Brokerage commissions and fees earned consist primarily of stock, bond and mutual fund sales as well as wrap fees on accounts. Wrap fees are charges for investment programs that bundle together a suite of services, such as brokerage, advisory, research and management, and are based on a percentage of assets. Bancorp deploys its brokers primarily through its branch network via an arrangement with a third party broker-dealer, while larger managed accounts are serviced in the Bank’s WM&T department.

Income related to bank-owned life insurance (“BOLI”) decreased to $187 thousand in the first quarter of 2018 compared with $204 thousand for the same time period in 2017 as a result of decreasing crediting rates received on the investments. BOLI assets represent the cash surrender value of life insurance policies on certain key employees who have provided consent for Bancorp to be the beneficiary of a portion of such policies. The related change in cash surrender value and any death benefits received under the policies are recorded as non-interest income. This income helps offset the cost of various employee benefits.

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Other non-interest income decreased $41 thousand, or 12.4%, for the first quarter of 2018 compared with the same period in 2017. Included in this category is rental income received from foreclosed real estate, which declined $26 thousand in the first quarter of 2018 compared with the same period in 2017. This category includes a variety of other income sources, none of which resulted in individually significant variances.

Non-interest expenses

Compensation, which includes salaries, incentives, bonuses, and share based compensation, increased $301 thousand, or 2.8%, for the first quarter of 2018, compared with the same period in 2017. The increase is due to higher salary and performance-based stock compensation expenses. At March 31, 2018, Bancorp had 589 full-time equivalent employees compared with 582 at March 31, 2017.

Employee benefits consists of all personnel related expense not included in compensation, with the two most significant items being health insurance and payroll taxes. Employee benefits decreased $109 thousand or 4% in 2018 compared with 2017, primarily due to lower recognized health insurance costs period over period of $74 thousand. Bancorp is self-insured, and health insurance costs fluctuate based on levels of claims.

Net occupancy and equipment expense decreased $89 thousand, or 4.7%, in the first quarter of 2018, compared with the same period in 2017. The decrease was due in part to decreased maintenance expense for multiple bank properties. Costs of capital asset additions flow through the statement of income over the lives of the assets in the form of depreciation expense.

Technology and communications expense increased $348 thousand, or 18.8% in the first quarter of 2018 compared with the same period in 2017. The increase was partially a result of increases in computer infrastructure upgrade and maintenance costs.  These expenses include ongoing computer software amortization, equipment depreciation, and expenditures related to investments in technology needed to maintain and improve the quality of delivery channels and internal resources. Technology related licensing and maintenance agreements increased $134 thousand in the first quarter of 2018 compared with the same time period in 2017. WM&T related expenses increased $97 thousand period over period due to accelerating expense recognition for client tax preparation services for which similar fees were expensed in the second quarter of 2017. Debit and credit card expenses increased $65 thousand over the same period in 2017, largely as a result of increased transaction volume, particularly with the growing commercial credit card portfolio.

Marketing and business development expenses include all costs associated with promoting Bancorp, community investment, retaining customers and acquiring new business. Category expense increased $201 thousand or 45.2% in the first quarter of 2018 compared with the first quarter of 2017, due largely to a procedural change that led to timing differences in recognizing community donation expenses. Advertising expenses increased $14 thousand in the first quarter of 2018 compared with the first quarter of 2017.

Postage, printing and supplies expenses increased $20 thousand or 5.4% in the first quarter of 2018 compared with the same time period in 2017, primarily due to an increase in postage expense of $16 thousand period over period. 2017 first quarter postage expense included a recovery of previous charged expense.

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Stock Yards Bancorp, inc. and subsidiary

Legal and professional fees increased $64 thousand to $493 thousand in the first quarter of 2018 from $429 thousand in the first quarter of 2017. Legal fees increased $34 thousand period over period primarily due to increased legal costs arising through the normal course of business. Professional and consulting fees increased $30 thousand due to increased fees associated with out-sourcing tax services.

FDIC insurance expense increased $12 thousand, or 5.2%, for the first quarter of 2018 compared with the same period in 2017. The assessment is calculated by the FDIC, and the increase in expense is directly related to growth in Bancorp’s balance sheet.

Amortization of investments in tax credit partnerships decreased $616 thousand for the first quarter of 2018 compared with the same periods of 2017 as Bancorp did not record any expense in 2018. This expense reflects amortization of investments in partnerships which generate federal income tax credits and vary widely depending upon the timing and magnitude of investments and related amortization. For each of Bancorp’s investments in tax credit partnerships the tax benefit compared with the amortization results in a positive effect on net income. See the Income Taxes section below for details on amortization and income tax impact for these credits.

Other non-interest expenses decreased $188 thousand or 19.3% in the first quarter of 2018 compared with the same period in 2017. The decrease for the 2018 period was largely due to $109 thousand of net recoveries on sales of foreclosed assets in 2018 compared with none in 2017. Losses on debit cards and losses on bad checks decreased period over period $54 thousand and $29 thousand, respectively. These expenses vary in timing and amount based upon customer activity.

Income Taxes

For the first three months of both 2018 and 2017, Bancorp recorded income tax expense of $3.1 million. The effective rate for the three month period was 18.5% in 2018 and 22.6% in 2017. The decrease in the effective tax rate from 2017 to 2018 was due to the decrease in the federal tax rate from 35% to 21% effective January 1, 2018, as a result of the Tax Cuts and Jobs Act enacted on December 22, 2018. The 2017 effective tax rate was significantly decreased by the positive effects of stock-based compensation and federal income tax credits.

Bancorp invests in certain partnerships that yield federal income tax credits. These tax credits provided a greater reduction of 2017 tax expense and effective tax rate than 2018. Taken as a whole, the tax benefit of these investments exceeds amortization expense associated with them, resulting in a positive impact on net income.

Commitments

Bancorp uses a variety of financial instruments in the normal course of business to meet the financial needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. A discussion of Bancorp’s commitments is included in Note 14.

Other commitments discussed in Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2017, have not materially changed since that report was filed, relative to qualitative and quantitative disclosures of fixed and determinable contractual obligations.

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b) Financial Condition

Balance Sheet

Total assets increased to $3.3 billion as of March 31, 2018 compared with $3.2 billion at December 31, 2017. In the first three months of 2018 increases in both loans and available for sale investments were offset by decreased cash held and invested short term as those funds were used to fund loan growth. Loans increased $102.8 million, or 4.3%, with the organic loan production and net growth occurring across all markets and in most loan categories. First quarter 2018 loan growth reflected ongoing expansion in key lending categories such as commercial and industrial lending and owner occupied commercial real estate lending. Bancorp has remained well under regulatory guidelines for commercial real estate. Securities available-for-sale increased by $23.6 million over the first three months of 2018. The increase was net of market value changes in the portfolio with unrealized losses at March 31, 2018 of $7.6 million as compared with unrealized losses of $2.9 million at December 31, 2017. Funds from maturing available-for-sale investments were used to fund loan growth. Included in securities available-for-sale are short term obligations of U.S. Treasury or U.S. government sponsored entities. These securities, which totaled $200 million at March 31, 2018 and $150 million at December 31, 2017, normally have a maturity of less than one month, and are purchased at quarter-end as part of a tax minimization strategy.

Total liabilities increased $42 million to 2.95 billion as of March 31, 2018, compared with $2.91 billion at December 31, 2017. Total deposits decreased $4.9 million or 0.2%, with increases in money market deposits, $7.5 million, or 1.1%; non-interest bearing deposit accounts, $7.2 million or 1.1%.; and savings accounts, $7.2 million, or 4.7%. Interest bearing demand deposit accounts decreased $22.3 million, or 2.7%, as did time deposits, $4.6 million, or 1.9%. Securities sold under agreements to repurchase decreased $2.6 million, or 3.7%, due to normal cyclical activity. Federal funds purchased and other short-term borrowing increased $53.9 million, or 33.4%, period to period. Bancorp uses short-term lines of credit to manage its overall liquidity position. Other liabilities decreased $4.3 million or 9.4% largely due to an increase in taxes payable.

Elements of Loan Portfolio

The following table sets forth the major classifications of the loan portfolio.

(in thousands)
Loans by Type	March 31, 2018		December 31, 2017
Commercial and industrial	$	843,478	$	779,014
Construction and development, excluding undeveloped land		215,752		195,912
Undeveloped land (1)		20,120		18,988
Real estate mortgage:
Commercial investment		590,942		594,902
Owner occupied commercial		407,733		398,685
1-4 family residential		272,900		262,110
Home equity - first lien		51,595		57,110
Home equity - junior lien		64,108		63,981
Subtotal: real estate mortgage		1,387,278		1,376,788
Consumer		45,760		38,868
Total loans	$	2,512,388	$	2,409,570

(1) Undeveloped land consists of land acquired for development by the borrower, but for which no development has yet taken place.

Bancorp occasionally enters into loan participation agreements with other banks to diversify credit risk. For certain sold participation loans, Bancorp has retained effective control of the loans, typically by restricting the participating institutions from pledging or selling their share of the loan without permission from Bancorp. US GAAP requires the participated portion of these loans to be recorded as secured borrowings. These participated loans are included in the commercial and industrial and real estate mortgage loan totals above, and a corresponding liability is recorded in other liabilities. At March 31, 2018 and December 31, 2017, the total participated portions of loans of this nature were $17.9 million and $18.2 million, respectively.

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Allowance for loan losses

An allowance for loan losses has been established to provide for probable losses on loans that may not be fully repaid. The allowance for loan losses is increased by provisions charged to expense and decreased by charge-offs, net of recoveries. Loans are typically charged off when management deems them uncollectible and after underlying collateral has been liquidated; however, collection efforts continue and future recoveries may occur. Periodically, loans are partially charged off to the net realizable value based upon evaluation of related underlying collateral, including Bancorp’s proclivity for resolution.

The allowance methodology is driven by risk ratings, historical losses, and qualitative factors. The level of the March 31, 2018 allowance for loan losses reflected a number of factors, primarily qualitative considerations, continued improvement in key metrics, and expansion of the historical look-back period from 28 quarters to 32 quarters. This expansion of the historical period was applied to all classes and segments of our portfolio. The expansion of the look-back period for the historical loss rates used in the quantitative allocation caused us to review the overall methodology for the qualitative factors to ensure we were appropriately capturing the risk not addressed in the historical loss rates used in the quantitative allocation. Management believes the extension of the look-back period is appropriate to ensure capture of the impact of a full economic cycle and more accurately represents the current level of risk inherent in the loan portfolio. Key indicators of loan quality, continued to trend at historic low levels during the first quarter of 2018 despite an uptick in non-performing loans due to one commercial relationship being placed on non-accrual status during the quarter. Additional information regarding Bancorp’s methodology for evaluating the adequacy of the allowance for loan loss can be read in the Company’s annual 10K.

As of March 31, 2018 the allowance for loan loss was $24.2 million, a $682 thousand decrease from the December 31, 2017 balance of $24.9 million. For the comparative periods, the allowance as a percent of average loans was 0.99% and 1.07%, respectively. The allowance as a percent of period end loans, as of each period end, 0.96% and 1.03%, respectively. The decline in the first quarter of 2018 was mainly due to first quarter loan growth and charge-offs that had been previously reserved, and remained adequate to cover potential losses in the loan portfolio, in management’s opinion.

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Non-performing Loans and Assets

Information summarizing non-performing assets, including non-accrual loans follows:

(Dollars in thousands)	March 31, 2018			December 31, 2017
Non-accrual loans (1)	$	11,422		$	6,511
Troubled debt restructuring		843			869
Loans past due 90 days or more and still accruing		-			2
Non-performing loans		12,265			7,382
Foreclosed real estate		360			2,640
Non-performing assets	$	12,625		$	10,022
Non-performing loans as a percentage of total loans		0.49	%		0.31	%
Non-performing assets as a percentage of total assets		0.38	%		0.31	%

One lending relationship totaling $4.7 million was classified as non-accrual in the first quarter of 2018 and accounts for 38% of total non-accrual loans as of March 31, 2018. In total, non-performing assets as of March 31, 2018 were comprised of 39 non-accrual loans, ranging in amount from $1 thousand to $2.2 million, four accruing TDRs, and foreclosed real estate held for sale. Foreclosed real estate held at March 31, 2018 included raw land and a commercial building lot.

(1) No TDRs previously accruing were moved to non-accrual during the three month periods ending March 31, 2018. No TDRs were on non-accrual as of March 31, 2018 or December 31, 2017.

The following table sets forth the major classifications of non-accrual loans:

Non-accrual loans by type
(In thousands)	March 31, 2018		December 31, 2017
Commercial and industrial	$	3,321	$	321
Construction and development, excluding undeveloped land		670		664
Undeveloped land		570		474
Real estate mortgage
Real estate mortgage - commercial investment		-		52
Real estate mortgage - owner occupied commercial		5,149		3,332
Real estate mortgage - 1-4 family residential		1,592		1,637
Home equity		29		31
Subtotal: Real estate mortgage		6,770		5,052
Consumer loans		91		-
Total loans	$	11,422	$	6,511

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Stock Yards Bancorp, inc. and subsidiary

c) Liquidity

The role of liquidity management is to ensure funds are available to meet depositors’ withdrawal and borrowers’ credit demands while at the same time maximizing profitability. This is accomplished by balancing changes in demand for funds with changes in the supply of those funds. Liquidity is provided by short-term liquid assets that can be converted to cash, investment securities available-for-sale, various lines of credit available to Bancorp, and the ability to attract funds from external sources, principally deposits. Management believes it has the ability to increase deposits at any time by offering rates slightly higher than market rate.

Bancorp’s most liquid assets are comprised of cash and due from banks, available-for-sale marketable investment securities, federal funds sold and interest bearing deposits with banks. Federal funds sold and interest bearing deposits totaled $15.3 million at March 31, 2018. These investments normally have overnight maturities and are used for general daily liquidity purposes. The fair value of the available-for-sale investment portfolio was $598.1 million at March 31, 2018. The portfolio includes maturities of approximately $230.7 million over the next twelve months, including $200 million of short-term securities which matured in April 2018. Combined with federal funds sold and interest bearing deposits, these offer substantial resources to meet either new loan demand or reductions in Bancorp’s deposit funding base. Bancorp pledges portions of its investment securities portfolio to secure public fund deposits, cash balances of certain wealth management and trust accounts, and securities sold under agreements to repurchase. At March 31, 2018, total investment securities pledged for these purposes comprised 57% of the available-for-sale investment portfolio, leaving $257.6 million of unpledged securities.

Bancorp has a large base of non-maturity customer deposits, defined as demand, savings, money market deposit accounts and time deposits less than or equal to $250,000. At March 31, 2018, such deposits totaled $2.5 billion and represented 99% of Bancorp’s total deposits, as compared with $2.6 billion, or 99% of total deposits at December 31, 2017. Because these deposits are less volatile and are often tied to other products of Bancorp through long lasting relationships they do not put heavy pressure on liquidity. However, many of Bancorp’s customers’ deposit balances are historically high. When market conditions improve, these balances may decrease, putting some strain on Bancorp’s liquidity position. To offset tightening liquidity resulting from loan growth experienced by Bancorp the past two quarters, the Company will add liquidity to the balance sheet by implementing a deposit gathering campaign targeting CD growth within Bancorp’s markets. Bancorp also will add brokered deposits as a secondary source of funding. As of March 31, 2018 and December 31, 2017, Bancorp had no brokered deposits.

Included in the total deposit balances at March 31, 2018 is $191.3 million of public funds deposits generally comprised of accounts from local government agencies and public school districts in our markets. As a result of property tax collections in the latter part of each year these accounts provide seasonal excess balances that originate with tax payments and decline leading into the next tax season. While this excess liquidity is maintained in low-yielding short-term investments and consequently results in lower net interest margin, it has a positive impact on net interest income.

Other sources of funds available to meet daily needs include the sales of securities under agreement to repurchase. Also, Bancorp is a member of the FHLB of Cincinnati. As a member of the FHLB of Cincinnati, Bancorp has access to credit products offered by the FHLB. Bancorp views these borrowings as a low cost alternative to brokered deposits. At March 31, 2018, available credit from the FHLB totaled $292.4 million. Additionally, Bancorp had available federal funds purchased lines with correspondent banks totaling $105 million at March 31, 2018. Bancorp also is eligible to borrow from the Federal Reserve Bank of St. Louis based upon value of posted collateral.

At March 31, 2018, Bancorp had an outstanding $200 million cash management advance from the FHLB. This advance matured in the first week of April 2018 and was used to manage Bancorp’s overall cash position. Due to the short term of the advance, it was recorded on the consolidated balance sheet within federal funds purchased and other short-term borrowings.

Bancorp’s principal source of cash is dividends paid to it as sole shareholder of the Bank. At March 31, 2018, the Bank could pay up to $55.8 million in dividends to Bancorp without regulatory approval subject to the ongoing capital requirements of the Bank.

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Stock Yards Bancorp, inc. and subsidiary

d) Capital Resources

At March 31, 2018, stockholders’ equity totaled $337.7 million, an increase of $4.1 million since December 31, 2017. See the Consolidated Statement of Changes in Stockholders’ Equity for further detail of the changes in equity since the end of 2017. One component of equity is accumulated other comprehensive loss which, for Bancorp, consists of net unrealized gains or losses on securities available-for-sale and hedging instruments, as well as a minimum pension liability, each net of taxes. Accumulated other comprehensive loss was $5.8 million at March 31, 2018 compared with a loss of $1.9 million on December 31, 2017. The $3.9 million decrease is primarily a reflection of the effect of the changing interest rate environment during the first three months of 2018 on the valuation of Bancorp’s portfolio of securities available-for-sale.   Bancorp adopted ASU 2018-02, Income Statement Reporting Comprehensive Income (Topic 220), Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income in the first quarter of 2018. Stranded items in accumulated other comprehensive income resulting from the Tax Cuts and Jobs Act enacted on December 22, 2017 totaling $506 thousand were reclassified into retained earnings.

The following table sets forth Bancorp’s and the Bank’s risk based capital ratios as of March 31, 2018 and December 31, 2017.

	March 31,			December 31,
	2018			2017
Total risk-based capital (1)
Consolidated		13.04	%		13.52	%
Bank		12.66			13.07
Common equity tier 1 risk-based capital (1)
Consolidated		12.16			12.57
Bank		11.79			12.12
Tier 1 risk-based capital (1)
Consolidated		12.16			12.57
Bank		11.79			12.12
Leverage (2)
Consolidated		11.05			10.70
Bank		10.71			10.32

(1) Under the banking agencies risk-based capital guidelines, assets and credit-equivalent amounts of derivatives and off-balance sheet exposures are assigned to broad risk categories. The aggregate dollar amount in each risk category is multiplied by the associated risk weight of the category. The resulting weighted values are added together, resulting in the Bancorp's total risk-weighted assets. These ratios are computed in relation to average assets.

(2) Ratio is computed in relation to average assets.

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Stock Yards Bancorp, inc. and subsidiary

In 2013, the Federal Reserve Board and the FDIC approved rules that substantially amended the regulatory risk-based capital rules applicable to Bancorp and Bank. The rules implemented the regulatory capital reforms of the Basel Committee on Banking Supervision reflected in "Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems" (Basel III) and changes required by the Dodd-Frank Act. The Basel III regulatory capital reforms became effective for Bancorp and Bank on January 1, 2015, and included new minimum risk-based capital and leverage ratios. The minimum capital level requirements applicable to bank holding companies and banks subject to the rules are:

• a common equity tier 1 capital ratio of 4.5%,

• a tier 1 risk-based capital ratio of 6% (increased from 4%),

• a total risk-based capital ratio of 8% (unchanged from current rules), and

• a tier 1 leverage ratio of 4% for all institutions.

The rules also established a "capital conservation buffer" of 2.5%, to be phased in over three years through December 31, 2018, above the new regulatory minimum risk-based capital ratios, and will result in the following minimum ratios once the capital conservation buffer is fully phased in:

• a common equity tier 1 risk-based capital ratio of 7.0%,

• a tier 1 risk-based capital ratio of 8.5%, and

• a total risk-based capital ratio of 10.5%.

The rules allowed banks and their holding companies with less than $250 billion in assets a one-time opportunity to opt-out of a requirement to include unrealized gains and losses in accumulated other comprehensive income in their capital calculation. Bancorp opted out of this requirement.

As of March 31, 2018, Bancorp meets the requirements to be considered well capitalized under the rules, and is not subject to limitations due to the capital conservation buffer.

e) Non-GAAP Financial Measures

In addition to capital ratios defined by banking regulators, Bancorp considers various ratios when evaluating capital adequacy and overhead, including tangible common equity to tangible assets, tangible common equity per share, and adjusted efficiency ratio, all of which are non-GAAP measures.

Bancorp believes the tangible common equity ratios are important because of their widespread use by investors as means to evaluate capital adequacy, as they reflect the level of capital available to withstand unexpected market conditions. Because US GAAP does not include capital ratio measures, there are no US GAAP financial measures comparable to these ratios.

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Stock Yards Bancorp, inc. and subsidiary

The following table reconciles Bancorp’s calculation of tangible common equity to amounts reported under US GAAP.

(In thousands, except per share data)

	March 31, 2018			December 31, 2017
Total equity	$	337,702		$	333,644
Less core deposit intangible		(1,182	)		(1,225	)
Less goodwill		(682	)		(682	)
Tangible common equity	$	335,838		$	331,737
Total assets	$	3,285,480		$	3,239,646
Less core deposit intangible		(1,182	)		(1,225	)
Less goodwill		(682	)		(682	)
Total tangible assets	$	3,283,616		$	3,237,739
Total shareholders' equity to total assets		10.28	%		10.30	%
Tangible common equity ratio		10.23			10.25
Number of outstanding shares		22,730			22,679
Book value per share	$	14.86		$	14.71
Tangible common equity per share		14.78			14.63

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Stock Yards Bancorp, inc. and subsidiary

In addition to the efficiency ratio normally presented, Bancorp considers an adjusted efficiency ratio. Bancorp believes excluding amortization of investments in tax credit partnerships from non-interest expense in this ratio is important because it provides a meaningful comparison to both prior periods, since amortization expense can fluctuate widely between periods depending upon timing of tax credits, and to other companies who do not invest in these partnerships.

The following table reconciles Bancorp’s calculation of adjusted efficiency ratios to the ratio reported under US GAAP.

	Three months ended
	March 31,
(Amounts in thousands)	2018			2017
Non-interest expense	$	21,027		$	20,995
Net interest income (tax-equivalent)		27,388			25,382
Non-interest income		10,923			10,644
Total revenue	$	38,311		$	36,026
Efficiency ratio		54.9	%		58.3	%

(amounts in thousands)	2018			2017
Non-interest expense	$	21,027		$	20,995
Less: amortization of investments in tax credit partnerships		-			(616	)
Adjusted non-interest expense		21,027			20,379
Net interest income (tax-equivalent)		27,388			25,382
Non-interest income		10,923			10,644
Total revenue	$	38,311		$	36,026
Adjusted efficiency ratio		54.9	%		56.6	%

f) Recently Adopted Accounting Pronouncements

Accounting Standards Update (ASU) 2014-09, Revenue – Revenue from Contracts with Customers. Bancorp adopted ASU 2014-09 and all related amendments (ASC 606), which creates a single framework for recognizing revenue from contracts with customers that fall within its scope and revises when it is appropriate to recognize a gain (loss) from the transfer of nonfinancial assets, effective January 1, 2018 using the full retrospective method. The great majority of Bancorp’s revenue consists of interest income generated by loans, leases, securities, and other investments, which is outside the scope of ASC 606. Significant judgements related to the nature and timing of revenue recognition were not impacted by implementing ASU 2014-09. Existing accrual practices for income earned but not collected proved consistent with the change in guidance to recognize revenue upon satisfying a performance obligation and as such no adjustment to retained earnings was needed. Services within the scope of ASC 606 include deposit service charges, WM&T revenue, investment product sales commissions and fees, interchange income, and the sale of other foreclosed assets. See note 20 for more revenue recognition details.

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Stock Yards Bancorp, inc. and subsidiary

The only impact to financial statement presentation was reclassification from expense to contra income costs incurred to obtain and fulfill contracts associated with investment product sales. All periods presented in these financial statements have been restated to reflect the reclassification, the effect of which can be seen below.

For the three months ended March 31, 2018

(In thousands)	As reported		Under legacy GAAP		Impact of ASC 606
Non-interest income
Investment product sales commissions and fees	$	404	$	542	$	(138	)
Non-interest expense
Technology and communication		2,196		2,334		(138	)
Net impact	$	-	$	-	$	-

For the three months ended March 31, 2017

(In thousands)	As reported		Under legacy GAAP		Impact of ASC 606
Non-interest income
Investment product sales commissions and fees	$	386	$	539	$	(153	)
Non-interest expense
Compensation		10,669		10,670		(1	)
Technology and communication		2,196		2,348		(152	)
Net impact	$	-	$	-	$	-

ASU 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. Bancorp adopted ASU 2016-01 effective January 1, 2018. The most significant impact to Bancorp was a change in valuation methods for the loan portfolio for fair value reporting. GAAP no longer allows for valuing financial instruments for fair value purposes using an “entrance” pricing methodology. The use of an “exit” price methodology requires greater assumptions regarding life of loan losses and is a more complex calculation, the results of which are documented in note 16.

ASU 2018-02, Income Statement Reporting Comprehensive Income (Topic 220), Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. Bancorp adopted ASU 2018-02 in the first quarter of 2018. Stranded items in accumulated other comprehensive income resulting from the Tax Cuts and Jobs Act enacted on December 22, 2017 totaling $506 thousand were reclassified into retained earnings.    

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Stock Yards Bancorp, inc. and subsidiary

g) Recently Issued Accounting Pronouncements

In February 2016, FASB issued ASU No. 2016-02, Leases, which requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize on the balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for lease term. The new guidance is effective for annual and interim reporting periods beginning after December 15, 2018. The standard should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period. Bancorp has evaluated existing lease commitments and expects to record a right-of-use asset and lease liability of approximately $11 million upon adoption. Bancorp’s financial condition and results of operations are not otherwise expected to be impacted.

In June 2016, FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which significantly changes the way entities recognize impairment of many financial assets by requiring immediate recognition of estimated credit losses expected to occur over their remaining life. This standard will likely have a significant impact on the way Bancorp recognizes credit impairment on loans. Under current US GAAP, credit impairment losses are determined using an incurred-loss model, which recognizes credit losses only when it is probable that all contractual cash flows will not be collected. The initial recognition of loss under CECL differs from current US GAAP because recognition of credit losses will not be based on any triggering event. This should generally result in credit impairment being recognized earlier and immediately after the financial asset is originated or purchased. Bancorp continues to evaluate existing accounting processes, internal controls, and technology capabilities to determine what additional changes will be needed to address the new requirements. These processes and controls require significant judgment, collection and analysis of additional data, and use of estimates. Technology and other resources have been upgraded or modified to capture additional data to support the accounting and disclosure requirements. The new guidance is effective for annual and interim reporting periods beginning after December 15, 2019. While the impact of implementing the CECL model cannot be quantified at this time, Bancorp expects to recognize a one-time cumulative-effect adjustment to the allowance in the first quarter of 2020, consistent with interagency guidance issued in 2016.

In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which requires an entity to no longer perform a hypothetical purchase price allocation to measure goodwill impairment. Instead, impairment will be measured using the difference between the carrying amount and the fair value of the reporting unit. The changes are effective for public business entities that are SEC filers, for annual and interim periods in fiscal years beginning after December 15, 2019. All entities may early adopt the standard for goodwill impairment tests with measurement dates after January 1, 2017. Bancorp does not expect adoption of this standard to have a significant impact on the consolidated financial statements of the Company.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815); Targeted Improvements for Accounting for Hedging Activities, which amends the hedge accounting recognition and presentation requirements under ASC 815. This ASU is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2018. Early adoption of this standard is permitted upon its issuance. Bancorp does not expect adoption of this standard to have a significant impact on the consolidated financial statements of the Company.

In February 2018, FASB issued ASU 2018-03, Technical Corrections and Improvements to Financial Instruments – Overall (Subtopic 825-10):Recognition and Measurement of Financial Assets and Financial Liabilities, which makes technical corrections to certain aspects of ASU 2016-01 regarding recognition of financial assets and liabilities. Transition guidance is provided for equity securities without a readily determinable fair value. This ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal periods. Public business entities with fiscal years beginning between December 15, 2017 and June 15, 2018, are not required to adopt the amendments until the interim period beginning after June 15, 2018. Bancorp does not expect adoption of this standard to have a significant impact on the consolidated financial statements of the Company.

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Stock Yards Bancorp, inc. and subsidiary

No other recently issued accounting pronouncements are expected to impact Bancorp.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

Information required by this item is included in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Item 4.  Controls and Procedures

Disclosure Controls and Procedures

Bancorp maintains disclosure controls and procedures designed to ensure that it is able to collect the information it is required to disclose in the reports it files with the Securities and Exchange Commission (SEC), and to record, process, summarize and disclose this information within the time periods specified in the rules of the SEC. Based on their evaluation of Bancorp’s disclosure controls and procedures, the Chief Executive and Chief Financial Officers believe that these controls and procedures are effective to ensure that Bancorp is able to collect, process and disclose the information it is required to disclose in reports it files with the SEC within the required time periods.

Changes in Internal Control over Financial Reporting

Based on the evaluation of Bancorp’s disclosure controls and procedures by the Chief Executive and Chief Financial Officers, there were no significant changes during the quarter ended March 31, 2018 in Bancorp’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, Bancorp’s internal control over financial reporting.

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Stock Yards Bancorp, inc. and subsidiary

PART II – OTHER INFORMATION

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds   

The following table shows information relating to the repurchase of shares of common stock by Bancorp during the three months ended March 31, 2018.

	Total number of shares purchased (1)		Average price paid per share		Total number of shares purchased as part of publicly announced plan		Maximum number of shares that may yet be purchased under the plan
Jan 1 - Jan 31		3,397	$	37.97		—		—
Feb 1 - Feb 28		9,324		35.91		—		—
Mar 1 - Mar 31		26,583		34.46		—		—
Total		39,304	$	35.10		—		—

(1)     Activity represents shares of stock withheld to pay taxes due upon exercise of stock appreciation rights, vesting of restricted stock, and vesting of performance stock units.

Item 6.   Exhibits

The following exhibits are filed or furnished as a part of this report:

Exhibit Number	Description of exhibit
31.1	Certifications pursuant to Section 302 of the Sarbanes-Oxley Act by David P. Heintzman
31.2	Certifications pursuant to Section 302 of the Sarbanes-Oxley Act by Nancy B. Davis
32	Certifications pursuant to 18 U.S.C. Section 1350
101	The following financial statements from the Stock Yards Bancorp, Inc. March 31, 2018 Quarterly Report on Form 10-Q, filed on May 4, 2018, formatted in eXtensible Business Reporting Language (XBRL):

(1) Consolidated Balance Sheets

(2) Consolidated Statements of Income

(3) Consolidated Statements of Comprehensive Income

(4) Consolidated Statements of Changes in Stockholders’ Equity

(5) Consolidated Statements of Cash Flows

(6) Notes to Consolidated Financial Statements

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Stock Yards Bancorp, inc. and subsidiary

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	STOCK YARDS BANCORP, INC.
Date: May 4, 2018	By:	/s/ David P. Heintzman
		David P. Heintzman, Chairman and Chief Executive Officer
Date: May 4, 2018	By:	/s/ Nancy B. Davis
		Nancy B. Davis, Executive Vice President, Treasurer and Chief Financial Officer

68

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT

I, David P. Heintzman, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Stock Yards Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 4, 2018	By:	/s/ David P. Heintzman
		David P. Heintzman, Chairman and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT

I, Nancy B. Davis, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Stock Yards Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 4, 2018	By:	/s/ Nancy B. Davis
		Nancy B. Davis, Executive Vice President, Treasurer and Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this quarterly report of Stock Yards Bancorp, Inc. on Form 10-Q for the period ending March 31, 2018 (the “Report”), we, the undersigned, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of our knowledge and belief: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Stock Yards Bancorp, Inc. as of and for the periods presented in the Report.

Date: May 4, 2018	By:	/s/ David P. Heintzman
		David P. Heintzman,
		Chairman and
		Chief Executive Officer
Date: May 4, 2018	By:	/s/ Nancy B. Davis
		Nancy B. Davis,
		Executive Vice President, Treasurer and
		Chief Financial Officer

A signed original of this written statement required by section 906 has been provided to Stock Yards Bancorp, Inc. and will be retained by Stock Yards Bancorp, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. 

XML

Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2018	Apr. 24, 2018
Document Information [Line Items]
Entity Registrant Name	Stock Yards Bancorp, Inc.
Entity Central Index Key	0000835324
Trading Symbol	sybt
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		22,731,897
Document Type	10-Q
Document Period End Date	Mar. 31, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Assets
Cash and due from banks	$ 41,622	$ 41,982
Federal funds sold and interest bearing due from banks	15,254	97,266
Cash and cash equivalents	56,876	139,248
Mortgage loans held for sale	4,239	2,964
Securities available-for-sale (amortized cost of $605,670 in 2018 and $577,406 in 2017)	598,081	574,524
Federal Home Loan Bank stock	8,876	7,646
Loans	2,512,388	2,409,570
Less allowance for loan losses	24,203	24,885
Net loans	2,488,185	2,384,685
Premises and equipment, net	41,684	41,655
Bank owned life insurance	32,236	32,049
Accrued interest receivable	8,026	8,369
Other assets	47,277	48,506
Total assets	3,285,480	3,239,646
Liabilities and Stockholders’ Equity
Non-interest bearing	681,936	674,697
Interest bearing	1,891,428	1,903,598
Total deposits	2,573,364	2,578,295
Securities sold under agreements to repurchase	67,892	70,473
Federal funds purchased and other short-term borrowings	215,233	161,352
Federal Home Loan Bank advances	49,140	49,458
Accrued interest payable	284	232
Other liabilities	41,865	46,192
Total liabilities	2,947,778	2,906,002
Stockholders’ equity:
Preferred stock, no par value. Authorized 1,000,000 shares; no shares issued or outsanding
Common stock, no par value. Authorized 40,000,000 shares; issued and outstanding 22,730,380 and 22,679,362 shares in 2018 and 2017, respectively	36,627	36,457
Additional paid-in capital	32,917	31,924
Retained earnings	274,002	267,193
Accumulated other comprehensive loss	(5,844)	(1,930)
Total stockholders’ equity	337,702	333,644
Total liabilities and stockholders’ equity	$ 3,285,480	$ 3,239,646

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Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) $ / shares in Thousands, $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Securities available for sale, amortized cost	$ 605,670	$ 577,406
Preferred stock, no par value (in dollars per share)	$ 0	$ 0
Preferred stock, shares authorized (in shares)	1,000,000	1,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, no par value (in dollars per share)	$ 0	$ 0
Common stock, shares authorized (in shares)	40,000,000	40,000,000
Common stock, shares issued (in shares)	22,730,380	22,679,362
Common stock, shares outstanding (in shares)	22,730,380	22,679,362

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Consolidated Statements of Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands		3 Months Ended
		Mar. 31, 2018	Mar. 31, 2017
Interest income
Loans		$ 27,048	$ 24,060
Federal funds sold and interest bearing deposits		268	134
Mortgage loans held for sale		35	44
Securities
Taxable		2,138	2,114
Tax-exempt		241	281
Total interest income		29,730	26,633
Interest expense
Deposits		2,077	1,163
Short term borrowing		123	54
Long term debt		235	232
Total interest expense		2,435	1,449
Net interest income		27,295	25,184
Provision for loan losses		735	900
Net interest income after provision for loan losses		26,560	24,284
Non-interest income
Total non-interest income		10,923	10,644
Non-interest expenses
Compensation		10,970	10,669
Employee benefits		2,633	2,742
Net occupancy and equipment		1,818	1,907
Technology and communication		2,196	1,848
Marketing and business development		646	445
Postage, printing and supplies		391	371
Legal and professional		493	429
FDIC insurance		242	230
Amortization/impairment of investments in tax credit partnerships			616
Capital and deposit based taxes		852	764
Other		786	974
Total non-interest expenses		21,027	20,995
Income before income taxes		16,456	13,933
Income tax expense		3,052	3,142
Net income		$ 13,404	$ 10,791
Net income per share, basic (in dollars per share)		$ 0.59	$ 0.48
Net income per share, diluted (in dollars per share)		$ 0.58	$ 0.47
Average common shares:
Average shares outstanding (in shares)		22,577	22,492
Diluted (in shares)		22,942	23,002
Fiduciary and Trust [Member]
Non-interest income
Non-interest income		$ 5,500	$ 5,094
Deposit Account [Member]
Non-interest income
Non-interest income		1,511	1,565
Credit and Debit Card [Member]
Non-interest income
Non-interest income		1,508	1,406
Treasury Management [Member]
Non-interest income
Non-interest income		947	956
Mortgage Banking [Member]
Non-interest income
Non-interest income	[1]	576	702
Investment Advisory, Management and Administrative Service [Member]
Non-interest income
Non-interest income		404	386
Life Insurance Product Line [Member]
Non-interest income
Non-interest income	[1]	187	204
Product and Service, Other [Member]
Non-interest income
Non-interest income	[2]	$ 290	$ 331

[1] Not within the scope of ASC 606

[2] includes safety box deposit fees of $45 thousand included within the scope of ASC 606

XML

Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Net income	$ 13,404	$ 10,791
Unrealized gains (losses) on securities available for sale:
Unrealized gains (losses) arising during the period, net of tax of $(989) and $370, respectively	(3,718)	689
Unrealized gains (losses) arising during the period, net of tax benefit of $82 and $47, respectively	310	85
Other comprehensive income (loss), net of tax	(3,408)	774
Comprehensive income	$ 9,996	$ 11,565

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Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($) shares in Thousands, $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Total
Balance (in shares) at Dec. 31, 2016	22,617
Balance at Dec. 31, 2016	$ 36,250	$ 26,682	$ 252,439	$ (1,499)	$ 313,872
Net income			10,791		10,791
Other comprehensive income, net of tax				774	774
Stock compensation expense		660			660
Stock issued for share-based awards, net of withholdings to satisfy employee tax obligations upon award (in shares)	47
Stock issued for share-based awards, net of withholdings to satisfy employee tax obligations upon award	$ 155	1,716	(3,976)		(2,105)
Cash dividends, $0.19 per share			(4,305)		(4,305)
Shares cancelled (in shares)	(3)
Shares cancelled	$ (10)	(56)	66
Balance (in shares) at Mar. 31, 2017	22,661
Balance at Mar. 31, 2017	$ 36,395	29,002	255,015	(725)	319,687
Balance (in shares) at Dec. 31, 2017	22,679
Balance at Dec. 31, 2017	$ 36,457	31,924	267,193	(1,930)	333,644
Net income			13,404		13,404
Other comprehensive income, net of tax				(3,408)	(3,408)
Stock compensation expense		823			823
Stock issued for share-based awards, net of withholdings to satisfy employee tax obligations upon award (in shares)	52
Stock issued for share-based awards, net of withholdings to satisfy employee tax obligations upon award	$ 174	205	(1,914)		(1,535)
Cash dividends, $0.19 per share			(5,226)		(5,226)
Shares cancelled (in shares)	(1)
Shares cancelled	$ (4)	(35)	39
Balance (in shares) at Mar. 31, 2018	22,730
Balance at Mar. 31, 2018	$ 36,627	$ 32,917	274,002	(5,844)	$ 337,702
Adoption of Accounting Standard Update 2018-02 at Dec. 31, 2017			$ 506	$ (506)

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Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (Parentheticals)	3 Months Ended
	Mar. 31, 2018 $ / shares
Cash dividends declared (in dollars per share)	$ 0.23

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Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Operating activities:
Net income	$ 13,404	$ 10,791
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	735	900	$ 2,550
Depreciation, amortization and accretion, net	1,326	2,280
Deferred income tax provision	488	25
Gain on sales of mortgage loans held for sale	(314)	(406)
Origination of mortgage loans held for sale	(18,245)	(20,839)
Proceeds from sale of mortgage loans held for sale	17,284	20,574
Bank owned life insurance income	(187)	(204)
(Gain) on the disposal of premises and equipment	(6)
(Gain) on the sale of foreclosed assets	(109)
Stock compensation expense	823	660
Excess tax benefits from share-based compensation arrangements	(316)	(1,013)
Decrease (increase) in accrued interest receivable and other assets	25	(1,125)
(Decrease) Increase in accrued interest payable and other liabilities	(3,978)	3,947
Net cash provided by operating activities	10,930	15,590
Investing activities:
Purchases of securities available for sale	(199,946)	(99,988)
Proceeds from maturities of securities available for sale	171,308	114,297
Purchase of Federal Home Loan Bank stock	(1,230)
Net (increase) decrease in loans	(104,505)	32,171
Purchases of premises and equipment	(1,111)	(308)
Proceeds from disposal of premises and equipment	215
Proceeds from sale of foreclosed assets	2,658	1,043
Net cash (used in) provided by investing activities	(132,611)	47,215
Financing activities:
Net (decrease) increase in deposits	(4,931)	23,707
Net increase (decrease) in securities sold under agreements to repurchase and federal funds purchased	51,300	(38,293)
Proceeds from Federal Home Loan Bank advances	30,000	30,000
Repayments of Federal Home Loan Bank advances	(30,318)	(30,320)
Repurchase common stock for performing stock units	(156)	(216)
Common stock repurchases of restricted shares surrendered for taxes	(1,379)	(1,889)
Cash dividends paid	(5,207)	(4,286)
Net cash provided by (used in) financing activities	39,309	(21,297)
Net increase (decrease) in cash and cash equivalents	(82,372)	41,508
Cash and cash equivalents at beginning of period	139,248	47,973	47,973
Cash and cash equivalents at end of period	56,876	89,481	$ 139,248
Supplemental cash flow information:
Income tax payments
Cash paid for interest	2,383	1,437
Supplemental non-cash activity:
Transfers from loans to foreclosed assets	$ 270

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Note 1 - Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Significant Accounting Policies [Text Block]

( 1 ) Summary of Significant Accounting Policies

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form

10

-Q and do

not

include all information and footnotes required by U.S. generally accepted accounting principles (US GAAP) for complete financial statements. The consolidated unaudited financial statements of Stock Yards Bancorp, Inc. (“Bancorp”) and its subsidiary reflect all adjustments (consisting only of adjustments of a normal recurring nature) which are, in the opinion of management, necessary for a fair presentation of financial condition and results of operations for the interim periods.

The unaudited consolidated financial statements include the accounts of Stock Yards Bancorp, Inc. and its wholly-owned subsidiary, Stock Yards Bank & Trust Company (“Bank”). Significant inter-company transactions and accounts have been eliminated in consolidation. In preparing the unaudited consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of certain assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of related revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, valuation of available-for sale securities, other real estate owned and income tax assets, and estimated liabilities and expense.

A description of other significant accounting policies is presented in the notes to Consolidated Financial Statements for the year ended

December 31, 2017

included in Stock Yards Bancorp, Inc.’s Annual Report on Form

10

-K. Certain reclassifications have been made in the prior year financial statements to conform to current year classifications.

Interim results for the

three

month period ended

March 31, 2018

are

not

necessarily indicative of the results for the entire year.

Critical Accounting Policies

The allowance for loan losses is management’s estimate of probable losses inherent in the loan portfolio as of the balance sheet date. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

Management has identified the accounting policy related to the allowance and provision for loan losses as critical to the understanding of Bancorp’s results of operations and discussed this conclusion with the Audit Committee of the Board of Directors. Since the application of this policy requires significant management assumptions and estimates, it could result in materially different amounts to be reported if conditions or underlying circumstances were to change. The provision for loan losses reflects an allowance methodology driven by risk ratings, historical losses, specific loan loss allocations, and qualitative factors. Assumptions include many factors such as changes in borrowers’ financial condition which can change quickly or historical loss ratios related to certain loan portfolios which

may

or

may

not

be indicative of future losses. Consistent with Bancorp’s methodology, in the

first

quarter of

2018,

Bancorp extended the historical period used to capture Bancorp’s historical loss ratios from

28

quarters to

32

quarters in order to capture the effects of a full economic cycle. This extension of the historical period was applied to all classes and segments of our portfolio. The expansion of the look-back period for the quantitative historical loss rate caused us to review the overall methodology for the qualitative factors to ensure we were appropriately capturing the risk

not

addressed in the quantitative historical loss rate. Management reviews the appropriateness of the look-back period annually, and believes the extension of the look-back period is appropriate to capture the impact of a full economic cycle and more accurately represents the current level of risk inherent in the loan portfolio.

As a result of extending the look-back period and making normal updates to other assumptions in the allowance model in the

first

quarter of

2018,

the allowance decreased

$682,000.

  The change in look-back period was consistent with management’s judgment regarding the risk in the loan portfolio and consistent with internal analysis showing continued strong asset quality related

not

only in the Company’s loan portfolio, but the Bank’s peer group as well, validating the continuation of the current economic cycle and thus the reasoning to extend the look-back period.  Management will continue to evaluate the appropriateness of the look-back period based on the status of the economic cycle.  To the extent that management’s assumptions prove incorrect, results from operations could be materially affected by a higher or lower provision for loan losses.  The accounting policy related to the allowance for loan losses is applicable to the commercial banking segment of Bancorp.  The impact and any associated risks related to this policy on Bancorp’s business operations are discussed in the “Allowance for Loan Losses” section below.

Bancorp’s allowance calculation includes allocations to loan portfolio segments at

March 31, 2018

for qualitative factors including, among other factors, local economic and business conditions in each of our primary markets, quality and experience of lending staff and management, exceptions to lending policies, levels of and trends in past due loans and loan classifications, concentrations of credit such as collateral type, trends in portfolio growth, trends in value of underlying collateral for collateral-dependent loans, effect of other external factors such as the national economic and business trends, quality and depth of the loan review function, and management’s judgement of current trends and potential risks. Bancorp utilizes the sum of all allowance amounts derived as described above as the appropriate level of allowance for loan and lease losses. Changes in criteria used in this evaluation or availability of new information could cause the allowance to be increased or decreased in future periods. In addition, bank regulatory agencies, as part of their examination process,

may

require adjustments to the allowance for loan and lease losses based on their judgments and estimates.

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Note 2 - Securities

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

( 2 ) Securities

The amortized cost, unrealized gains and losses, and fair value of securities available-for-sale follows:

(In thousands)	Amortized		Unrealized
March 31, 2018	cost		Gains		Losses			Fair value
Government sponsored enterprise obligations	$	405,684	$	100	$	(3,373	)	$	402,411
Mortgage-backed securities - government agencies		156,045		155		(4,452	)		151,748
Obligations of states and political subdivisions		43,941		260		(279	)		43,922
Total securities available for sale	$	605,670	$	515	$	(8,104	)	$	598,081
December 31, 2017
U.S. Treasury and other U.S. Government obligations	$	149,996	$	-	$	(12	)	$	149,984
Government sponsored enterprise obligations		214,852		474		(1,482	)		213,844
Mortgage-backed securities - government agencies		163,571		383		(2,447	)		161,507
Obligations of states and political subdivisions		48,987		365		(163	)		49,189
Total securities available for sale	$	577,406	$	1,222	$	(4,104	)	$	574,524

There were

no

securities classified as held to maturity as of

March 31, 2018

or

December 31, 2017.

Bancorp sold

no

securities during the

three

-month periods ending

March 31, 2018

or

2017.

A summary of the available-for-sale investment securities by contractual maturity groupings as of

March 31, 2018

is shown below.

(In thousands)
Securities available-for-sale	Amortized cost		Fair value
Due within 1 year	$	230,740	$	230,686
Due after 1 but within 5 years		97,419		96,063
Due after 5 but within 10 years		10,058		9,808
Due after 10 years		111,408		109,776
Mortgage-backed securities – government agencies		156,045		151,748
Total securities available-for-sale	$	605,670	$	598,081

Actual maturities

may

differ from contractual maturities because some issuers have the right to call or prepay obligations. The investment portfolio includes agency mortgage-backed securities, which are guaranteed by agencies such as the FHLMC, FNMA, and GNMA. These securities differ from traditional debt securities primarily in that they

may

have uncertain principal payment dates and are priced based on estimated prepayment rates on the underlying collateral.

Bancorp pledges portions of its investment securities portfolio to secure public fund deposits, cash balances of uninsured wealth management and trust accounts, and securities sold under agreements to repurchase. The carrying value of these pledged securities was approximately

$340.5

million at

March 31, 2018

and

$384.7

million at

December 31, 2017.

Securities with unrealized losses at

March 31, 2018

and

December 31, 2017,

not

recognized in the statements of income are as follows:

(In thousands)	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
March 31, 2018	value		losses			value		losses			value		losses
Government sponsored enterprise obligations	$	340,018	$	(2,188	)	$	48,470	$	(1,185	)	$	388,488	$	(3,373	)
Mortgage-backed securities - government agencies		75,107		(1,669	)		63,083		(2,783	)		138,190		(4,452	)
Obligations of states and political subdivisions		19,582		(192	)		5,242		(87	)		24,824		(279	)
Total temporarily impaired securities	$	434,707	$	(4,049	)	$	116,795	$	(4,055	)	$	551,502	$	(8,104	)
December 31, 2017
U.S. Treasury and U.S. obligations	$	149,984	$	(12	)	$	-	$	-		$	149,984	$	(12	)
Government sponsored enterprise obligations		95,139		(586	)		49,870		(896	)		145,009		(1,482	)
Mortgage-backed securities - government agencies		69,290		(440	)		67,047		(2,007	)		136,337		(2,447	)
Obligations of states and political subdivisions		22,366		(107	)		5,064		(56	)		27,430		(163	)
Total temporarily impaired securities	$	336,779	$	(1,145	)	$	121,981	$	(2,959	)	$	458,760	$	(4,104	)

Applicable dates for determining when securities are in an unrealized loss position are

March 31, 2018

and

December 31, 2017.

As such, it is possible that a security had a market value lower than its amortized cost on other days during the past

twelve

months, but is

not

in the “Investments with an Unrealized Loss of less than

12

months” category above.

Unrealized losses on Bancorp’s investment securities portfolio have

not

been recognized as an expense because the securities are of high credit quality, and the decline in fair values is due to changes in the prevailing interest rate environment since the purchase date. Fair value is expected to recover as securities reach their maturity date and/or the interest rate environment returns to conditions similar to when these securities were purchased. These investments consist of

132

and

117

separate investment positions as of

March 31, 2018

and

December 31, 2017,

respectively. Because management does

not

intend to sell the investments, and it is

not

likely that Bancorp will be required to sell the investments before recovery of their amortized cost bases, which

may

be maturity, Bancorp does

not

consider these securities to be other-than-temporarily impaired at

March 31, 2018.

FHLB stock is an investment held by Bancorp which is

not

readily marketable and is carried at cost adjusted for identified impairment.

No

impairment was indicated as of

March 31, 2018.

Holdings of Federal Home Loan Bank of Cincinnati (FHLB) stock are required for access to FHLB borrowing, and are classified as restricted securities.

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Note 3 - Loans

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

( 3 ) Loans

Composition of loans, net of deferred fees and costs, by primary loan portfolio class follows:

(In thousands)	March 31, 201 8		December 31, 201 7
Commercial and industrial	$	843,478	$	779,014
Construction and development, excluding undeveloped land		215,752		195,912
Undeveloped land		20,120		18,988
Real estate mortgage:
Commercial investment		590,942		594,902
Owner occupied commercial		407,733		398,685
1-4 family residential		272,900		262,110
Home equity - first lien		51,595		57,110
Home equity - junior lien		64,108		63,981
Subtotal: Real estate mortgage		1,387,278		1,376,788
Consumer		45,760		38,868
Total loans	$	2,512,388	$	2,409,570

The following table presents the balance in the recorded investment in loans and allowance for loan losses by portfolio segment and based on impairment evaluation method as of

March 31, 2018

and

December 31, 2017.

(In thousands)	Type of loan
			Construction
			and development
	Commercial		excluding
	and		undeveloped		Undeveloped		Real estate
March 31, 2018	industrial		land		land		mortgage		Consumer		Total
Loans	$	843,478	$	215,752	$	20,120	$	1,387,278	$	45,760	$	2,512,388
Loans collectively evaluated for impairment	$	839,328	$	215,082	$	19,550	$	1,380,494	$	45,669	$	2,500,123
Loans individually evaluated for impairment	$	4,150	$	670	$	570	$	6,784	$	91	$	12,265
Loans acquired with deteriorated credit quality	$	-	$	-	$	-	$	-	$	-	$	-

				Construction
				and development
	Commercial			excluding
	and			undeveloped		Undeveloped			Real estate
	industrial			land		land			mortgage			Consumer			Total
Allowance for loan losses
At December 31, 2017	$	11,276		$	1,724	$	521		$	11,012		$	352		$	24,885
Provision (credit)		761			296		(39	)		(309	)		26			735
Charge-offs		(1,409	)		-		-			-			(119	)		(1,528	)
Recoveries		10			-		-			4			97			111
At March 31, 2018	$	10,638		$	2,020	$	482		$	10,707		$	356		$	24,203
Allowance for loans collectively evaluated for impairment	$	9,646		$	2,020	$	481		$	10,230		$	356		$	22,733
Allowance for loans individually evaluated for impairment	$	992		$	-	$	1		$	477		$	-		$	1,470
Allowance for loans acquired with deteriorated credit quality	$	-		$	-	$	-		$	-		$	-		$	-

(In thousands)	Type of loan
			Construction
			and development
	Commercial		excluding
	and		undeveloped		Undeveloped		Real estate
December 31, 2017	industrial		land		land		mortgage		Consumer		Total
Loans	$	779,014	$	195,912	$	18,988	$	1,376,788	$	38,868	$	2,409,570
Loans collectively evaluated for impairment	$	777,838	$	195,248	$	18,514	$	1,371,246	$	38,868	$	2,401,714
Loans individually evaluated for impairment	$	1,176	$	664	$	474	$	5,066	$	-	$	7,380
Loans acquired with deteriorated credit quality	$	-	$	-	$	-	$	476	$	-	$	476

				Construction
				and development
	Commercial			excluding
	and			undeveloped			Undeveloped			Real estate
	industrial			land			land			mortgage			Consumer			Total
Allowance for loan losses
At December 31, 2016	$	10,483		$	1,923		$	684		$	10,573		$	344		$	24,007
Provision (credit)		2,373			(199	)		(163	)		383			156			2,550
Charge-offs		(1,782	)		-			-			(98	)		(549	)		(2,429	)
Recoveries		202			-			-			154			401			757
At December 31, 2017	$	11,276		$	1,724		$	521		$	11,012		$	352		$	24,885
Allowance for loans collectively evaluated for impairment	$	11,242		$	1,724		$	521		$	10,998		$	352		$	24,837
Allowance for loans individually evaluated for impairment	$	34		$	-		$	-		$	14		$	-		$	48
Allowance for loans acquired with deteriorated credit quality	$	-		$	-		$	-		$	-		$	-		$	-

The considerations by Bancorp in computing its allowance for loan losses are determined based on the various risk characteristics of each loan segment. Relevant risk characteristics are as follows:

● Commercial and industrial loans: Loans in this category are made to businesses. Generally these loans are secured by assets of the business and repayment is expected from cash flows of the business. A decline in the strength of the business or a weakened economy and resultant decreased consumer and/or business spending may have an effect on the credit quality in this loan category.

● Construction and development, excluding undeveloped land: Loans in this category primarily include owner-occupied and investment construction loans and commercial development projects. In most cases, construction loans require only interest to be paid during construction. Upon completion or stabilization, the construction loans generally convert to permanent financing in the real estate mortgage segment, requiring principal amortization. Repayment of development loans is derived from sale of lots or units. Credit risk is affected by construction delays, cost overruns, market conditions and availability of permanent financing, to the extent such permanent financing is not being provided by Bancorp.

● Undeveloped land: Loans in this category are secured by land acquired for development by the borrower, but for which no development has yet taken place. Credit risk is primarily dependent upon the financial strength of the borrower, but can also be affected by market conditions and time to sell lots at an adequate price in the future. Credit risk is also affected by availability of permanent financing, including to the end user, to the extent such permanent financing is not being provided by Bancorp.  

● Real estate mortgage: Loans in this category are made to and secured by owner-occupied residential real estate, owner-occupied real estate used for business purposes, and income-producing investment properties. For owner occupied residential and owner-occupied commercial real estate, repayment is dependent on financial strength of the borrower. For income-producing investment properties, repayment is dependent on financial strength of tenants, and to a lesser extent the borrowers’ financial strength, once the project is stabilized. Underlying properties are generally located in Bancorp's primary market area. Cash flows of income producing investment properties may be adversely impacted by a downturn in the economy as reflected in increased vacancy rates, which in turn, will have an effect on credit quality and property values. Overall health of the economy, including unemployment rates and real estate prices, has an effect on credit quality in this loan category.

● Consumer: Loans in this category may be either secured or unsecured and repayment is dependent on credit quality of the individual borrower and, if applicable, adequacy of collateral securing the loan. Therefore, overall health of the economy, including unemployment rates as well as home and securities prices, will have a significant effect on credit quality in this loan category.

The following tables present loans individually evaluated for impairment as of

March 31, 2018

and

December 31, 2017.

(In thousands)			Unpaid				Average
	Recorded		principal		Related		recorded
March 31, 2018	investment		balance		allowance		investment
Loans with no related allowance recorded:
Commercial and industrial	$	212	$	295	$	-	$	677
Construction and development, excluding undeveloped land		670		840		-		667
Undeveloped land		474		506		-		474
Real estate mortgage
Commercial investment		-		-		-		26
Owner occupied commercial		3,437		3,894		-		3,384
1-4 family residential		1,592		1,614		-		1,615
Home equity - first lien		-		-		-		-
Home equity - junior lien		29		29		-		30
Subtotal: Real estate mortgage		5,058		5,537		-		5,055
Consumer		91		91		-		46
Subtotal	$	6,505	$	7,269	$	-	$	6,919
Loans with an allowance recorded:
Commercial and industrial	$	3,938	$	4,616	$	992	$	1,986
Construction and development, excluding undeveloped land		-		-		-		-
Undeveloped land		96		96		1		48
Real estate mortgage
Commercial investment		-		-		-		-
Owner occupied commercial		1,712		1,712		463		856
1-4 family residential		14		14		14		14
Home equity - first lien		-		-		-		-
Home equity - junior lien		-		-		-		-
Subtotal: Real estate mortgage		1,726		1,726		477		870
Consumer		-		-		-		-
Subtotal	$	5,760	$	6,438	$	1,470	$	2,904
Total:
Commercial and industrial	$	4,150	$	4,911	$	992	$	2,663
Construction and development, excluding undeveloped land		670		840		-		667
Undeveloped land		570		602		1		522
Real estate mortgage
Commercial investment		-		-		-		26
Owner occupied commercial		5,149		5,606		463		4,240
1-4 family residential		1,606		1,628		14		1,629
Home equity - first lien		-		-		-		-
Home equity - junior lien		29		29		-		30
Subtotal: Real estate mortgage		6,784		7,263		477		5,925
Consumer		91		91		-		46
Total	$	12,265	$	13,707	$	1,470	$	9,823

(In thousands)			Unpaid				Average
	Recorded		principal		Related		recorded
December 31, 2017	investment		balance		allowance		investment
Loans with no related allowance recorded:
Commercial and industrial	$	1,142	$	2,202	$	-	$	411
Construction and development, excluding undeveloped land		664		834		-		559
Undeveloped land		474		506		-		425
Real estate mortgage
Commercial investment		52		53		-		110
Owner occupied commercial		3,332		3,789		-		1,678
1-4 family residential		1,637		1,657		-		935
Home equity - first lien		-		-		-		-
Home equity - junior lien		31		31		-		186
Subtotal: Real estate mortgage		5,052		5,530		-		2,909
Consumer		-		-		-		-
Subtotal	$	7,332	$	9,072	$	-	$	4,304
Loans with an allowance recorded:
Commercial and industrial	$	34	$	34	$	34	$	1,882
Construction and development, excluding undeveloped land		-		-		-		-
Undeveloped land		-		-		-		48
Real estate mortgage
Commercial investment		-		-		-		-
Owner occupied commercial		-		-		-		-
1-4 family residential		14		14		14		5
Home equity - first lien		-		-		-		-
Home equity - junior lien		-		-		-		-
Subtotal: Real estate mortgage		14		14		14		5
Consumer		-		-		-		46
Subtotal	$	48	$	48	$	48	$	1,981
Total:
Commercial and industrial	$	1,176	$	2,236	$	34	$	2,293
Construction and development, excluding undeveloped land		664		834		-		559
Undeveloped land		474		506		-		473
Real estate mortgage		-		-		-		-
Commercial investment		52		53		-		110
Owner occupied commercial		3,332		3,789		-		1,678
1-4 family residential		1,651		1,671		14		940
Home equity - first lien		-		-		-		-
Home equity - junior lien		31		31		-		186
Subtotal: Real estate mortgage		5,066		5,544		14		2,914
Consumer		-		-		-		46
Total	$	7,380	$	9,120	$	48	$	6,285

Differences between recorded investment amounts and unpaid principal balance amounts less related allowance are due to partial charge-offs which have occurred over the life of certain loans.

Impaired loans include non-accrual loans and accruing loans accounted for as troubled debt restructurings (TDRs), which continue to accrue interest. Non-performing loans include the balance of impaired loans plus any loans over

90

days past due and still accruing interest. Bancorp had

no

loans past due more than

90

days and still accruing interest at

March 31, 2018,

compared with

$2

thousand at

December 31, 2017,

and

none

at

March 31, 2017.

The following table presents the recorded investment in non-accrual loans as of

March 31, 2018

and

December 31, 2017.

(In thousands)	March 31, 201 8		December 31, 201 7
Commercial and industrial	$	3,321	$	321
Construction and development, excluding undeveloped land		670		664
Undeveloped land		570		474
Real estate mortgage
Commercial investment		-		52
Owner occupied commercial		5,149		3,332
1-4 family residential		1,592		1,637
Home equity - first lien		-		-
Home equity - junior lien		29		31
Subtotal: Real estate mortgage		6,770		5,052
Consumer		91		-
Total	$	11,422	$	6,511

In the course of working with borrowers, Bancorp

may

elect to restructure the contractual terms of certain loans. Troubled debt restructurings (TDRs) occur when, for economic, legal, or other reasons related to a borrower’s financial difficulties, Bancorp grants a concession to the borrower that it would

not

otherwise consider.

At

March 31, 2018

and

December 31, 2017,

Bancorp had

$843

thousand and

$869

thousand of accruing loans classified as TDRs, respectively. Bancorp did

not

modify and classify any additional loans as TDRs during the

three

-month period ended

March 31, 2018.

One commercial loan, with a recorded investment of

$38,000

at

March 31, 2017

was modified and classified as TDRs in the

three

-month period ended

March 31, 2017.

The pre and post-modification balance for this loan was

$39,000

.

The monthly payment amount of this loan was modified to enable the borrower to fulfill the loan agreement. A specific reserve was established for the entire recorded investment of this loan.

No

loans classified and reported as troubled debt restructured within the

twelve

months prior to

March 31, 2018

defaulted during the

three

-month period ended

March 31, 2018.

Loans accounted for as TDRs include modifications from original terms such as those due to bankruptcy proceedings, certain modifications of amortization periods or extended suspension of principal payments due to customer financial difficulties. Loans accounted for as TDRs are individually evaluated for impairment and, at

March 31, 2018,

had a total allowance allocation of

$94

thousand, compared with

$48

thousand at

December 31, 2017.

At

March 31, 2018

and

December 31, 2017,

Bancorp did

not

have any outstanding commitments to lend additional funds to borrowers whose loans have been modified as TDRs.

At

March 31, 2018

formal foreclosure proceedings were in process on

three

consumer mortgage loans with a total recorded investment of

$412

thousand, all secured by residential real estate properties. The recorded investments for these properties ranged from

$30

thousand to

$350

thousand, and these loans were reported as non-accrual as of

March 31, 2018.

The following table presents the aging of the recorded investment in loans as of

March 31, 2018

and

December 31, 2017.

													Recorded
(In thousands)							90 or more						investment
							days past						> 90 days
			30-59 days		60-89 days		due (includes)		Total		Total		and
March 31, 2018	Current		past due		past due		non-accrual)		past due		loans		accruing
Commercial and industrial	$	839,756	$	401	$	-	$	3,321	$	3,722	$	843,478	$	-
Construction and development, excluding undeveloped land		215,082		-		-		670		670		215,752		-
Undeveloped land		19,550		-		-		570		570		20,120		-
Real estate mortgage
Commercial investment		589,916		886		140		-		1,026		590,942		-
Owner occupied commercial		402,382		-		202		5,149		5,351		407,733		-
1-4 family residential		270,048		1,028		232		1,592		2,852		272,900		-
Home equity - first lien		51,595		-		-		-		-		51,595		-
Home equity - junior lien		63,818		61		200		29		290		64,108		-
Subtotal: Real estate mortgage		1,377,759		1,975		774		6,770		9,519		1,387,278		-
Consumer		45,648		20		1		91		112		45,760		-
Total	$	2,497,795	$	2,396	$	775	$	11,422	$	14,593	$	2,512,388	$	-
December 31, 2017
Commercial and industrial	$	776,118	$	2,571	$	4	$	321	$	2,896	$	779,014	$	-
Construction and development, excluding undeveloped land		194,936		-		312		664		976		195,912		-
Undeveloped land		18,514		-		-		474		474		18,988		-
Real estate mortgage
Commercial investment		594,242		608		-		52		660		594,902		-
Owner occupied commercial		394,623		455		275		3,332		4,062		398,685		-
1-4 family residential		259,994		172		307		1,637		2,116		262,110		-
Home equity - first lien		56,938		172		-		-		172		57,110		-
Home equity - junior lien		63,667		87		194		33		314		63,981		2
Subtotal: Real estate mortgage		1,369,464		1,494		776		5,054		7,324		1,376,788		2
Consumer		38,699		86		83		-		169		38,868		-
Total	$	2,397,731	$	4,151	$	1,175	$	6,513	$	11,839	$	2,409,570	$	2

Consistent with regulatory guidance, Bancorp categorizes loans into credit 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. Pass-rated loans included all risk-rated loans other than those classified as other assets especially mentioned, substandard, and doubtful, which are defined below:

● Other assets especially mentioned (“OAEM”): Loans classified as OAEM have potential weaknesses that deserve management's close attention. These potential weaknesses may result in deterioration of repayment prospects for the loan or of Bancorp's credit position at some future date.

● Substandard: Loans classified as substandard are inadequately protected by the paying capacity of the obligor or of collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize repayment of the debt. Default is a distinct possibility if the deficiencies are not corrected.

● Substandard non-performing: Loans classified as substandard non-performing have all the characteristics of substandard loans and have been placed on non-accrual status or have been accounted for as troubled debt restructurings. Loans are placed on non-accrual status when prospects for recovering both principal and accrued interest are considered doubtful or when a default of principal or interest has existed for 90 days or more. While on non-accrual status, payments of interest are applied to reduce the recorded investment in the loan.

● Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or repayment in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

As of

March 31, 2018

and

December 31, 2017,

the internally assigned risk grades of loans by category were as follows:

(In thousands)							Substandard				Total
March 31, 2018	Pass		OAEM		Substandard		non-performing		Doubtful		loans
Commercial and industrial	$	811,544	$	14,275	$	13,509	$	4,150	$	-	$	843,478
Construction and development, excluding undeveloped land		215,082		-		-		670		-		215,752
Undeveloped land		19,520		-		30		570		-		20,120
Real estate mortgage
Commercial investment		588,075		2,741		126		-		-		590,942
Owner occupied commercial		388,799		11,678		2,107		5,149		-		407,733
1-4 family residential		268,441		1,884		969		1,606		-		272,900
Home equity - first lien		51,595		-		-		-		-		51,595
Home equity - junior lien		63,596		101		382		29		-		64,108
Subtotal: Real estate mortgage		1,360,506		16,404		3,584		6,784		-		1,387,278
Consumer		45,553		112		4		91		-		45,760
Total	$	2,452,205	$	30,791	$	17,127	$	12,265	$	-	$	2,512,388
December 31, 2017
Commercial and industrial	$	751,628	$	12,032	$	14,178	$	1,176	$	-	$	779,014
Construction and development, excluding undeveloped land		195,248		-		-		664		-		195,912
Undeveloped land		18,484		-		30		474		-		18,988
Real estate mortgage
Commercial investment		591,232		3,599		19		52		-		594,902
Owner occupied commercial		383,455		8,683		3,215		3,332		-		398,685
1-4 family residential		256,968		2,477		1,014		1,651		-		262,110
Home equity - first lien		57,110		-		-		-		-		57,110
Home equity - junior lien		63,471		247		230		33		-		63,981
Subtotal: Real estate mortgage		1,352,236		15,006		4,478		5,068		-		1,376,788
Consumer		38,747		117		4		-		-		38,868
Total	$	2,356,343	$	27,155	$	18,690	$	7,382	$	-	$	2,409,570

XML

Note 4 - Goodwill and Intangible Assets

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

( 4 ) Goodwill and Intangible Assets

US GAAP requires that goodwill and intangible assets with indefinite useful lives

not

be amortized, but instead be tested for impairment at least annually. Bancorp currently has goodwill in the amount of

$682

thousand from the

1996

acquisition of an Indiana bank.

No

impairment charges have been deemed necessary or recorded to date, as the fair value is substantially in excess of the carrying value.    This goodwill is assigned to the commercial banking segment of Bancorp.

Bancorp recorded a gross core deposit intangible totaling

$2.5

million as a result of its

2013

acquisition of THE BANCorp, Inc. This intangible is being amortized over the expected life of the underlying deposits to which the intangible is attributable. At

March 31, 2018,

the unamortized core deposit intangible was

$1.2

million.

Mortgage servicing rights (MSRs) are initially recognized at fair value when mortgage loans are sold with servicing retained. The MSRs are amortized in proportion to and over the period of estimated net servicing income, considering appropriate prepayment assumptions. MSRs are evaluated quarterly for impairment by comparing carrying value to fair value. Estimated fair values of MSRs at

March 31, 2018

and

December 31, 2017

were

$3.5

million and

$3.1

million, respectively. Total outstanding principal balances of loans serviced for others were

$336.0

million and

$344.5

million at

March 31, 2018,

and

December 31, 2017,

respectively.

Changes in the net carrying amount of MSRs for the

three

months ended

March 31, 2018

and

2017

are shown in the following table:

	For the three months
	ended March 31,
(In thousands)	2018			2017
Balance at beginning of period	$	875		$	921
Additions for mortgage loans sold		21			42
Amortization		(35	)		(72	)
Balance at end of period	$	861		$	891

XML

Note 5 - Income Taxes

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Income Tax Disclosure [Text Block]

( 5 ) Income Taxes

Components of income tax expense from operations were as follows:

	Three months ended
	March 31,
(In thousands)	2018		2017
Current income tax expense
Federal	$	2,436	$	3,003
State		128		114
Total current income tax expense		2,564		3,117
Deferred income tax (benefit) expense
Federal		467		(26	)
State		21		38
Total deferred income tax expense		488		12
Change in valuation allowance		-		13
Total income tax expense	$	3,052	$	3,142

An analysis of the difference between statutory and effective income tax rates for the

three

months ended

March 31, 2018

and

2017

follows:

	Three months ended March 31,
	2018			2017
U.S. federal statutory income tax rate		21.0	%		35.0	%
Excess tax benefits from share-based compensation arrangements		(1.9	)		(7.1	)
Tax credits		(0.4	)		(5.5	)
Tax exempt interest income		(0.5	)		(1.1	)
Increase in cash surrender value of life insurance		(0.4	)		(1.3	)
State income taxes, net of federal benefit		0.7			0.7
Other, net		-			1.9
Effective income tax rate		18.5	%		22.6	%

State income tax expense represents tax owed in Indiana. Kentucky and Ohio state bank taxes are based on capital levels, and are recorded as other non-interest expense.

In

December 2017

the Tax Cuts and Jobs Act was enacted and, among other matters, it reduced Bancorp’s marginal federal income tax rate from

35%

to

21%.

Largely offsetting that decrease the effective tax rate for the

three

month period ending

March 31, 2018

as compared with the year earlier period was affected by substantially lower benefit from excess tax benefits from share-based compensation arrangements and from tax credits.

In

December 2017,

the U.S. Securities and Exchange Commission (“SEC”) released Staff Accounting Bulletin

No.

118

(“SAB

118”

) to address any uncertainty or diversity of views in practice in accounting for the income tax effects of tax reform in situations where a registrant does

not

have the necessary information available, prepared or analyzed in reasonable detail to complete this accounting in the reporting period that includes the enactment date. SAB

118

allows a measurement period

not

to extend beyond

one

year from the tax reform’s enactment date to complete the necessary accounting.

In

two

areas, Bancorp recorded provisional amounts of deferred taxes where the information was

not

available to complete the accounting:

1

) the Company’s deferred tax assets of

$565

thousand for temporary differences in certain tax credit investments is awaiting receipt of Schedules K-

1

from outside preparers. Management believe the Company used a reasonable estimate to account for this item; however, there

may

be provisions of the new tax law that could impact the partnerships’ calculation of taxable income, which in effect could affect the Company’s share of taxable income. The final effect will

not

be known until receipt of Schedules K-

1.

2

) Bancorp estimated that

no

reductions are required to deferred tax assets included in the

$19

thousand of future deductions for compensation that might be subject to new limitations under Code Sec.

162

(m) which, generally, limits to

$1

million annual deductions for certain compensation paid to certain executives. There is uncertainty in applying new rules to existing contracts, and Bancorp is seeking clarification before finalizing its analysis. In a

third

area, the Company recorded

no

provisional amounts to its deferred tax liability for temporary differences between the tax and financial reporting bases of certain property and equipment items. These cannot be reasonably estimated. Bancorp’s deferred tax liability of

$541

thousand for temporary differences between the tax and financial reporting bases of fixed assets is awaiting completion of a cost segregation study to take advantage of additional depreciation deductions available through tax reform. Bancorp will complete and record income tax effects of tax reform during the period the necessary information becomes available. This measurement period will

not

extend beyond

December 22, 2018.

US GAAP provides guidance on financial statement recognition and measurement of tax positions taken, or expected to be taken, in tax returns. If recognized, tax benefits would reduce tax expense and accordingly, increase net income. The amount of unrecognized tax benefits

may

increase or decrease in the future for various reasons including adding amounts for current year tax positions, expiration of open income tax returns due to statutes of limitation, changes in management’s judgment about the level of uncertainty, status of examination, litigation and legislative activity and addition or elimination of uncertain tax positions. As of

March 31, 2018

and

December 31, 2017,

the gross amount of unrecognized tax benefits was immaterial to the consolidated financial statements of the Company. Federal and state income tax returns are subject to examination for the years after

2013.

XML

Note 6 - Deposits

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Deposit Liabilities Disclosures [Text Block]

( 6 ) Deposits

The composition of the Bank’s deposits outstanding at

March 31, 2018 (

unaudited) and

December 31, 2017

is as follows:

	March 31 ,		December 31,
(In thousands)	2018		201 7
Non-interest bearing demand	$	681,936	$	674,697
Interest bearing deposits:
Interest bearing demand		811,182		833,450
Savings		159,521		152,348
Money market		689,733		682,226
Time deposits of more than $250,000		33,677		38,439
Other time deposits		197,315		197,135
Total time deposits		230,992		235,574
Total interest bearing deposits		1,891,428		1,903,598
Total deposits	$	2,573,364	$	2,578,295

Maturities of time deposits of more than

$250,000,

outstanding at

March 31, 2018,

are summarized as follows:

(In thousands)	Amount
3 months or less	$	8,509
Over 3 through 6 months		7,865
Over 6 through 12 months		8,082
Over 1 through 3 years		7,756
Over 3 years		1,465
Total	$	33,677

XML

Note 7 - Securities Sold Under Agreements to Repurchase

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Securities Sold Under Agreements To Repurchase [Text Block]

( 7 ) Securities Sold Under Agreements to Repurchase

Securities sold under agreements to repurchase, which represent excess funds from commercial customers as part of a cash management service, totaled

$67.9

million and

$70.5

million at

March 31, 2018

and

December 31, 2017,

respectively. Bancorp enters into sales of securities under agreement to repurchase at a specified future date. At

March 31, 2018,

all of these financing arrangements had overnight maturities and were secured by government sponsored enterprise obligations and government agency mortgage-backed securities which were owned and under the control of Bancorp.

XML

Note 8 - Federal Home Loan Bank Advances

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Federal Home Loan Bank Advances, Disclosure [Text Block]

( 8 ) Federal Home Loan Bank Advances

Bancorp had outstanding borrowings totaling

$49.1

million and

$49.5

million at

March 31, 2018

and

December 31, 2017,

respectively, via

14

separate fixed-rate advances. As of

March 31, 2018,

for

two

advances totaling

$30

million, both of which are non-callable, interest payments are due monthly, with principal due at maturity. For the remaining advances totaling

$19.1

million, principal and interest payments are due monthly based on an amortization schedule.

The following is a summary of the contractual maturities and average effective rates of outstanding advances:

(In thousands)	March 31, 2018					December 31, 2017
Year	Advance		Fixed Rate			Advance		Fixed Rate
2018	$	30,000		1.93	%	$	30,000		1.48	%
2020		1,728		2.23			1,741		2.23
2021		270		2.12			288		2.12
2024		2,400		2.36			2,454		2.36
2025		5,019		2.42			5,149		2.42
2026		8,471		1.99			8,564		1.99
2028		1,252		1.49			1,262		1.49
Total	$	49,140		2.01	%	$	49,458		1.74	%

In addition to fixed-rate advances listed above, Bancorp had cash management advances from the FHLB of

$200

million, and

$150

million as of

March 31, 2018

and

December 31, 2017,

respectively. These advances typically mature in the

first

week following the end of the quarter and are used to manage Bancorp’s overall cash position. Due to the short-term nature of the cash management advances, they were recorded on the consolidated balance sheet within federal funds purchased.

Advances from the FHLB are collateralized by certain commercial and residential real estate mortgage loans under a blanket mortgage collateral agreement and FHLB stock. Bancorp believes these borrowings to be an effective alternative to higher cost time deposits to manage interest rate risk associated with long-term fixed rate loans. At

March 31, 2018,

the amount of available credit from the FHLB totaled

$292.4

million.

XML

Note 9 - Other Comprehensive Income

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Comprehensive Income (Loss) Note [Text Block]

( 9 ) Other Comprehensive Income

The following table illustrates activity within the balances in accumulated other comprehensive income (AOCI) by component, and is shown for the

three

months ended

March 31, 2018

and

2017.

The table also includes

$506

thousand reclassified from AOCI to retained earnings related to the adoption of ASU

2018

-

02

in the

first

quarter of

2018.

ASU

2018

-

02

provides for the reclassification of tax effects stranded in other comprehensive income as a result of the

2017

Tax Cuts and Jobs Act into retained earnings. The Tax Reform reduced the US Federal corporate tax rate from

35%

to

21%

effective

January 1, 2018.

As a result, Bancorp was required to remeasure its net deferred tax assets at the lower rate and recognize the adjustment through income tax expense in

2017.

The adjustment through income tax expense left items presented in AOCI, for which the related income tax effects were originally recognized in other comprehensive income, unadjusted for the new tax rate. The reclassification upon adoption of ASU

2018

-

02

results in AOCI reflecting the new tax rate.

	Net unrealized			Net unrealized			Minimum
	gains on			gains (losses)			pension
	securities			on cash			liability
(in thousands)	available-for-sale			flow hedges			adjustment			Total
Balance at December 31, 2016	$	(1,211	)	$	(16	)	$	(272	)	$	(1,499	)
Net current period other comprehensive gain (loss)		689			85			-			774
Balance at March 31, 2017	$	(522	)	$	69		$	(272	)	$	(725	)
Balance at December 31, 2017 (1)	$	(1,781	)	$	193		$	(342	)	$	(1,930	)
Net current period other comprehensive income gain (loss)		(3,718	)		310			-			(3,408	)
Adoption of Accounting Standards Update 2018-02		(496	)		41			(51	)		(506	)
Balance at March 31, 2018	$	(5,995	)	$	544		$	(393	)	$	(5,844	)

(

1

)

December 31, 2017

AOCI component balances reflect a correction of incorrectly reported year-end balances in Note

12

of the

2017

Form

10

-K, which were presented as $(

2,278

),

$234,

and $(

392

) for securities available-for-sale, cash flow hedges, and minimum pension liability, respectively.  

XML

Note 10 - Preferred Stock

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

( 10 ) Preferred Stock

Bancorp has a class of preferred stock (

no

par value;

1,000,000

shares authorized), the relative rights, preferences and other terms of which or any series within the class will be determined by the Board of Directors prior to any issuance.

None

of this stock has been issued to date.

XML

Note 11 - Net Income Per Share

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Earnings Per Share [Text Block]

( 11 ) Net Income Per Share

The following table reflects, for the

three

months ended

March 31, 2018

and

2017,

net income (numerator) and average shares outstanding (denominator) for basic and diluted net income per share computations:

	Three months ended
(In thousands, except per share data)	March 31,
	2018		2017
Net income	$	13,404	$	10,791
Average shares outstanding		22,577		22,492
Dilutive securities		365		510
Average shares outstanding including dilutive securities including dilutive securities		22,942		23,002
Net income per share, basic	$	0.59	$	0.48
Net income per share, diluted	$	0.58	$	0.47

As of

March 31, 2018,

SARs totaling

47,410

granted in

March 2017

and

January 2018

with strike prices of

$40

and

$38.30,

respectively, were

not

included in the EPS calculation as they were antidilutive; however they could be dilutive to EPS in the future. 

XML

Note 12 - Defined Benefit Plans

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Compensation and Employee Benefit Plans [Text Block]

( 12 ) Defined Benefit Plan

Bancorp sponsors an unfunded, non-qualified, defined benefit retirement plan for

three

key officers (

two

current and

one

retired), and has

no

plans to increase the number of or benefits to participants. Benefits vest based on

25

years of service and all participants are fully vested. Actuarially determined pension costs are expensed and accrued over the service period, and benefits are paid from Bancorp’s assets. Information about the components of the net periodic benefit cost of the defined benefit plan, recorded in compensation expense, is as follows:

	Three months ended March 31,
(In thousands)	201 8		201 7
Components of net periodic benefit cost:
Service cost	$	–	$	–
Interest cost (1)		20		18
Expected return on plan assets		–		–
Amortization of prior service cost		–		–
Amortization of net losses (1)		18		16
Net periodic benefit cost	$	38	$	34

(

1

) Bancorp elected as a practical expedient to use amounts disclosed in the

2017

consolidated financial statements as a basis for estimating quarterly application of components of defined benefit cost.

XML

Note 13 - Stock-based Compensation

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

( 13 ) Stock-Based Compensation

The fair value of all awards granted, net of estimated forfeitures, is recognized as compensation expense over the respective service period.

Bancorp currently has

one

stock-based compensation plan. At Bancorp's

2015

Annual Meeting of Shareholders, shareholders approved the

2015

Omnibus Equity Compensation Plan and authorized the shares available from the expiring

2005

plan for future awards under the

2015

plan. The

2005

Stock Incentive Plan expired in

April 2015.

No

additional shares were made available, however, SARs granted under this plan expire as late as

2025.

As of

March 31, 2018,

there were

174,458

shares available for future awards.

Options, which have

not

been granted since

2007,

generally had a vesting schedule of

20%.

The last remaining options were exercised in the

first

quarter of

2017.

Stock appreciation rights (“SARs”) granted have a vesting schedule of

20%

per year and expire

ten

years after the grant date unless forfeited due to employment termination.

Restricted shares granted to officers vest over

five

years. All restricted shares have been granted at a price equal to the market value of common stock at the time of grant. For all grants prior to

2015,

grantees are entitled to dividend payments during the vesting period. For grants in

2015

and forward, forfeitable dividends are deferred until shares are vested. Fair value of restricted shares is equal to the market value of the shares on the date of grant.

Grants of performance stock units (“PSUs”) vest based upon service and a single

three

-year performance period which begins

January 1

of the

first

year of the performance period. Because grantees are

not

entitled to dividend payments during the performance period, the fair value of these PSUs is estimated based upon the fair value of the underlying shares on the date of grant, adjusted for non-payment of dividends. Grants require a

one

year post-vesting holding periods and the fair value of such grants incorporates a liquidity discount related to the holding period of

4.26%,

5.12%

and

4.50%

for

2018,

2017,

and

2016,

respectively.

Grants of restricted stock units (“RSUs”) to directors are time-based and vest

12

months after grant date. Because grantees are entitled to deferred dividend payments at the end of the vesting period, fair value of the RSUs is estimated based on fair value of underlying shares on the date of grant.

Bancorp has recognized stock-based compensation expense, within salaries and employee benefits for employees, and within other non-interest expense for directors, in the consolidated statements of income as follows:

	For three months ended
	March 31,
(In thousands)	2018			2017
Stock-based compensation expense before income taxes	$	823		$	660
Less: deferred tax benefit		(173	)		(231	)
Reduction of net income	$	650		$	429

Bancorp expects to record an additional

$2.5

million of stock-based compensation expense in

2018

for equity grants outstanding as of

March 31, 2018.

As of

March 31, 2018,

Bancorp has

$7.4

million of unrecognized stock-based compensation expense that is expected to be recorded as compensation expense over the next

five

years as awards vest. Bancorp used cash of

$156

thousand during the

first

three

months of

2018

for the purchase of shares upon the vesting of restricted stock units. This compares with cash used of

$216

thousand during the

first

three

months of

2017

for the purchase of shares upon the vesting of restricted stock units net of cash received for options exercised.

Fair values of Bancorp’s SARs are estimated at the date of grant using the Black-Scholes option pricing model, a leading formula for calculating the value of stock options and SARs. This model requires the input of assumptions, changes to which can materially affect the fair value estimate. The following assumptions were used in SAR valuations at the grant date in each year:

	2018			2017
Dividend yield		2.57	%		2.72	%
Expected volatility		20.60	%		19.47	%
Risk free interest rate		2.82	%		2.29	%
Expected life of SARs (in years)		7.0			7.0

Dividend yield and expected volatility are based on historical information for Bancorp corresponding to the expected life of options and SARs granted. Expected volatility is the volatility of the underlying shares for the expected term on a monthly basis. The risk free interest rate is the implied yield currently available on U.S. Treasury issues with a remaining term equal to the expected life of the options. The expected life of SARs is based on actual experience of past like-term SARs. Bancorp evaluates historical exercise and post-vesting termination behavior when determining the expected life.

A summary of stock option and SARs activity and related information for the

twelve

month period ended

December 31, 2017

and the

three

month period ended

March 31, 2018

follows:

														Weighted
								Weighted		Aggregate		Weighted		average
	Options							average		intrinsic		average		remaining
	and SARs			Exercise				exercise		value		fair		contractual
	(In thousands)			price				price		(In thousands)		value		life (In years)
At December 31, 2016
Vested and exercisable		475			$14.02	-	24.56	$	15.72	$	14,820	$	3.16		4.3
Unvested		260			15.24	-	33.08		21.53		6,623		3.43		7.8
Total outstanding		735			14.02	-	33.08		17.78		21,443		3.26		5.5
Granted		46			40.00	-	40.00		40.00		-		6.34
Exercised		(77	)		14.02	-	17.89		15.41		1,855		3.18
Forfeited		-				-			-		-		-
At December 31, 2017
Vested and exercisable		490			14.02	-	33.08		16.46		10,408		3.16		4.0
Unvested		214			15.26	-	40.00		26.46		2,515		4.17		7.7
Total outstanding		704			14.02	-	40.00		19.51		12,923		3.47		5.1
Granted		46			35.90	-	38.30		35.95		-		6.66
Exercised		(17	)		15.24	-	15.58		15.57		362		3.03
Forfeited		-				-			-		-		-
At March 31, 2018
Vested and exercisable		547			14.02	-	40.00		17.43		9,710		3.24		4.3
Unvested		187			19.37	-	40.00		30.05		1,165		4.95		8.3
Total outstanding		734			14.02	-	40.00		20.64	$	10,875		3.68		5.3
Vested year-to-date		74			$15.26	-	40.00	$	23.38	$	914	$	3.77

Intrinsic value for stock options and SARs is defined as the amount by which the current market price of the underlying stock exceeds the exercise or grant price.

A summary of activity for the

twelve

month period ending

December 31, 2017

and the

three

month period ending

March 31, 2018

for restricted shares of common stock granted to officers is in the following table:

				Grant date
				weighted-
	Number			average cost
Unvested at December 31, 2016		145,235		$	21.57
Shares awarded		28,625			44.85
Restrictions lapsed and shares released		(46,797	)		19.79
Shares forfeited		(7,691	)		25.18
Unvested at December 31, 2017		119,372		$	27.62
Shares awarded		38,205			36.00
Restrictions lapsed and shares released		(43,385	)		23.57
Shares forfeited		(1,368	)		28.46
Unvested at March 31, 2018		112,824		$	32.16

Bancorp awarded performance-based restricted stock units (“PSUs”) to executive officers of Bancorp, the single

three

-year performance period for which began

January 1

of the award year. The following table outlines the PSU grants.

	Vesting				Expected
Grant	period		Fair		shares to
year	in years		value		be awarded
2016		3	$	22.61		69,161
2017		3		35.66		43,325
2018		3		31.54		50,352

In the

first

quarter of

2018,

Bancorp awarded

6,525

RSUs to directors of Bancorp with a grant date fair value of

$247

thousand.

XML

Note 14 - Commitments and Contingent Liabilities

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

( 14 ) Commitments and Contingent Liabilities

As of

March 31, 2018,

Bancorp had various commitments outstanding that arose in the normal course of business, including standby letters of credit and commitments to extend credit, which are properly

not

reflected in the consolidated financial statements. In management’s opinion, at

March 31, 2018

commitments to extend credit of

$692.4

million, including standby letters of credit of

$18.9

million, represent normal banking transactions. Commitments to extend credit were

$688.3

million, including letters of credit of

$14.8

million, as of

December 31, 2017.

Commitments to extend credit are an agreement to lend to a customer as long as collateral is available and there is

no

violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses. Commitments to extend credit are mainly comprised of commercial lines of credit, construction and home equity credit lines and credit cards issued to commercial customers. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do

not

necessarily represent future cash requirements. Bancorp uses the same credit and collateral policies in making commitments and conditional guarantees as for on-balance sheet instruments. Bancorp evaluates each customer’s creditworthiness on a case by case basis. The amount of collateral obtained is based on management’s credit evaluation of the customer. Collateral held varies but

may

include accounts receivable, inventory, equipment, and real estate. However, should the commitments be drawn upon and should our customers default on their resulting obligation to us, our maximum exposure to credit loss, without consideration of collateral, is represented by the contractual amount of those instruments. At

March 31, 2018,

Bancorp has recorded

$350

thousand in other liabilities for inherent risks related to unfunded credit commitments.

Standby letters of credit and financial guarantees written are conditional commitments issued by Bancorp to guarantee the performance of a customer to a

first

party. Those guarantees are primarily issued to support customer commercial transactions. Standby letters of credit generally have maturities of

one

to

two

years.

As of

March 31, 2018,

in the normal course of business, there were pending legal actions and proceedings in which claims for damages are asserted. Management, after discussion with legal counsel, believes the ultimate result of these legal actions and proceedings will

not

have a material adverse effect on the consolidated financial position or results of operations of Bancorp.

XML

Note 15 - Assets and Liabilities Measured and Reported at Fair Value

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Fair Value Measurement and Measurement Inputs, Recurring and Nonrecurring [Text Block]

( 15 ) Assets and Liabilities Measured and Reported at Fair Value

Bancorp follows the provisions of authoritative guidance for fair value measurements. This guidance is definitional and disclosure oriented and addresses how companies should approach measuring fair value when required by US GAAP. The guidance also prescribes various disclosures about financial statement categories and amounts which are measured at fair value, if such disclosures are

not

already specified elsewhere in US GAAP. Bancorp adopted ASU

2016

-

01,

Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities,

effective

January 1, 2018.

The most significant change impacting Bancorp was a change in valuation methods for the loan portfolio for fair value reporting. GAAP

no

longer allows for valuing financial instruments for fair value purposes using an “entrance” pricing methodology. The use of an “exit” price methodology requires greater assumptions regarding life of loan losses and is a more complex calculation, the results of which can be seen below.

Authoritative guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between participants at the measurement date. The guidance also establishes a hierarchy to group assets and liabilities carried at fair value in

three

levels based upon the markets in which the assets and liabilities trade and the reliability of assumptions used to determine fair value. These levels are:

● Level 1: Valuation is based upon quoted prices for identical instruments traded in active markets.

● Level 2: Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

● Level 3: Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions would reflect internal estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques could include pricing models, discounted cash flows and other similar techniques.

Authoritative guidance requires maximum use of observable inputs and minimum use of unobservable inputs in fair value measurements. Where there exists limited or

no

observable market data, Bancorp derives its own estimates by generally considering characteristics of the asset/liability, the current economic and competitive environment and other factors. For this reason, results cannot be determined with precision and

may

not

be realized on an actual sale or immediate settlement of the asset or liability.

Bancorp’s investment securities available-for-sale and interest rate swaps are recorded at fair value on a recurring basis. Other accounts including mortgage servicing rights, impaired loans and other real estate owned

may

be recorded at fair value on a non-recurring basis, generally in the application of lower of cost or market adjustments or write-downs of specific assets.

The portfolio of investment securities available-for-sale is comprised of U.S. Treasury and other U.S. government obligations, debt securities of U.S. government-sponsored corporations (including mortgage-backed securities), obligations of state and political subdivisions and corporate equity securities. U.S. Treasury and corporate equity securities are priced using quoted prices of identical securities in an active market. These measurements are classified as Level

1

in the hierarchy above. All other securities are priced using standard industry models or matrices with various assumptions such as yield curves, volatility, prepayment speeds, default rates, time value, credit rating and market prices for similar instruments. These assumptions are generally observable in the market place and can be derived from or supported by observable data. These measurements are classified as Level

2

in the hierarchy above.

Interest rate swaps are valued using primarily Level

2

inputs. Fair value measurements generally based on benchmark forward yield curves and other relevant observable market data. For purposes of potential valuation adjustments to derivative positions, Bancorp evaluates the credit risk of its counterparties as well as its own credit risk. To date, Bancorp has

not

realized any losses due to counterparty’s inability to perform and the change in value of derivative assets and liabilities attributable to credit risk was

not

significant during

2018.

Below are the carrying values of assets measured at fair value on a recurring basis.

(In thousands)	Fair value at March 31, 2018
Assets	Total		Level 1		Level 2		Level 3
Investment securities available-for-sale
Government sponsored enterprise obligations	$	402,411	$	-	$	402,411	$	-
Mortgage-backed securities - government agencies		151,748		-		151,748		-
Obligations of states and political subdivisions		43,922		-		43,922		-
Total investment securities available-for-sale		598,081		-		598,081		-
Interest rate swaps		1,987		-		1,987		-
Total assets	$	600,068	$	-	$	600,068	$	-
Liabilities
Interest rate swaps	$	1,275	$	-	$	1,275	$	-

(In thousands)	Fair value at December 31, 2017
Assets	Total		Level 1		Level 2		Level 3
Investment securities available-for-sale
U.S. Treasury and other U.S. government obligations	$	149,984	$	149,984	$	-	$	-
Government sponsored enterprise obligations		213,844		-		213,844		-
Mortgage-backed securities - government agencies		161,507		-		161,507		-
Obligations of states and political subdivisions		49,189		-		49,189		-
Total investment securities available-for-sale		574,524		149,984		424,540		-
Interest rate swaps		579		-		579		-
Total assets	$	575,103	$	149,984	$	425,119	$	-
Liabilities
Interest rate swaps	$	259	$	-	$	259	$	-

Bancorp had

no

financial instruments classified within Level

3

of the valuation hierarchy for assets and liabilities measured at fair value on a recurring basis at

March 31, 2018

or

December 31, 2017.

MSRs are recorded at fair value upon capitalization, are amortized to correspond with estimated servicing income, and are periodically assessed for impairment based on fair value at the reporting date. Fair value is based on a valuation model that calculates the present value of estimated net servicing income. The model incorporates assumptions that market participants would use in estimating future net servicing income. These measurements are classified as Level

3.

At

March 31, 2018

and

December 31, 2017

there was

no

valuation allowance for the mortgage servicing rights, as the fair value exceeded the cost. Accordingly, the MSRs are

not

included in either table below for

March 31, 2018

or

December 31, 2017.

See Note

4

for more information regarding MSRs.

For impaired loans in the table below, fair value is calculated as the carrying value of only loans with a specific valuation allowance, less the specific allowance, and the carrying value of collateral dependent loans that have been charged down to their fair value. Fair value of impaired loans was primarily measured based on the value of collateral securing these loans. Impaired loans are classified within Level

3

of the fair value hierarchy. Collateral

may

be real estate and/or business assets including equipment, inventory, and/or accounts receivable. Bancorp determines the value of real estate collateral based on independent appraisals performed by qualified licensed appraisers. These appraisals

may

utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Appraised values are discounted for costs to sell and

may

be discounted further based on management’s historical knowledge, changes in market conditions from the date of the most recent appraisal, and/or management’s expertise and knowledge of the customer and the customer’s business. Such discounts by management are subjective and are typically significant unobservable inputs for determining fair value. For other assets, Bancorp relies on both internal and

third

party assessments of asset value, based on information provided by the borrower, following methodologies similar to those described for real estate. As of

March 31, 2018,

total impaired collateral dependent loans charged down to their fair value and impaired loans with a valuation allowance were

$7.4

million, and the specific allowance totaled

$1.5

million, resulting in a fair value of

$5.9

million, compared with total collateral dependent loans charged down to their fair value and impaired loans with a valuation allowance of

$2.6

million, and the specific allowance allocation totaling

$48

thousand, resulting in a fair value of

$2.6

million at

December 31, 2017.

Losses represent charge offs and changes in specific allowances for the periods indicated.

Other real estate owned (“OREO”), which is carried at the lower of cost or fair value, is periodically assessed for impairment based on fair value at the reporting date. Fair value is based on appraisals performed by external parties which use judgments and assumptions that are property-specific and sensitive to changes in the overall economic environment. Appraisals

may

be further discounted based on management’s historical knowledge and/or changes in market conditions from the date of the most recent appraisal. Many of these inputs are

not

observable and, accordingly, these measurements are classified as Level

3.

For OREO in the table below, fair value is the carrying value of only parcels of OREO which have a carrying value equal to appraised value. Losses represent write-downs which occurred during the period indicated. At

March 31, 2018

and

December 31, 2017,

carrying value of all other real estate owned was

$360

thousand and

$2.6

million, respectively.

Below are the carrying values of assets measured at fair value on a non-recurring basis.

(In thousands)	Fair value at March 31, 2018								Losses for 3 month
									period ended
	Total		Level 1		Level 2		Level 3		March 31, 2018
Impaired loans	$	5,918	$	-	$	-	$	5,918	$	(1,711	)
Other real estate owned		360		-		-		360		-
Total	$	6,278	$	-	$	-	$	6,278	$	(1,711	)

(in thousands)	Fair value at December 31, 2017								Losses for 3 month
									period ended
	Total		Level 1		Level 2		Level 3		March 31, 2017
Impaired loans	$	2,569	$	-	$	-	$	2,569	$	(452	)
Other real estate owned		2,640		-		-		2,640		-
Total	$	5,209	$	-	$	-	$	5,209	$	(452	)

For the securities portfolio, Bancorp monitors the valuation technique used by pricing agencies to ascertain when transfers between levels have occurred. The nature of other assets and liabilities measured at fair value is such that transfers in and out of any level are expected to be rare. For the

three

months ended

March 31, 2018,

there were

no

transfers between Levels

1,

2,

or

3.

For Level

3

assets measured at fair value on a non-recurring basis as of

March 31, 2018,

the significant unobservable inputs used in the fair value measurements are presented below.

				Significant	Weighted
	Fair		Valuation	unobservable	average of
(Dollars in thousands)	value		technique	input	input
Impaired loans - collateral dependent	$	5,918	Appraisal	Appraisal discounts		42.2	%
Other real estate owned		360	Appraisal	Appraisal discounts		10.0

XML

Note 16 - Disclosure of Financial Instruments Not Reported at Fair Value

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Fair Value Disclosures [Text Block]

( 16 ) Disclosure of Financial Instruments Not Reported at Fair Value

US GAAP requires disclosure of the fair value of financial assets and liabilities, including those financial assets and financial liabilities that are

not

measured and reported at fair value on a recurring basis or nonrecurring basis. Carrying amounts, estimated fair values, and placement in the fair value hierarchy of Bancorp’s financial instruments are as follows:

(In thousands)	Carrying
March 31, 2018	amount		Fair value		Level 1		Level 2		Level 3
Financial assets
Cash and short-term investments	$	56,876	$	56,876	$	56,876	$	-	$	-
Mortgage loans held for sale		4,239		4,299		-		4,299		-
Federal Home Loan Bank stock and other securities		8,876		8,876		-		8,876		-
Loans, net		2,488,185		2,487,204		-		-		2,487,204
Accrued interest receivable		8,026		8,026		8,026		-		-
Financial liabilities
Deposits		2,573,364		2,571,032		-		-		2,571,032
Short-term borrowings		283,125		283,125		-		283,125		-
FHLB advances		49,140		47,759		-		47,759		-
Accrued interest payable		284		284		284		-		-

(In thousands)	Carrying
December 31, 2017	amount		Fair value		Level 1		Level 2		Level 3
Financial assets
Cash and short-term investments	$	139,248	$	139,248	$	139,248	$	-	$	-
Mortgage loans held for sale		2,964		2,964		-		2,964		-
Federal Home Loan Bank stock and other securities		7,646		7,646		-		7,646		-
Loans, net		2,384,685		2,338,464		-		-		2,338,464
Accrued interest receivable		8,369		8,369		8,369		-		-
Financial liabilities
Deposits		2,578,295		2,576,385		-		-		2,576,385
Short-term borrowings		231,825		231,825		-		231,825		-
FHLB advances		49,458		48,642		-		48,642		-
Accrued interest payable		232		232		232		-		-

Limitations

Fair value estimates are made at a specific point in time based on relevant market information and information about financial instruments. Because

no

market exists for a significant portion of Bancorp’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Therefore, calculated fair value estimates in many instances cannot be substantiated by comparison to independent markets and, in many cases,

may

not

be realizable in a current sale of the instrument. Changes in assumptions could significantly affect estimates.

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Note 17 - Derivative Financial Instruments

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

( 17 ) Derivative Financial Instruments

Periodically, Bancorp enters into an interest rate swap transaction with a borrower, who desires to hedge exposure to rising interest rates, while at the same time entering into an offsetting interest rate swap, with substantially matching terms, with another approved independent counterparty. These are undesignated derivative instruments and are recognized on the balance sheet at fair value. Because of matching terms of offsetting contracts and collateral provisions mitigating any non-performance risk, changes in fair value subsequent to initial recognition have an insignificant effect on earnings. Exchanges of cash flows related to undesignated interest rate swap agreements for the

first

three

months of

2018

were offsetting and therefore had

no

effect on Bancorp’s earnings or cash flows.

Interest rate swap agreements derive their value from underlying interest rates. These transactions involve both credit and market risk. Notional amounts are amounts on which calculations, payments, and the value of the derivative are based. Notional amounts do

not

represent direct credit exposures. Direct credit exposure is limited to the net difference between the calculated amounts to be received and paid, if any. Bancorp is exposed to credit-related losses in the event of nonperformance by counterparties to these agreements. Bancorp mitigates the credit risk of its financial contracts through credit approvals, limits, collateral, and monitoring procedures, and does

not

expect any counterparties to fail their obligations.

At

March 31, 2018

and

December 31, 2017,

Bancorp had outstanding undesignated interest rate swap contracts as follows:

(Dollar amounts in thousands)	Receiving						Paying
	March 31,			December 31,			March 31,		December 31,
	2018			2017			2018		2017
Notional amount	$	54,310		$	54,964		$	54,310	$	54,964
Weighted average maturity (years)		8.5			8.7			8.5		8.7
Fair value	$	(1,275	)	$	(259	)	$	1,298	$	283

In

2016,

Bancorp entered into an interest rate swap to hedge cash flows of a

$10

million rolling fixed-rate

three

-month FHLB borrowing. The swap began

December 6, 2016

and ends

December 6, 2021.

In

2015,

Bancorp entered into an interest rate swap to hedge cash flows of a

$20

million rolling fixed-rate

three

-month FHLB borrowing. The swap began

December 9, 2015

and matures

December 6, 2020.

For purposes of hedging, rolling fixed rate advances are considered to be floating rate liabilities. Interest rate swaps involve exchange of Bancorp’s floating rate interest payments for fixed rate swap payments on underlying principal amounts. These swaps were designated, and qualified, for cash-flow hedge accounting. For derivative instruments that are designated and qualify as cash flow hedging instruments, the effective portion of gains or losses is reported as a component of other comprehensive income, and is subsequently reclassified into earnings as an adjustment to interest expense in periods in which the hedged forecasted transaction affects earnings.

The following table details Bancorp’s derivative position designated as a cash flow hedge, and the fair values as of

March 31, 2018

and

December 31, 2017.

(Dollars in thousands)
							Fair value
Notional		Maturity	Receive (variable)	Pay fixed			assets (liabilities)
amount		date	index	swap rate			March 31, 2018		December 31, 2017
$	10,000	12/6/2021	US 3 Month LIBOR		1.89	%	$	266	$	106
	20,000	12/6/2020	US 3 Month LIBOR		1.79	%		423		190
$	30,000				1.82	%	$	689	$	296

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Note 18 - Regulatory Matters

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Regulatory Capital Requirements under Banking Regulations [Text Block]

( 18 ) Regulatory Matters

Bancorp and the Bank are subject to various capital requirements prescribed by banking regulations and administered by state and federal banking agencies. Under these requirements, Bancorp and the Bank must meet minimum amounts and percentages of Tier

1,

common equity Tier

1,

and total capital, as defined, to risk weighted assets and Tier

1

capital to average assets. Risk weighted assets are determined by applying certain risk weightings prescribed by regulation to various categories of assets and off-balance sheet commitments. Capital and risk weighted assets

may

be further subject to qualitative judgments by regulators as to components, risk weighting and other factors. Failure to meet capital requirements can result in certain mandatory, and possibly discretionary, corrective actions prescribed by regulation or determined to be necessary by regulators, which could materially affect the unaudited consolidated financial statements.

In

2013,

the Federal Reserve Board and the FDIC approved rules that substantially amended regulatory risk-based capital rules applicable to Bancorp and the Bank. The rules implemented regulatory capital reforms of the Basel Committee on Banking Supervision reflected in "Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems" (Basel III) and changes required by the Dodd-Frank Act. Basel III regulatory capital reforms became effective for Bancorp and the Bank on

January 1, 2015,

and include new minimum risk-based capital and leverage ratios. Bancorp and the Bank met all capital requirements to which they were subject as of

March 31, 2018.

The following table sets forth consolidated Bancorp’s and the Bank’s risk based capital amounts and ratios as of

March 31, 2018

and

December 31, 2017.

(Dollars in thousands)	Actual					Minimum for adequately capitalized					Minimum for well capitalized
March 31, 2018	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk-based capital (1)
Consolidated	$	366,493		13.04	%	$	224,842		8.00	%	NA		NA
Bank		355,611		12.66			224,715		8.00		$	280,893		10.00	%
Common equity tier 1 risk-based capital
Consolidated		341,940		12.16			126,540		4.50		NA		NA
Bank		331,058		11.79			126,358		4.50			182,517		6.50
Tier 1 risk-based capital (1)
Consolidated		341,940		12.16			168,720		6.00		NA		NA
Bank		331,058		11.79			168,477		6.00			224,636		8.00
Leverage (2)
Consolidated		341,940		11.05			123,779		4.00		NA		NA
Bank		331,058		10.71			123,644		4.00			154,556		5.00

(Dollars in thousands)	Actual					Minimum for adequately capitalized					Minimum for well capitalized
December 31, 2017	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk-based capital (1)
Consolidated	$	359,866		13.52	%	$	213,012		8.00	%	NA		NA
Bank		347,840		13.07			212,891		8.00		$	266,114		10.00	%
Common equity tier 1 risk-based capital
Consolidated		334,631		12.57			119,820		4.50		NA		NA
Bank		322,605		12.12			212,891		4.50			172,974		6.50
Tier 1 risk-based capital (1)
Consolidated		334,631		12.57			159,760		6.00		NA		NA
Bank		322,605		12.12			159,668		6.00			212,891		8.00
Leverage (2)
Consolidated		334,631		10.70			125,122		4.00		NA		NA
Bank		322,605		10.32			125,040		4.00			156,300		5.00

( 1 ) Ratio is computed in relation to risk-weighted assets.

( 2 ) Ratio is computed in relation to average assets.

NA Not applicable. Regulatory framework does not define well capitalized for holding companies.

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Note 19 - Segments

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

( 19 ) Segments

Bancorp’s principal activities include commercial banking and wealth management and trust. Commercial banking provides a full range of loan and deposit products to individual consumers and businesses. Commercial banking also includes Bancorp’s mortgage origination and investment products sales activity. Wealth management and trust provides financial management services including investment management, trust and estate administration, and retirement plan services.

Financial information for each business segment reflects that which is specifically identifiable or allocated based on an internal allocation method. Income taxes are allocated based on the effective federal income tax rate adjusted for any tax exempt activity. All tax exempt activity and provision for loan losses have been allocated to the commercial banking segment. Measurement of performance of business segments is based on the management structure of Bancorp and is

not

necessarily comparable with similar information for any other financial institution. Information presented is also

not

necessarily indicative of the segments’ operations if they were independent entities.

Principally, all of the net assets of Stock Yards Bancorp, Inc. are involved in the commercial banking segment. Bancorp has goodwill of

$682,000

related to a bank acquisition in

1996

which has been assigned to the commercial banking segment. Assets assigned to the Wealth Management & Trust Group (WM&T) consist of premises and equipment, net of accumulated depreciation.

Selected financial information by business segment for the

three

month periods ended

March 31, 2018

and

2017

follows: 

			Wealth
	Commercial		management
(In thousands)	banking		and trust		Total
Three months ended March 31, 2018
Net interest income	$	27,224	$	71	$	27,295
Provision for loan losses		735		-		735
Wealth management and trust services		-		5,500		5,500
All other non-interest income		5,423		-		5,423
Non-interest expense		17,829		3,198		21,027
Income before income taxes		14,083		2,373		16,456
Income tax expense		2,537		515		3,052
Net income	$	11,546	$	1,858	$	13,404
Segment assets	$	3,283,539	$	1,941	$	3,285,480
Three months ended March 31, 2017
Net interest income	$	25,107	$	77	$	25,184
Provision (credit) for loan losses		900		-		900
Wealth management and trust services		-		5,094		5,094
All other non-interest income		5,500		-		5,550
Non-interest expense		17,948		3,047		20,995
Income before income taxes		11,809		2,124		13,933
Income tax expense		2,384		758		3,142
Net income	$	9,425	$	1,366	$	10,791
Segment assets	$	3,031,318	$	2,025	$	3,033,343

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Note 20 - Revenue From Contracts With Customers

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

( 20 ) Revenue from Contracts with Customers

Bancorp adopted Accounting Standards Update (ASU)

2014

-

09,

Revenue from Contracts with Customers and all related amendments (ASC

606

), which creates a single framework for recognizing revenue from contracts with customers that fall within its scope and revises when it is appropriate to recognize a gain (loss) from the transfer of nonfinancial assets, effective

January 1, 2018

using the full retrospective method. Bancorp recognizes revenue upon satisfying a performance obligation as services are rendered to a customer. All of Bancorp’s revenue from contracts with customers in the scope of ASC

606

is recognized within non-interest income. The only impact to financial statement presentation was reclassification from expense to contra income costs incurred to obtain and fulfill contracts associated with investment product sales. All periods presented in these financial statements have been restated to reflect the reclassification. The table below presents the Company’s sources of non-interest income for the

three

months ended

March 31, 2018

and

March 31, 2017.

Items outside the scope of ASC

606

are noted as such.

For the three months ended March 31, 2018
(In thousands)
Revenue by operating segment	Commercial		WM&T		Consolidated
Wealth management and trust services	$	-	$	5,500	$	5,500
Deposit service charges		1,511				1,511
Debit and credit card revenue		1,508				1,508
Treasury management fees		947				947
Mortgage banking revenue (1)		576				576
Investment product sales commissions and fees		404				404
Bank owned life insurance income (1)		187				187
Other income (2)		290				290
Total non-interest income	$	5,423	$	5,500	$	10,923

( 1 )	Not within the scope of ASC 606
( 2 )	includes safety box deposit fees of $45 thousand included within the scope of ASC 606

For the three months ended March 31, 2017
(In thousands)
Revenue by operating segment	Commercial		WM&T		Consolidated
Wealth management and trust services	$	-	$	5,094	$	5,094
Deposit service charges		1,565				1,565
Debit and credit card revenue		1,406				1,406
Treasury management fees		956				956
Mortgage banking revenue (1)		702				702
Investment product sales commissions and fees		386				386
Bank owned life insurance income (1)		204				204
Other income (2)		331				331
Total non-interest income	$	5,550	$	5,094	$	10,644

( 1 )	Not within the scope of ASC 606
( 2 )	includes safety box deposit fees of $45 thousand included within the scope of ASC 606

Revenue sources within the scope of ASC

606

are discussed below.

The Company earns fees from its deposit customers for transactions-based, account management, and overdraft services. Transaction-based fees, which include services such as ATM use fees, stop payments fees, and ACH fees, are recognized at the time the transaction is executed as that is when the company fulfills the performance obligation. Account management fees are earned over the course of a month and charged in the month in which the services are provided. Overdraft fees are recognized at the point in time that the overdraft occurs. Deposit service charges are withdrawn from customer’s account balances.

Treasury management transaction fees are recognized at the time the transaction is executed as that is when the company fulfills the performance obligation.  Account management fees are earned over the course of a month and charged in the month in which the services are provided.  Treasury management fees are withdrawn from customer’s account balances.

The Wealth Management and Trust Group (WM&T) provides customers fiduciary and investment management services as agreed upon in asset management contracts. The contracts require WM&T to provide a series of distinct services for which fees are earned over time. The contracts are cancellable upon demand with fees typically based upon the asset value of investments. Revenue is accrued and recognized monthly based upon month-end asset values and collected from the customer predominately in the following month except for a small percentage of fees collected quarterly. Incentive compensation related to WM&T activities is considered a cost of obtaining the contract. Contracts between WM&T and clients do

not

permit performance based fees and accordingly,

none

of the fees earned by WM&T are performance based.

Investment products sales commissions and fees represent the Bank’s share of transaction fees and wrap fees resulting from investment services and programs provided through an agent relationship with a

third

party broker-dealer. Transaction fees are assessed at the time of the transaction. Those fees are collected and recognized on a monthly basis. Trailing fees are based upon market value and are assessed, collected, and recognized on a quarterly basis. Variable costs considered costs of obtaining the contracts related to investment product sales activities include incentive compensation expense and trading activity charges. The incentive compensation has been reclassified from compensation expense and the trading activity fees from technology and communication in prior years’ presentation to a reduction of income.

Debit and credit card interchange revenue represents fees assessed within the payment card system for acceptance of card based transactions. Interchange fees are assessed as the performance obligation is satisfied, which is at the point in time the card transaction is authorized. Revenue is collected and recognized daily through the payment network settlement process.

Bancorp did

not

establish any contract assets or liabilities as a result of adopting ASC

606,

nor were any recognized during the

first

quarter of

2018.

Trust fees receivable as of

March 31, 2018

were

$2.2

million compared with

$2.2

million as of

December 31, 2017.

Bancorp’s revenue on the consolidated statement of income is categorized by product type, which effectively depicts how the nature, timing, and extent of cash flows are affected by economic factors.

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Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

Loans and Leases Receivable, Allowance for Loan Losses Policy [Policy Text Block]

The allowance for loan losses is management’s estimate of probable losses inherent in the loan portfolio as of the balance sheet date. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

Management has identified the accounting policy related to the allowance and provision for loan losses as critical to the understanding of Bancorp’s results of operations and discussed this conclusion with the Audit Committee of the Board of Directors. Since the application of this policy requires significant management assumptions and estimates, it could result in materially different amounts to be reported if conditions or underlying circumstances were to change. The provision for loan losses reflects an allowance methodology driven by risk ratings, historical losses, specific loan loss allocations, and qualitative factors. Assumptions include many factors such as changes in borrowers’ financial condition which can change quickly or historical loss ratios related to certain loan portfolios which

may

or

may

not

be indicative of future losses. Consistent with Bancorp’s methodology, in the

first

quarter of

2018,

Bancorp extended the historical period used to capture Bancorp’s historical loss ratios from

28

quarters to

32

quarters in order to capture the effects of a full economic cycle. This extension of the historical period was applied to all classes and segments of our portfolio. The expansion of the look-back period for the quantitative historical loss rate caused us to review the overall methodology for the qualitative factors to ensure we were appropriately capturing the risk

not

addressed in the quantitative historical loss rate. Management reviews the appropriateness of the look-back period annually, and believes the extension of the look-back period is appropriate to capture the impact of a full economic cycle and more accurately represents the current level of risk inherent in the loan portfolio.

As a result of extending the look-back period and making normal updates to other assumptions in the allowance model in the

first

quarter of

2018,

the allowance decreased

$682,000.

  The change in look-back period was consistent with management’s judgment regarding the risk in the loan portfolio and consistent with internal analysis showing continued strong asset quality related

not

only in the Company’s loan portfolio, but the Bank’s peer group as well, validating the continuation of the current economic cycle and thus the reasoning to extend the look-back period.  Management will continue to evaluate the appropriateness of the look-back period based on the status of the economic cycle.  To the extent that management’s assumptions prove incorrect, results from operations could be materially affected by a higher or lower provision for loan losses.  The accounting policy related to the allowance for loan losses is applicable to the commercial banking segment of Bancorp.  The impact and any associated risks related to this policy on Bancorp’s business operations are discussed in the “Allowance for Loan Losses” section below.

Bancorp’s allowance calculation includes allocations to loan portfolio segments at

March 31, 2018

for qualitative factors including, among other factors, local economic and business conditions in each of our primary markets, quality and experience of lending staff and management, exceptions to lending policies, levels of and trends in past due loans and loan classifications, concentrations of credit such as collateral type, trends in portfolio growth, trends in value of underlying collateral for collateral-dependent loans, effect of other external factors such as the national economic and business trends, quality and depth of the loan review function, and management’s judgement of current trends and potential risks. Bancorp utilizes the sum of all allowance amounts derived as described above as the appropriate level of allowance for loan and lease losses. Changes in criteria used in this evaluation or availability of new information could cause the allowance to be increased or decreased in future periods. In addition, bank regulatory agencies, as part of their examination process,

may

require adjustments to the allowance for loan and lease losses based on their judgments and estimates.

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Note 2 - Securities (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Available-for-sale Securities Reconciliation [Table Text Block]

(In thousands)	Amortized		Unrealized
March 31, 2018	cost		Gains		Losses			Fair value
Government sponsored enterprise obligations	$	405,684	$	100	$	(3,373	)	$	402,411
Mortgage-backed securities - government agencies		156,045		155		(4,452	)		151,748
Obligations of states and political subdivisions		43,941		260		(279	)		43,922
Total securities available for sale	$	605,670	$	515	$	(8,104	)	$	598,081
December 31, 2017
U.S. Treasury and other U.S. Government obligations	$	149,996	$	-	$	(12	)	$	149,984
Government sponsored enterprise obligations		214,852		474		(1,482	)		213,844
Mortgage-backed securities - government agencies		163,571		383		(2,447	)		161,507
Obligations of states and political subdivisions		48,987		365		(163	)		49,189
Total securities available for sale	$	577,406	$	1,222	$	(4,104	)	$	574,524

Investments Classified by Contractual Maturity Date [Table Text Block]

(In thousands)
Securities available-for-sale	Amortized cost		Fair value
Due within 1 year	$	230,740	$	230,686
Due after 1 but within 5 years		97,419		96,063
Due after 5 but within 10 years		10,058		9,808
Due after 10 years		111,408		109,776
Mortgage-backed securities – government agencies		156,045		151,748
Total securities available-for-sale	$	605,670	$	598,081

Schedule of Unrealized Loss on Investments [Table Text Block]

(In thousands)	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
March 31, 2018	value		losses			value		losses			value		losses
Government sponsored enterprise obligations	$	340,018	$	(2,188	)	$	48,470	$	(1,185	)	$	388,488	$	(3,373	)
Mortgage-backed securities - government agencies		75,107		(1,669	)		63,083		(2,783	)		138,190		(4,452	)
Obligations of states and political subdivisions		19,582		(192	)		5,242		(87	)		24,824		(279	)
Total temporarily impaired securities	$	434,707	$	(4,049	)	$	116,795	$	(4,055	)	$	551,502	$	(8,104	)
December 31, 2017
U.S. Treasury and U.S. obligations	$	149,984	$	(12	)	$	-	$	-		$	149,984	$	(12	)
Government sponsored enterprise obligations		95,139		(586	)		49,870		(896	)		145,009		(1,482	)
Mortgage-backed securities - government agencies		69,290		(440	)		67,047		(2,007	)		136,337		(2,447	)
Obligations of states and political subdivisions		22,366		(107	)		5,064		(56	)		27,430		(163	)
Total temporarily impaired securities	$	336,779	$	(1,145	)	$	121,981	$	(2,959	)	$	458,760	$	(4,104	)

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Note 3 - Loans (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

(In thousands)	March 31, 201 8		December 31, 201 7
Commercial and industrial	$	843,478	$	779,014
Construction and development, excluding undeveloped land		215,752		195,912
Undeveloped land		20,120		18,988
Real estate mortgage:
Commercial investment		590,942		594,902
Owner occupied commercial		407,733		398,685
1-4 family residential		272,900		262,110
Home equity - first lien		51,595		57,110
Home equity - junior lien		64,108		63,981
Subtotal: Real estate mortgage		1,387,278		1,376,788
Consumer		45,760		38,868
Total loans	$	2,512,388	$	2,409,570

Allowance for Credit Losses on Financing Receivables [Table Text Block]

(In thousands)	Type of loan
			Construction
			and development
	Commercial		excluding
	and		undeveloped		Undeveloped		Real estate
March 31, 2018	industrial		land		land		mortgage		Consumer		Total
Loans	$	843,478	$	215,752	$	20,120	$	1,387,278	$	45,760	$	2,512,388
Loans collectively evaluated for impairment	$	839,328	$	215,082	$	19,550	$	1,380,494	$	45,669	$	2,500,123
Loans individually evaluated for impairment	$	4,150	$	670	$	570	$	6,784	$	91	$	12,265
Loans acquired with deteriorated credit quality	$	-	$	-	$	-	$	-	$	-	$	-

				Construction
				and development
	Commercial			excluding
	and			undeveloped		Undeveloped			Real estate
	industrial			land		land			mortgage			Consumer			Total
Allowance for loan losses
At December 31, 2017	$	11,276		$	1,724	$	521		$	11,012		$	352		$	24,885
Provision (credit)		761			296		(39	)		(309	)		26			735
Charge-offs		(1,409	)		-		-			-			(119	)		(1,528	)
Recoveries		10			-		-			4			97			111
At March 31, 2018	$	10,638		$	2,020	$	482		$	10,707		$	356		$	24,203
Allowance for loans collectively evaluated for impairment	$	9,646		$	2,020	$	481		$	10,230		$	356		$	22,733
Allowance for loans individually evaluated for impairment	$	992		$	-	$	1		$	477		$	-		$	1,470
Allowance for loans acquired with deteriorated credit quality	$	-		$	-	$	-		$	-		$	-		$	-

(In thousands)	Type of loan
			Construction
			and development
	Commercial		excluding
	and		undeveloped		Undeveloped		Real estate
December 31, 2017	industrial		land		land		mortgage		Consumer		Total
Loans	$	779,014	$	195,912	$	18,988	$	1,376,788	$	38,868	$	2,409,570
Loans collectively evaluated for impairment	$	777,838	$	195,248	$	18,514	$	1,371,246	$	38,868	$	2,401,714
Loans individually evaluated for impairment	$	1,176	$	664	$	474	$	5,066	$	-	$	7,380
Loans acquired with deteriorated credit quality	$	-	$	-	$	-	$	476	$	-	$	476

				Construction
				and development
	Commercial			excluding
	and			undeveloped			Undeveloped			Real estate
	industrial			land			land			mortgage			Consumer			Total
Allowance for loan losses
At December 31, 2016	$	10,483		$	1,923		$	684		$	10,573		$	344		$	24,007
Provision (credit)		2,373			(199	)		(163	)		383			156			2,550
Charge-offs		(1,782	)		-			-			(98	)		(549	)		(2,429	)
Recoveries		202			-			-			154			401			757
At December 31, 2017	$	11,276		$	1,724		$	521		$	11,012		$	352		$	24,885
Allowance for loans collectively evaluated for impairment	$	11,242		$	1,724		$	521		$	10,998		$	352		$	24,837
Allowance for loans individually evaluated for impairment	$	34		$	-		$	-		$	14		$	-		$	48
Allowance for loans acquired with deteriorated credit quality	$	-		$	-		$	-		$	-		$	-		$	-

Impaired Financing Receivables [Table Text Block]

(In thousands)			Unpaid				Average
	Recorded		principal		Related		recorded
March 31, 2018	investment		balance		allowance		investment
Loans with no related allowance recorded:
Commercial and industrial	$	212	$	295	$	-	$	677
Construction and development, excluding undeveloped land		670		840		-		667
Undeveloped land		474		506		-		474
Real estate mortgage
Commercial investment		-		-		-		26
Owner occupied commercial		3,437		3,894		-		3,384
1-4 family residential		1,592		1,614		-		1,615
Home equity - first lien		-		-		-		-
Home equity - junior lien		29		29		-		30
Subtotal: Real estate mortgage		5,058		5,537		-		5,055
Consumer		91		91		-		46
Subtotal	$	6,505	$	7,269	$	-	$	6,919
Loans with an allowance recorded:
Commercial and industrial	$	3,938	$	4,616	$	992	$	1,986
Construction and development, excluding undeveloped land		-		-		-		-
Undeveloped land		96		96		1		48
Real estate mortgage
Commercial investment		-		-		-		-
Owner occupied commercial		1,712		1,712		463		856
1-4 family residential		14		14		14		14
Home equity - first lien		-		-		-		-
Home equity - junior lien		-		-		-		-
Subtotal: Real estate mortgage		1,726		1,726		477		870
Consumer		-		-		-		-
Subtotal	$	5,760	$	6,438	$	1,470	$	2,904
Total:
Commercial and industrial	$	4,150	$	4,911	$	992	$	2,663
Construction and development, excluding undeveloped land		670		840		-		667
Undeveloped land		570		602		1		522
Real estate mortgage
Commercial investment		-		-		-		26
Owner occupied commercial		5,149		5,606		463		4,240
1-4 family residential		1,606		1,628		14		1,629
Home equity - first lien		-		-		-		-
Home equity - junior lien		29		29		-		30
Subtotal: Real estate mortgage		6,784		7,263		477		5,925
Consumer		91		91		-		46
Total	$	12,265	$	13,707	$	1,470	$	9,823

(In thousands)			Unpaid				Average
	Recorded		principal		Related		recorded
December 31, 2017	investment		balance		allowance		investment
Loans with no related allowance recorded:
Commercial and industrial	$	1,142	$	2,202	$	-	$	411
Construction and development, excluding undeveloped land		664		834		-		559
Undeveloped land		474		506		-		425
Real estate mortgage
Commercial investment		52		53		-		110
Owner occupied commercial		3,332		3,789		-		1,678
1-4 family residential		1,637		1,657		-		935
Home equity - first lien		-		-		-		-
Home equity - junior lien		31		31		-		186
Subtotal: Real estate mortgage		5,052		5,530		-		2,909
Consumer		-		-		-		-
Subtotal	$	7,332	$	9,072	$	-	$	4,304
Loans with an allowance recorded:
Commercial and industrial	$	34	$	34	$	34	$	1,882
Construction and development, excluding undeveloped land		-		-		-		-
Undeveloped land		-		-		-		48
Real estate mortgage
Commercial investment		-		-		-		-
Owner occupied commercial		-		-		-		-
1-4 family residential		14		14		14		5
Home equity - first lien		-		-		-		-
Home equity - junior lien		-		-		-		-
Subtotal: Real estate mortgage		14		14		14		5
Consumer		-		-		-		46
Subtotal	$	48	$	48	$	48	$	1,981
Total:
Commercial and industrial	$	1,176	$	2,236	$	34	$	2,293
Construction and development, excluding undeveloped land		664		834		-		559
Undeveloped land		474		506		-		473
Real estate mortgage		-		-		-		-
Commercial investment		52		53		-		110
Owner occupied commercial		3,332		3,789		-		1,678
1-4 family residential		1,651		1,671		14		940
Home equity - first lien		-		-		-		-
Home equity - junior lien		31		31		-		186
Subtotal: Real estate mortgage		5,066		5,544		14		2,914
Consumer		-		-		-		46
Total	$	7,380	$	9,120	$	48	$	6,285

Schedule of Financing Receivables, Non Accrual Status [Table Text Block]

(In thousands)	March 31, 201 8		December 31, 201 7
Commercial and industrial	$	3,321	$	321
Construction and development, excluding undeveloped land		670		664
Undeveloped land		570		474
Real estate mortgage
Commercial investment		-		52
Owner occupied commercial		5,149		3,332
1-4 family residential		1,592		1,637
Home equity - first lien		-		-
Home equity - junior lien		29		31
Subtotal: Real estate mortgage		6,770		5,052
Consumer		91		-
Total	$	11,422	$	6,511

Past Due Financing Receivables [Table Text Block]

													Recorded
(In thousands)							90 or more						investment
							days past						> 90 days
			30-59 days		60-89 days		due (includes)		Total		Total		and
March 31, 2018	Current		past due		past due		non-accrual)		past due		loans		accruing
Commercial and industrial	$	839,756	$	401	$	-	$	3,321	$	3,722	$	843,478	$	-
Construction and development, excluding undeveloped land		215,082		-		-		670		670		215,752		-
Undeveloped land		19,550		-		-		570		570		20,120		-
Real estate mortgage
Commercial investment		589,916		886		140		-		1,026		590,942		-
Owner occupied commercial		402,382		-		202		5,149		5,351		407,733		-
1-4 family residential		270,048		1,028		232		1,592		2,852		272,900		-
Home equity - first lien		51,595		-		-		-		-		51,595		-
Home equity - junior lien		63,818		61		200		29		290		64,108		-
Subtotal: Real estate mortgage		1,377,759		1,975		774		6,770		9,519		1,387,278		-
Consumer		45,648		20		1		91		112		45,760		-
Total	$	2,497,795	$	2,396	$	775	$	11,422	$	14,593	$	2,512,388	$	-
December 31, 2017
Commercial and industrial	$	776,118	$	2,571	$	4	$	321	$	2,896	$	779,014	$	-
Construction and development, excluding undeveloped land		194,936		-		312		664		976		195,912		-
Undeveloped land		18,514		-		-		474		474		18,988		-
Real estate mortgage
Commercial investment		594,242		608		-		52		660		594,902		-
Owner occupied commercial		394,623		455		275		3,332		4,062		398,685		-
1-4 family residential		259,994		172		307		1,637		2,116		262,110		-
Home equity - first lien		56,938		172		-		-		172		57,110		-
Home equity - junior lien		63,667		87		194		33		314		63,981		2
Subtotal: Real estate mortgage		1,369,464		1,494		776		5,054		7,324		1,376,788		2
Consumer		38,699		86		83		-		169		38,868		-
Total	$	2,397,731	$	4,151	$	1,175	$	6,513	$	11,839	$	2,409,570	$	2

Financing Receivable Credit Quality Indicators [Table Text Block]

(In thousands)							Substandard				Total
March 31, 2018	Pass		OAEM		Substandard		non-performing		Doubtful		loans
Commercial and industrial	$	811,544	$	14,275	$	13,509	$	4,150	$	-	$	843,478
Construction and development, excluding undeveloped land		215,082		-		-		670		-		215,752
Undeveloped land		19,520		-		30		570		-		20,120
Real estate mortgage
Commercial investment		588,075		2,741		126		-		-		590,942
Owner occupied commercial		388,799		11,678		2,107		5,149		-		407,733
1-4 family residential		268,441		1,884		969		1,606		-		272,900
Home equity - first lien		51,595		-		-		-		-		51,595
Home equity - junior lien		63,596		101		382		29		-		64,108
Subtotal: Real estate mortgage		1,360,506		16,404		3,584		6,784		-		1,387,278
Consumer		45,553		112		4		91		-		45,760
Total	$	2,452,205	$	30,791	$	17,127	$	12,265	$	-	$	2,512,388
December 31, 2017
Commercial and industrial	$	751,628	$	12,032	$	14,178	$	1,176	$	-	$	779,014
Construction and development, excluding undeveloped land		195,248		-		-		664		-		195,912
Undeveloped land		18,484		-		30		474		-		18,988
Real estate mortgage
Commercial investment		591,232		3,599		19		52		-		594,902
Owner occupied commercial		383,455		8,683		3,215		3,332		-		398,685
1-4 family residential		256,968		2,477		1,014		1,651		-		262,110
Home equity - first lien		57,110		-		-		-		-		57,110
Home equity - junior lien		63,471		247		230		33		-		63,981
Subtotal: Real estate mortgage		1,352,236		15,006		4,478		5,068		-		1,376,788
Consumer		38,747		117		4		-		-		38,868
Total	$	2,356,343	$	27,155	$	18,690	$	7,382	$	-	$	2,409,570

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Note 4 - Goodwill and Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Valuation Allowance for Impairment of Recognized Servicing Assets [Table Text Block]

	For the three months
	ended March 31,
(In thousands)	2018			2017
Balance at beginning of period	$	875		$	921
Additions for mortgage loans sold		21			42
Amortization		(35	)		(72	)
Balance at end of period	$	861		$	891

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Note 5 - Income Taxes (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

	Three months ended
	March 31,
(In thousands)	2018		2017
Current income tax expense
Federal	$	2,436	$	3,003
State		128		114
Total current income tax expense		2,564		3,117
Deferred income tax (benefit) expense
Federal		467		(26	)
State		21		38
Total deferred income tax expense		488		12
Change in valuation allowance		-		13
Total income tax expense	$	3,052	$	3,142

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

	Three months ended March 31,
	2018			2017
U.S. federal statutory income tax rate		21.0	%		35.0	%
Excess tax benefits from share-based compensation arrangements		(1.9	)		(7.1	)
Tax credits		(0.4	)		(5.5	)
Tax exempt interest income		(0.5	)		(1.1	)
Increase in cash surrender value of life insurance		(0.4	)		(1.3	)
State income taxes, net of federal benefit		0.7			0.7
Other, net		-			1.9
Effective income tax rate		18.5	%		22.6	%

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Note 6 - Deposits (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Deposit Liabilities, Type [Table Text Block]

	March 31 ,		December 31,
(In thousands)	2018		201 7
Non-interest bearing demand	$	681,936	$	674,697
Interest bearing deposits:
Interest bearing demand		811,182		833,450
Savings		159,521		152,348
Money market		689,733		682,226
Time deposits of more than $250,000		33,677		38,439
Other time deposits		197,315		197,135
Total time deposits		230,992		235,574
Total interest bearing deposits		1,891,428		1,903,598
Total deposits	$	2,573,364	$	2,578,295

Time Deposit Maturities [Table Text Block]

(In thousands)	Amount
3 months or less	$	8,509
Over 3 through 6 months		7,865
Over 6 through 12 months		8,082
Over 1 through 3 years		7,756
Over 3 years		1,465
Total	$	33,677

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Note 8 - Federal Home Loan Bank Advances (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Maturities and Average Effective Interest Rates of Federal Home Loan Bank Advances Disclosure [Table Text Block]

(In thousands)	March 31, 2018					December 31, 2017
Year	Advance		Fixed Rate			Advance		Fixed Rate
2018	$	30,000		1.93	%	$	30,000		1.48	%
2020		1,728		2.23			1,741		2.23
2021		270		2.12			288		2.12
2024		2,400		2.36			2,454		2.36
2025		5,019		2.42			5,149		2.42
2026		8,471		1.99			8,564		1.99
2028		1,252		1.49			1,262		1.49
Total	$	49,140		2.01	%	$	49,458		1.74	%

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Note 9 - Other Comprehensive Income (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

	Net unrealized			Net unrealized			Minimum
	gains on			gains (losses)			pension
	securities			on cash			liability
(in thousands)	available-for-sale			flow hedges			adjustment			Total
Balance at December 31, 2016	$	(1,211	)	$	(16	)	$	(272	)	$	(1,499	)
Net current period other comprehensive gain (loss)		689			85			-			774
Balance at March 31, 2017	$	(522	)	$	69		$	(272	)	$	(725	)
Balance at December 31, 2017 (1)	$	(1,781	)	$	193		$	(342	)	$	(1,930	)
Net current period other comprehensive income gain (loss)		(3,718	)		310			-			(3,408	)
Adoption of Accounting Standards Update 2018-02		(496	)		41			(51	)		(506	)
Balance at March 31, 2018	$	(5,995	)	$	544		$	(393	)	$	(5,844	)

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Note 11 - Net Income Per Share (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three months ended
(In thousands, except per share data)	March 31,
	2018		2017
Net income	$	13,404	$	10,791
Average shares outstanding		22,577		22,492
Dilutive securities		365		510
Average shares outstanding including dilutive securities including dilutive securities		22,942		23,002
Net income per share, basic	$	0.59	$	0.48
Net income per share, diluted	$	0.58	$	0.47

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Note 12 - Defined Benefit Plans (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Net Benefit Costs [Table Text Block]

	Three months ended March 31,
(In thousands)	201 8		201 7
Components of net periodic benefit cost:
Service cost	$	–	$	–
Interest cost (1)		20		18
Expected return on plan assets		–		–
Amortization of prior service cost		–		–
Amortization of net losses (1)		18		16
Net periodic benefit cost	$	38	$	34

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Note 13 - Stock-based Compensation (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table Text Block]

	For three months ended
	March 31,
(In thousands)	2018			2017
Stock-based compensation expense before income taxes	$	823		$	660
Less: deferred tax benefit		(173	)		(231	)
Reduction of net income	$	650		$	429

Schedule of Share-based Compensation Arrangement by Share-based Payment Award Fair Value Assumptions and Methodology [Table Text Block]

	2018			2017
Dividend yield		2.57	%		2.72	%
Expected volatility		20.60	%		19.47	%
Risk free interest rate		2.82	%		2.29	%
Expected life of SARs (in years)		7.0			7.0

Schedule of Share-based Compensation, Stock Options and Stock Appreciation Rights Award Activity [Table Text Block]

														Weighted
								Weighted		Aggregate		Weighted		average
	Options							average		intrinsic		average		remaining
	and SARs			Exercise				exercise		value		fair		contractual
	(In thousands)			price				price		(In thousands)		value		life (In years)
At December 31, 2016
Vested and exercisable		475			$14.02	-	24.56	$	15.72	$	14,820	$	3.16		4.3
Unvested		260			15.24	-	33.08		21.53		6,623		3.43		7.8
Total outstanding		735			14.02	-	33.08		17.78		21,443		3.26		5.5
Granted		46			40.00	-	40.00		40.00		-		6.34
Exercised		(77	)		14.02	-	17.89		15.41		1,855		3.18
Forfeited		-				-			-		-		-
At December 31, 2017
Vested and exercisable		490			14.02	-	33.08		16.46		10,408		3.16		4.0
Unvested		214			15.26	-	40.00		26.46		2,515		4.17		7.7
Total outstanding		704			14.02	-	40.00		19.51		12,923		3.47		5.1
Granted		46			35.90	-	38.30		35.95		-		6.66
Exercised		(17	)		15.24	-	15.58		15.57		362		3.03
Forfeited		-				-			-		-		-
At March 31, 2018
Vested and exercisable		547			14.02	-	40.00		17.43		9,710		3.24		4.3
Unvested		187			19.37	-	40.00		30.05		1,165		4.95		8.3
Total outstanding		734			14.02	-	40.00		20.64	$	10,875		3.68		5.3
Vested year-to-date		74			$15.26	-	40.00	$	23.38	$	914	$	3.77

Schedule of Nonvested Share Activity [Table Text Block]

				Grant date
				weighted-
	Number			average cost
Unvested at December 31, 2016		145,235		$	21.57
Shares awarded		28,625			44.85
Restrictions lapsed and shares released		(46,797	)		19.79
Shares forfeited		(7,691	)		25.18
Unvested at December 31, 2017		119,372		$	27.62
Shares awarded		38,205			36.00
Restrictions lapsed and shares released		(43,385	)		23.57
Shares forfeited		(1,368	)		28.46
Unvested at March 31, 2018		112,824		$	32.16

Schedule of Share-based Compensation, Restricted Stock Units Award Activity [Table Text Block]

	Vesting				Expected
Grant	period		Fair		shares to
year	in years		value		be awarded
2016		3	$	22.61		69,161
2017		3		35.66		43,325
2018		3		31.54		50,352

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Note 15 - Assets and Liabilities Measured and Reported at Fair Value (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Fair Value, Assets Measured on Recurring Basis [Table Text Block]

(In thousands)	Fair value at March 31, 2018
Assets	Total		Level 1		Level 2		Level 3
Investment securities available-for-sale
Government sponsored enterprise obligations	$	402,411	$	-	$	402,411	$	-
Mortgage-backed securities - government agencies		151,748		-		151,748		-
Obligations of states and political subdivisions		43,922		-		43,922		-
Total investment securities available-for-sale		598,081		-		598,081		-
Interest rate swaps		1,987		-		1,987		-
Total assets	$	600,068	$	-	$	600,068	$	-
Liabilities
Interest rate swaps	$	1,275	$	-	$	1,275	$	-

(In thousands)	Fair value at December 31, 2017
Assets	Total		Level 1		Level 2		Level 3
Investment securities available-for-sale
U.S. Treasury and other U.S. government obligations	$	149,984	$	149,984	$	-	$	-
Government sponsored enterprise obligations		213,844		-		213,844		-
Mortgage-backed securities - government agencies		161,507		-		161,507		-
Obligations of states and political subdivisions		49,189		-		49,189		-
Total investment securities available-for-sale		574,524		149,984		424,540		-
Interest rate swaps		579		-		579		-
Total assets	$	575,103	$	149,984	$	425,119	$	-
Liabilities
Interest rate swaps	$	259	$	-	$	259	$	-

Fair Value Measurements, Nonrecurring [Table Text Block]

(In thousands)	Fair value at March 31, 2018								Losses for 3 month
									period ended
	Total		Level 1		Level 2		Level 3		March 31, 2018
Impaired loans	$	5,918	$	-	$	-	$	5,918	$	(1,711	)
Other real estate owned		360		-		-		360		-
Total	$	6,278	$	-	$	-	$	6,278	$	(1,711	)

(in thousands)	Fair value at December 31, 2017								Losses for 3 month
									period ended
	Total		Level 1		Level 2		Level 3		March 31, 2017
Impaired loans	$	2,569	$	-	$	-	$	2,569	$	(452	)
Other real estate owned		2,640		-		-		2,640		-
Total	$	5,209	$	-	$	-	$	5,209	$	(452	)

Fair Value, Assets and Liabilities Measured on Nonrecurring Basis, Valuation Techniques [Table Text Block]

				Significant	Weighted
	Fair		Valuation	unobservable	average of
(Dollars in thousands)	value		technique	input	input
Impaired loans - collateral dependent	$	5,918	Appraisal	Appraisal discounts		42.2	%
Other real estate owned		360	Appraisal	Appraisal discounts		10.0

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Note 16 - Disclosure of Financial Instruments Not Reported at Fair Value (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Fair Value, by Balance Sheet Grouping [Table Text Block]

(In thousands)	Carrying
March 31, 2018	amount		Fair value		Level 1		Level 2		Level 3
Financial assets
Cash and short-term investments	$	56,876	$	56,876	$	56,876	$	-	$	-
Mortgage loans held for sale		4,239		4,299		-		4,299		-
Federal Home Loan Bank stock and other securities		8,876		8,876		-		8,876		-
Loans, net		2,488,185		2,487,204		-		-		2,487,204
Accrued interest receivable		8,026		8,026		8,026		-		-
Financial liabilities
Deposits		2,573,364		2,571,032		-		-		2,571,032
Short-term borrowings		283,125		283,125		-		283,125		-
FHLB advances		49,140		47,759		-		47,759		-
Accrued interest payable		284		284		284		-		-

(In thousands)	Carrying
December 31, 2017	amount		Fair value		Level 1		Level 2		Level 3
Financial assets
Cash and short-term investments	$	139,248	$	139,248	$	139,248	$	-	$	-
Mortgage loans held for sale		2,964		2,964		-		2,964		-
Federal Home Loan Bank stock and other securities		7,646		7,646		-		7,646		-
Loans, net		2,384,685		2,338,464		-		-		2,338,464
Accrued interest receivable		8,369		8,369		8,369		-		-
Financial liabilities
Deposits		2,578,295		2,576,385		-		-		2,576,385
Short-term borrowings		231,825		231,825		-		231,825		-
FHLB advances		49,458		48,642		-		48,642		-
Accrued interest payable		232		232		232		-		-

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Note 17 - Derivative Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2018

Designated as Hedging Instrument [Member]

Notes Tables

Schedule of Interest Rate Derivatives [Table Text Block]

(Dollars in thousands)
							Fair value
Notional		Maturity	Receive (variable)	Pay fixed			assets (liabilities)
amount		date	index	swap rate			March 31, 2018		December 31, 2017
$	10,000	12/6/2021	US 3 Month LIBOR		1.89	%	$	266	$	106
	20,000	12/6/2020	US 3 Month LIBOR		1.79	%		423		190
$	30,000				1.82	%	$	689	$	296

Not Designated as Hedging Instrument [Member]

Notes Tables

Schedule of Interest Rate Derivatives [Table Text Block]

(Dollar amounts in thousands)	Receiving						Paying
	March 31,			December 31,			March 31,		December 31,
	2018			2017			2018		2017
Notional amount	$	54,310		$	54,964		$	54,310	$	54,964
Weighted average maturity (years)		8.5			8.7			8.5		8.7
Fair value	$	(1,275	)	$	(259	)	$	1,298	$	283

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Note 18 - Regulatory Matters (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Compliance with Regulatory Capital Requirements under Banking Regulations [Table Text Block]

(Dollars in thousands)	Actual					Minimum for adequately capitalized					Minimum for well capitalized
March 31, 2018	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk-based capital (1)
Consolidated	$	366,493		13.04	%	$	224,842		8.00	%	NA		NA
Bank		355,611		12.66			224,715		8.00		$	280,893		10.00	%
Common equity tier 1 risk-based capital
Consolidated		341,940		12.16			126,540		4.50		NA		NA
Bank		331,058		11.79			126,358		4.50			182,517		6.50
Tier 1 risk-based capital (1)
Consolidated		341,940		12.16			168,720		6.00		NA		NA
Bank		331,058		11.79			168,477		6.00			224,636		8.00
Leverage (2)
Consolidated		341,940		11.05			123,779		4.00		NA		NA
Bank		331,058		10.71			123,644		4.00			154,556		5.00

(Dollars in thousands)	Actual					Minimum for adequately capitalized					Minimum for well capitalized
December 31, 2017	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk-based capital (1)
Consolidated	$	359,866		13.52	%	$	213,012		8.00	%	NA		NA
Bank		347,840		13.07			212,891		8.00		$	266,114		10.00	%
Common equity tier 1 risk-based capital
Consolidated		334,631		12.57			119,820		4.50		NA		NA
Bank		322,605		12.12			212,891		4.50			172,974		6.50
Tier 1 risk-based capital (1)
Consolidated		334,631		12.57			159,760		6.00		NA		NA
Bank		322,605		12.12			159,668		6.00			212,891		8.00
Leverage (2)
Consolidated		334,631		10.70			125,122		4.00		NA		NA
Bank		322,605		10.32			125,040		4.00			156,300		5.00

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Note 19 - Segments (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Segment Reporting Information, by Segment [Table Text Block]

			Wealth
	Commercial		management
(In thousands)	banking		and trust		Total
Three months ended March 31, 2018
Net interest income	$	27,224	$	71	$	27,295
Provision for loan losses		735		-		735
Wealth management and trust services		-		5,500		5,500
All other non-interest income		5,423		-		5,423
Non-interest expense		17,829		3,198		21,027
Income before income taxes		14,083		2,373		16,456
Income tax expense		2,537		515		3,052
Net income	$	11,546	$	1,858	$	13,404
Segment assets	$	3,283,539	$	1,941	$	3,285,480
Three months ended March 31, 2017
Net interest income	$	25,107	$	77	$	25,184
Provision (credit) for loan losses		900		-		900
Wealth management and trust services		-		5,094		5,094
All other non-interest income		5,500		-		5,550
Non-interest expense		17,948		3,047		20,995
Income before income taxes		11,809		2,124		13,933
Income tax expense		2,384		758		3,142
Net income	$	9,425	$	1,366	$	10,791
Segment assets	$	3,031,318	$	2,025	$	3,033,343

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Note 20 - Revenue From Contracts With Customers (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Disaggregation of Revenue [Table Text Block]

For the three months ended March 31, 2018
(In thousands)
Revenue by operating segment	Commercial		WM&T		Consolidated
Wealth management and trust services	$	-	$	5,500	$	5,500
Deposit service charges		1,511				1,511
Debit and credit card revenue		1,508				1,508
Treasury management fees		947				947
Mortgage banking revenue (1)		576				576
Investment product sales commissions and fees		404				404
Bank owned life insurance income (1)		187				187
Other income (2)		290				290
Total non-interest income	$	5,423	$	5,500	$	10,923

For the three months ended March 31, 2017
(In thousands)
Revenue by operating segment	Commercial		WM&T		Consolidated
Wealth management and trust services	$	-	$	5,094	$	5,094
Deposit service charges		1,565				1,565
Debit and credit card revenue		1,406				1,406
Treasury management fees		956				956
Mortgage banking revenue (1)		702				702
Investment product sales commissions and fees		386				386
Bank owned life insurance income (1)		204				204
Other income (2)		331				331
Total non-interest income	$	5,550	$	5,094	$	10,644

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Note 1 - Summary of Significant Accounting Policies (Details Textual)	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Period Look-back, Quarters	32	28

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Note 2 - Securities (Details Textual) $ in Thousands	3 Months Ended
	Mar. 31, 2018 USD ($)	Mar. 31, 2017	Dec. 31, 2017 USD ($)
Debt Securities, Held-to-maturity, Total	$ 0		$ 0
Number of Securities Sold	0	0
Debt Securities, Available-for-sale, Unrealized Loss Position, Number of Positions	132		117
Other than Temporary Impairment Losses, Investments, Portion Recognized in Earnings, Net, Total	$ 0
Collateral Pledged [Member]
Debt Securities, Available-for-sale, Restricted	$ 340,500		$ 384,700

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Note 2 - Securities - Available-for-sale Securities (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Securities available for sale, amortized cost	$ 605,670	$ 577,406
Securities available-for-sale, unrealized gains	515	1,222
Securities available-for-sale, unrealized losses	(8,104)	(4,104)
Securities available-for-sale, fair value	598,081	574,524
US Government-sponsored Enterprises Debt Securities [Member]
Securities available for sale, amortized cost	405,684	214,852
Securities available-for-sale, unrealized gains	100	474
Securities available-for-sale, unrealized losses	(3,373)	(1,482)
Securities available-for-sale, fair value	402,411	213,844
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Securities available for sale, amortized cost	156,045	163,571
Securities available-for-sale, unrealized gains	155	383
Securities available-for-sale, unrealized losses	(4,452)	(2,447)
Securities available-for-sale, fair value	151,748	161,507
US States and Political Subdivisions Debt Securities [Member]
Securities available for sale, amortized cost	43,941	48,987
Securities available-for-sale, unrealized gains	260	365
Securities available-for-sale, unrealized losses	(279)	(163)
Securities available-for-sale, fair value	$ 43,922	49,189
US Treasury Securities [Member]
Securities available for sale, amortized cost		149,996
Securities available-for-sale, unrealized gains
Securities available-for-sale, unrealized losses		(12)
Securities available-for-sale, fair value		$ 149,984

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Note 2 - Securities - Available-for-sale Securities by Contractual Maturity (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Due within 1 year, amortized cost	$ 230,740
Due within 1 year, fair value	230,686
Due after 1 but within 5 years, amortized cost	97,419
Due after 1 but within 5 years, fair value	96,063
Due after 5 but within 10 years, amortized cost	10,058
Due after 5 but within 10 years, fair value	9,808
Due after 10 years, amortized cost	111,408
Due after 10 years, fair value	109,776
Mortgage-backed securities – government agencies, amortized cost	156,045
Mortgage-backed securities – government agencies, fair value	151,748
Total securities available-for-sale, amortized cost	605,670	$ 577,406
Total securities available-for-sale, fair value	$ 598,081	$ 574,524

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Note 2 - Securities - Securities With Unrealized Losses (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Securities available-for-sale, less than 12 months, fair value	$ 434,707	$ 336,779
Securities available-for-sale, less than 12 months, unrealized losses	(4,049)	(1,145)
Securities available-for-sale, 12 months or more, fair value	116,795	121,981
Securities available-for-sale, 12 months or more, unrealized losses	(4,055)	(2,959)
Securities available-for-sale, fair value	551,502	458,760
Securities available-for-sale, unrealized losses	(8,104)	(4,104)
US Government-sponsored Enterprises Debt Securities [Member]
Securities available-for-sale, less than 12 months, fair value	340,018	95,139
Securities available-for-sale, less than 12 months, unrealized losses	(2,188)	(586)
Securities available-for-sale, 12 months or more, fair value	48,470	49,870
Securities available-for-sale, 12 months or more, unrealized losses	(1,185)	(896)
Securities available-for-sale, fair value	388,488	145,009
Securities available-for-sale, unrealized losses	(3,373)	(1,482)
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Securities available-for-sale, less than 12 months, fair value	75,107	69,290
Securities available-for-sale, less than 12 months, unrealized losses	(1,669)	(440)
Securities available-for-sale, 12 months or more, fair value	63,083	67,047
Securities available-for-sale, 12 months or more, unrealized losses	(2,783)	(2,007)
Securities available-for-sale, fair value	138,190	136,337
Securities available-for-sale, unrealized losses	(4,452)	(2,447)
US States and Political Subdivisions Debt Securities [Member]
Securities available-for-sale, less than 12 months, fair value	19,582	22,366
Securities available-for-sale, less than 12 months, unrealized losses	(192)	(107)
Securities available-for-sale, 12 months or more, fair value	5,242	5,064
Securities available-for-sale, 12 months or more, unrealized losses	(87)	(56)
Securities available-for-sale, fair value	24,824	27,430
Securities available-for-sale, unrealized losses	$ (279)	(163)
US Treasury Securities [Member]
Securities available-for-sale, less than 12 months, fair value		149,984
Securities available-for-sale, less than 12 months, unrealized losses		(12)
Securities available-for-sale, 12 months or more, fair value
Securities available-for-sale, 12 months or more, unrealized losses
Securities available-for-sale, fair value		149,984
Securities available-for-sale, unrealized losses		$ (12)

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Note 3 - Loans (Details Textual) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2018 USD ($)	Mar. 31, 2017 USD ($)	Dec. 31, 2017 USD ($)
Financing Receivable, Recorded Investment, 90 Days Past Due and Still Accruing	$ 0	$ 0	$ 2
Financing Receivable, Modifications, Recorded Investment	$ 843		$ 869
Financing Receivable, Modifications, Number of Contracts	0
Financing Receivable, Modifications, Subsequent Default, Number of Contracts			0
Allowance for Credit Losses, Change in Method of Calculating Impairment	$ 94		$ 48
Loans and Leases Receivable, Impaired, Commitment to Lend	0		$ 0
Mortgage Loans in Process of Foreclosure, Amount	$ 412
Mortgage Loans in Process of Foreclosure, Number	3
Minimum [Member]
Mortgage Loans in Process of Foreclosure, Amount	$ 30
Maximum [Member]
Mortgage Loans in Process of Foreclosure, Amount	$ 350
Commercial Portfolio Segment [Member]
Loan Restructuring, Trial Modifications, Amount		38,000
Financing Receivable, Modifications, Pre-Modification Recorded Investment		39,000
Financing Receivable, Modifications, Post-Modification Recorded Investment		$ 39,000

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Note 3 - Loans - Loans by Loan Portfolio Class (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Loans	$ 2,512,388	$ 2,409,570
Commercial and Industrial Portfolio Segment [Member]
Loans	843,478	779,014
Construction and Development Excluding Undeveloped Land Portfolio Segment [Member]
Loans	215,752	195,912
Undevelopment Land Portfolio Segment [Member]
Loans	20,120	18,988
Real Estate Mortgage Portfolio Segment [Member]
Loans	1,387,278	1,376,788
Real Estate Mortgage Portfolio Segment [Member] | Commercial Investment [Member]
Loans	590,942	594,902
Real Estate Mortgage Portfolio Segment [Member] | Owner Occupied Commercial [Member]
Loans	407,733	398,685
Real Estate Mortgage Portfolio Segment [Member] | One to Four Family Residential [Member]
Loans	272,900	262,110
Real Estate Mortgage Portfolio Segment [Member] | Home Equity First Lien [Member]
Loans	51,595	57,110
Real Estate Mortgage Portfolio Segment [Member] | Home Equity Junior Lien [Member]
Loans	64,108	63,981
Consumer Portfolio Segment [Member]
Loans	$ 45,760	$ 38,868

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Note 3 - Loans - Allowance for Loan Losses by Portfolio Segment and Based on Impairment Evaluation Method (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017	Mar. 31, 2018	Dec. 31, 2017
Loans				$ 2,512,388	$ 2,409,570
Loans collectively evaluated for impairment				2,500,123	2,401,714
Loans individually evaluated for impairment				12,265	7,380
Balance	$ 24,885	$ 24,007	$ 24,007
Provision for loan losses	735	900	2,550
Charge-offs	(1,528)		(2,429)
Recoveries	111		757
Balance	24,203		24,885
Allowance for loans collectively evaluated for impairment				22,733	24,837
Allowance for loans individually evaluated for impairment				1,470	48
Allowance for loans acquired with deteriorated credit quality	24,203	24,007	24,885	24,203	24,885
Financial Asset Acquired with Credit Deterioration [Member]
Loans					476
Balance
Balance
Allowance for loans acquired with deteriorated credit quality
Commercial and Industrial Portfolio Segment [Member]
Loans				843,478	779,014
Loans collectively evaluated for impairment				839,328	777,838
Loans individually evaluated for impairment				4,150	1,176
Balance	11,276	10,483	10,483
Provision for loan losses	761		2,373
Charge-offs	(1,409)		(1,782)
Recoveries	10		202
Balance	10,638		11,276
Allowance for loans collectively evaluated for impairment				9,646	11,242
Allowance for loans individually evaluated for impairment				992	34
Allowance for loans acquired with deteriorated credit quality	11,276	10,483	11,276	10,638	11,276
Commercial and Industrial Portfolio Segment [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Loans
Balance
Balance
Allowance for loans acquired with deteriorated credit quality
Construction and Development Excluding Undeveloped Land Portfolio Segment [Member]
Loans				215,752	195,912
Loans collectively evaluated for impairment				215,082	195,248
Loans individually evaluated for impairment				670	664
Balance	1,724	1,923	1,923
Provision for loan losses	296		(199)
Charge-offs
Recoveries
Balance	2,020		1,724
Allowance for loans collectively evaluated for impairment				2,020	1,724
Allowance for loans individually evaluated for impairment
Allowance for loans acquired with deteriorated credit quality	1,724	1,923	1,724	2,020	1,724
Construction and Development Excluding Undeveloped Land Portfolio Segment [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Loans
Balance
Balance
Allowance for loans acquired with deteriorated credit quality
Undevelopment Land Portfolio Segment [Member]
Loans				20,120	18,988
Loans collectively evaluated for impairment				19,550	18,514
Loans individually evaluated for impairment				570	474
Balance	521	684	684
Provision for loan losses	(39)		(163)
Charge-offs
Recoveries
Balance	482		521
Allowance for loans collectively evaluated for impairment				481	521
Allowance for loans individually evaluated for impairment				1
Allowance for loans acquired with deteriorated credit quality	521	684	521	482	521
Undevelopment Land Portfolio Segment [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Loans
Balance
Balance
Allowance for loans acquired with deteriorated credit quality
Real Estate Mortgage Portfolio Segment [Member]
Loans				1,387,278	1,376,788
Loans collectively evaluated for impairment				1,380,494	1,371,246
Loans individually evaluated for impairment				6,784	5,066
Balance	11,012	10,573	10,573
Provision for loan losses	(309)		383
Charge-offs			(98)
Recoveries	4		154
Balance	10,707		11,012
Allowance for loans collectively evaluated for impairment				10,230	10,998
Allowance for loans individually evaluated for impairment				477	14
Allowance for loans acquired with deteriorated credit quality	11,012	10,573	11,012	10,707	11,012
Real Estate Mortgage Portfolio Segment [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Loans					476
Balance
Balance
Allowance for loans acquired with deteriorated credit quality
Consumer Portfolio Segment [Member]
Loans				45,760	38,868
Loans collectively evaluated for impairment				45,669	38,868
Loans individually evaluated for impairment				91
Balance	352	344	344
Provision for loan losses	26		156
Charge-offs	(119)		(549)
Recoveries	97		401
Balance	356		352
Allowance for loans collectively evaluated for impairment				356	352
Allowance for loans individually evaluated for impairment
Allowance for loans acquired with deteriorated credit quality	352	$ 344	352	356	352
Consumer Portfolio Segment [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Loans
Balance
Balance
Allowance for loans acquired with deteriorated credit quality

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Note 3 - Loans - Loans Individually Evaluated for Impairment (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Loans with no related allowance recorded, recorded investment	$ 6,505	$ 7,332
Loans with no related allowance recorded, unpaid principal balance	7,269	9,072
Loans with no related allowance recorded, average recorded investment	6,919	4,304
Loans with an allowance recorded, recorded investment	5,760	48
Loans with an allowance recorded, unpaid principal balance	6,438	48
Related allowance	1,470	48
Loans with an allowance recorded, average recorded investment	2,904	1,981
Recorded investment	12,265	7,380
Unpaid principal balance	13,707	9,120
Average recorded investment	9,823	6,285
Commercial and Industrial Portfolio Segment [Member]
Loans with no related allowance recorded, recorded investment	212	1,142
Loans with no related allowance recorded, unpaid principal balance	295	2,202
Loans with no related allowance recorded, average recorded investment	677	411
Loans with an allowance recorded, recorded investment	3,938	34
Loans with an allowance recorded, unpaid principal balance	4,616	34
Related allowance	992	34
Loans with an allowance recorded, average recorded investment	1,986	1,882
Recorded investment	4,150	1,176
Unpaid principal balance	4,911	2,236
Average recorded investment	2,663	2,293
Construction and Development Excluding Undeveloped Land Portfolio Segment [Member]
Loans with no related allowance recorded, recorded investment	670	664
Loans with no related allowance recorded, unpaid principal balance	840	834
Loans with no related allowance recorded, average recorded investment	667	559
Loans with an allowance recorded, recorded investment
Loans with an allowance recorded, unpaid principal balance
Related allowance
Loans with an allowance recorded, average recorded investment
Recorded investment	670	664
Unpaid principal balance	840	834
Average recorded investment	667	559
Undevelopment Land Portfolio Segment [Member]
Loans with no related allowance recorded, recorded investment	474	474
Loans with no related allowance recorded, unpaid principal balance	506	506
Loans with no related allowance recorded, average recorded investment	474	425
Loans with an allowance recorded, recorded investment	96
Loans with an allowance recorded, unpaid principal balance	96
Related allowance	1
Loans with an allowance recorded, average recorded investment	48	48
Recorded investment	570	474
Unpaid principal balance	602	506
Average recorded investment	522	473
Real Estate Mortgage Portfolio Segment [Member]
Loans with no related allowance recorded, recorded investment	5,058	5,052
Loans with no related allowance recorded, unpaid principal balance	5,537	5,530
Loans with no related allowance recorded, average recorded investment	5,055	2,909
Loans with an allowance recorded, recorded investment	1,726	14
Loans with an allowance recorded, unpaid principal balance	1,726	14
Related allowance	477	14
Loans with an allowance recorded, average recorded investment	870	5
Recorded investment	6,784	5,066
Unpaid principal balance	7,263	5,544
Average recorded investment	5,925	2,914
Real Estate Mortgage Portfolio Segment [Member] | Commercial Investment [Member]
Loans with no related allowance recorded, recorded investment		52
Loans with no related allowance recorded, unpaid principal balance		53
Loans with no related allowance recorded, average recorded investment	26	110
Loans with an allowance recorded, recorded investment
Loans with an allowance recorded, unpaid principal balance
Related allowance
Loans with an allowance recorded, average recorded investment
Recorded investment		52
Unpaid principal balance		53
Average recorded investment	26	110
Real Estate Mortgage Portfolio Segment [Member] | Owner Occupied Commercial [Member]
Loans with no related allowance recorded, recorded investment	3,437	3,332
Loans with no related allowance recorded, unpaid principal balance	3,894	3,789
Loans with no related allowance recorded, average recorded investment	3,384	1,678
Loans with an allowance recorded, recorded investment	1,712
Loans with an allowance recorded, unpaid principal balance	1,712
Related allowance	463
Loans with an allowance recorded, average recorded investment	856
Recorded investment	5,149	3,332
Unpaid principal balance	5,606	3,789
Average recorded investment	4,240	1,678
Real Estate Mortgage Portfolio Segment [Member] | One to Four Family Residential [Member]
Loans with no related allowance recorded, recorded investment	1,592	1,637
Loans with no related allowance recorded, unpaid principal balance	1,614	1,657
Loans with no related allowance recorded, average recorded investment	1,615	935
Loans with an allowance recorded, recorded investment	14	14
Loans with an allowance recorded, unpaid principal balance	14	14
Related allowance	14	14
Loans with an allowance recorded, average recorded investment	14	5
Recorded investment	1,606	1,651
Unpaid principal balance	1,628	1,671
Average recorded investment	1,629	940
Real Estate Mortgage Portfolio Segment [Member] | Home Equity First Lien [Member]
Loans with no related allowance recorded, recorded investment
Loans with no related allowance recorded, unpaid principal balance
Loans with no related allowance recorded, average recorded investment
Loans with an allowance recorded, recorded investment
Loans with an allowance recorded, unpaid principal balance
Related allowance
Loans with an allowance recorded, average recorded investment
Recorded investment
Unpaid principal balance
Average recorded investment
Real Estate Mortgage Portfolio Segment [Member] | Home Equity Junior Lien [Member]
Loans with no related allowance recorded, recorded investment	29	31
Loans with no related allowance recorded, unpaid principal balance	29	31
Loans with no related allowance recorded, average recorded investment	30	186
Loans with an allowance recorded, recorded investment
Loans with an allowance recorded, unpaid principal balance
Related allowance
Loans with an allowance recorded, average recorded investment
Recorded investment	29	31
Unpaid principal balance	29	31
Average recorded investment	30	186
Consumer Portfolio Segment [Member]
Loans with no related allowance recorded, recorded investment	91
Loans with no related allowance recorded, unpaid principal balance	91
Loans with no related allowance recorded, average recorded investment	46
Loans with an allowance recorded, recorded investment
Loans with an allowance recorded, unpaid principal balance
Related allowance
Loans with an allowance recorded, average recorded investment		46
Recorded investment	91
Unpaid principal balance	91
Average recorded investment	$ 46	$ 46

XML

Note 3 - Loans - Non-accrual Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Non-accrual loans	$ 11,422	$ 6,511
Commercial and Industrial Portfolio Segment [Member]
Non-accrual loans	3,321	321
Construction and Development Excluding Undeveloped Land Portfolio Segment [Member]
Non-accrual loans	670	664
Undevelopment Land Portfolio Segment [Member]
Non-accrual loans	570	474
Real Estate Mortgage Portfolio Segment [Member]
Non-accrual loans	6,770	5,052
Real Estate Mortgage Portfolio Segment [Member] | Commercial Investment [Member]
Non-accrual loans		52
Real Estate Mortgage Portfolio Segment [Member] | Owner Occupied Commercial [Member]
Non-accrual loans	5,149	3,332
Real Estate Mortgage Portfolio Segment [Member] | One to Four Family Residential [Member]
Non-accrual loans	1,592	1,637
Real Estate Mortgage Portfolio Segment [Member] | Home Equity First Lien [Member]
Non-accrual loans
Real Estate Mortgage Portfolio Segment [Member] | Home Equity Junior Lien [Member]
Non-accrual loans	29	31
Consumer Portfolio Segment [Member]
Non-accrual loans	$ 91

XML

Note 3 - Loans - Aging of the Recorded Investment in Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017	Mar. 31, 2017
Current	$ 2,497,795	$ 2,397,731
Past due	14,593	11,839
Loans	2,512,388	2,409,570
Recorded investment greater than 90 days and accruing	0	2	$ 0
Financing Receivables, 30 to 59 Days Past Due [Member]
Past due	2,396	4,151
Financing Receivables, 60 to 89 Days Past Due [Member]
Past due	775	1,175
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Past due	11,422	6,513
Commercial and Industrial Portfolio Segment [Member]
Current	839,756	776,118
Past due	3,722	2,896
Loans	843,478	779,014
Recorded investment greater than 90 days and accruing
Commercial and Industrial Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Past due	401	2,571
Commercial and Industrial Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Past due		4
Commercial and Industrial Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Past due	3,321	321
Construction and Development Excluding Undeveloped Land Portfolio Segment [Member]
Current	215,082	194,936
Past due	670	976
Loans	215,752	195,912
Recorded investment greater than 90 days and accruing
Construction and Development Excluding Undeveloped Land Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Past due
Construction and Development Excluding Undeveloped Land Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Past due		312
Construction and Development Excluding Undeveloped Land Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Past due	670	664
Undevelopment Land Portfolio Segment [Member]
Current	19,550	18,514
Past due	570	474
Loans	20,120	18,988
Recorded investment greater than 90 days and accruing
Undevelopment Land Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Past due
Undevelopment Land Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Past due
Undevelopment Land Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Past due	570	474
Real Estate Mortgage Portfolio Segment [Member]
Current	1,377,759	1,369,464
Past due	9,519	7,324
Loans	1,387,278	1,376,788
Recorded investment greater than 90 days and accruing		2
Real Estate Mortgage Portfolio Segment [Member] | Commercial Investment [Member]
Current	589,916	594,242
Past due	1,026	660
Loans	590,942	594,902
Recorded investment greater than 90 days and accruing
Real Estate Mortgage Portfolio Segment [Member] | Owner Occupied Commercial [Member]
Current	402,382	394,623
Past due	5,351	4,062
Loans	407,733	398,685
Recorded investment greater than 90 days and accruing
Real Estate Mortgage Portfolio Segment [Member] | One to Four Family Residential [Member]
Current	270,048	259,994
Past due	2,852	2,116
Loans	272,900	262,110
Recorded investment greater than 90 days and accruing
Real Estate Mortgage Portfolio Segment [Member] | Home Equity First Lien [Member]
Current	51,595	56,938
Past due		172
Loans	51,595	57,110
Recorded investment greater than 90 days and accruing
Real Estate Mortgage Portfolio Segment [Member] | Home Equity Junior Lien [Member]
Current	63,818	63,667
Past due	290	314
Loans	64,108	63,981
Recorded investment greater than 90 days and accruing		2
Real Estate Mortgage Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Past due	1,975	1,494
Real Estate Mortgage Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member] | Commercial Investment [Member]
Past due	886	608
Real Estate Mortgage Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member] | Owner Occupied Commercial [Member]
Past due		455
Real Estate Mortgage Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member] | One to Four Family Residential [Member]
Past due	1,028	172
Real Estate Mortgage Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member] | Home Equity First Lien [Member]
Past due		172
Real Estate Mortgage Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member] | Home Equity Junior Lien [Member]
Past due	61	87
Real Estate Mortgage Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Past due	774	776
Real Estate Mortgage Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member] | Commercial Investment [Member]
Past due	140
Real Estate Mortgage Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member] | Owner Occupied Commercial [Member]
Past due	202	275
Real Estate Mortgage Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member] | One to Four Family Residential [Member]
Past due	232	307
Real Estate Mortgage Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member] | Home Equity First Lien [Member]
Past due
Real Estate Mortgage Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member] | Home Equity Junior Lien [Member]
Past due	200	194
Real Estate Mortgage Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Past due	6,770	5,054
Real Estate Mortgage Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Commercial Investment [Member]
Past due		52
Real Estate Mortgage Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Owner Occupied Commercial [Member]
Past due	5,149	3,332
Real Estate Mortgage Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | One to Four Family Residential [Member]
Past due	1,592	1,637
Real Estate Mortgage Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Home Equity First Lien [Member]
Past due
Real Estate Mortgage Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Home Equity Junior Lien [Member]
Past due	29	33
Consumer Portfolio Segment [Member]
Current	45,648	38,699
Past due	112	169
Loans	45,760	38,868
Recorded investment greater than 90 days and accruing
Consumer Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Past due	20	86
Consumer Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Past due	1	83
Consumer Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Past due	$ 91

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Note 3 - Loans - Internally Assigned Risk Grades of Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Loans	$ 2,512,388	$ 2,409,570
Commercial and Industrial Portfolio Segment [Member]
Loans	843,478	779,014
Construction and Development Excluding Undeveloped Land Portfolio Segment [Member]
Loans	215,752	195,912
Undevelopment Land Portfolio Segment [Member]
Loans	20,120	18,988
Real Estate Mortgage Portfolio Segment [Member]
Loans	1,387,278	1,376,788
Real Estate Mortgage Portfolio Segment [Member] | Commercial Investment [Member]
Loans	590,942	594,902
Real Estate Mortgage Portfolio Segment [Member] | Owner Occupied Commercial [Member]
Loans	407,733	398,685
Real Estate Mortgage Portfolio Segment [Member] | One to Four Family Residential [Member]
Loans	272,900	262,110
Real Estate Mortgage Portfolio Segment [Member] | Home Equity First Lien [Member]
Loans	51,595	57,110
Real Estate Mortgage Portfolio Segment [Member] | Home Equity Junior Lien [Member]
Loans	64,108	63,981
Consumer Portfolio Segment [Member]
Loans	45,760	38,868
Pass [Member]
Loans	2,452,205	2,356,343
Pass [Member] | Commercial and Industrial Portfolio Segment [Member]
Loans	811,544	751,628
Pass [Member] | Construction and Development Excluding Undeveloped Land Portfolio Segment [Member]
Loans	215,082	195,248
Pass [Member] | Undevelopment Land Portfolio Segment [Member]
Loans	19,520	18,484
Pass [Member] | Real Estate Mortgage Portfolio Segment [Member]
Loans	1,360,506	1,352,236
Pass [Member] | Real Estate Mortgage Portfolio Segment [Member] | Commercial Investment [Member]
Loans	588,075	591,232
Pass [Member] | Real Estate Mortgage Portfolio Segment [Member] | Owner Occupied Commercial [Member]
Loans	388,799	383,455
Pass [Member] | Real Estate Mortgage Portfolio Segment [Member] | One to Four Family Residential [Member]
Loans	268,441	256,968
Pass [Member] | Real Estate Mortgage Portfolio Segment [Member] | Home Equity First Lien [Member]
Loans	51,595	57,110
Pass [Member] | Real Estate Mortgage Portfolio Segment [Member] | Home Equity Junior Lien [Member]
Loans	63,596	63,471
Pass [Member] | Consumer Portfolio Segment [Member]
Loans	45,553	38,747
Special Mention [Member]
Loans	30,791	27,155
Special Mention [Member] | Commercial and Industrial Portfolio Segment [Member]
Loans	14,275	12,032
Special Mention [Member] | Construction and Development Excluding Undeveloped Land Portfolio Segment [Member]
Loans
Special Mention [Member] | Undevelopment Land Portfolio Segment [Member]
Loans
Special Mention [Member] | Real Estate Mortgage Portfolio Segment [Member]
Loans	16,404	15,006
Special Mention [Member] | Real Estate Mortgage Portfolio Segment [Member] | Commercial Investment [Member]
Loans	2,741	3,599
Special Mention [Member] | Real Estate Mortgage Portfolio Segment [Member] | Owner Occupied Commercial [Member]
Loans	11,678	8,683
Special Mention [Member] | Real Estate Mortgage Portfolio Segment [Member] | One to Four Family Residential [Member]
Loans	1,884	2,477
Special Mention [Member] | Real Estate Mortgage Portfolio Segment [Member] | Home Equity First Lien [Member]
Loans
Special Mention [Member] | Real Estate Mortgage Portfolio Segment [Member] | Home Equity Junior Lien [Member]
Loans	101	247
Special Mention [Member] | Consumer Portfolio Segment [Member]
Loans	112	117
Substandard [Member] | Performing Financial Instruments [Member]
Loans	17,127	18,690
Substandard [Member] | Nonperforming Financial Instruments [Member]
Loans	12,265	7,382
Substandard [Member] | Commercial and Industrial Portfolio Segment [Member] | Performing Financial Instruments [Member]
Loans	13,509	14,178
Substandard [Member] | Commercial and Industrial Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Loans	4,150	1,176
Substandard [Member] | Construction and Development Excluding Undeveloped Land Portfolio Segment [Member] | Performing Financial Instruments [Member]
Loans
Substandard [Member] | Construction and Development Excluding Undeveloped Land Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Loans	670	664
Substandard [Member] | Undevelopment Land Portfolio Segment [Member] | Performing Financial Instruments [Member]
Loans	30	30
Substandard [Member] | Undevelopment Land Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Loans	570	474
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Performing Financial Instruments [Member]
Loans	3,584	4,478
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Performing Financial Instruments [Member] | Commercial Investment [Member]
Loans	126	19
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Performing Financial Instruments [Member] | Owner Occupied Commercial [Member]
Loans	2,107	3,215
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Performing Financial Instruments [Member] | One to Four Family Residential [Member]
Loans	969	1,014
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Performing Financial Instruments [Member] | Home Equity First Lien [Member]
Loans
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Performing Financial Instruments [Member] | Home Equity Junior Lien [Member]
Loans	382	230
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Loans	6,784	5,068
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Nonperforming Financial Instruments [Member] | Commercial Investment [Member]
Loans		52
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Nonperforming Financial Instruments [Member] | Owner Occupied Commercial [Member]
Loans	5,149	3,332
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Nonperforming Financial Instruments [Member] | One to Four Family Residential [Member]
Loans	1,606	1,651
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Nonperforming Financial Instruments [Member] | Home Equity First Lien [Member]
Loans
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Nonperforming Financial Instruments [Member] | Home Equity Junior Lien [Member]
Loans	29	33
Substandard [Member] | Consumer Portfolio Segment [Member] | Performing Financial Instruments [Member]
Loans	4	4
Substandard [Member] | Consumer Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Loans	91
Doubtful [Member]
Loans
Doubtful [Member] | Commercial and Industrial Portfolio Segment [Member]
Loans
Doubtful [Member] | Construction and Development Excluding Undeveloped Land Portfolio Segment [Member]
Loans
Doubtful [Member] | Undevelopment Land Portfolio Segment [Member]
Loans
Doubtful [Member] | Real Estate Mortgage Portfolio Segment [Member]
Loans
Doubtful [Member] | Real Estate Mortgage Portfolio Segment [Member] | Commercial Investment [Member]
Loans
Doubtful [Member] | Real Estate Mortgage Portfolio Segment [Member] | Owner Occupied Commercial [Member]
Loans
Doubtful [Member] | Real Estate Mortgage Portfolio Segment [Member] | One to Four Family Residential [Member]
Loans
Doubtful [Member] | Real Estate Mortgage Portfolio Segment [Member] | Home Equity First Lien [Member]
Loans
Doubtful [Member] | Real Estate Mortgage Portfolio Segment [Member] | Home Equity Junior Lien [Member]
Loans
Doubtful [Member] | Consumer Portfolio Segment [Member]
Loans

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Note 4 - Goodwill and Intangible Assets (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Dec. 31, 2017	Dec. 31, 2013
Goodwill, Impairment Loss	$ 0
Finite-lived Intangible Assets, Fair Value Disclosure	3,500	$ 3,100
Loans Serviced for Others Outstanding Principal Balance	336,000	$ 344,500
Core Deposits [Member]
Finite-Lived Intangible Assets, Net, Ending Balance	1,200
Indiana Bank [Member] | Commercial Banking [Member]
Goodwill, Ending Balance	$ 682
THE BANCorp [Member] | Core Deposits [Member]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles			$ 2,500

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Note 4 - Goodwill and Intangible Assets - Mortgage Servicing Rights (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Balance at beginning of period	$ 875	$ 921
Additions for mortgage loans sold	21	42
Amortization	(35)	(72)
Balance at end of period	$ 861	$ 891

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Note 5 - Income Taxes (Details Textual) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2018	Dec. 31, 2017
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	21.00%	35.00%		35.00%
Deferred Tax Assets, Equity Method Investments	$ 565
Deferred Tax Assets, Future Deductions for Compensation	19
Deferred Tax Liabilities, Fixed Assets	$ 541
Scenario, Forecast [Member]
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent			21.00%

XML

Note 5 - Income Taxes - Components of Income Tax Expense (Benefit) From Operations (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Current income tax expense
Federal	$ 2,436	$ 3,003
State	128	114
Total current income tax expense	2,564	3,117
Deferred income tax (benefit) expense
Federal	467	(26)
State	21	38
Total deferred income tax expense	488	12
Change in valuation allowance		13
Total income tax expense	$ 3,052	$ 3,142

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Note 5 - Income Taxes - Difference Between Statutory and Effective Tax Rates (Details)	3 Months Ended		12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
U.S. federal statutory income tax rate	21.00%	35.00%	35.00%
Excess tax benefits from share-based compensation arrangements	(1.90%)	(7.10%)
Tax credits	(0.40%)	(5.50%)
Tax exempt interest income	(0.50%)	(1.10%)
Increase in cash surrender value of life insurance	(0.40%)	(1.30%)
State income taxes, net of federal benefit	0.70%	0.70%
Other, net		1.90%
Effective income tax rate	18.50%	22.60%

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Note 6 - Deposits - Composition of Interest Bearing Deposits (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Non-interest bearing	$ 681,936	$ 674,697
Interest bearing demand	811,182	833,450
Savings	159,521	152,348
Money market	689,733	682,226
Time deposits of more than $250,000	33,677	38,439
Other time deposits	197,315	197,135
Total time deposits	230,992	235,574
Total interest bearing deposits	1,891,428	1,903,598
Total deposits	$ 2,573,364	$ 2,578,295

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Note 6 - Deposits - Maturities of Time Deposits (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
3 months or less	$ 8,509
Over 3 through 6 months	7,865
Over 6 through 12 months	8,082
Over 1 through 3 years	7,756
Over 3 years	1,465
Total	$ 33,677	$ 38,439

XML

Note 7 - Securities Sold Under Agreements to Repurchase (Details Textual) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Securities Sold under Agreements to Repurchase, Total	$ 67,892	$ 70,473

XML

Note 8 - Federal Home Loan Bank Advances (Details Textual) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)
Advances from Federal Home Loan Banks, Total	$ 49,140	$ 49,458
Federal Home Loan Bank, Number of Separate Advances	14	14
Federal Home Loan Bank, Number of Separate Advances Principal Due at Maturity	2
Advances From Federal Home Loan Banks, Principal Due at Maturity	$ 30,000
Final Advances from Federal Home Loan Banks, Principal Paid Monthly	19,100
Federal Home Loan Bank, Advances, General Debt Obligations, Maximum Amount Available	292,400
Federal Funds Purchased [Member]
Cash Management Advance from the FHLB	$ 200,000	$ 150,000

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Note 8 - Federal Home Loan Bank Advances - Contractual Maturities and Average Effective Rates of Outstanding Advances (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Advance, 2018	$ 30,000	$ 30,000
Fixed rate, 2018	1.93%	1.48%
Advance, 2020	$ 1,728	$ 1,741
Fixed rate, 2020	2.23%	2.23%
Advance, 2021	$ 270	$ 288
Fixed rate, 2021	2.12%	2.12%
Advance, 2024	$ 2,400	$ 2,454
Fixed rate, 2024	2.36%	2.36%
Advance, 2025	$ 5,019	$ 5,149
Fixed rate, 2025	2.42%	2.42%
Advance, 2026	$ 8,471	$ 8,564
Fixed rate, 2026	1.99%	1.99%
Advance, 2028	$ 1,252	$ 1,262
Fixed rate, 2028	1.49%	1.49%
Advance	$ 49,140	$ 49,458
Weighted Average [Member]
Fixed rate	2.01%	1.74%

XML

Note 9 - Other Comprehensive Income (Details Textual) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017		Dec. 31, 2016
Other Comprehensive Income (Loss), Remeasurement of Deferred Tax Assets and Liabilities	$ 506
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	21.00%	35.00%	35.00%
Stockholders' Equity Attributable to Parent, Ending Balance	$ 337,702	$ 319,687	$ 333,644		$ 313,872
Accumulated Net Investment Gain (Loss) Attributable to Parent [Member]
Other Comprehensive Income (Loss), Remeasurement of Deferred Tax Assets and Liabilities	496
Stockholders' Equity Attributable to Parent, Ending Balance	(5,995)	(522)	(1,781)	[1]	(1,211)
Accumulated Net Investment Gain (Loss) Attributable to Parent [Member] | Previously Reported [Member]
Stockholders' Equity Attributable to Parent, Ending Balance			(2,278)
Accumulated Net Gain (Loss) from Cash Flow Hedges Attributable to Parent [Member]
Other Comprehensive Income (Loss), Remeasurement of Deferred Tax Assets and Liabilities	(41)
Stockholders' Equity Attributable to Parent, Ending Balance	544	69	193	[1]	(16)
Accumulated Net Gain (Loss) from Cash Flow Hedges Attributable to Parent [Member] | Previously Reported [Member]
Stockholders' Equity Attributable to Parent, Ending Balance			234
Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member]
Other Comprehensive Income (Loss), Remeasurement of Deferred Tax Assets and Liabilities	51
Stockholders' Equity Attributable to Parent, Ending Balance	$ (393)	$ (272)	(342)	[1]	$ (272)
Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member] | Previously Reported [Member]
Stockholders' Equity Attributable to Parent, Ending Balance			$ (392)

[1] December 31, 2017 AOCI component balances reflect a correction of incorrectly reported year-end balances in Note 12 of the 2017 Form 10-K, which were presented as $(2,278), $234, and $(392) for securities available-for-sale, cash flow hedges, and minimum pension liability, respectively.

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Note 9 - Other Comprehensive Income - Accumulated Other Comprehensive Income (Loss) by Component (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018		Mar. 31, 2017
Balance	$ 333,644		$ 313,872
Other comprehensive income, net of tax	(3,408)		774
Adoption of Accounting Standards Update 2018-02	(506)
Balance	337,702		319,687
Accumulated Net Investment Gain (Loss) Attributable to Parent [Member]
Balance	(1,781)	[1]	(1,211)
Other comprehensive income, net of tax	(3,718)		689
Adoption of Accounting Standards Update 2018-02	(496)
Balance	(5,995)		(522)
Accumulated Net Gain (Loss) from Cash Flow Hedges Attributable to Parent [Member]
Balance	193	[1]	(16)
Other comprehensive income, net of tax	310		85
Adoption of Accounting Standards Update 2018-02	41
Balance	544		69
Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member]
Balance	(342)	[1]	(272)
Other comprehensive income, net of tax
Adoption of Accounting Standards Update 2018-02	(51)
Balance	(393)		(272)
Disproportionate Tax Effect [Member]
Balance	(1,930)	[1]	(1,499)
Other comprehensive income, net of tax	(3,408)		774
Adoption of Accounting Standards Update 2018-02	(506)
Balance	$ (5,844)		$ (725)

[1] December 31, 2017 AOCI component balances reflect a correction of incorrectly reported year-end balances in Note 12 of the 2017 Form 10-K, which were presented as $(2,278), $234, and $(392) for securities available-for-sale, cash flow hedges, and minimum pension liability, respectively.

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Note 10 - Preferred Stock (Details Textual) - $ / shares $ / shares in Thousands	Mar. 31, 2018	Dec. 31, 2017
Preferred Stock, No Par Value	$ 0	$ 0
Preferred Stock, Shares Authorized	1,000,000	1,000,000
Preferred Stock, Shares Issued, Total	0	0

XML

Note 11 - Net Income Per Share (Details Textual) - $ / shares	1 Months Ended		13 Months Ended
	Mar. 01, 2018	Mar. 31, 2017	Mar. 31, 2018
Stock Appreciation Rights (SARs) [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount			47,410
Stock Appreciation Rights (SARs), Grant 1 [Member]
Antidilutive Securities Excluded from Computation of Net Income, Per Outstanding Unit, Amount		$ 40
Stock Appreciation Rights (SARs), Grant 2 [Member]
Antidilutive Securities Excluded from Computation of Net Income, Per Outstanding Unit, Amount	$ 38.30

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Note 11 - Net Income Per Share - Basic and Diluted Net Income Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Net income	$ 13,404	$ 10,791
Average shares outstanding (in shares)	22,577	22,492
Dilutive securities (in shares)	365	510
Average shares outstanding including dilutive securities including dilutive securities (in shares)	22,942	23,002
Net income per share, basic (in dollars per share)	$ 0.59	$ 0.48
Net income per share, diluted (in dollars per share)	$ 0.58	$ 0.47

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Note 12 - Defined Benefit Plans (Details Textual)	3 Months Ended
	Mar. 31, 2018
Defined Benefit Plan, Number of Employees Covered	3
Defined Benefit Plan, Number of Present Employees Covered	2
Defined Benefit Plan, Number of Retired Employees Covered	1
Deferred Compensation Arrangement with Individual, Requisite Service Period	25 years

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Note 12 - Defined Benefit Plans - Components of the Net Periodic Benefit Cost of the Defined Benefit Plan (Details) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2018	Mar. 31, 2017
Components of net periodic benefit cost:
Service cost
Interest cost (1)	[1]	20	18
Expected return on plan assets
Amortization of prior service cost
Amortization of net losses (1)	[1]	18	16
Net periodic benefit cost		$ 38	$ 34

[1] Bancorp elected as a practical expedient to use amounts disclosed in the 2017 consolidated financial statements as a basis for estimating quarterly application of components of defined benefit cost.

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Note 13 - Stock-based Compensation (Details Textual) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017	Mar. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award, Number of Plans	1
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	174,458
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Ending Balance	0
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage	20.00%
Share-based Compensation Arrangement by Share-based Payment Award, Expected Additional Compensation Cost Remainder of Year	$ 2,500
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Total	$ 7,400
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	5 years
Proceeds (Used for) and Received from Settlement of Stock Awards	$ (156)	$ (216)
Stock Appreciation Rights (SARs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage	20.00%
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period	10 years
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	5 years
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	38,205		28,625
Restricted Stock [Member] | Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	1 year
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	6,525
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Fair Value Granted	$ 247
Performance Shares [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	3 years
Sharebased Compensation Arrangement by Share-based Payment Award Post Vesting Holding Period	1 year
Share-based Compensation Arrangement by Share-based Payment Award Liquidity Discount	4.26%	5.12%		4.50%

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Note 13 - Stock-based Compensation - Stock-based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Stock-based compensation expense before income taxes	$ 823	$ 660
Less: deferred tax benefit	(173)	(231)
Reduction of net income	$ 650	$ 429

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Note 13 - Stock-based Compensation - Fair Value Assumptions (Details) - Stock Appreciation Rights (SARs) [Member]	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Dividend yield	2.57%	2.72%
Expected volatility	20.60%	19.47%
Risk free interest rate	2.82%	2.29%
Expected life of SARs (Year)	7 years	7 years

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Note 13 - Stock-based Compensation - Stock Option and SARs Activity (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Award Vested and Exercisable [Member]
Options and SARs (in shares)	547	490	475
Exercise price (in dollars per share)	$ 17.43	$ 16.46	$ 15.72
Aggregate intrinsic value	$ 9,710	$ 10,408	$ 14,820
Weighted average fair value (in dollars per share)	$ 3.24	$ 3.16	$ 3.16
Weighted average remaining contractual life (Year)	4 years 109 days	4 years	4 years 109 days
Options and SARs (in shares)	(547)	(490)	(475)
Award Vested and Exercisable [Member] | Minimum [Member]
Exercise price (in dollars per share)	$ 14.02	$ 14.02	$ 14.02
Award Vested and Exercisable [Member] | Maximum [Member]
Exercise price (in dollars per share)	$ 40	$ 33.08	$ 24.56
Award Unvested [Member]
Options and SARs (in shares)	187	214	260
Exercise price (in dollars per share)	$ 30.05	$ 26.46	$ 21.53
Aggregate intrinsic value	$ 1,165	$ 2,515	$ 6,623
Weighted average fair value (in dollars per share)	$ 4.95	$ 4.17	$ 3.43
Weighted average remaining contractual life (Year)	8 years 109 days	7 years 255 days	7 years 292 days
Options and SARs (in shares)	(187)	(214)	(260)
Award Unvested [Member] | Minimum [Member]
Exercise price (in dollars per share)	$ 19.37	$ 15.26	$ 15.24
Award Unvested [Member] | Maximum [Member]
Exercise price (in dollars per share)	$ 40	$ 40	$ 33.08
Award Outstanding [Member]
Options and SARs (in shares)	734	704	735
Exercise price (in dollars per share)	$ 20.64	$ 19.51	$ 17.78
Aggregate intrinsic value	$ 10,875	$ 12,923	$ 21,443
Weighted average fair value (in dollars per share)	$ 3.68	$ 3.47	$ 3.26
Weighted average remaining contractual life (Year)	5 years 109 days	5 years 36 days	5 years 182 days
Options and SARs (in shares)	(734)	(704)	(735)
Award Outstanding [Member] | Minimum [Member]
Exercise price (in dollars per share)	$ 14.02	$ 14.02	$ 14.02
Award Outstanding [Member] | Maximum [Member]
Exercise price (in dollars per share)	$ 40	$ 40	$ 33.08
Award Granted [Member]
Options and SARs (in shares)		46	46
Exercise price (in dollars per share)		$ 35.95	$ 40
Aggregate intrinsic value
Weighted average fair value (in dollars per share)		$ 6.66	$ 6.34
Weighted average remaining contractual life (Year)
Options and SARs (in shares)		(46)	(46)
Award Granted [Member] | Minimum [Member]
Exercise price (in dollars per share)		$ 35.90	$ 40
Award Granted [Member] | Maximum [Member]
Exercise price (in dollars per share)		$ 38.30	$ 40
Award Exercised [Member]
Options and SARs (in shares)		17	77
Exercise price (in dollars per share)		$ 15.57	$ 15.41
Aggregate intrinsic value		$ 362	$ 1,855
Weighted average fair value (in dollars per share)		$ 3.03	$ 3.18
Weighted average remaining contractual life (Year)
Options and SARs (in shares)		(17)	(77)
Award Exercised [Member] | Minimum [Member]
Exercise price (in dollars per share)		$ 15.24	$ 14.02
Award Exercised [Member] | Maximum [Member]
Exercise price (in dollars per share)		$ 15.58	$ 17.89
Award Forfeited [Member]
Options and SARs (in shares)
Exercise price (in dollars per share)
Aggregate intrinsic value
Weighted average fair value (in dollars per share)
Weighted average remaining contractual life (Year)
Options and SARs (in shares)
Award Forfeited [Member] | Minimum [Member]
Exercise price (in dollars per share)
Award Forfeited [Member] | Maximum [Member]
Exercise price (in dollars per share)
Award Vested [Member]
Options and SARs (in shares)	74
Exercise price (in dollars per share)	$ 23.38
Aggregate intrinsic value	$ 914
Weighted average fair value (in dollars per share)	$ 3.77
Weighted average remaining contractual life (Year)
Options and SARs (in shares)	(74)
Award Vested [Member] | Minimum [Member]
Exercise price (in dollars per share)	$ 15.26
Award Vested [Member] | Maximum [Member]
Exercise price (in dollars per share)	$ 40

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Note 13 - Stock-based Compensation - Restricted Stock (Details) - Restricted Stock [Member] - $ / shares	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Unvested (in shares)	119,372	145,235
Unvested, grant date weighted average cost (in dollars per share)	$ 27.62	$ 21.57
Awarded (in shares)	38,205	28,625
Shares awarded, grant date weighted average cost (in dollars per share)	$ 36	$ 44.85
Restrictions lapsed and shares released (in shares)	(43,385)	(46,797)
Restrictions lapsed and shares released, grant date weighted average cost (in dollars per share)	$ 23.57	$ 19.79
Forfeited (in shares)	(1,368)	(7,691)
Shares forfeited, grant date weighted average cost (in dollars per share)	$ 28.46	$ 25.18
Unvested (in shares)	112,824	119,372
Unvested, grant date weighted average cost (in dollars per share)	$ 32.16	$ 27.62

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Note 13 - Stock-based Compensation - Performance-based Restricted Stock Units (Details) - $ / shares	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Expected shares to be awarded (in shares)	174,458
Performance Shares [Member]
Vesting period (Year)	3 years
Performance Shares [Member] | Executive Officer [Member]
Vesting period (Year)	3 years	3 years	3 years
Shares awarded, grant date weighted average cost (in dollars per share)	$ 31.54	$ 35.66	$ 22.61
Expected shares to be awarded (in shares)	50,352	43,325	69,161

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Note 14 - Commitments and Contingent Liabilities (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Loss Contingency Accrual, Ending Balance	$ 350
Standby Letters of Credit [Member]
Fair Value Disclosure, Off-balance Sheet Risks, Amount, Liability	$ 18,900	$ 14,800
Standby Letters of Credit [Member] | Minimum [Member]
Guarantee Obligations, Agreement Term	1 year
Standby Letters of Credit [Member] | Maximum [Member]
Guarantee Obligations, Agreement Term	2 years
Commitments to Extend Credit and Standby Letters of Credit [Member]
Fair Value Disclosure, Off-balance Sheet Risks, Amount, Liability	$ 692,400	$ 688,300

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Note 15 - Assets and Liabilities Measured and Reported at Fair Value (Details Textual) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Impaired Financing Receivable, Related Allowance	$ 1,470	$ 48
Impaired Financing Receivable, with Related Allowance, Recorded Investment	5,760	48
Other Real Estate, Foreclosed Assets, and Repossessed Assets, Total	360	2,600
Impaired Loans [Member] | Appraisal Discount Method [Member]
Assets, Fair Value Disclosure	5,900	2,600
Impaired Financing Receivable, Related Allowance	1,500	48
Impaired Financing Receivable, with Related Allowance, Recorded Investment	7,400	2,600
Mortgage Servicing Rights [Member]
Impaired Financing Receivable, Related Allowance	0	0
Fair Value, Measurements, Recurring [Member]
Assets, Fair Value Disclosure	600,068	575,103
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Assets, Fair Value Disclosure	0	0
Financial and Nonfinancial Liabilities, Fair Value Disclosure	$ 0	$ 0

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Note 15 - Assets and Liabilities Measured and Reported at Fair Value - Assets Measured at Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Securities available-for-sale, fair value	$ 598,081	$ 574,524
Fair Value, Measurements, Recurring [Member]
Securities available-for-sale, fair value	598,081	574,524
Interest rate swaps	1,987	579
Total assets	600,068	575,103
Interest rate swaps	1,275	259
Liabilities
Interest rate swaps	1,275	259
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available-for-sale, fair value		149,984
Interest rate swaps
Total assets		149,984
Interest rate swaps
Liabilities
Interest rate swaps
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available-for-sale, fair value	598,081	424,540
Interest rate swaps	1,987	579
Total assets	600,068	425,119
Interest rate swaps	1,275	259
Liabilities
Interest rate swaps	1,275	259
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Securities available-for-sale, fair value
Interest rate swaps
Total assets	0	0
Interest rate swaps
Liabilities
Interest rate swaps
US Government-sponsored Enterprises Debt Securities [Member]
Securities available-for-sale, fair value	402,411	213,844
US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Measurements, Recurring [Member]
Securities available-for-sale, fair value	402,411	213,844
US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available-for-sale, fair value
US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available-for-sale, fair value	402,411	213,844
US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Securities available-for-sale, fair value
US Treasury and Government [Member] | Fair Value, Measurements, Recurring [Member]
Securities available-for-sale, fair value		149,984
US Treasury and Government [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available-for-sale, fair value		149,984
US Treasury and Government [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available-for-sale, fair value
US Treasury and Government [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Securities available-for-sale, fair value
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Securities available-for-sale, fair value	151,748	161,507
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member] | Fair Value, Measurements, Recurring [Member]
Securities available-for-sale, fair value	151,748	161,507
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available-for-sale, fair value
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available-for-sale, fair value	151,748	161,507
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Securities available-for-sale, fair value
US States and Political Subdivisions Debt Securities [Member]
Securities available-for-sale, fair value	43,922	49,189
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Measurements, Recurring [Member]
Securities available-for-sale, fair value	43,922	49,189
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available-for-sale, fair value
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available-for-sale, fair value	43,922	49,189
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Securities available-for-sale, fair value

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Note 15 - Assets and Liabilities Measured and Reported at Fair Value - Assets Measured at Fair Value on a Non-recurring Basis (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Other real estate owned losses	$ 109
Fair Value, Measurements, Nonrecurring [Member]
Impaired loans	5,918	2,569
Impaired loans losses	(1,711)	(452)
Other real estate owned	360	2,640
Other real estate owned losses
Assets, Fair Value Disclosure	6,278	5,209
Total losses	(1,711)	(452)
Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 1 [Member]
Impaired loans
Other real estate owned
Assets, Fair Value Disclosure
Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 2 [Member]
Impaired loans
Other real estate owned
Assets, Fair Value Disclosure
Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member]
Impaired loans	5,918	2,569
Other real estate owned	360	2,640
Assets, Fair Value Disclosure	$ 6,278	$ 5,209

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Note 15 - Assets and Liabilities Measured and Reported at Fair Value - Significant Unobservable Inputs (Details) - Fair Value, Inputs, Level 3 [Member] - Appraisal Discount Method [Member]	Mar. 31, 2018 USD ($)
Impaired loans - collateral dependent, fair value	$ 5,918
Other real estate owned, fair value	$ 360
Weighted Average [Member]
Impaired loans - collateral dependent, weighted average of input	42.2
Other real estate owned, weighted average of input	10

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Note 16 - Disclosure of Financial Instruments Not Reported at Fair Value - Financial Assets and Financial Liabilities That Are Not Measured and Reported at Fair Value (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Financial assets
Cash and short-term investments	$ 56,876	$ 139,248
Accrued interest receivable	8,026	8,369
Financial liabilities
Accrued interest payable	284	232
Reported Value Measurement [Member]
Financial assets
Cash and short-term investments	56,876	139,248
Mortgage loans held for sale	4,239	2,964
Federal Home Loan Bank stock and other securities	8,876	7,646
Loans, net	2,488,185	2,384,685
Accrued interest receivable	8,026	8,369
Financial liabilities
Deposits	2,573,364	2,578,295
Short-term borrowings	283,125	231,825
FHLB advances	49,140	49,458
Accrued interest payable	284	232
Estimate of Fair Value Measurement [Member]
Financial assets
Cash and short-term investments	56,876	139,248
Mortgage loans held for sale	4,299	2,964
Federal Home Loan Bank stock and other securities	8,876	7,646
Loans, net	2,487,204	2,338,464
Accrued interest receivable	8,026	8,369
Financial liabilities
Deposits	2,571,032	2,576,385
Short-term borrowings	283,125	231,825
FHLB advances	47,759	48,642
Accrued interest payable	284	232
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Financial assets
Cash and short-term investments	56,876	139,248
Mortgage loans held for sale
Federal Home Loan Bank stock and other securities
Loans, net
Accrued interest receivable	8,026	8,369
Financial liabilities
Deposits
Short-term borrowings
FHLB advances
Accrued interest payable	284	232
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Financial assets
Cash and short-term investments
Mortgage loans held for sale	4,299	2,964
Federal Home Loan Bank stock and other securities	8,876	7,646
Loans, net
Accrued interest receivable
Financial liabilities
Deposits
Short-term borrowings	283,125	231,825
FHLB advances	47,759	48,642
Accrued interest payable
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Financial assets
Cash and short-term investments
Mortgage loans held for sale
Federal Home Loan Bank stock and other securities
Loans, net	2,487,204	2,338,464
Accrued interest receivable
Financial liabilities
Deposits	2,571,032	2,576,385
Short-term borrowings
FHLB advances
Accrued interest payable

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Note 17 - Derivative Financial Instruments (Details Textual) - Cash Flow Hedging [Member] - Designated as Hedging Instrument [Member] - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2016	Dec. 31, 2015
Derivative, Notional Amount	$ 30,000
Interest Rate Swap, Maturing December 6, 2016 [Member]
Derivative, Notional Amount		$ 10,000
Interest Rate Swap, Maturing December 6, 2020 [Member]
Derivative, Notional Amount	$ 20,000		$ 20,000

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Note 17 - Derivative Financial Instruments - Outstanding Undesignated Interest Rate Swap Contracts (Details) - Not Designated as Hedging Instrument [Member] - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Receiving [Member]
Notional amount	$ 54,310	$ 54,964
Weighted average maturity (Year)	8 years 182 days	8 years 255 days
Fair value	$ (1,275)	$ (259)
Paying [Member]
Notional amount	$ 54,310	$ 54,964
Weighted average maturity (Year)	8 years 182 days	8 years 255 days
Fair value	$ 1,298	$ 283

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Note 17 - Derivative Financial Instruments - Derivative Position Designated As a Cash Flow Hedge (Details) - Designated as Hedging Instrument [Member] - Cash Flow Hedging [Member] - USD ($) $ in Thousands	15 Months Ended
	Mar. 31, 2018	Dec. 31, 2017	Dec. 31, 2015
Notional amount	$ 30,000
Pay fixed swap rate	1.82%
Fair value	$ 689	$ 296
Interest Rate Swap, Maturing December 6, 2021 [Member]
Notional amount	$ 10,000
Receive (variable index)	US 3 Month LIBOR
Pay fixed swap rate	1.89%
Fair value	$ 266	106
Interest Rate Swap, Maturing December 6, 2020 [Member]
Notional amount	$ 20,000		$ 20,000
Receive (variable index)	US 3 Month LIBOR
Pay fixed swap rate	1.79%
Fair value	$ 423	$ 190

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Note 18 - Regulatory Matters - Risk Based Capital Amounts and Ratios (Details) - USD ($) $ in Thousands		Mar. 31, 2018	Dec. 31, 2017
Total risk-based capital
Total risk-based capital, actual amount	[1]	$ 366,493	$ 359,866
Total risk-based capital, actual ratio	[1]	13.04%	13.52%
Total risk-based capital, minimum for adequately capitalized amount	[1]	$ 224,842	$ 213,012
Total risk-based capital, minimum for adequately capitalized ratio	[1]	8.00%	8.00%
Common equity tier 1 risk-based capital
Common Equity Tier 1 risk-based capital, actual amount		$ 341,940	$ 334,631
Common Equity Tier 1 risk-based capital, actual ratio		12.16%	12.57%
Common Equity Tier 1 risk-based capital, minimum for adequately capitalized amount		$ 126,540	$ 119,820
Common Equity Tier 1 risk-based capital, minimum for adequately capitalized ratio		4.50%	4.50%
Common Equity Tier 1 risk-based capital, minimum for well capitalized amount	[2]
Common Equity Tier 1 risk-based capital, minimum for well capitalized ratio	[2]
Tier 1 risk-based capital
Tier 1 risk-based capital, actual amount	[1]	$ 341,940	$ 334,631
Tier 1 risk-based capital, actual ratio	[1]	12.16%	12.57%
Tier 1 risk-based capital, minimum for adequately capitalized amount	[1]	$ 168,720	$ 159,760
Tier 1 risk-based capital, minimum for adequately capitalized ratio	[1]	6.00%	6.00%
Tier 1 risk-based capital, minimum for well capitalized amount	[1],[2]
Tier 1 risk-based capital, minimum for well capitalized ratio	[1],[2]
Leverage
Leverage, actual amount	[3]	$ 341,940	$ 334,631
Leverage, actual ratio	[3]	11.05%	10.70%
Leverage, minimum for adequately capitalized amount	[3]	$ 123,779	$ 125,122
Leverage, minimum for adequately capitalized ratio	[3]	4.00%	4.00%
Leverage, minimum for well capitalized amount	[2],[3]
Leverage, minimum for well capitalized ratio	[2],[3]
Subsidiaries [Member]
Total risk-based capital
Total risk-based capital, actual amount	[1]	$ 355,611	$ 347,840
Total risk-based capital, actual ratio	[1]	12.66%	13.07%
Total risk-based capital, minimum for adequately capitalized amount	[1]	$ 224,715	$ 212,891
Total risk-based capital, minimum for adequately capitalized ratio	[1]	8.00%	8.00%
Total risk-based capital, minimum for well capitalized amount	[1]	$ 280,893	$ 266,114
Total risk-based capital, minimum for well capitalized ratio	[1]	10.00%	10.00%
Common equity tier 1 risk-based capital
Common Equity Tier 1 risk-based capital, actual amount		$ 331,058	$ 322,605
Common Equity Tier 1 risk-based capital, actual ratio		11.79%	12.12%
Common Equity Tier 1 risk-based capital, minimum for adequately capitalized amount		$ 126,358	$ 212,891
Common Equity Tier 1 risk-based capital, minimum for adequately capitalized ratio		4.50%	4.50%
Common Equity Tier 1 risk-based capital, minimum for well capitalized amount		$ 182,517	$ 172,974
Common Equity Tier 1 risk-based capital, minimum for well capitalized ratio		6.50%	6.50%
Tier 1 risk-based capital
Tier 1 risk-based capital, actual amount	[1]	$ 331,058	$ 322,605
Tier 1 risk-based capital, actual ratio	[1]	11.79%	12.12%
Tier 1 risk-based capital, minimum for adequately capitalized amount	[1]	$ 168,477	$ 159,668
Tier 1 risk-based capital, minimum for adequately capitalized ratio	[1]	6.00%	6.00%
Tier 1 risk-based capital, minimum for well capitalized amount	[1]	$ 224,636	$ 212,891
Tier 1 risk-based capital, minimum for well capitalized ratio	[1]	8.00%	8.00%
Leverage
Leverage, actual amount	[3]	$ 331,058	$ 322,605
Leverage, actual ratio	[3]	10.71%	10.32%
Leverage, minimum for adequately capitalized amount	[3]	$ 123,644	$ 125,040
Leverage, minimum for adequately capitalized ratio	[3]	4.00%	4.00%
Leverage, minimum for well capitalized amount	[3]	$ 154,556	$ 156,300
Leverage, minimum for well capitalized ratio	[3]	5.00%	5.00%

[1] Ratio is computed in relation to risk-weighted assets.

[2] Not applicable. Regulatory framework does not define well capitalized for holding companies.

[3] Ratio is computed in relation to average assets.

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Note 19 - Segments (Details Textual)	Mar. 31, 2018 USD ($)
Commercial Banking [Member] | Operating Segments [Member]
Goodwill, Ending Balance	$ 682,000

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Note 19 - Segments - Financial Information by Business Segment (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Net interest income	$ 27,295	$ 25,184
Provision for loan losses	735	900	$ 2,550
All other non-interest income	5,423	5,550
Non-interest expense	21,027	20,995
Income before income taxes	16,456	13,933
Income tax expense	3,052	3,142
Net income	13,404	10,791
Segment assets	3,285,480	3,033,343	$ 3,239,646
Fiduciary and Trust [Member]
Non-interest income	5,500	5,094
Commercial Banking [Member]
Net interest income	27,224	25,107
Provision for loan losses	735	900
All other non-interest income	5,423	5,500
Non-interest expense	17,829	17,948
Income before income taxes	14,083	11,809
Income tax expense	2,537	2,384
Net income	11,546	9,425
Segment assets	3,283,539	3,031,318
Commercial Banking [Member] | Fiduciary and Trust [Member]
Non-interest income
Investment Management and Trust [Member]
Net interest income	71	77
Provision for loan losses
All other non-interest income
Non-interest expense	3,198	3,047
Income before income taxes	2,373	2,124
Income tax expense	515	758
Net income	1,858	1,366
Segment assets	1,941	2,025
Investment Management and Trust [Member] | Fiduciary and Trust [Member]
Non-interest income	$ 5,500	$ 5,094

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Note 20 - Revenue From Contracts With Customers (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Safety Box Deposit Fees [Member] | Other Income [Member]
Revenue from Contract with Customer, Including Assessed Tax	$ 45	$ 45
Fiduciary and Trust [Member]
Revenue from Contract with Customer, Including Assessed Tax	5,500	5,094
Accrued Fees and Other Revenue Receivable	$ 2,200	$ 2,200

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Note 20 - Revenue from Contracts with Customers - Revenue by Operating Segment (Details) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2018	Mar. 31, 2017
Total non-interest income		$ 10,923	$ 10,644
Commercial Banking [Member]
Total non-interest income		5,423	5,550
Investment Management and Trust [Member]
Total non-interest income		5,500	5,094
Fiduciary and Trust [Member]
Non-interest income		5,500	5,094
Fiduciary and Trust [Member] | Commercial Banking [Member]
Non-interest income
Fiduciary and Trust [Member] | Investment Management and Trust [Member]
Non-interest income		5,500	5,094
Deposit Account [Member]
Non-interest income		1,511	1,565
Deposit Account [Member] | Commercial Banking [Member]
Non-interest income		1,511	1,565
Deposit Account [Member] | Investment Management and Trust [Member]
Non-interest income
Credit and Debit Card [Member]
Non-interest income		1,508	1,406
Credit and Debit Card [Member] | Commercial Banking [Member]
Non-interest income		1,508	1,406
Credit and Debit Card [Member] | Investment Management and Trust [Member]
Non-interest income
Treasury Management [Member]
Non-interest income		947	956
Treasury Management [Member] | Commercial Banking [Member]
Non-interest income		947	956
Treasury Management [Member] | Investment Management and Trust [Member]
Non-interest income
Mortgage Banking [Member]
Non-interest income	[1]	576	702
Mortgage Banking [Member] | Commercial Banking [Member]
Non-interest income	[1]	576	702
Mortgage Banking [Member] | Investment Management and Trust [Member]
Non-interest income	[1]
Investment Advisory, Management and Administrative Service [Member]
Non-interest income		404	386
Investment Advisory, Management and Administrative Service [Member] | Commercial Banking [Member]
Non-interest income		404	386
Investment Advisory, Management and Administrative Service [Member] | Investment Management and Trust [Member]
Non-interest income
Life Insurance Product Line [Member]
Non-interest income	[1]	187	204
Life Insurance Product Line [Member] | Commercial Banking [Member]
Non-interest income	[1]	187	204
Life Insurance Product Line [Member] | Investment Management and Trust [Member]
Non-interest income	[1]
Product and Service, Other [Member]
Non-interest income	[2]	290	331
Product and Service, Other [Member] | Commercial Banking [Member]
Non-interest income	[2]	290	331
Product and Service, Other [Member] | Investment Management and Trust [Member]
Non-interest income	[2]

[1] Not within the scope of ASC 606

[2] includes safety box deposit fees of $45 thousand included within the scope of ASC 606