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 September 30, 2017

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	(I.R.S. Employer
incorporation or organization)	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 October 26, 2017 was 22,670,610.

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 September 30, 2017 (Unaudited) and December 31, 2016	3
	Consolidated Statements of Income (Unaudited) for the three and nine months ended September 30, 2017 and 2016	4
	Consolidated Statements of Comprehensive Income (Unaudited) for the three and nine months ended September 30, 2017 and 2016	5
	Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) for the nine months ended September 30, 2017 and 2016	6
	Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2017 and 2016	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	68
Item 4.	Controls and Procedures	69
PART II – OTHER INFORMATION
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	69
Item 6.	Exhibits	70

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
WM&T	Wealth Management and Trust Department
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
TDRs	Troubled Debt Restructurings
US GAAP	United States Generally Accepted Accounting Principles
VA	U.S. Department of Veterans Affairs

2

Item 1.   Financial Statements

STOCK YARDS BANCORP, INC. AND SUBSIDIARY

Consolidated Balance Sheets

September 30, 2017 (unaudited) and December 31, 2016

(In thousands, except share data)

	September 30,			December 31,
	2017			2016
Assets
Cash and due from banks	$	47,700		$	39,709
Federal funds sold and interest bearing deposits		81,378			8,264
Cash and cash equivalents		129,078			47,973
Mortgage loans held for sale		5,459			3,213
Securities available-for-sale (amortized cost of $571,953 in 2017 and $571,936 in 2016)		571,522			570,074
Federal Home Loan Bank stock and other securities		7,666			6,347
Loans		2,335,120			2,305,375
Less allowance for loan losses		24,948			24,007
Net loans		2,310,172			2,281,368
Premises and equipment, net		41,498			42,384
Bank owned life insurance		31,854			31,867
Accrued interest receivable		8,162			6,878
Other assets		50,502			49,377
Total assets	$	3,155,913		$	3,039,481
Liabilities and Stockholders’ Equity
Deposits:
Non-interest bearing	$	676,824		$	680,156
Interest bearing		1,805,142			1,840,392
Total deposits		2,481,966			2,520,548
Securities sold under agreements to repurchase		71,863			67,595
Federal funds purchased and other short-term borrowings		161,961			47,374
Federal Home Loan Bank advances		50,110			51,075
Accrued interest payable		212			144
Other liabilities		55,546			38,873
Total liabilities		2,821,658			2,725,609
Stockholders’ equity:
Preferred stock, no par value. Authorized 1,000,000 shares; no shares issued or outstanding		-			-
Common stock, no par value. Authorized 40,000,000 shares; issued and outstanding 22,669,339 and 22,617,098 shares in 2017 and 2016, respectively		36,424			36,250
Additional paid-in capital		30,681			26,682
Retained earnings		267,681			252,439
Accumulated other comprehensive loss		(531	)		(1,499	)
Total stockholders’ equity		334,255			313,872
Total liabilities and stockholders’ equity	$	3,155,913		$	3,039,481

See accompanying notes to unaudited consolidated financial statements.

3

STOCK YARDS BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Income  (Unaudited)

For the three and nine months ended September 30, 2017 and 2016

(In thousands, except per share data)

	For three months ended				For the nine months ended
	September 30,				September 30,
	2017		2016		2017		2016
Interest income:
Loans	$	25,401	$	23,436	$	73,812	$	67,992
Federal funds sold and interest bearing deposits		388		95		798		395
Mortgage loans held for sale		48		66		145		185
Securities – taxable		2,003		2,047		6,173		6,325
Securities – tax-exempt		271		298		829		907
Total interest income		28,111		25,942		81,757		75,804
Interest expense:
Deposits		1,593		941		4,237		2,916
Federal funds purchased and other short-term borrowing		77		19		125		57
Securities sold under agreements to repurchase		33		38		100		100
Federal Home Loan Bank advances		244		184		715		552
Total interest expense		1,947		1,182		5,177		3,625
Net interest income		26,164		24,760		76,580		72,179
Provision for loan losses		150		1,250		1,650		2,500
Net interest income after provision for loan losses		26,014		23,510		74,930		69,679
Non-interest income:
Wealth management and trust services		5,025		4,800		15,272		14,219
Service charges on deposit accounts		2,522		2,544		7,368		6,952
Bankcard transactions		1,492		1,455		4,412		4,198
Mortgage banking		781		1,072		2,380		2,896
Gain on call of securities available for sale		31		—		31		—
Securities brokerage		551		558		1,584		1,539
Bank owned life insurance		204		216		964		657
Other		497		713		1,564		1,757
Total non-interest income		11,103		11,358		33,575		32,218
Non-interest expenses:
Salaries and employee benefits		12,983		12,048		39,244		36,214
Net occupancy		1,621		1,646		4,765		4,716
Data processing		1,920		1,747		5,909		5,172
Furniture and equipment		316		277		861		853
FDIC insurance		242		356		716		1,035
Amortization of investments in tax credit partnerships		616		1,015		1,847		3,046
Other		3,619		3,429		10,469		9,215
Total non-interest expenses		21,317		20,518		63,811		60,251
Income before income taxes		15,800		14,350		44,694		41,646
Income tax expense		4,096		3,883		11,597		11,235
Net income	$	11,704	$	10,467	$	33,097	$	30,411
Net income per share:
Basic	$	0.52	$	0.47	$	1.47	$	1.36
Diluted	$	0.51	$	0.46	$	1.44	$	1.34
Average common shares:
Basic		22,542		22,385		22,524		22,325
Diluted		22,964		22,803		22,984		22,711

See accompanying notes to unaudited consolidated financial statements.

4

STOCK YARDS BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Comprehensive Income (Unaudited)

For the three and nine months ended September 30, 2017 and 2016

(In thousands)

	Three months ended						Nine months ended
	September 30,						September 30,
	2017			2016			2017			2016
Net income	$	11,704		$	10,467		$	33,097		$	30,411
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities available for sale:
Unrealized gains (losses) arising during the period, net of tax $29, ($616), $512, and $2,213, respectively		56			(1,147	)		950			4,110
Reclassification adjustment for securities (gains) realized in income (net of tax of $(11), $0, $(11), and $0, respectively)		(20	)		—			(20	)		—
Unrealized losses on hedging instruments:
Unrealized gains (losses) arising during the period, net of tax benefit of $23, $74, $21, ($162), respectively		43			137			38			(301	)
Other comprehensive income (loss), net of tax		79			(1,010	)		968			3,809
Comprehensive income	$	11,783		$	9,457		$	34,065		$	34,220

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 nine months ended September 30, 2017 and 2016

(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, 2015		14,919		$	10,616		$	44,180		$	231,091		$	632		$	286,519
Net income		-			-			-			30,411			-			30,411
Other comprehensive income, net of tax		-			-			-			-			3,809			3,809
Stock compensation expense		-			-			1,646			-			-			1,646
Stock issued for share-based awards, net of withholdings to satisfy employee tax obligations upon award		159			527			3,404			(2,903	)		-			1,028
3 for 2 stock split		7,494			24,956			(24,956	)		-			-			-
Cash dividends, $0.53 per share		-			-			-			(11,843	)		-			(11,843	)
Shares cancelled		(9	)		(31	)		(224	)		255			-			-
Balance September 30, 2016		22,563		$	36,068		$	24,050		$	247,011		$	4,441		$	311,570
Balance December 31, 2016		22,617		$	36,250		$	26,682		$	252,439		$	(1,499	)	$	313,872
Net income		-			-			-			33,097			-			33,097
Other comprehensive income, net of tax		-			-			-			-			968			968
Stock compensation expense		-			-			2,012			-			-			2,012
Stock issued for share-based awards, net of withholdings to satisfy employee tax obligations upon award		59			198			2,142			(4,669	)		-			(2,329	)
Cash dividends, $0.59 per share		-			-			-			(13,365	)		-			(13,365	)
Shares cancelled		(7	)		(24	)		(155	)		179			-			-
Balance September 30, 2017		22,669		$	36,424		$	30,681		$	267,681		$	(531	)	$	334,255

See accompanying notes to unaudited consolidated financial statements.

6

STOCK YARDS BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows (Unaudited)

For the nine months ended September 30, 2017 and 2016

(In thousands)

	2017			2016
Operating activities:
Net income	$	33,097		$	30,411
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		1,650			2,500
Depreciation, amortization and accretion, net		6,848			8,016
Deferred income tax provision		(1,811	)		(320	)
Gain on call of securities available for sale		(31	)		—
Gain on sales of mortgage loans held for sale		(1,453	)		(1,825	)
Origination of mortgage loans held for sale		(74,857	)		(91,195	)
Proceeds from sale of mortgage loans held for sale		74,064			93,861
Bank owned life insurance income		(964	)		(657	)
Loss on the disposal of premises and equipment		-			163
(Gain) on the sale of foreclosed assets		(39	)		(382	)
Stock compensation expense		2,012			1,646
Excess tax benefits from share-based compensation arrangements		(1,353	)		(963	)
Decrease in accrued interest receivable and other assets		(5,651	)		(6,145	)
Increase in accrued interest payable and other liabilities		18,062			14,253
Net cash provided by operating activities		49,574			49,363
Investing activities:
Purchases of securities available for sale		(422,190	)		(327,711	)
Proceeds from sale of securities available for sale		-			-
Proceeds from maturities of securities available for sale		420,179			355,943
Purchase of Federal Home Loan Bank stock		(1,319	)		-
Net increase in loans		(30,454	)		(191,793	)
Purchases of premises and equipment		(1,733	)		(5,853	)
Proceeds from mortality benefit of bank owned life insurance		970			-
Proceeds from sale of foreclosed assets		2,432			1,403
Net cash used in investing activities		(32,115	)		(168,011	)
Financing activities:
Net (decrease) increase in deposits		(38,582	)		18,895
Net increase in securities sold under agreements to repurchase and federal funds purchased		118,855			56,699
Proceeds from Federal Home Loan Bank advances		90,000			199,000
Repayments of Federal Home Loan Bank advances		(90,965	)		(191,102	)
Proceeds (used for) and received from settlement of stock awards		(216	)		1,599
Excess tax benefits from share-based compensation arrangements		-			963
Common stock repurchases		(2,113	)		(1,534	)
Cash dividends paid		(13,333	)		(11,812	)
Net cash provided by financing activities		63,646			72,708
Net increase (decrease) in cash and cash equivalents		81,105			(45,940	)
Cash and cash equivalents at beginning of period		47,973			103,833
Cash and cash equivalents at end of period	$	129,078		$	57,893
Supplemental cash flow information:
Income tax payments	$	11,063		$	9,190
Cash paid for interest		5,109			3,636
Supplemental non-cash activity:
Transfers from loans to foreclosed assets	$	-		$	1,522

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 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 reported amounts of certain assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and 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 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, 2016 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 and nine-month periods ended September 30, 2017 are not necessarily indicative of 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 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 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. In the first quarter of 2017, Bancorp extended the historical period used to capture Bancorp’s historical loss ratios from 24 quarters to 28 quarters. This extension of the historical period was applied to all classes and segments of the portfolio. The expansion of the look-back period for the historical loss rates used in the quantitative allocation caused management to review the overall methodology for the qualitative factors to ensure Bancorp was appropriately capturing the risk not addressed in the historical loss rates used in the quantitative allocation, resulting in the same expansion of the look-back period for the qualitative factors. Management 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. 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.

8

Stock Yards Bancorp, inc. and subsidiary

Bancorp’s allowance calculation includes allocations to loan portfolio segments at September 30, 2017 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, changes 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 losses based on their judgments and estimates.

(2) Securities

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

(in thousands)	Amortized		Unrealized
September 30, 2017	cost		Gains		Losses		Fair value
Government sponsored enterprise obligations	$	372,596	$	846	$	778	$	372,664
Mortgage-backed securities - government agencies		147,604		697		1,581		146,720
Obligations of states and political subdivisions		51,100		611		89		51,622
Corporate equity securities		653		-		137		516
Total securities available for sale	$	571,953	$	2,154	$	2,585	$	571,522
December 31, 2016
U.S. Treasury and other U.S. Government obligations	$	74,997	$	1	$	-	$	74,998
Government sponsored enterprise obligations		268,784		800		1,494		268,090
Mortgage-backed securities - government agencies		170,344		735		2,236		168,843
Obligations of states and political subdivisions		57,158		682		396		57,444
Corporate equity securities		653		46		-		699
Total securities available for sale	$	571,936	$	2,264	$	4,126	$	570,074

Corporate equity securities consist of common stock in a publicly-traded business development company.

There were no securities classified as held to maturity as of September 30, 2017 or December 31, 2016.

9

Stock Yards Bancorp, inc. and subsidiary

Bancorp sold no securities during the three or nine month periods ending September 30, 2016 or 2017. One security was called prior to maturity in the third quarter of 2017 resulting in the receipt of a pre-payment penalty. The penalty income was classified as a realized gain on the call of available for sale securities.

A summary of the available-for-sale investment securities by contractual maturity groupings as of September 30, 2017 is shown below.

(in thousands)
Securities available-for-sale	Amortized cost		Fair value
Due within 1 year	$	216,651	$	216,696
Due after 1 but within 5 years		74,383		74,529
Due after 5 but within 10 years		14,085		14,031
Due after 10 years		118,577		119,030
Mortgage-backed securities - government agencies		147,604		146,720
Corporate equity securities		653		516
Total securities available-for-sale	$	571,953	$	571,522

Actual maturities may differ from contractual maturities because some issuers have the right to call or prepay obligations. In addition to equity securities, 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 underlying collateral.

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. The carrying value of these pledged securities was approximately $329.7 million at September 30, 2017 and $380.4 million at December 31, 2016.

10

Stock Yards Bancorp, inc. and subsidiary

Securities with unrealized losses at September 30, 2017 and December 31, 2016, 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
September 30, 2017	value		losses		value		losses		value		losses
Government sponsored enterprise obligations	$	190,462	$	135	$	70,176	$	643	$	260,638	$	778
Mortgage-backed securities - government agencies		13,227		117		65,781		1,464		79,008		1,581
Obligations of states and political subdivisions		9,307		13		6,287		76		15,594		89
Corporate equity securities		516		137		-		-		516		137
Total temporarily impaired securities	$	213,512	$	402	$	142,244	$	2,183	$	355,756	$	2,585
December 31, 2016
Government sponsored enterprise obligations	$	154,951	$	1,344	$	3,485	$	150	$	158,436	$	1,494
Mortgage-backed securities - government agencies		115,374		1,873		9,914		363		125,288		2,236
Obligations of states and political subdivisions		29,893		380		1,478		16		31,371		396
Total temporarily impaired securities	$	300,218	$	3,597	$	14,877	$	529	$	315,095	$	4,126

Applicable dates for determining when securities are in an unrealized loss position are September 30, 2017 and December 31, 2016. 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. 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 September 30, 2017.

FHLB stock and other securities are investments held by Bancorp which are not readily marketable and are carried at cost. This category includes Federal Home Loan Bank of Cincinnati (FHLB) stock which is required for access to FHLB borrowing.

11

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)	September 30, 2017		December 31, 2016
Commercial and industrial	$	750,728	$	736,841
Construction and development, excluding undeveloped land		174,310		192,348
Undeveloped land		20,989		21,496
Real estate mortgage:
Commercial investment		576,810		538,886
Owner occupied commercial		397,804		408,292
1-4 family residential		261,707		249,498
Home equity - first lien		51,925		55,325
Home equity - junior lien		63,416		67,519
Subtotal: Real estate mortgage		1,351,662		1,319,520
Consumer		37,431		35,170
Total loans	$	2,335,120	$	2,305,375

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Stock Yards Bancorp, inc. and subsidiary

The following table presents the balance of the recorded investment in loans and allowance for loan losses by portfolio segment and based on impairment evaluation method as of September 30, 2017 and December 31, 2016.

(in thousands)	Type of loan
			Construction
			and development
	Commercial		excluding
	and		undeveloped		Undeveloped		Real estate
September 30, 2017	industrial		land		land		mortgage		Consumer		Total
Loans	$	750,728	$	174,310	$	20,989	$	1,351,662	$	37,431	$	2,335,120
Loans collectively evaluated for impairment	$	748,591	$	173,573	$	20,515	$	1,348,774	$	37,375	$	2,328,828
Loans individually evaluated for impairment	$	2,137	$	737	$	474	$	2,403	$	56	$	5,807
Loans acquired with deteriorated credit quality	$	-	$	-	$	-	$	485	$	-	$	485

				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)		1,518			9		(85	)		54			154			1,650
Charge-offs		(770	)		-		-			(45	)		(418	)		(1,233	)
Recoveries		128			-		-			98			298			524
At September 30, 2017	$	11,359		$	1,932	$	599		$	10,680		$	378		$	24,948
Allowance for loans collectively evaluated for impairment	$	10,705		$	1,932	$	599		$	10,668		$	322		$	24,226
Allowance for loans individually evaluated for impairment	$	654		$	-	$	-		$	12		$	56		$	722
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, 2016	industrial		land		land		mortgage		Consumer		Total
Loans	$	736,841	$	192,348	$	21,496	$	1,319,520	$	35,170	$	2,305,375
Loans collectively evaluated for impairment	$	734,139	$	191,810	$	21,022	$	1,316,400	$	35,111	$	2,298,482
Loans individually evaluated for impairment	$	2,682	$	538	$	474	$	2,516	$	59	$	6,269
Loans acquired with deteriorated credit quality	$	20	$	-	$	-	$	604	$	-	$	624

				Construction
				and development
	Commercial			excluding
	and			undeveloped			Undeveloped			Real estate
	industrial			land			land			mortgage			Consumer			Total
Allowance for loan losses
At December 31, 2015	$	8,645		$	1,760		$	814		$	10,875		$	347		$	22,441
Provision (credit)		2,775			275			(130	)		(68	)		148			3,000
Charge-offs		(1,216	)		(133	)		-			(576	)		(568	)		(2,493	)
Recoveries		279			21			-			342			417			1,059
At December 31, 2016	$	10,483		$	1,923		$	684		$	10,573		$	344		$	24,007
Allowance for loans collectively evaluated for impairment	$	9,276		$	1,923		$	683		$	10,573		$	285		$	22,740
Allowance for loans individually evaluated for impairment	$	1,207		$	-		$	1		$	-		$	59		$	1,267
Allowance for loans acquired with deteriorated credit quality	$	-		$	-		$	-		$	-		$	-		$	-

The considerations by Bancorp in computing its allowance for loan losses are determined based on 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 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 development projects. In most cases, construction loans require interest only during construction. Upon completion or stabilization, the construction loan may 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, and can be affected by market conditions and time to develop land for ultimate sale. Credit risk is also affected by availability of development financing to the extent such financing is not being provided by Bancorp.  

● Real estate mortgage: Loans in this category are made to and secured by owner-occupied residential and commercial real estate and income-producing investment properties. For owner occupied residential and 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 borrower. Underlying properties are generally located in Bancorp's primary market areas. Cash flows of income producing investment properties may be adversely impacted by a downturn in the economy that may cause increased vacancy rates, which in turn, could have an effect on credit quality. Overall health of the economy, including 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, could have a significant effect on credit quality in this loan category.

Bancorp has loans that were acquired for which there was, at acquisition, evidence of deterioration of credit quality since origination and for which it was probable that all contractually required payments would not be collected. The carrying amount of those loans is included in the balance sheet amounts of loans at September 30, 2017 and December 31, 2016. Changes in the fair value adjustment for acquired impaired loans are shown in the following table:

(in thousands)	Accretable discount			Non- accretable discount
Balance at December 31, 2015	$	3		$	189
Accretion		(3	)		(41	)
Reclassifications from (to) non-accretable discount		-			-
Disposals		-			-
Balance at December 31, 2016	$	-		$	148
Accretion		-			-
Reclassifications from (to) non-accretable discount		-			-
Disposals		-			-
Balance at September 30, 2017	$	-		$	148

15

Stock Yards Bancorp, inc. and subsidiary

The following tables present loans individually evaluated for impairment as of September 30, 2017 and December 31, 2016.

			Unpaid				Average
(in thousands)	Recorded		principal		Related		recorded
September 30, 2017	investment		balance		allowance		investment
Loans with no related allowance recorded:
Commercial and industrial	$	350	$	540	$	-	$	228
Construction and development, excluding undeveloped land		737		907		-		533
Undeveloped land		474		506		-		413
Real estate mortgage
Commercial investment		55		55		-		124
Owner occupied commercial		1,470		1,908		-		1,264
1-4 family residential		785		785		-		759
Home equity - first lien		-		-		-		-
Home equity - junior lien		81		81		-		224
Subtotal: Real estate mortgage		2,391		2,829		-		2,371
Consumer		-		17		-		-
Subtotal	$	3,952	$	4,799	$	-	$	3,545
Loans with an allowance recorded:
Commercial and industrial	$	1,787	$	2,321	$	654	$	2,343
Construction and development, excluding undeveloped land		-		-		-		-
Undeveloped land		-		-		-		60
Real estate mortgage
Commercial investment		-		-		-		-
Owner occupied commercial		-		-		-		-
1-4 family residential		12		12		12		3
Home equity - first lien		-		-		-		-
Home equity - junior lien		-		-		-		-
Subtotal: Real estate mortgage		12		12		12		3
Consumer		56		56		56		58
Subtotal	$	1,855	$	2,389	$	722	$	2,464
Total:
Commercial and industrial	$	2,137	$	2,861	$	654	$	2,571
Construction and development, excluding undeveloped land		737		907		-		533
Undeveloped land		474		506		-		473
Real estate mortgage
Commercial investment		55		55		-		124
Owner occupied commercial		1,470		1,908		-		1,264
1-4 family residential		797		797		12		762
Home equity - first lien		-		-		-		-
Home equity - junior lien		81		81		-		224
Subtotal: Real estate mortgage		2,403		2,841		12		2,374
Consumer		56		73		56		58
Total	$	5,807	$	7,188	$	722	$	6,009

16

Stock Yards Bancorp, inc. and subsidiary

			Unpaid				Average
(in thousands)	Recorded		principal		Related		recorded
December 31, 2016	investment		balance		allowance		investment
Loans with no related allowance recorded:
Commercial and industrial	$	322	$	465	$	-	$	1,947
Construction and development, excluding undeveloped land		538		708		-		108
Undeveloped land		233		265		-		76
Real estate mortgage
Commercial investment		107		107		-		193
Owner occupied commercial		1,042		1,479		-		1,356
1-4 family residential		895		896		-		962
Home equity - first lien		-		-		-		3
Home equity - junior lien		472		472		-		333
Subtotal: Real estate mortgage		2,516		2,954		-		2,847
Consumer		-		-		-		18
Subtotal	$	3,609	$	4,392	$	-	$	4,996
Loans with an allowance recorded:
Commercial and industrial	$	2,360	$	2,835	$	1,207	$	1,619
Construction and development, excluding undeveloped land		-		-		-		182
Undeveloped land		241		241		1		149
Real estate mortgage
Commercial investment		-		-		-		-
Owner occupied commercial		-		-		-		554
1-4 family residential		-		-		-		-
Home equity - first lien		-		-		-		-
Home equity - junior lien		-		-		-		-
Subtotal: Real estate mortgage		-		-		-		554
Consumer		59		59		59		63
Subtotal	$	2,660	$	3,135	$	1,267	$	2,567
Total:
Commercial and industrial	$	2,682	$	3,300	$	1,207	$	3,566
Construction and development, excluding undeveloped land		538		708		-		290
Undeveloped land		474		506		1		225
Real estate mortgage		-		-		-		-
Commercial investment		107		107		-		193
Owner occupied commercial		1,042		1,479		-		1,910
1-4 family residential		895		896		-		962
Home equity - first lien		-		-		-		3
Home equity - junior lien		472		472		-		333
Subtotal: Real estate mortgage		2,516		2,954		-		3,401
Consumer		59		59		59		81
Total	$	6,269	$	7,527	$	1,267	$	7,563

Differences between recorded investment amounts and unpaid principal balance amounts are due to partial charge-offs and interest paid on non-accrual loans which have occurred over the life of loans. Unpaid principal balance is reduced by these items to arrive at the recorded investment in the loan.

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 loans totaling $261 thousand past due more than 90 days and still accruing interest at September 30, 2017, compared with $438 thousand at December 31, 2016.

The following table presents the recorded investment in non-accrual loans as of September 30, 2017 and December 31, 2016.

(in thousands)	September 30, 2017		December 31, 2016
Commercial and industrial	$	1,256	$	1,767
Construction and development, excluding undeveloped land		737		538
Undeveloped land		474		474
Real estate mortgage
Commercial investment		55		107
Owner occupied commercial		1,470		1,042
1-4 family residential		785		984
Home equity - first lien		-		-
Home equity - junior lien		81		383
Subtotal: Real estate mortgage		2,391		2,516
Consumer		-		-
Total	$	4,858	$	5,295

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

At September 30, 2017 Bancorp had $949 thousand of loans classified as TDRs, all of which were accruing interest consistent with their modified terms. One residential real estate loan with a recorded investment of $12 thousand was modified and classified as a TDR in the three-month period ended September 30, 2017. Interest due and unpaid was capitalized into the principal balance resulting in the TDR classification. A specific reserve was established for the entire recorded investment of this loan. One additional loan, a commercial loan with a recorded investment of $35 thousand at September 30, 2017, was modified and classified as a TDR previously in the nine-month period ended September 30, 2017. The pre and post-modification balance for this loan was $39 thousand. 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.

18

Stock Yards Bancorp, inc. and subsidiary

At September 30, 2016 Bancorp had $999 thousand of accruing loans classified as TDR. Bancorp did not modify or classify any additional loans as TDR during the three or nine month periods ended September 30, 2016.

No loans classified and reported as TDRs within the twelve months prior to September 30, 2017 defaulted during the three or nine-month periods ended September 30, 2017. Likewise, no loans classified and reported as troubled debt restructured within the twelve months prior to September 30, 2016 defaulted during the three-month or nine-month periods ended September 30, 2016. 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 September 30, 2017, had a total allowance allocation of $142 thousand, compared with $207 thousand at December 31, 2016.

At September 30, 2017 and December 31, 2016, Bancorp did not have any outstanding commitments to lend additional funds to borrowers whose loans have been modified as TDRs.

At September 30, 2017 formal foreclosure proceedings were in process on two loans with a total recorded investment of $75 thousand.

The following table presents aging of the recorded investment in loans as of September 30, 2017 and December 31, 2016.

													Recorded
(in thousands)							90 or more						investment
							days past						> 90 days
			30-59 days		60-89 days		due (includes		Total		Total		and
September 30, 2017	Current		past due		past due		non-accrual)		past due		loans		accruing
Commercial and industrial	$	747,316	$	2,149	$	7	$	1,256	$	3,412	$	750,728	$	-
Construction and development, excluding undeveloped land		173,573		-		-		737		737		174,310		-
Undeveloped land		20,515		-		-		474		474		20,989		-
Real estate mortgage
Commercial investment		574,088		2,667		-		55		2,722		576,810		-
Owner occupied commercial		395,924		47		363		1,470		1,880		397,804		-
1-4 family residential		259,729		330		602		1,046		1,978		261,707		261
Home equity - first lien		51,836		89		-		-		89		51,925		-
Home equity - junior lien		62,892		165		278		81		524		63,416		-
Subtotal: Real estate mortgage		1,344,469		3,298		1,243		2,652		7,193		1,351,662		261
Consumer		37,196		226		9		-		235		37,431		-
Total	$	2,323,069	$	5,673	$	1,259	$	5,119	$	12,051	$	2,335,120	$	261
December 31, 2016
Commercial and industrial	$	734,682	$	84	$	290	$	1,785	$	2,159	$	736,841	$	18
Construction and development, excluding undeveloped land		191,810		-		-		538		538		192,348		-
Undeveloped land		21,022		-		-		474		474		21,496		-
Real estate mortgage
Commercial investment		537,998		631		64		193		888		538,886		86
Owner occupied commercial		406,726		342		-		1,224		1,566		408,292		182
1-4 family residential		246,730		1,174		576		1,018		2,768		249,498		34
Home equity - first lien		55,027		231		21		46		298		55,325		46
Home equity - junior lien		66,911		99		126		383		608		67,519		72
Subtotal: Real estate mortgage		1,313,392		2,477		787		2,864		6,128		1,319,520		420
Consumer		34,965		28		105		72		205		35,170		-
Total	$	2,295,871	$	2,589	$	1,182	$	5,733	$	9,504	$	2,305,375	$	438

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 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 repayment on the basis of currently existing facts, conditions and values, highly questionable and improbable.

20

Stock Yards Bancorp, inc. and subsidiary

As of September 30, 2017 and December 31, 2016, the internally assigned risk grades of loans by category were as follows:

(in thousands)							Substandard				Total
September 30, 2017	Pass		OAEM		Substandard		non-performing		Doubtful		loans
Commercial and industrial	$	726,194	$	7,464	$	14,197	$	2,873	$	-	$	750,728
Construction and development, excluding undeveloped land		174,310		-		-		-		-		174,310
Undeveloped land		20,485		-		30		474		-		20,989
Real estate mortgage
Commercial investment		575,339		761		420		290		-		576,810
Owner occupied commercial		383,387		10,313		2,869		1,235		-		397,804
1-4 family residential		256,458		3,018		1,172		1,059		-		261,707
Home equity - first lien		51,923		2		-		-		-		51,925
Home equity - junior lien		63,029		73		233		81		-		63,416
Subtotal: Real estate mortgage		1,330,136		14,167		4,694		2,665		-		1,351,662
Consumer		37,269		102		4		56		-		37,431
Total	$	2,288,394	$	21,733	$	18,925	$	6,068	$	-	$	2,335,120
December 31, 2016
Commercial and industrial	$	714,025	$	14,266	$	5,850	$	2,700	$	-	$	736,841
Construction and development, excluding undeveloped land		191,455		-		355		538		-		192,348
Undeveloped land		21,022		-		-		474		-		21,496
Real estate mortgage
Commercial investment		538,688		-		5		193		-		538,886
Owner occupied commercial		396,997		7,960		2,111		1,224		-		408,292
1-4 family residential		247,888		-		592		1,018		-		249,498
Home equity - first lien		55,279		-		-		46		-		55,325
Home equity - junior lien		66,710		-		426		383		-		67,519
Subtotal: Real estate mortgage		1,305,562		7,960		3,134		2,864		-		1,319,520
Consumer		35,039		-		-		131		-		35,170
Total	$	2,267,103	$	22,226	$	9,339	$	6,707	$	-	$	2,305,375

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. Evaluations have resulted in no indication of impairment. Bancorp currently has goodwill in the amount of $682 thousand from the 1996 acquisition of an Indiana bank. 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 September 30, 2017, the unamortized core deposit intangible was $1.3 million, as compared to $1.4 million at December 31, 2016.

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 both September 30, 2017 and December 31, 2016 were $2.7 million. Total outstanding principal balances of loans serviced for others were $350.1 million and $372.2 million at September 30, 2017, and December 31, 2016, respectively.

Changes in the net carrying amount of MSRs for the nine months ended September 30, 2017 and 2016 are shown in the following table:

	For the nine months
	ended September 30,
(in thousands)	2017			2016
Balance at beginning of period	$	921		$	1,018
Additions for mortgage loans sold		143			105
Amortization		(222	)		(192	)
Balance at end of period	$	842		$	931

22

Stock Yards Bancorp, inc. and subsidiary

(5) Income Taxes

Components of income tax expense from operations were as follows:

	Three months ended						Nine months ended
	September 30,						September 30,
(in thousands)	2017			2016			2017			2016
Current income tax expense
Federal	$	5,211		$	4,363		$	12,936		$	10,958
State		179			287			472			597
Total current income tax expense		5,390			4,650			13,408			11,555
Deferred income tax (benefit) expense
Federal		(1,583	)		(692	)		(2,240	)		(302	)
State		(44	)		(75	)		(30	)		(18	)
Total deferred income tax expense (benefit)		(1,627	)		(767	)		(2,270	)		(320	)
Change in valuation allowance		333			-			459			-
Total income tax expense	$	4,096		$	3,883		$	11,597		$	11,235

An analysis of the difference between statutory and effective income tax rates for the nine months ended September 30, 2017 and 2016 follows:

	Nine months ended September 30,
	2017			2016
U.S. federal statutory income tax rate		35.0	%		35.0	%
Tax credits		(4.6	)		(9.4	)
Excess tax benefits from share-based compensation arrangements		(3.0	)		-
Increase in cash surrender value of life insurance		(1.4	)		(0.9	)
Tax exempt interest income		(1.1	)		(1.3	)
State income taxes, net of federal benefit		0.7			0.9
Other, net		0.3			2.7
Effective income tax rate		25.9	%		27.0	%

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

Bancorp’s results for the first nine months of 2017 reflect implementation of Accounting Standards Update 2016-09, which provides guidance for the recognition of excess tax benefits or deficiencies related to share-based payment awards. Effective for fiscal years beginning after December 15, 2016, ASU 2016-09 changes the way these benefits and deficiencies are recorded. Prior to 2017 they were recorded in additional paid-in capital, and therefore did not affect earnings. Beginning in 2017, these amounts are being recorded as tax expense or benefit in the income statement. For the three and nine month periods ending September 30, 2017 Bancorp recorded benefits of $241 thousand and $1.4 million, respectively, within the provision for income tax expense for such awards.

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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 September 30, 2017 and December 31, 2016, 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 2012.

(6) Deposits

The composition of the Bank’s deposits outstanding at September 30, 2017 (unaudited) and December 31, 2016 is as follows:

	September 30,		December 31,
	2017		2016
(in thousands)
Non-interest bearing demand	$	676,824	$	680,156
Interest bearing deposits:
Interest bearing demand		725,368		768,139
Savings		149,596		140,030
Money market		698,198		682,421
Time deposits of more than $250,000		33,270		40,427
Other time deposits		198,710		209,375
Total time deposits		231,980		249,802
Total interest bearing deposits		1,805,142		1,840,392
Total deposits	$	2,481,966	$	2,520,548

Maturities of time deposits of more than $250,000, outstanding at September 30, 2017, are summarized as follows:

(in thousands)	Amount
3 months or less	$	11,463
Over 3 through 6 months		3,938
Over 6 through 12 months		10,942
Over 1 through 3 years		6,410
Over 3 years		517
Total	$	33,270

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Stock Yards Bancorp, inc. and subsidiary

(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 $71.9 million and $67.6 million at September 30, 2017 and December 31, 2016, respectively. Bancorp enters into sales of securities under agreement to repurchase at a specified future date. At September 30, 2017, 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 by and under the control of Bancorp.

(8) Federal Home Loan Bank Advances

Bancorp had outstanding borrowings totaling $50.1 million and $51.1 million at September 30, 2017 and December 31, 2016, respectively, via 14 separate fixed-rate advances. As of September 30, 2017, 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 $20.1 million, principal and interest payments are due monthly based on an amortization schedule.

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

(In thousands)	September 30, 2017					December 31, 2016
Year	Advance		Fixed Rate			Advance		Fixed Rate
2017	$	30,000		1.24	%	$	30,000		0.70	%
2020		1,753		2.23			1,790		2.23
2021		306		2.12			359		2.12
2024		2,505		2.36			2,661		2.36
2025		5,615		2.43			6,025		2.43
2026		8,658		1.99			8,936		1.99
2028		1,273		1.48			1,304		1.48
Total	$	50,110		1.61	%	$	51,075		1.30	%

In addition to fixed-rate advances listed above, at September 30, 2017 Bancorp had a $150 million cash management advance from the FHLB. This advance matured in the first week of October, 2017 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.

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 at times utilizes these borrowings to match fund long-term fixed rate loans. At September 30, 2017, the amount of available credit from the FHLB totaled $367.3 million.

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(9) Other Comprehensive Income

The following table illustrates activity within the balances of accumulated other comprehensive income by component, and is shown for the nine months ended September 30, 2017 and 2016.

	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, 2015	$	965		$	(60	)	$	(273	)	$	632
Net current period other comprehensive gain (loss)		4,110			(301	)		-			3,809
Balance at September 30, 2016	$	5,075		$	(361	)	$	(273	)	$	4,441
Balance at December 31, 2016	$	(1,211	)	$	(16	)	$	(272	)	$	(1,499	)
Net current period other comprehensive income gain		950			38			-			988
Amounts reclassified from other comprehensive income		(20	)		-			-			(20	)
Net current-period other comprehensive income		930			38			-			968
Balance at September 30, 2017	$	(281	)	$	22		$	(272	)	$	(531	)

(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.

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Stock Yards Bancorp, inc. and subsidiary

(11) Net Income Per Share

The following table reflects, for the three and nine months ended September 30, 2017 and 2016, net income (numerator) and average shares outstanding (denominator) for basic and diluted net income per share computations:

	Three months ended				Nine months ended
(in thousands, except per share data)	September 30,				September 30,
	2017		2016		2017		2016
Net income	$	11,704	$	10,467	$	33,097	$	30,411
Average basic shares outstanding		22,542		22,385		22,524		22,325
Dilutive securities		422		418		460		386
Average shares outstanding including dilutive securities including dilutive securities		22,964		22,803		22,984		22,711
Net income per share, basic	$	0.52	$	0.47	$	1.47	$	1.36
Net income per share, diluted	$	0.51	$	0.46	$	1.44	$	1.34

(12) Defined Benefit Retirement 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. All three officers are fully vested as of September 2017. Actuarially determined pension costs are expensed and accrued over the service period, and benefits are paid from Bancorp’s assets. Net periodic benefits costs, which include interest cost and amortization of net losses, totaled $34 thousand and $33 thousand for the three-month periods ended September 30, 2017 and 2016, respectively. For the nine months ended September 30, 2017 and 2016, the net periodic benefit costs totaled $103 thousand and $100 thousand, respectively.

(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. No additional shares were made available. As of September 30, 2017, there were 285,133 shares available for future awards.

Options, which have not been granted since 2007, had a vesting schedule of 20% per year and as of February 2017; all options have been exercised or expired. Stock appreciation rights (“SARs”) have a vesting schedule of 20% per year. SARs expire ten years after the grant date unless unvested grants are forfeited due to employment termination. SARs granted under the 2005 plan expire as late as 2025.

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 were entitled to dividend payments during the vesting period. For grants in 2015 and after, forfeitable dividends are deferred until shares are vested.

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Stock Yards Bancorp, inc. and subsidiary

Grants of performance stock units (“PSUs”) vest based upon service and a 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. Beginning in 2015, grants require a one year post-vesting holding period. For 2015, 2016 and 2017, the fair value of such grants incorporates a liquidity discount of 4.80%, 4.50% and 5.12%, respectively, related to the holding period.

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 equal to the 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						For nine months ended
	September 30,						September 30,
(in thousands)	2017			2016			2017			2016
Stock-based compensation expense before income taxes	$	670		$	573		$	2,012		$	1,646
Less: deferred tax benefit		(235	)		(200	)		(704	)		(576	)
Reduction of net income	$	435		$	373		$	1,308		$	1,070

Bancorp’s net income for the three and nine-month periods ended September 30, 2017 reflected the implementation of ASU 2016-09 which changed the way excess tax benefits and deficiencies related to share-based compensation are recorded. Prior to 2017 these were recorded directly to additional paid-in capital and, thus did not affect earnings. Beginning in 2017 these are recorded as a tax expense or benefit in the income statement. For the three and nine months ended September 30, 2017 these benefits resulted in a $241 thousand and a $1.4 million increase in net income, respectively. This tax benefit is not reflected in the table above.

Bancorp expects to record an additional $679 thousand of stock-based compensation expense in 2017 for equity grants outstanding as of September 30, 2017. As of September 30, 2017, Bancorp has $4.9 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 $216 thousand during the first nine months of 2017 for purchase of shares upon vesting of restricted stock units, net of cash received for options exercised. This compares to cash received of $1.6 million during the first nine months of 2016 for similar activity.

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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 input of assumptions, changes to which can materially affect the fair value estimate. Fair value of restricted shares is equal to Bancorp’s closing stock price on the date of grant. The following assumptions were used in SAR valuations at the grant date in each year:

	2017			2016
Dividend yield		2.72	%		2.94	%
Expected volatility		19.47	%		19.31	%
Risk free interest rate		2.29	%		1.70	%
Expected life of SARs (in years)		7.0			7.3

Dividend yield and expected volatility are based on historical information for Bancorp for time periods corresponding to the expected life of options and SARs granted. Expected volatility is the price volatility of the underlying shares for the expected term measured 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 award. 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, 2016 and the nine month period ended September 30, 2017 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, 2015
Vested and exercisable		656		$	14.02	-	19.44	$	15.75	$	6,191	$	3.39		3.7
Unvested		266			15.24	-	24.55		18.66		1,733		3.29		7.7
Total outstanding		922			14.02	-	24.55		16.59		7,924		3.36		4.8
Granted		88			25.76	-	33.08		25.84		1,866		3.56
Exercised		(272	)		14.02	-	17.89		16.38		4,155		3.73
Forfeited		(3	)		14.02	-	15.84		15.18		60		2.94
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		(47	)		14.02	-	17.89		15.52		1,168		3.27
Forfeited		-				-			-		-		-
At September 30, 2017
Vested and exercisable		519			14.02	-	25.76		16.39		11,218		3.15		4.3
Unvested		215			15.24	-	40.00		26.45		2,567		4.17		7.9
Total outstanding		734			14.02	-	40.00		19.17	$	13,785		3.45		5.3
Vested year-to-date		92		$	15.24	-	25.76	$	19.34	$	1,723	$	3.18

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. 46,410 shares had an intrinsic value of zero because the exercise price for those shares exceeded the current market price at September 30, 2017. There are no options outstanding as of September 30, 2017; all have been exercised or have expired.

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Stock Yards Bancorp, inc. and subsidiary

A summary of activity for restricted shares of common stock granted to officers for the periods ending December 31, 2016 and September 30, 2017 is outlined in the following table:

				Grant date
				weighted-
	Number			average cost
Unvested at December 31, 2015		155,858		$	18.98
2016 activity:
Shares awarded		51,122			25.78
Restrictions lapsed and shares released		(49,265	)		17.98
Shares forfeited		(12,480	)		20.69
Unvested at December 31, 2016		145,235		$	21.57
2017 activity:
Shares awarded		28,625			44.85
Restrictions lapsed and shares released		(46,220	)		19.76
Shares forfeited		(7,154	)		25.03
Unvested at September 30, 2017		120,486		$	27.59

Bancorp awarded PSUs to executive officers of Bancorp, the three-year performance period for which began January 1 of the award year. Shares awarded in 2017 under the 2014 grant totaled 50,022. Shares awarded in 2016 under the 2013 grant totaled 55,188.

The following table outlines outstanding PSU grants:

	Vesting				Expected
Grant	period		Fair		shares to
year	in years		value		be awarded
2015		3	$	20.02		51,910
2016		3		22.61		58,786
2017		3		35.66		24,756

In the first quarter of 2017, Bancorp awarded 4,680 RSUs to directors of Bancorp with a grant date fair value of $220 thousand. No awards were made in the second or third quarters of 2017.

(14) Stock Split

In April 2016 Bancorp declared a 3 for 2 stock split effected as a 50% stock dividend payable in May 2016. Share and per share information has been adjusted for this split.

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(15) Commitments and Contingent Liabilities

As of September 30, 2017, 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 September 30, 2017 commitments to extend credit of $709.7 million, including standby letters of credit of $17.6 million, represent normal banking transactions. Commitments to extend credit were $628.3 million, including letters of credit of $15.6 million, as of December 31, 2016. 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, if any, 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 September 30, 2017, Bancorp had accrued $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 part of the normal course of business Bancorp entered into an agreement to purchase 29 automatic teller machines (ATMs) over the next three years at a total price of $1.2 million. Management was able to secure favorable pricing by contractually committing to purchase the machines.

Also, as of September 30, 2017, in the normal course of business, there were pending legal actions and administrative proceedings in which claims for damages are asserted and/or losses could be incurred. We record a liability for these matters if an unfavorable outcome is probable and the amount of loss can be reasonably estimated, including expected insurance coverage. For proceedings where the reasonable estimate of loss is a range, we record a best estimate of loss within the range. At September 30, 2017 we have recorded a liability of $266 thousand for such matters.

(16) 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.

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 source 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.

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● 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 publicly traded 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 a counterparty’s inability to perform and the change in value of derivative assets and liabilities attributable to credit risk was not significant during 2017.

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Stock Yards Bancorp, inc. and subsidiary

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

(in thousands)	Fair value at September 30, 2017
Assets	Total		Level 1		Level 2		Level 3
Investment securities available-for-sale
Government sponsored enterprise obligations	$	372,664	$	-	$	372,664	$	-
Mortgage-backed securities - government agencies		146,720		-		146,720		-
Obligations of states and political subdivisions		51,622		-		51,622		-
Corporate equity securities		516		516		-		-
Total investment securities available-for-sale		571,522		516		571,006		-
Interest rate swaps		182		-		182		-
Total assets	$	571,704	$	516	$	571,188	$	-
Liabilities
Interest rate swaps	$	148	$	-	$	148	$	-

(in thousands)	Fair value at December 31, 2016
Assets	Total		Level 1		Level 2		Level 3
Investment securities available-for-sale
U.S. Treasury and other U.S. government obligations	$	74,998	$	74,998	$	-	$	-
Government sponsored enterprise obligations		268,090		-		268,090		-
Mortgage-backed securities - government agencies		168,843		-		168,843		-
Obligations of states and political subdivisions		57,444		-		57,444		-
Corporate equity securities		699		699		-		-
Total investment securities available-for-sale		570,074		75,697		494,377		-
Interest rate swaps		203		-		203		-
Total assets	$	570,277	$	75,697	$	494,580	$	-
Liabilities
Interest rate swaps	$	178	$	-	$	178	$	-

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 September 30, 2017 or December 31, 2016.

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Stock Yards Bancorp, inc. and subsidiary

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 September 30, 2017 and December 31, 2016 there was no valuation allowance for the mortgage servicing rights, as fair value exceeded cost. Accordingly, MSRs are not included in either table below for September 30, 2017 or December 31, 2016. See Note 4 for more information regarding MSRs.

For impaired loans in the table below, fair value is calculated as carrying value of 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 the 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 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 September 30, 2017, total impaired collateral dependent loans charged down to their fair value and impaired loans with a valuation allowance were $3.2 million, and the specific allowance totaled $722 thousand, resulting in a fair value of $2.5 million, compared with total collateral dependent loans charged down to their fair value and impaired loans with a valuation allowance of $4.2 million, and the specific allowance allocation totaling $1.3 million, resulting in a fair value of $2.9 million at December 31, 2016.  Losses represent charge offs and changes in specific allowances for the period 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 September 30, 2017 and December 31, 2016, carrying value of all other real estate owned was $2.6 million and $5.0 million, respectively.

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Stock Yards Bancorp, inc. and subsidiary

Below are carrying values of assets measured at fair value on a non-recurring basis.  Impaired loan amounts reported represent only those impaired loans with specific valuation allowances and collateral dependent impaired loans charged down to their carrying value.

(in thousands)	Fair value at September 30, 2017								Losses for 9 month
									period ended
	Total		Level 1		Level 2		Level 3		September 30, 2017
Impaired loans	$	2,530	$	-	$	-	$	2,530	$	(280	)
Other real estate owned		2,640		-		-		2,640		(171	)
Total	$	5,170	$	-	$	-	$	5,170	$	(451	)

(in thousands)	Fair value at December 31, 2016								Losses for 9 month
									period ended
	Total		Level 1		Level 2		Level 3		September 30, 2016
Impaired loans	$	2,933	$	-	$	-	$	2,933	$	(1,612	)
Other real estate owned		4,488		-		-		4,488		(62	)
Total	$	7,421	$	-	$	-	$	7,421	$	(1,674	)

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 nine months ended September 30, 2017, 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 September 30, 2017, significant unobservable inputs used in fair value measurements are presented below.

				Significant	Weighted
	Fair		Valuation	unobservable	average of
(dollars in thousands)	Value		technique	input	input
Impaired loans -collateral dependent	$	2,530	Appraisal	Appraisal discounts		15.0	%
Other real estate owned		2,640	Appraisal	Appraisal discounts		23.4

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Stock Yards Bancorp, inc. and subsidiary

(17) 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
September 30, 2017	amount		Fair value		Level 1		Level 2		Level 3
Financial assets
Cash and short-term investments	$	129,078	$	129,078	$	129,078	$	-	$	-
Mortgage loans held for sale		5,459		6,005		-		6,005		-
Federal Home Loan Bank stock and other securities		7,666		7,666		-		7,666		-
Loans, net		2,310,172		2,302,466		-		-		2,302,466
Accrued interest receivable		8,162		8,162		8,162		-		-
Financial liabilities
Deposits		2,481,966		2,480,641		-		-		2,480,641
Short-term borrowings		233,824		233,824		-		233,824		-
FHLB advances		50,110		50,070		-		50,070		-
Secured borrowings		18,351								18,210
Accrued interest payable		212		212		212		-		-

(in thousands)	Carrying
December 31, 2016	amount		Fair value		Level 1		Level 2		Level 3
Financial assets
Cash and short-term investments	$	47,973	$	47,973	$	47,973	$	-	$	-
Mortgage loans held for sale		3,213		3,481		-		3,481		-
Federal Home Loan Bank stock and other securities		6,347		6,347		-		6,347		-
Loans, net		2,281,368		2,284,569		-		-		2,284,569
Accrued interest receivable		6,878		6,878		6,878		-		-
Financial liabilities
Deposits		2,520,548		2,519,725		-		-		2,519,725
Short-term borrowings		114,969		114,969		-		114,969		-
FHLB advances		51,075		50,806		-		50,806		-
Secured borrowings		15,814								15,731
Accrued interest payable		144		144		144		-		-

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Stock Yards Bancorp, inc. and subsidiary

Management used the following methods and assumptions to estimate the fair value of each class of financial instrument for which it is practicable to estimate the value.

Cash, short-term investments, accrued interest receivable/payable and short-term borrowings

For these short-term instruments, carrying amount is a reasonable estimate of fair value.

Mortgage loans held for sale

Mortgage loans held for sale are initially recorded at the lower of cost or market value. The portfolio is comprised of residential real estate loans and fair value is determined by market quotes for similar loans based on loan type, term, rate, size and the borrower’s credit score.

Federal Home Loan Bank stock and other securities

For these securities without readily available market values, carrying amount is a reasonable estimate of fair value as it equals the amount due from FHLB or other issuer at upon redemption.

Loans, net

US GAAP prescribes the exit price concept for estimating fair value of loans. Because there is not an active market (exit price) for trading virtually all types of loans in Bancorp’s portfolio, fair value of loans is estimated by discounting future cash flows using current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities (entrance price).

Deposits

Fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date. Fair value of fixed-rate certificates of deposits is estimated by discounting future cash flows using the rates currently offered for deposits of similar remaining maturities.

Federal Home Loan Bank advances

Fair value of FHLB advances is estimated by discounting future cash flows using estimates of current market rate for instruments with similar terms and remaining maturities.

Secured Borrowings Secured borrowings represent sold participation loans for which 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. Secured borrowings are included in other liabilities on the consolidated balance sheets.

Commitments to extend credit and standby letters of credit

Fair values of commitments to extend credit are estimated using fees currently charged to enter into similar agreements and creditworthiness of customers. Fair values of standby letters of credit are based on fees currently charged for similar agreements or estimated cost to terminate them or otherwise settle obligations with counterparties at the reporting date.

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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Stock Yards Bancorp, inc. and subsidiary

(18) Derivative Financial Instruments

Periodically, Bancorp enters into an interest rate swap transaction with a borrower, who desires to hedge their 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 consolidated 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 are expected to have an insignificant effect on earnings. Exchanges of cash flows related to undesignated interest rate swap agreements for the first nine months of 2017 were offsetting and therefore had no net 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 exposure. Direct credit exposure is limited to the net difference between 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 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 September 30, 2017 and December 31, 2016, Bancorp had outstanding undesignated interest rate swap contracts as follows:

(dollar amounts in thousands)	Receiving					Paying
	September 30,		December 31,			September 30,			December 31,
	2017		2016			2017			2016
Notional amount	$	53,214	$	43,986		$	53,214		$	43,986
Weighted average maturity (years)		8.9		9.9			8.9			9.9
Fair value	$	148	$	(178	)	$	(148	)	$	178

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.

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Stock Yards Bancorp, inc. and subsidiary

The following table details Bancorp’s derivative position designated as a cash flow hedges, and fair values as of September 30, 2017 and December 31, 2016.

(dollars in thousands)
							Fair value
Notional		Maturity	Receive (variable)	Pay fixed			assets (liabilities)
amount		date	index	swap rate			September 30, 2017		December 31, 2016
$	10,000	12/6/2021	US 3 Month LIBOR		1.89	%	$	26	$	16
	20,000	12/6/2020	US 3 Month LIBOR		1.79	%		8		9
$	30,000				1.82	%	$	34	$	25

(19) Regulatory Matters

Bancorp and the Bank are subject to various capital requirements prescribed by banking regulations and administered by state and federal banking agencies. The final rules implementing the Basel Committee on Banking Supervision's capital guidelines for U.S. banks (Basel III rules) became effective on January 1, 2015 with full compliance with all of the requirements being phased in over a multi-year schedule, and fully phased in by January 1, 2019. The minimum capital level requirements applicable to banks and bank holding companies subject to the rules are:

• a total risk-based capital ratio of 8%

• a common equity tier 1 capital ratio of 4.5%

• a tier 1 risk-based capital ratio of 6%

• a tier 1 leverage ratio of 4%

Under these requirements, Bancorp and the Bank must meet minimum amounts and percentages of Tier 1 capital, common equity Tier 1 capital, and total capital 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.

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

• 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.

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Stock Yards Bancorp, inc. and subsidiary

As of September 30, 2017, Bancorp meets the requirements to be considered well capitalized under the rules, and is not subject to limitations due to the capital conservation buffer.

The following tables set forth consolidated Bancorp’s and the Bank’s risk based capital amounts and ratios as of September 30, 2017 and December 31, 2016.

(dollars in thousands)	Actual					Minimum for adequately capitalized					Minimum for well capitalized
September 30, 2017	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk-based capital (1)
Consolidated	$	358,610		13.64	%	$	210,328		8.00	%	NA		NA
Bank		346,040		13.20			209,721		8.00		$	262,152		10.00	%
Common equity tier 1 risk-based capital
Consolidated		333,312		12.67			118,382		4.50		NA		NA
Bank		320,742		12.23			118,016		4.50			157,355		6.00
Tier 1 risk-based capital (1)
Consolidated		333,312		12.67			157,843		6.00		NA		NA
Bank		320,742		12.23			157,355		6.00			157,355		6.00
Leverage (2)
Consolidated		333,312		11.02			120,984		4.00		NA		NA
Bank		320,742		10.61			120,921		4.00			151,151		5.00

(dollars in thousands)	Actual					Minimum for adequately capitalized					Minimum for well capitalized
December 31, 2016	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk-based capital (1)
Consolidated	$	338,525		13.04	%	$	207,684		8.00	%	NA		NA
Bank		325,630		12.57			207,243		8.00		$	259,053		10.00	%
Common equity tier 1 risk-based capital
Consolidated		314,147		12.10			116,832		4.50		NA		NA
Bank		301,252		11.63			116,564		4.50			155,418		6.00
Tier 1 risk-based capital (1)
Consolidated		314,147		12.10			155,775		6.00		NA		NA
Bank		301,252		11.63			155,418		6.00			155,418		6.00
Leverage (2)
Consolidated		314,147		10.54			119,221		4.00		NA		NA
Bank		301,252		10.11			119,190		4.00			148,987		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

(20) Segments

Bancorp’s principal activities include commercial banking and wealth management and trust (WM&T). 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 securities brokerage activity. WM&T 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 WM&T consist of premises and equipment, net of accumulated depreciation.

Selected financial information by business segment for the three and nine month periods ended September 30, 2017 and 2016 follows:

			Wealth
	Commercial		management
(in thousands)	banking		and trust		Total
Three months ended September 30, 2017
Net interest income	$	26,089	$	75	$	26,164
Provision for loan losses		150		-		150
Wealth management and trust services		-		5,025		5,025
All other non-interest income		6,078		-		6,078
Non-interest expense		18,491		2,826		21,317
Income before income taxes		13,526		2,274		15,800
Income tax expense		3,284		812		4,096
Net income	$	10,242	$	1,462	$	11,704
Segment assets	$	3,153,886	$	2,027	$	3,155,913
Three months ended September 30, 2016
Net interest income	$	24,690	$	70	$	24,760
Provision for loan losses		1,250		-		1,250
Wealth management and trust services		-		4,800		4,800
All other non-interest income		6,558		-		6,558
Non-interest expense		17,722		2,796		20,518
Income before income taxes		12,276		2,074		14,350
Income tax expense		3,142		741		3,883
Net income	$	9,134	$	1,333	$	10,467
Segment assets	$	2,936,542	$	2,123	$	2,938,665

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Stock Yards Bancorp, inc. and subsidiary

			Wealth
	Commercial		management
(in thousands)	banking		and trust		Total
Nine months ended September 30, 2017
Net interest income	$	76,350	$	230	$	76,580
Provision for loan losses		1,650		-		1,650
Wealth management and trust services		-		15,272		15,272
All other non-interest income		18,303		-		18,303
Non-interest expense		54,756		9,055		63,811
Income before income taxes		38,247		6,447		44,694
Income tax expense		9,295		2,302		11,597
Net income	$	28,952	$	4,145	$	33,097
Segment assets	$	3,153,886	$	2,027	$	3,155,913
Nine months ended September 30, 2016
Net interest income	$	71,985	$	194	$	72,179
Provision for loan losses		2,500		-		2,500
Wealth management and trust services		-		14,219		14,219
All other non-interest income		17,999		-		17,999
Non-interest expense		51,914		8,337		60,251
Income before income taxes		35,570		6,076		41,646
Income tax expense		9,064		2,171		11,235
Net income	$	26,506	$	3,905	$	30,411
Segment assets	$	2,936,542	$	2,123	$	2,938,665

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

This item discusses results of operations for Stock Yards Bancorp, Inc. (“Bancorp” or “Company”), and its subsidiary, Stock Yards Bank & Trust Company (“Bank”) for the three and nine months ended September 30, 2017 and compares these periods with the same periods 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 nine months of 2017 compared with same period in 2016. 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.

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Stock Yards Bancorp, inc. and subsidiary

Overview of 2017 through September 30, 2017

Bancorp completed the first nine months of 2017 with net income of $33.1 million, an 8.8% increase over the comparable period in 2016. The increase is primarily due to higher net interest income, higher non-interest income, and a reduction in provision for loan losses. These increases were partially offset by higher non-interest expense. Diluted earnings per share for the first nine months of 2017 were $1.44, compared with $1.34 for the first nine months of 2016. Bancorp's performance for the first nine months of 2017 reflected several positive factors, including:

● The continued positive effect of solid loan growth over the past 12 months, which has increased Bancorp’s net interest income nearly 6% compared with that for the third quarter of 2016;

● A six basis point increase in net interest margin sequentially from the second quarter of 2017;

● A reduction in the provision for loan losses as credit quality remained excellent;

● Steady growth in fee income from the Wealth Management and Trust Group;

● A tax benefit from the wind-down of a tax-credit partnership; and

● Solid 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. Loan and deposit volumes are influenced by competition, new account acquisition efforts and economic factors including market interest rates, business spending, consumer confidence and competitive conditions within the marketplace.

Net interest income increased $4.4 million, or 6.1%, for the first nine months of 2017, compared with the same period in 2016. Net interest margin increased to 3.63% for the first nine months of 2017, compared with 3.60% for the same period of 2016.

For the nine-month period ended September 30, 2017, Bancorp recorded a $1.7 million provision for loan losses, compared to $2.5 million for the same period in 2016. The provision for loan losses represents a charge to earnings necessary to establish an allowance for loan losses that, in management’s evaluation, is adequate to provide coverage for the inherent losses on outstanding loans.

Total non-interest income in the first nine months of 2017 increased $1.4 million, or 4.2%, compared with the same period in 2016, and comprised 30.0% of total revenues, as compared to 31.6% for the same period in 2016. Continuing the trends of 2016, Bancorp’s wealth management and trust department (WM&T) led the increase with a 7.4%, or $1.1 million increase over the same period in 2016.

Total non-interest expense in the first nine months of 2017 increased $3.6 million, or 5.9%, compared with the same period in 2016, primarily due to increases in salaries and employee benefits, as well as expenses related to the Bancorp’s continued growth and improvements in technology infrastructure. Amortization expenses for investments in tax-credit partnerships, which had a significant impact on earnings in 2016, decreased by $1.2 million, or 39.4%, in the first nine months of 2017 as compared to the same period in 2016. Bancorp's efficiency ratio in the first nine months of 2017 was 57.6% compared to 57.4% in the same period in 2016. Excluding amortization of the investments in tax credit partnerships, the adjusted efficiency ratio, a non-GAAP measure, would have been 55.9% and 54.5% for the first nine months of 2017 and 2016, respectively. See the Non-GAAP Financial Measures section for details on reconcilement to US GAAP measures.

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Stock Yards Bancorp, inc. and subsidiary

Bancorp’s effective tax rate decreased to 25.9% in 2017 from 27.0% in 2016. In 2017 Bancorp adopted ASU 2016-09 “Compensation – Stock Compensation Improvements to Employee Share-Based Payment Accounting”. The new standard requires excess tax benefits and deficiencies related to share-based payment awards to be reflected in the statement of operations as a component of the provision for income taxes. For the nine months ended September 30, 2017 Bancorp recorded a benefit of $1.4 million for such tax benefits against the provision for income tax expense. Prior to adoption of ASU 2016-09 these tax benefits were recorded directly to additional paid-in capital.

The ratio of shareholder’s equity to total assets was 10.59% as of September 30, 2017 compared with 10.33% at December 31, 2016. 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. The ratio of tangible common equity to total tangible assets was 10.54% as of September 30, 2017, compared with 10.26% at December 31, 2016. See the Non-GAAP Financial Measures section for details on reconcilement to US GAAP measures.

In April 2016 Bancorp declared a 3 for 2 stock split effected as a 50% stock dividend payable in May 2016. Share and per share information has been adjusted for this dividend.

The following sections provide more details on Bancorp’s financial condition and results of operation.

a) Results Of Operations

Net income of $11.7 million for the three months ended September 30, 2017 increased $1.2 million, or 11.8%, from $10.5 million for the comparable 2016 period. Basic net income per share was $0.52 for the third quarter of 2017, an increase of 10.6% from the $0.47 for the third quarter of 2016. Net income per share on a diluted basis was $0.51 for the third quarter of 2017, as compared to $0.46 for the same period in 2016. See Note 11 for additional information related to net income per share.

Annualized return on average assets and annualized return on average stockholders’ equity were 1.53% and 14.03%, respectively, for the third quarter of 2017, compared with 1.44% and 13.47%, respectively, for the same period in 2016.

Net income of $33.1 million for the nine months ended September 30, 2017 increased $2.7 million, or 8.8%, from $30.4 million for the comparable 2016 period. Basic net income per share was $1.47 for the first nine months of 2017, an increase of 8.1% from the $1.36 for the period in 2016. Net income per share on a diluted basis was $1.44 for the first nine months of 2017, an increase of 7.5% from the $1.34 for the same period in 2016. See Note 11 for additional information related to net income per share.

Annualized return on average assets and annualized return on average stockholders’ equity were 1.47% and 13.65%, respectively, for the first nine months of 2017, compared with 1.42% and 13.51%, respectively, for the same period in 2016.

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Stock Yards Bancorp, inc. and subsidiary

Net Interest Income

The following table presents average balance sheets for the three and nine month periods ended September 30, 2017 and 2016 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.

Average Balances and Interest Rates - Taxable Equivalent Basis

	Three months ended September 30,
	2017							2016
	Average				Average			Average				Average
(Dollars in thousands)	balances		Interest		rate			balances		Interest		rate
Earning assets:
Federal funds sold and interest bearing deposits	$	120,927	$	388		1.27	%	$	72,673	$	95		0.52	%
Mortgage loans held for sale		3,515		48		5.42			5,070		66		5.18
Securities:
Taxable		387,696		1,920		1.96			406,481		1,984		1.94
Tax-exempt		51,905		388		2.97			59,981		426		2.83
FHLB stock and other securities		7,666		83		4.30			6,347		63		3.95
Loans, net of unearned income		2,289,435		25,484		4.42			2,171,772		23,511		4.31
Total earning assets		2,861,144		28,311		3.93			2,722,324		26,145		3.82
Less allowance for loan losses		25,434							23,634
		2,835,710							2,698,690
Non-earning assets:
Cash and due from banks		41,550							41,682
Premises and equipment		41,395							42,665
Accrued interest receivable and other assets		108,433							100,109
Total assets	$	3,027,088						$	2,883,146
Interest bearing liabilities:
Deposits:
Interest bearing demand deposits	$	725,822	$	418		0.23	%	$	698,874	$	232		0.13	%
Savings deposits		150,332		55		0.15			136,292		11		0.03
Money market deposits		691,726		741		0.43			655,912		346		0.21
Time deposits		232,773		379		0.65			247,237		352		0.57
Securities sold under agreements to repurchase		73,806		33		0.18			68,835		38		0.22
Federal funds purchased and other short term borrowings		27,535		77		1.11			23,471		19		0.32
FHLB advances		50,221		244		1.93			44,194		184		1.66
Total interest bearing liabilities		1,952,215		1,947		0.40			1,874,815		1,182		0.25
Non-interest bearing liabilities:
Non-interest bearing demand deposits		697,815							656,689
Accrued interest payable and other liabilities		46,194							42,597
Total liabilities		2,696,224							2,574,101
Stockholders’ equity		330,864							309,045
Total liabilities and stockholders’ equity	$	3,027,088						$	2,883,146
Net interest income			$	26,364						$	24,963
Net interest spread						3.53	%						3.57	%
Net interest margin						3.66	%						3.65	%

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Stock Yards Bancorp, inc. and subsidiary

Average Balances and Interest Rates - Taxable Equivalent Basis

	Nine months ended September 30,
	2017							2016
	Average				Average			Average				Average
(Dollars in thousands)	balances		Interest		rate			balances		Interest		rate
Earning assets:
Federal funds sold and interest bearing deposits	$	97,543	$	798		1.09	%	$	100,653	$	395		0.52	%
Mortgage loans held for sale		3,656		145		5.30			4,918		185		5.02
Securities:
Taxable		406,476		5,944		1.96			413,508		6,135		1.98
Tax-exempt		53,568		1,186		2.96			61,417		1,298		2.82
FHLB stock and other securities		6,801		229		4.50			6,347		190		4.00
Loans, net of unearned income		2,275,320		74,055		4.35			2,113,744		68,238		4.31
Total earning assets		2,843,364		82,357		3.87			2,700,587		76,441		3.78
Less allowance for loan losses		24,891							23,057
		2,818,473							2,677,530
Non-earning assets:
Cash and due from banks		40,547							40,097
Premises and equipment		41,798							41,500
Accrued interest receivable and other assets		106,035							94,263
Total assets	$	3,006,853						$	2,853,390
Interest bearing liabilities:
Deposits:
Interest bearing demand deposits	$	739,295	$	1,076		0.19	%	$	710,417	$	735		0.14	%
Savings deposits		147,471		123		0.11			134,004		35		0.03
Money market deposits		693,656		1,968		0.38			652,406		1,060		0.22
Time deposits		239,250		1,070		0.60			254,172		1,086		0.57
Securities sold under agreements to repurchase		67,556		100		0.20			60,438		100		0.22
Federal funds purchased and other short term borrowings		20,581		125		0.81			25,021		57		0.30
FHLB advances		50,541		715		1.89			43,533		552		1.69
Total interest bearing liabilities		1,958,350		5,177		0.35			1,879,991		3,625		0.26
Non-interest bearing liabilities:
Non-interest bearing demand deposits		680,831							637,812
Accrued interest payable and other liabilities		43,437							34,844
Total liabilities		2,682,618							2,552,647
Stockholders’ equity		324,235							300,743
Total liabilities and stockholders’ equity	$	3,006,853						$	2,853,390
Net interest income			$	77,180						$	72,816
Net interest spread						3.52	%						3.52	%
Net interest margin						3.63	%						3.60	%

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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 35%. Approximate tax equivalent adjustments to interest income were $199 thousand and $203 thousand, respectively, for the three month periods ended September 30, 2017 and 2016 and $599 thousand and $637 thousand, respectively, for the nine month periods ended September 30, 2017 and 2016.

● 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 $19.4 million and $16.3 million, respectively, for the three month periods ended September 30, 2017 and 2016 and $18.9 million and $11.2 million, respectively, for the nine month periods ended September 30, 2017 and 2016.

Fully taxable equivalent net interest income of $26.4 million for the three months ended September 30, 2017 increased $1.4 million, or 5.6%, from $25.0 million for the same period in 2016. Bancorp recognized positive effects of increased average balances on loans, resulting from loan growth in 2016, and increased rates on all earning asset categories following rate increases by the Federal Reserve, were partially offset by the negative effect of increased rates for all funding sources, and increased average balances for all funding sources except certificate of deposit accounts. To date in 2017 the Federal Reserve twice raised the target Fed Funds rate with 25 basis point increases in both March and June. Management increased rates paid on retail deposits accounts in conjunction with the March rate hike. Those deposit customers had not seen a rate increase on their accounts in over ten years. The June increase resulted in most of the variable rate loan portfolio breaking through applicable floor rates which will enhance margin going forward. Net interest spread and net interest margin were 3.53% and 3.66%, respectively, for the third quarter of 2017 and 3.57% and 3.65%, respectively, for the third quarter of 2016. Heightened competition on pricing, effects of liquidity and a flattening yield curve contributed to pressure on net interest margin.

Fully taxable equivalent net interest income of $77.2 million for the nine months ended September 30, 2017 increased $4.4 million, or 6.0%, from $72.8 million for the same period in 2016. Positive effects of increased average balances on loans, resulting from loan growth in 2016, and increased rates on other earning assets, were partially offset by the negative effect of increasing rates and average balances for all funding sources except certificates of deposits. Average rates on loans increased period to period while the rates on taxable securities decreased. Net interest spread and net interest margin were 3.52% and 3.63%, respectively, for the first nine months of 2017 and 3.52% and 3.60%, respectively, for the first nine months of 2016.

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Stock Yards Bancorp, inc. and subsidiary

Average earning assets increased $138.8 million or 5.1% to $2.9 billion for the three month period ended September 30, 2017 as compared to the same time period in 2016, reflecting growth in the loan portfolio and to a lesser extent fed funds sold. Average interest bearing liabilities increased $77 million or 4.1% for the third quarter of September 30, 2017 as compared to the third quarter of 2016. A decrease in volume of time deposits partially offset increases in all other interest bearing deposit and borrowing categories. Average earning assets increased $142.8 million or 5.3%, to $2.8 billion for the first nine months of 2017 as compared with 2016, reflecting increases in the loan portfolio, the majority of which was garnered in 2016. Average interest bearing liabilities increased $78.4 million, or 4.1%, to $1.95 billion for the first nine months of 2017, as compared with the same period in 2016. Increases in the volume of interest bearing demand deposits, savings deposits, money market deposit accounts, securities sold under agreements to repurchase, and FHLB advances, were partially offset by decreases in volume of time deposits, and other short term borrowing products.

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.

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, interest bearing liabilities and off-balance sheet financial instruments. 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 September 30, 2017 simulation analysis, which shows minimal interest rate sensitivity, indicates that Bancorp is asset sensitive as increases in interest rates of 100 to 200 basis points have a positive effect on net interest income. If rates raise 200 basis points, net interest income would increase 2.12%. The excess liquidity held in interest bearing deposit accounts and other short-term investments along with variable rate loans now at or above their floors gives Bancorp significant assets that will reprice as rates move. Those same balances cause an estimated decline in net interest income in a down 100 basis point rate scenario. These estimates are summarized below.

	Net interest income % change
Increase 200 bp	2.12
Increase 100 bp	1.03
Decrease 100 bp	(4.27)
Decrease 200 bp	(11.10)

Approximately 61% of Bancorp’s loan portfolio has fixed rates and 39% of its loan portfolio is priced at variable rates. With the Prime rate currently at 4.25%, and after the .25% increase in Prime in June of 2017, the majority of Bancorp’s variable rate loans now have interest rates at or above their floors.   

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Stock Yards Bancorp, inc. and subsidiary

Undesignated derivative instruments described in Note 18 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 18 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.

Provision for Loan Losses

The provision for loan losses represents a charge to earnings necessary to establish 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. The provision reflects an allowance methodology that is driven by risk ratings, historical losses, and qualitative factors. The provision for the first nine months of 2017, and the resulting allowance level, reflected a number of factors, including stable and acceptable credit quality metrics, modest loan growth during the period, and an expansion of the historical look-back period from 24 quarters to 28 quarters. 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 loss rates used in the quantitative allocation caused management to review the overall methodology for the qualitative factors to ensure Bancorp was appropriately capturing the risk not addressed in the historical loss rates used in the quantitative allocation, resulting in the same expansion of the look-back period for the qualitative factors. 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 show improvement during 2017, with levels of non-performing loans continuing a five year downward trend. Classified assets, after experiencing a slight elevation the prior quarter stabilized in the third quarter. Bancorp recorded provision for loan losses of $150 thousand and $1.7 million for the first three and nine month periods of 2017, respectively, as compared to $1.3 million and $2.5 million for the same periods in 2016.

Management uses loan grading procedures which result in specific allowance allocations for estimated inherent risk of loss. For all loans graded, but not individually reviewed for allowance purposes, a general allowance allocation is computed using historical data based on actual loss experience. Specific and general allocations plus consideration of qualitative factors represent management’s best estimate of probable losses contained in the loan portfolio at the evaluation date. Although the allowance for loan losses is comprised of specific and general allocations, the entire allowance is available to absorb any credit losses. Based on this detailed analysis of credit risk, management considers the allowance for loan losses adequate to cover probable losses inherent in the loan portfolio at September 30, 2017.

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Stock Yards Bancorp, inc. and subsidiary

An analysis of the changes in the allowance for loan losses and selected ratios for the three and nine month periods ended September 30, 2017 and 2016 follows:

(dollars in thousands)	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
Balance at the beginning of the period	$	25,115		$	23,141		$	24,007		$	22,441
Provision for loan losses		150			1,250			1,650			2,500
Loan charge-offs, net of recoveries		(317	)		(22	)		(709	)		(572	)
Balance at the end of the period	$	24,948		$	24,369		$	24,948		$	24,369
Average loans, net of unearned income	$	2,289,436		$	2,188,089		$	2,275,320		$	2,124,921
Provision for loan losses to average loans (1)		0.01	%		0.06	%		0.07	%		0.12	%
Net loan charge-offs to average loans (1)		0.01	%		0.00	%		0.03	%		0.03	%
Allowance for loan losses to average loans		1.09	%		1.11	%		1.09	%		1.15	%
Allowance for loan losses to period-end loans		1.07	%		1.10	%		1.07	%		1.10	%
(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.

An analysis of net charge-offs by loan category for the three and nine month periods ended September 30, 2017 and 2016 follows:

(in thousands)	Three months						Nine months
	ended September 30,						ended September 30,
Net loan charge-offs (recoveries)	2017			2016			2017			2016
Commercial and industrial	$	280		$	18		$	642		$	375
Construction and development, excluding undeveloped land		-			(11	)		-			(21	)
Undeveloped land		-			-			-			-
Real estate mortgage - commercial investment		(16	)		(67	)		(52	)		(226	)
Real estate mortgage - owner occupied commercial		-			(9	)		-			305
Real estate mortgage - 1-4 family residential		(1	)		64			(5	)		63
Home equity		(5	)		(34	)		4			(34	)
Consumer		59			61			120			110
Total net loan charge-offs (recoveries)	$	317		$	22		$	709		$	572

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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 and nine month periods ended September 30, 2017 and 2016.

	Three months							Nine months
	ended September 30,							ended September 30,
(In thousands)	2017		2016		% Change			2017		2016		% Change
Non-interest income:
Wealth management and trust services	$	5,025	$	4,800		4.7	%	$	15,272	$	14,219		7.4	%
Service charges on deposit accounts		2,522		2,544		(0.9	)		7,368		6,952		6.0
Bankcard transactions		1,492		1,455		2.5			4,412		4,198		5.1
Mortgage banking		781		1,072		(27.1	)		2,380		2,896		(17.8	)
Gain (loss) on calls of securities available for sale		31		-		0.0			31		-		0.0
Securities brokerage		551		558		(1.3	)		1,584		1,539		2.9
Bank owned life insurance		204		216		(5.6	)		964		657		46.7
Other		497		713		(30.3	)		1,564		1,757		(11.0	)
Total non-interest income	$	11,103	$	11,358		(2.2	)%	$	33,575	$	32,218		4.2	%
Non-interest expenses:
Salaries and employee benefits	$	12,983	$	12,048		7.8	%	$	39,244	$	36,214		8.4	%
Net occupancy		1,621		1,646		(1.5	)		4,765		4,716		1.0
Data processing		1,920		1,747		9.9			5,909		5,172		14.2
Furniture and equipment		316		277		14.1			861		853		0.9
FDIC insurance		242		356		(32.0	)		716		1,035		(30.8	)
Amortization of investment in tax credit partnerships		616		1,015		(39.3	)		1,847		3,046		(39.4	)
Other		3,619		3,429		5.5			10,469		9,215		13.6
Total non-interest expenses	$	21,317	$	20,518		3.9	%	$	63,811	$	60,251		5.9	%

The largest component of non-interest income is wealth management and trust (“WM&T”) revenue. The magnitude of WM&T revenue distinguishes Bancorp from most other community banks of similar asset size. WM&T assets under management (AUM) totaled $2.7 billion at September 30, 2017, a 12.5% increase compared to $2.4 billion at September 30, 2016. AUM are stated at market value and while the 2017 increase was partially the result of a rising stock market during the period, primarily it represents a continuance of the 2016 trend for new clients added. WM&T revenue, which constitutes an average of 45% of non-interest income, increased $225 thousand, or 4.7% and $1.1 million or 7.4% for the three and nine month periods ended September 30, 2017 respectively, compared to the same periods in 2016. Recurring fees, which generally comprise over 98% of the WM&T revenue, increased $340 thousand or 7.4% and $1.4 million, or 10.7%, for the respective three and nine month periods ended September 30, 2017, as compared to the same periods in 2016. Recurring fees earned for managing accounts are based on a percentage of market value of AUM and are assessed on a monthly basis. Some revenues of WM&T, 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 AUM. Total non-recurring fees decreased $115 thousand and $393 thousand for the three and nine months ended September 30, 2017, compared to the same periods in 2016, primarily due to a decrease in estate fees period to period. 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 WM&T will continue to factor significantly in Bancorp’s financial results and provide strategic diversity to revenue streams.

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Stock Yards Bancorp, inc. and subsidiary

The following table provides information regarding AUM by WM&T as of September 30, 2017 and 2016. This table demonstrates that:

•     Approximately 80% of WM&T’s assets are actively managed.

•     Corporate retirement plan accounts consist primarily of participant directed assets.

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

•     The majority of WM&T’s managed assets are in personal trust and investment advisory accounts.

Assets Under Management by Account Type
	September 30, 2017				September 30, 2016
	Assets				Assets
(in thousands)	Managed		Non- managed (1)		Managed		Non- managed (1)
Personal trust accounts	$	567,222	$	96,005	$	512,905	$	62,221
Personal investment retirement accounts		340,159		7,142		311,215		10,024
Corporate retirement accounts		56,515		382,803		53,190		335,613
Investment advisory accounts		995,769		20,169		867,776		-
Foundation and endowment accounts		220,722		-		224,213		-
Total fiduciary accounts	$	2,180,387	$	506,119	$	1,969,299	$	407,858
Custody and safekeeping accounts		-		59,490		-		35,773
Totals	$	2,180,387	$	565,609	$	1,969,299	$	443,631
Total managed and non-managed assets	$	2,745,996			$	2,412,930

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

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Stock Yards Bancorp, inc. and subsidiary

The table below presents data regarding WM&T managed assets by class of investment for the periods ending September 30, 2017 and 2016. 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 WM&T’s managed assets is divided approximately 60% in equities and 40% in fixed income securities, and this composition is relatively consistent from year to year, and

• No Stock Yards Bank propriety mutual funds exist, and therefore no such investment options are available to WM&T clients.

Managed Assets by Class of Investment
	As of September 30,
(in thousands)	2017		2016
Interest bearing deposits	$	122,787	$	127,570
US Treasury and government agency obligations		42,293		50,020
State, county and municipal obligations		132,431		126,394
Money market mutual funds		8,211		13,718
Equity mutual funds		548,972		453,995
Other mutual funds - fixed, balanced, and municipal		310,779		319,240
Other notes and bonds		120,155		88,463
Common and preferred stocks		795,732		688,543
Real estate mortgages		373		392
Real estate		43,664		44,572
Other miscellaneous assets (1)		54,990		56,392
Total managed assets	$	2,180,387	$	1,969,299

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

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Stock Yards Bancorp, inc. and subsidiary

The table below provides information regarding fee income earned by Bancorp’s WM&T department for the three and nine-month periods ended September 30, 2017 and 2016. 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. 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.

Wealth Management and Trust Services Income
	Three months				Nine months
	ended September 30,				ended September 30,
(In thousands)	2017		2016		2017		2016
Personal trust accounts	$	1,691	$	1,707	$	5,523	$	5,427
Personal retirement accounts		832		778		2,426		2,229
Corporate retirement accounts		373		408		1,161		1,162
Investment advisory accounts		1,895		1,681		5,471		4,789
Foundation and endowment		135		126		400		364
Custody and safekeeping		36		27		119		73
Brokerage and insurance		9		13		28		35
Other		54		60		144		140
Total	$	5,025	$	4,800	$	15,272	$	14,219

Other Non-interest Income and Non-interest Expense

Service charges on deposit accounts decreased $22 thousand or 1% while increasing $416 thousand, or 6.0%, for the three and nine month periods of 2017, respectively, as compared with the same periods in 2016. The decline quarter over quarter was driven by a decline in fees assessed on overdrawn checking accounts. This component of service charge income is generally driven by transaction volume, which can fluctuate throughout the year. Cash management services offered to commercial customers through our treasury management area continues to be a growing source of revenue. Treasury generated gross revenue grew 12% over the nine month period ended September 30, 2017, as compared to the same period in 2016. Fees charged on overdrawn checking accounts declined 4% year over year. Management expects this source of revenue to slowly decline due to changes in customer behavior and ongoing regulatory restrictions. Service charges were further impacted by the introduction of a new checking account product in the third quarter of 2016. The product provides ancillary services to customers, while carrying a monthly service charge. The income associated with the new checking account product was approximately $641 thousand for the first nine months of 2017, as compared to $198 thousand for the same period in 2016.

Bankcard transaction revenue increased $37 thousand or 2.5% for the third quarter of 2017, and $214 thousand, or 5.1% for the first nine months of 2017, as compared as compared with the same periods in 2016. Bankcard transaction revenue primarily represents income the Bank derives from customers’ use of debit and credit cards. Bancorp began offering credit cards to business customers late in 2015. Revenue on credit cards totaled $276 thousand and $795 thousand for the three and nine month periods of 2017, respectively, compared to $206 thousand and $520 thousand for the same periods in 2016. Bancorp expects volume of credit card transactions to increase as this product is expanded within the commercial customer base. Interchange income on debit cards declined $35 thousand and $66 thousand in the three and nine month periods of 2017, respectively, compared to the same periods in 2016. Bancorp expects future decreases in interchange rates on debit cards as merchants structure their technology and processes to take advantage of lower transactional pricing options, which do not favor Bancorp or the banking industry as a whole.

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Stock Yards Bancorp, inc. and subsidiary

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. Changes in interest rates on mortgage loans directly impact the volume of business transacted by the mortgage banking department. Mortgage banking revenue decreased $291 thousand or 27.1% and $516 thousand, or 17.8%, for the respective three and nine month periods ended September 30, 2017 as compared with the same periods in 2016, primarily due to lower transaction volume. In Bancorp’s primary market of Louisville, Kentucky the housing inventory was low, particularly in the first half of 2017, contributing to this decline.

Securities brokerage commissions and fees decreased $7 thousand or 1.3% while increasing $45 thousand, or 2.9%, for the respective three and nine month periods ended September 30, 2017 as compared with the same periods in 2016. Revenue fluctuations correspond 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.

Bank Owned Life Insurance (BOLI) income totaled $204 thousand for the third quarter and $964 thousand for the first nine months of 2017, as compared to $216 thousand and $657 thousand for the same periods in 2016. The year to date increase in 2017 over 2016, was primarily due to $348 thousand in death benefit proceeds recorded in the second quarter of 2017. BOLI assets represent the cash surrender value for life insurance policies on certain current and prior employees who provided consent for Bancorp to be the beneficiary of a portion of such policies. BOLI income results from the related change in cash surrender value and any death benefits received under the policies. This income helps offset the cost of various employee benefits.

Other non-interest income decreased $216 thousand or 30.3% and $193 thousand, or 11%, for the respective three and nine month periods ended September 30, 2017 compared with the same periods in 2016. The primary driver of the decline was swap fee income, which declined $116 thousand in the third quarter and $251 thousand for the first nine months of 2017, as compared with the same periods in 2016. These fees are an infrequent source of revenue due to the unique nature of the transactions. This category contains a variety of other income sources none of which resulted in individually significant variances.

Salaries and employee benefits increased $935 thousand or 7.8% for the third quarter of 2017, and $3.0 million, or 8.4%, for the first nine months of 2017, as compared with the same periods in 2016. The increases are largely due to higher compensation expenses, reflecting addition of personnel and to a lesser extent, increased health care costs. The additions to staff were driven by expanding market presence in Cincinnati and Indianapolis, along with the need for front line lending and loan support staff across all markets. The Bank’s employee health insurance is a self-insured plan and related expenses fluctuate with claims experience. At September 30, 2017, Bancorp had 581 full-time equivalent employees compared with 558 at September 30, 2016.

Net occupancy expense decreased $25 thousand or 1.5% for the third quarter and increased $49 thousand or 1.0% for the nine months ended September 30, 2017, as compared with the same periods in 2016. The quarterly decrease was the result of timing of normal maintenance activities. The increase year over year was largely due to increased recurring expenses for multiple bank properties and a decrease in sub-lease rents.

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Stock Yards Bancorp, inc. and subsidiary

Data processing expense increased $173 thousand or 9.9% in the third quarter of 2017 and $737 thousand, or 14.2% in the first nine months of 2017, as compared with the same periods in 2016. The increase was primarily a result of increases in computer infrastructure 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.

Furniture and equipment expense increased $39 thousand or 14.1% in the third quarter of 2017 and $8 thousand or 0.9% for the first nine months of 2017, as compared with the same periods in 2016. Costs of capital asset additions flow through the statement of income over the lives of the assets in the form of depreciation expense.

FDIC insurance expense decreased $114 thousand or 32% and $319 thousand, or 30.7%, for the respective three and nine month periods of 2017, as compared with the same periods in 2016. The expense assessment is calculated by the FDIC on a quarterly basis. During 2016 the FDIC revised the assessment criteria to more closely align FDIC insurance expense with each financial institution’s risk profile. Bancorp benefited from this change.

Amortization of investments in tax credit partnerships decreased $399 thousand for the third quarter of 2017 and $1.2 million for the first nine months of 2017, as compared with the same periods of 2016. 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 increased $190 thousand or 5.5% and $1.3 million or 13.6% in the respective three and nine month periods ending September 30, 2017, as compared with the same periods in 2016. The quarterly increase was largely due to recording a $266 thousand liability related to an estimated loss from certain administrative proceedings arising in the course of our business. The increase for the year to date 2017 period was largely due to a combination of numerous items, the largest of which are detailed below:

● $382 thousand of net recoveries on sales of foreclosed assets in 2016 compared with a net recovery in 2017 of $39 thousand.

● Legal and professional fees increased $351 thousand primarily as a result of expenses associated with elevated collection efforts on impaired credits.

● Local Franchise taxes based upon deposit balances which Bancorp pays in lieu of income taxes in Kentucky and Ohio, were up $174 thousand during the nine month period. Deposit growth drove the increased expense.

● As described above, during 2016 Bancorp introduced a checking product that offers benefits to account owners. The expense associated with the product totaled $145 thousand for the first nine months of 2017 as opposed to $28 thousand for the same period in 2016.

● Losses relating to check and debit card fraud increased $84 thousand for the first nine months of 2017 over the same period in 2016.

● In the third quarter of 2017 we recorded a $266 thousand liability related to an estimated loss from certain administrative proceedings arising in the course of our business.

● Other non-interest expenses also include other insurance, advertising, printing, mail and telecommunications, none of which had individually significant variances.

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Income Taxes

Bancorp recorded income tax expense of $4.1 million and $11.6 million for the three and nine month periods ended September 30, 2017, respectively, as compared with $3.9 million and $11.2 million for the same periods in 2016. The effective rate for both the three and nine months ended September 30, 2017, was 25.9% in 2017 as compared to 27.1% and 27.0% for the three and nine months ended September 30, 2016, respectively. Refer to Footnote 5 to the consolidated financial statements for a reconciliation of the statutory and effective income tax rates.

Bancorp invests in certain partnerships with customers that yield federal income tax credits, and these tax credits reduce the effective tax rate. The level of this activity for the first nine months of 2017 was less than that of the comparable period in 2016 as is reflected in the comparable effect on effective tax rates for those periods. Taken as a whole, the tax benefit of these investments exceeds amortization expense associated with them, resulting in a positive impact on net income.

The effective tax rate in 2017 was largely reduced by the result of the adoption of ASU 2016-09 “Compensation – Stock Compensation Improvements to Employee Share-Based Payment Accounting”. The new standard requires excess tax benefits and deficiencies related to share-based payment awards to be reflected in the statement of operations as a component of the provision for income taxes. For the three and nine months ended September 30, 2017 Bancorp recorded a benefit of $241 thousand and $1.4 million, respectively for such excess benefits against the provision for income tax expense. Prior to adoption of ASU 2016-09 these tax benefits were recorded directly to additional paid-in capital. Tax benefits recorded to capital for the three and nine months ended September 30, 2016 were $443 thousand and $963 thousand, respectively.

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 15.

Other commitments discussed in Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2016, have not materially changed since that report was filed, relative to qualitative and quantitative disclosures of fixed and determinable contractual obligations.

b) Financial Condition

Balance Sheet

Total assets increased $116.4 million, or 3.8%, to $3.2 billion at September 30, 2017 as compared to $3.0 billion at December 31, 2016. Loans increased $29.7 million, or 1.3%, period to period, with increases primarily in commercial and industrial loans, commercial real estate, and to a lesser degree, 1-4 family residential loans. The most significant decrease was seen in commercial construction and development loans, primarily the result of significant loan principal repayments where maturing loans were not replaced with permanent financing. Securities available-for-sale increased by $1.4 million during the first nine months of 2017. The majority of this increase the result of short-term investments made at quarter end largely offset by maturities during the first nine months of 2017. Included in securities available-for-sale are short-term U.S. government sponsored entities. These securities, which totaled $150 million at September 30, 2017 and $100 million at December 31, 2016, normally have a maturity of less than one month, and are purchased at quarter-end as part of a tax minimization strategy. The remaining variance was attributable to reduction in unrealized losses on the securities portfolio to $431 thousand at September 30, 2017 as compared to unrealized losses of $1.9 million at December 31, 2016. Funds from maturing available-for-sale investments were held as cash, or invested short term, to fund future loan growth.

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Total liabilities increased $96.0 million, December 31, 2016 to September 30, 2017, from $2.7 billion to $2.8 billion, respectively. Federal funds purchased and other short-term borrowing increased $114.6 million, period to period, primarily the result of $150 million in borrowing for the short-term investments mentioned above. Bancorp uses short-term lines of credit to manage its overall liquidity position. Due to normal cyclical activity total deposits decreased $38.6 million or 1.5%, period to period. Interest bearing demand deposits accounts decreased, $42.7 million, or 5.6%; time deposits, $17.8 million, or 7.1%; and non-interest bearing demand deposit accounts, $3.3 million, or 0.5%. Money market deposit accounts and savings accounts increased, period to period, $15.7 million, or 2.3%, and $9.6 million, or 6.8%, respectively. Securities sold under agreements to repurchase increased $4.3 million, or 6.3%. Other liabilities increased $16.7 million, or 42.9%.

Elements of Loan Portfolio

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

(in thousands)
Loans by Type	September 30, 2017		December 31, 2016
Commercial and industrial	$	750,728	$	736,841
Construction and development, excluding undeveloped land		174,310		192,348
Undeveloped land (1)		20,989		21,496
Real estate mortgage:
Commercial investment		576,810		538,886
Owner occupied commercial		397,804		408,292
1-4 family residential		261,707		249,498
Home equity - first lien		51,925		55,325
Home equity - junior lien		63,416		67,519
Subtotal: real estate mortgage		1,351,662		1,319,520
Consumer		37,431		35,170
Total loans	$	2,335,120	$	2,305,375

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

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Loan portfolio growth built further on the momentum experienced in the second quarter of 2017, driven by solid loan production that continued to exceed the average pace recorded over the last three years. While all of the Company's markets participated in this growth, Indianapolis, through excellent leadership and a growing lending team, led the way. Still, the conversion of loan production into portfolio growth continued to track below the exceedingly strong rate that characterized 2016 due to several factors, including principal repayments primarily related to commercial construction projects and borrowers who sold collateral or their business. Also, management believes that business owners remain more cautious about the longer-term direction of the economy, awaiting greater clarity on possible tax reform. Considering its loan pipeline, management anticipates continued momentum in net loan growth in the fourth quarter of 2017, although net loan growth could be challenging if loan payoffs persist at high levels.

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 September 30, 2017 and December 31, 2016, the total participated portions of loans of this nature were $18.3 million and $15.8 million, respectively.

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, if any. 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 bias for resolution.

The allowance methodology is driven by risk ratings, historical losses, and qualitative factors. The provision for the first nine months of 2017, and the resulting allowance level, reflected a number of factors, including a slight elevation in classified loans and an expansion of the historical look-back period from 24 quarters to 28 quarters. 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 loss rates used in the quantitative allocation caused management to review the overall methodology for the qualitative factors to ensure Bancorp was 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 show improvement during 2017, with levels of non-performing loans continuing a five year downward trend. During its review of qualitative factors in the first nine months of 2017, Bancorp noted a potential exposure for one pool of classified loans. Due to this potential exposure, Bancorp increased its qualitative allocation for the allowance for the nine month period.

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 September 30, 2017 the allowance for loan loss was $24.9 million, a $900 thousand increase over the December 31, 2016 balance of $24.0 million. For the comparative periods, the allowance as a percent of average loans was 1.09% and 1.11%, respectively. The allowance as a percent of period end loans, as of each period end, was 1.07% and 1.04%, respectively.

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Non-performing Loans and Assets

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

(dollars in thousands)	September 30, 2017			December 31, 2016
Non-accrual loans(1)	$	4,858		$	5,295
Troubled debt restructuring		949			974
Loans past due 90 days or more and still accruing		261			438
Non-performing loans		6,068			6,707
Foreclosed real estate		2,640			5,033
Non-performing assets	$	8,708		$	11,740
Non-performing loans as a percentage of total loans		0.26	%		0.29	%
Non-performing assets as a percentage of total assets		0.28	%		0.39	%

Non-performing assets as of September 30, 2017 were comprised of 33 non-accrual loans, ranging in amount from $1 to $907 thousand, five accruing TDRs, and foreclosed real estate held for sale. Foreclosed real estate held at September 30, 2017 included properties of three former lending relationships, with a combined value of $2.6 million. At September 30, 2017 there were two properties, with a combined recorded investment of $75 thousand, in the process of foreclosure.

(1) No TDRs previously accruing were moved to non-accrual during the three or nine month periods ending September 30, 2017. No TDRs were non-accrual as of September 30, 2017 or December 31, 2016.

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

Non-accrual loans by type
(in thousands)	September 30, 2017		December 31, 2016
Commercial and industrial	$	1,256	$	1,767
Construction and development, excluding undeveloped land		737		538
Undeveloped land		474		474
Real estate mortgage
Real estate mortgage - commercial investment		55		107
Real estate mortgage - owner occupied commercial		1,470		1,042
Real estate mortgage - 1-4 family residential		785		984
Home equity		81		383
Subtotal: Real estate mortgage		2,391		2,516
Home equity and consumer loans		-		-
Total loans	$	4,858	$	5,295

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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 $81.4 million at September 30, 2017. 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 $571.5 million at September 30, 2017. The portfolio includes maturities of approximately $216.7 million over the next twelve months, including $150 million of short-term securities which matured in October 2017. 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 September 30, 2017, total investment securities pledged for these purposes comprised 58% of the available-for-sale investment portfolio, leaving $241.8 million of unpledged securities, including $150 million which matured the first week of October..

Bancorp defines core deposits as demand, savings, and money market deposit accounts and certificates of deposit less than or equal to $250,000. At September 30, 2017, such deposits totaled $2.4 billion and represented 99% of Bancorp’s total deposits, as compared to $2.5 billion, or 98% of total deposits at December 31, 2016. 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.

As of September 30, 2017 Bancorp had no brokered deposits. This compares to $498 thousand, or 0.02% of total deposits, in brokered deposits at December 31, 2016.

Included in the total deposit balances at September 30, 2017 is $122.4 million of public funds deposits generally comprised of accounts from local government agencies and public school districts in Bancorp’s markets.

Other sources of funds available to meet daily needs include FHLB advances. 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 other time deposits. At September 30, 2017, available credit from the FHLB totaled $367.3 million. Additionally, Bancorp had available federal funds purchased lines with correspondent banks totaling $105 million at September 30, 2017.

At September 30, 2017 Bancorp had a $150 million cash management advance from the FHLB. This advance matured in the first week of October, 2017 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.

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Bancorp’s principal source of cash is dividends paid to it as sole shareholder of the Bank. At September 30, 2017, the Bank may pay up to $70.3 million in dividends to Bancorp without regulatory approval subject to the ongoing capital requirements of the Bank.

d) Capital Resources

At September 30, 2017, stockholders’ equity totaled $334.3 million, an increase of $20.4 million since December 31, 2016. See the Consolidated Statement of Changes in Stockholders’ Equity for further detail of the changes in equity since the end of 2015. One component of equity is accumulated other comprehensive income 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 $531 thousand at September 30, 2017 compared with a loss of $1.5 million on December 31, 2016. The $968 thousand positive difference is primarily a reflection of the effect of the changing interest rate environment during the first nine months of 2017 as short term rates increased slightly, while long term rates decreased, which decreased Bancorp’s unrealized loss on securities available for sale.

As of September 30, 2017, Bancorp meets all requirements to be considered well capitalized under regulatory risk-based capital rules, and is not subject to limitations due to the capital conservation buffer. See Footnote 19 to the consolidated financials for more information regarding Bancorp’s and the Bank’s risk-based capital amounts and ratios as of September 30, 2017 and December 31, 2016.

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

(in thousands, except per share data)	September 30, 2017			December 31, 2016
Total equity	$	334,255		$	313,872
Less core deposit intangible		(1,269	)		(1,405	)
Less goodwill		(682	)		(682	)
Tangible common equity	$	332,304		$	311,785
Total assets	$	3,155,913		$	3,039,481
Less core deposit intangible		(1,269	)		(1,405	)
Less goodwill		(682	)		(682	)
Total tangible assets	$	3,153,962		$	3,037,394
Total shareholders' equity to total assets		10.59	%		10.33	%
Tangible common equity ratio		10.54			10.26
Number of outstanding shares		22,669			22,617
Book value per share	$	14.75		$	13.88
Tangible common equity per share		14.66			13.79

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.

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

	Three months ended						Nine months ended
	September 30,						September 30,
(amounts in thousands)	2017			2016			2017			2016
Non-interest expense	$	21,317		$	20,518		$	63,811		$	60,251
Net interest income (tax-equivalent)		26,363			24,963			77,179			72,816
Non-interest income		11,103			11,358			33,575			32,218
Total revenue	$	37,466		$	36,321		$	110,754		$	105,034
Efficiency ratio		56.9	%		56.5	%		57.6	%		57.4	%

(amounts in thousands)	2017			2016			2017			2016
Non-interest expense	$	21,317		$	20,518		$	63,811		$	60,251
Less: amortization of investments in tax credit partnerships		(616	)		(1,015	)		(1,847	)		(3,046	)
Adjusted non-interest expense		20,701			19,503			61,964			57,205
Net interest income (tax-equivalent)		26,363			24,963			77,179			72,816
Non-interest income		11,103			11,358			33,575			32,218
Total revenue	$	37,466		$	36,321		$	110,754		$	105,034
Adjusted efficiency ratio		55.3	%		53.7	%		55.9	%		54.5	%

f) Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, which outlines a single comprehensive model for use in accounting for revenue arising from contracts with customers, and supersedes most current revenue recognition guidance. The ASU was originally effective for fiscal years and interim periods beginning after December 15, 2016. In August 2015, FASB issued ASU 2015-14 which delayed the effective date. The effective date will be annual reporting periods beginning after December 15, 2017, and the interim periods within that year. Bancorp has reviewed existing contractual arrangements and believes the majority of revenue earned is excluded from the scope of the pronouncement and the impact of adoption if any would be minimal. Bancorp continues to evaluate and develop processes and controls for procedural and disclosure requirements of the standard.

The FASB also issued a series of other ASUs, which update ASU 2014-09. The effective dates for ASU 2014-09 have been updated by ASU 2015-14, Deferral of the Effective Date. For public business entities, certain employee benefit plans, and certain not-for-profit entities, ASU 2014-09 is effective for annual and interim periods in fiscal years beginning after December 15, 2017. Earlier application is permitted only as of annual and interim periods in fiscal years beginning after December 15, 2016. Bancorp is including these ASUs in its evaluation and implementation efforts relative to ASU 2014-09.

•     ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)

•     ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing

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•     ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients

•     ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers

In January 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities, which requires equity investments to be measured at fair value with changes in fair value recognized in net income. The ASU is effective for fiscal years and interim periods beginning after December 15, 2017. Because Bancorp does not have significant investments in equity securities, the adoption of ASU 2016-01 is not expected to have a significant impact on Bancorp’s operations or financial statements.

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 amendment 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 does not expect adoption to significantly impact Bancorp’s financial condition or results of operations.

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.

In August 2016, FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, which amends guidance in ASC 230 on the classification of certain cash receipts and payments in the statement of cash flows. The primary purpose of the ASU is to reduce the diversity in practice that has resulted from the lack of consistent principles on this topic. The ASU’s amendments add or clarify guidance on eight cash flow issues. The guidance in the ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. Entities must apply the guidance retrospectively to all periods presented but may apply it prospectively from the earliest date practicable if retrospective application would be impracticable. Bancorp does not anticipate that adoption of the ASU will have a significant impact on the consolidated financial statements of the Company.

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In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, which requires entities to recognize at the transaction date the income tax consequences of inter-company asset transfers other than inventory. This ASU is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2017. Entities may early adopt the ASU, but only at the beginning of an annual period for which no financial statements (interim or annual) have already been issued or made available for issuance. Bancorp does not expect adoption of this standard to have a significant impact on the consolidated financial statements of the Company.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires companies to include cash and cash equivalents that have restrictions on withdrawal or use in total cash and cash equivalents on the statement of cash flows. This ASU is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, adjustments should be reflected at the beginning of the fiscal year that includes that interim period. Bancorp does not expect adoption of this standard to have a significant impact on the consolidated financial statements of the Company.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which provides a new framework for determining whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This ASU is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2017. For all other entities, the ASU is effective for annual periods in fiscal years beginning after December 15, 2018, and interim periods in fiscal years beginning after December 15, 2019. Entities may early adopt the ASU and apply it to transactions that have not been reported in financial statements that have been issued or made available for issuance. Bancorp does not expect adoption of this standard to have a significant impact on the consolidated financial statements of the Company.

In January 2017, the FASB issued ASU 2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments—Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings (SEC Update), which incorporates into the FASB Accounting Standards Codification recent SEC guidance about disclosing, under SEC SAB Topic 11.M, the effect on financial statements of adopting the revenue, leases, and credit losses standards. The SEC staff had previously announced that registrants should include the disclosures starting with their December 2017 financial statements. Bancorp is evaluating the potential impact of implementation of this standard on the consolidated financial statements of the Company.

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 February 2017, the FASB issued ASU 2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets, which clarifies the guidance in Subtopic 610-20 on accounting for derecognition of a nonfinancial asset. The ASU also defines in-substance nonfinancial assets and includes guidance on partial sales of nonfinancial assets. An entity is required to apply the amendments in this ASU at the same time that it applies ASU 2014-09. 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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In March 2017, the FASB issued ASU 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which requires companies to present the service cost component of net benefit cost in the same line items in which they report compensation cost. Companies will present all other components of net benefit cost outside operating income, if this subtotal is presented. This ASU is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2017. Early adoption is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance. Bancorp does not expect adoption of this standard to have a significant impact on the consolidated financial statements of the Company.

In May 2017, the FASB issued ASU 2017-09, Compensation — Stock Compensation (Topic 718): Scope of Modification Accounting which clarifies what constitutes a modification of a share-based payment award. This ASU is effective for all entities for annual and interim periods in fiscal years beginning after December 15, 2017. Early adoption is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance. Bancorp does not expect adoption of this standard to have a significant impact on the consolidated financial statements of the Company.

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815); I. Accounting for Certain Financial Instruments with Down Round Features. II. Replacement of the Indefinite Deferral for Mandatory Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatory Redeemable Noncontrolling Interests with a Scope Exception, which makes limited changes to as to classifying certain financial instruments as either liabilities or equity. This ASU is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. Because Bancorp does not have financial instruments with a down round feature, the implementation of ASU 2017-11 is not expected 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.

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.”

68

Stock Yards Bancorp, inc. and subsidiary

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 have concluded that, because of the material weakness described in Management’s Report on Internal Control Over Financial Reporting in our Annual Report on Form 10-K for the year ended December 31, 2016, Bancorp’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were not effective as of September 30, 2017. However, based on a number of factors, we believe that the consolidated financial statements in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial position and results of operation and cash flows for the periods presented in conformity with US GAAP.

Changes in Internal Control over Financial Reporting

With regard to the material weakness, our remediation efforts began during the first quarter of 2017. We continue to strengthen how certain controls are designed, performed and documented. We have increased staffing in the internal loan review department, and engaged a third party to assist with loan review. We must now demonstrate the effectiveness of these changes with an appropriate amount of consistency and for a sufficient period of time to conclude that the control is functioning properly. Other than these changes, 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 September 30, 2017 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.

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 September 30, 2017.

	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
July 1 - July 31		-	$	-		-		-
August 1 - August 31		2,280	$	35.62		-		-
Sep 1 - Sep 30		2,306	$	37.52		-		-
Total		4,586	$	36.58		-		-

(1)     Activity represents shares of stock withheld to pay taxes due upon exercise of stock appreciation rights.

69

Stock Yards Bancorp, inc. and subsidiary

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. September 30, 2017 Quarterly Report on Form 10-Q, filed on November 3, 2017, 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

70

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: November 3, 2017	By:     /s/ David P. Heintzman David P. Heintzman, Chairman and Chief Executive Officer
Date: November 3, 2017	By:     /s/ Nancy B. Davis Nancy B. Davis, Executive Vice President, Treasurer and Chief Financial Officer

71

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: November 3, 2017	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: November 3, 2017	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 September 30, 2017 (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: November 3, 2017	By:	/s/ David P. Heintzman
		David P. Heintzman,
		Chairman and
		Chief Executive Officer
Date: November 3, 2017	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	9 Months Ended
	Sep. 30, 2017	Oct. 26, 2017
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	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		22,670,610
Document Type	10-Q
Document Period End Date	Sep. 30, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3
Amendment Flag	false

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Assets
Cash and due from banks	$ 47,700	$ 39,709
Federal funds sold and interest bearing deposits	81,378	8,264
Cash and cash equivalents	129,078	47,973
Mortgage loans held for sale	5,459	3,213
Securities available-for-sale (amortized cost of $571,953 in 2017 and $571,936 in 2016)	571,522	570,074
Federal Home Loan Bank stock and other securities	7,666	6,347
Loans	2,335,120	2,305,375
Less allowance for loan losses	24,948	24,007
Net loans	2,310,172	2,281,368
Premises and equipment, net	41,498	42,384
Bank owned life insurance	31,854	31,867
Accrued interest receivable	8,162	6,878
Other assets	50,502	49,377
Total assets	3,155,913	3,039,481
Liabilities and Stockholders’ Equity
Non-interest bearing	676,824	680,156
Interest bearing	1,805,142	1,840,392
Total deposits	2,481,966	2,520,548
Securities sold under agreements to repurchase	71,863	67,595
Federal funds purchased and other short-term borrowings	161,961	47,374
Federal Home Loan Bank advances	50,110	51,075
Accrued interest payable	212	144
Other liabilities	55,546	38,873
Total liabilities	2,821,658	2,725,609
Stockholders’ equity:
Preferred stock, no par value. Authorized 1,000,000 shares; no shares issued or outstanding
Common stock, no par value. Authorized 40,000,000 shares; issued and outstanding 22,669,339 and 22,617,098 shares in 2017 and 2016, respectively	36,424	36,250
Additional paid-in capital	30,681	26,682
Retained earnings	267,681	252,439
Accumulated other comprehensive loss	(531)	(1,499)
Total stockholders’ equity	334,255	313,872
Total liabilities and stockholders’ equity	$ 3,155,913	$ 3,039,481

XML

Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) $ / shares in Thousands, $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Securities available for sale, amortized cost	$ 571,953	$ 571,936
Preferred stock, 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, 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)	22,669,339	22,617,098
Common stock, shares outstanding (in shares)	22,669,339	22,617,098

XML

Consolidated Statements of Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Interest income:
Loans	$ 25,401	$ 23,436	$ 73,812	$ 67,992
Federal funds sold and interest bearing deposits	388	95	798	395
Mortgage loans held for sale	48	66	145	185
Securities – taxable	2,003	2,047	6,173	6,325
Securities – tax-exempt	271	298	829	907
Total interest income	28,111	25,942	81,757	75,804
Interest expense:
Deposits	1,593	941	4,237	2,916
Federal funds purchased and other short-term borrowing	77	19	125	57
Securities sold under agreements to repurchase	33	38	100	100
Federal Home Loan Bank advances	244	184	715	552
Total interest expense	1,947	1,182	5,177	3,625
Net interest income	26,164	24,760	76,580	72,179
Provision for loan losses	150	1,250	1,650	2,500
Net interest income after provision for loan losses	26,014	23,510	74,930	69,679
Non-interest income:
Wealth management and trust services	5,025	4,800	15,272	14,219
Service charges on deposit accounts	2,522	2,544	7,368	6,952
Bankcard transactions	1,492	1,455	4,412	4,198
Mortgage banking	781	1,072	2,380	2,896
Gain on call of securities available for sale	31		31
Securities brokerage	551	558	1,584	1,539
Bank owned life insurance	204	216	964	657
Other	497	713	1,564	1,757
Total non-interest income	11,103	11,358	33,575	32,218
Non-interest expenses:
Salaries and employee benefits	12,983	12,048	39,244	36,214
Net occupancy	1,621	1,646	4,765	4,716
Data processing	1,920	1,747	5,909	5,172
Furniture and equipment	316	277	861	853
FDIC insurance	242	356	716	1,035
Amortization of investments in tax credit partnerships	616	1,015	1,847	3,046
Other	3,619	3,429	10,469	9,215
Total non-interest expenses	21,317	20,518	63,811	60,251
Income before income taxes	15,800	14,350	44,694	41,646
Income tax expense	4,096	3,883	11,597	11,235
Net income	$ 11,704	$ 10,467	$ 33,097	$ 30,411
Net income per share:
Basic (in dollars per share)	$ 0.52	$ 0.47	$ 1.47	$ 1.36
Diluted (in dollars per share)	$ 0.51	$ 0.46	$ 1.44	$ 1.34
Average common shares:
Basic (in shares)	22,542	22,385	22,524	22,325
Diluted (in shares)	22,964	22,803	22,984	22,711

XML

Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Net income	$ 11,704	$ 10,467	$ 33,097	$ 30,411
Other comprehensive income, net of tax:
Unrealized gains (losses) arising during the period, net of tax $29, ($616), $512, and $2,213, respectively	56	(1,147)	950	4,110
Reclassification adjustment for securities (gains) realized in income (net of tax of $(11), $0, $(11), and $0, respectively)	(20)		(20)
Unrealized gains (losses) arising during the period, net of tax benefit of $23, $74, $21, ($162), respectively	43	137	38	(301)
Other comprehensive income (loss), net of tax	79	(1,010)	968	3,809
Comprehensive income	$ 11,783	$ 9,457	$ 34,065	$ 34,220

XML

Consolidated Statements of Comprehensive Income (Unaudited) (Parentheticals) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Unrealized gain (loss) on securities available for sale, tax	$ 29,000	$ (616,000)	$ 512,000	$ 2,213,000
Reclassification adjustment for securities gains realized in income, tax	(11,000)	0	(11,000)	0
Unrealized gain (loss) on hedging instruments, tax	$ 23,000	$ 74,000	$ 21,000	$ (162,000)

XML

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, 2015	14,919
Balance at Dec. 31, 2015	$ 10,616	$ 44,180	$ 231,091	$ 632	$ 286,519
Net income			30,411		30,411
Other comprehensive income, net of tax				3,809	3,809
Stock compensation expense		1,646			1,646
Stock issued for share-based awards, net of withholdings to satisfy employee tax obligations upon award (in shares)	159
Stock issued for share-based awards, net of withholdings to satisfy employee tax obligations upon award	$ 527	3,404	(2,903)		1,028
3 for 2 stock split (in shares)	7,494
3 for 2 stock split	$ 24,956	(24,956)
Cash dividends			(11,843)		(11,843)
Shares cancelled (in shares)	(9)
Shares cancelled	$ (31)	(224)	255
Balance (in shares) at Sep. 30, 2016	22,563
Balance at Sep. 30, 2016	$ 36,068	24,050	247,011	4,441	311,570
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			33,097		33,097
Other comprehensive income, net of tax				968	968
Stock compensation expense		2,012			2,012
Stock issued for share-based awards, net of withholdings to satisfy employee tax obligations upon award (in shares)	59
Stock issued for share-based awards, net of withholdings to satisfy employee tax obligations upon award	$ 198	2,142	(4,669)		(2,329)
Cash dividends			(13,365)		(13,365)
Shares cancelled (in shares)	(7)
Shares cancelled	$ (24)	(155)	179
Balance (in shares) at Sep. 30, 2017	22,669
Balance at Sep. 30, 2017	$ 36,424	$ 30,681	$ 267,681	$ (531)	$ 334,255

XML

Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (Parentheticals)	9 Months Ended
	Sep. 30, 2017 $ / shares	Sep. 30, 2016 $ / shares
Common Stock [Member] | Stock Split From [Member]
Stock split		2
Retained Earnings [Member]
Cash dividends, per share (in dollars per share)	$ 0.59	$ 0.53
Stock split		3

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Operating activities:
Net income	$ 11,704	$ 10,467	$ 33,097	$ 30,411
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	150	1,250	1,650	2,500	$ 3,000
Depreciation, amortization and accretion, net			6,848	8,016
Deferred income tax provision			(1,811)	(320)
Gain on call of securities available for sale	(31)		(31)
Gain on sales of mortgage loans held for sale			(1,453)	(1,825)
Origination of mortgage loans held for sale			(74,857)	(91,195)
Proceeds from sale of mortgage loans held for sale			74,064	93,861
Bank owned life insurance income	(204)	(216)	(964)	(657)
Loss on the disposal of premises and equipment				163
(Gain) on the sale of foreclosed assets			(39)	(382)
Stock compensation expense			2,012	1,646
Excess tax benefits from share-based compensation arrangements			(1,353)	(963)
Decrease in accrued interest receivable and other assets			(5,651)	(6,145)
Increase in accrued interest payable and other liabilities			18,062	14,253
Net cash provided by operating activities			49,574	49,363
Investing activities:
Purchases of securities available for sale			(422,190)	(327,711)
Proceeds from sale of securities available for sale
Proceeds from maturities of securities available for sale			420,179	355,943
Purchase of Federal Home Loan Bank stock			(1,319)
Net increase in loans			(30,454)	(191,793)
Purchases of premises and equipment			(1,733)	(5,853)
Proceeds from mortality benefit of bank owned life insurance			970
Proceeds from sale of foreclosed assets			2,432	1,403
Net cash used in investing activities			(32,115)	(168,011)
Financing activities:
Net (decrease) increase in deposits			(38,582)	18,895
Net increase in securities sold under agreements to repurchase and federal funds purchased			118,855	56,699
Proceeds from Federal Home Loan Bank advances			90,000	199,000
Repayments of Federal Home Loan Bank advances			(90,965)	(191,102)
Proceeds (used for) and received from settlement of stock awards			(216)	1,599
Excess tax benefits from share-based compensation arrangements				963
Common stock repurchases			(2,113)	(1,534)
Cash dividends paid			(13,333)	(11,812)
Net cash provided by financing activities			63,646	72,708
Net increase (decrease) in cash and cash equivalents			81,105	(45,940)
Cash and cash equivalents at beginning of period			47,973	103,833	103,833
Cash and cash equivalents at end of period	$ 129,078	$ 57,893	129,078	57,893	$ 47,973
Supplemental cash flow information:
Income tax payments			11,063	9,190
Cash paid for interest			5,109	3,636
Supplemental non-cash activity:
Transfers from loans to foreclosed assets				$ 1,522

XML

Note 1 - Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Significant Accounting Policies [Text Block]

( 1 ) Summary of Significant Accounting Policies

The ac

companying unaudited consolidated financial statements have been prepared in accordance with 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 reported amounts of certain assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and 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 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,

201

6

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

and

nine

-month periods ended

September 30, 2017

are

not

necessarily indicative of 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 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 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. In the

first

quarter of

2017,

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

24

quarters to

28

quarters. This extension of the historical period was applied to all classes and segments of the portfolio. The expansion of the look-back period for the historical loss rates used in the quantitative allocation caused management to review the overall methodology for the qualitative factors to ensure Bancorp was appropriately capturing the risk

not

addressed in the historical loss rates used in the quantitative allocation, resulting in the same expansion of the look-back period for the qualitative factors. Management 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. 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

September 30, 2017

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, changes 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 losses based on their judgments and estimates.

XML

Note 2 - Securities

9 Months Ended

Sep. 30, 2017

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 follow:

(in thousands)	Amortized		Unrealized
September 30, 2017	cost		Gains		Losses		Fair value
Government sponsored enterprise obligations	$	372,596	$	846	$	778	$	372,664
Mortgage-backed securities - government agencies		147,604		697		1,581		146,720
Obligations of states and political subdivisions		51,100		611		89		51,622
Corporate equity securities		653		-		137		516
Total securities available for sale	$	571,953	$	2,154	$	2,585	$	571,522
December 31, 2016
U.S. Treasury and other U.S. Government obligations	$	74,997	$	1	$	-	$	74,998
Government sponsored enterprise obligations		268,784		800		1,494		268,090
Mortgage-backed securities - government agencies		170,344		735		2,236		168,843
Obligations of states and political subdivisions		57,158		682		396		57,444
Corporate equity securities		653		46		-		699
Total securities available for sale	$	571,936	$	2,264	$	4,126	$	570,074

Corporate equity securities consist of common stock in a publicly-traded business development

company.

There were

no

securities classified as held to maturity as of

September 30, 2017

or

December 31, 2016.

Bancorp sold

no

securities

during the

three

or

nine

month periods ending

September 30, 2016

or

2017.

One security was called prior to maturity in the

third

quarter of

2017

resulting in the receipt of a pre-payment penalty. The penalty income was classified as a realized gain on the call of available for sale securities.

A summary of the

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

September 30, 2017

is shown below.

(in thousands)
Securities available-for-sale	Amortized cost		Fair value
Due within 1 year	$	216,651	$	216,696
Due after 1 but within 5 years		74,383		74,529
Due after 5 but within 10 years		14,085		14,031
Due after 10 years		118,577		119,030
Mortgage-backed securities  - government agencies		147,604		146,720
Corporate equity securities		653		516
Total securities available-for-sale	$	571,953	$	571,522

Actual maturities

may

differ from contractual maturities because some issuers have the right to call or prepay obligations. In addition to equity securities, 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 underlying collateral.

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.

The carrying value of these pledged securities was approximately

$329.7

million at

September 30, 2017

and

$380.4

million at

December 31, 2016.

Securities with unrealized losses at

September 30, 2017

and

December 31, 2016,

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
September 30, 2017	value		losses		value		losses		value		losses
Government sponsored enterprise obligations	$	190,462	$	135	$	70,176	$	643	$	260,638	$	778
Mortgage-backed securities - government agencies		13,227		117		65,781		1,464		79,008		1,581
Obligations of states and political subdivisions		9,307		13		6,287		76		15,594		89
Corporate equity securities		516		137		-		-		516		137
Total temporarily impaired securities	$	213,512	$	402	$	142,244	$	2,183	$	355,756	$	2,585
December 31, 2016
Government sponsored enterprise obligations	$	154,951	$	1,344	$	3,485	$	150	$	158,436	$	1,494
Mortgage-backed securities - government agencies		115,374		1,873		9,914		363		125,288		2,236
Obligations of states and political subdivisions		29,893		380		1,478		16		31,371		396
Total temporarily impaired securities	$	300,218	$	3,597	$	14,877	$	529	$	315,095	$	4,126

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

September 30, 2017

and

December 31, 2016.

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. 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

September 30, 2017.

FHLB stock and other securities are investments held by Bancorp which are

not

readily marketable and are carried at cost. This category includes Federal Home Loan Bank of Cincinnati (FHLB) stock which

is required for access to FHLB borrowing.

XML

Note 3 - Loans

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

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

( 3 ) Loans

C

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

(in thousands)	September 30, 2017		December 31, 2016
Commercial and industrial	$	750,728	$	736,841
Construction and development, excluding undeveloped land		174,310		192,348
Undeveloped land		20,989		21,496
Real estate mortgage:
Commercial investment		576,810		538,886
Owner occupied commercial		397,804		408,292
1-4 family residential		261,707		249,498
Home equity - first lien		51,925		55,325
Home equity - junior lien		63,416		67,519
Subtotal: Real estate mortgage		1,351,662		1,319,520
Consumer		37,431		35,170
Total loans	$	2,335,120	$	2,305,375

The following table presents the balance

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

September 30, 2017

and

December 31, 2016.

(in thousands)	Type of loan
			Construction
			and development
	Commercial		excluding
	and		undeveloped		Undeveloped		Real estate
September 30, 2017	industrial		land		land		mortgage		Consumer		Total
Loans	$	750,728	$	174,310	$	20,989	$	1,351,662	$	37,431	$	2,335,120
Loans collectively evaluated for impairment	$	748,591	$	173,573	$	20,515	$	1,348,774	$	37,375	$	2,328,828
Loans individually evaluated for impairment	$	2,137	$	737	$	474	$	2,403	$	56	$	5,807
Loans acquired with deteriorated credit quality	$	-	$	-	$	-	$	485	$	-	$	485

				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)		1,518			9		(85	)		54			154			1,650
Charge-offs		(770	)		-		-			(45	)		(418	)		(1,233	)
Recoveries		128			-		-			98			298			524
At September 30, 2017	$	11,359		$	1,932	$	599		$	10,680		$	378		$	24,948
Allowance for loans collectively evaluated for impairment	$	10,705		$	1,932	$	599		$	10,668		$	322		$	24,226
Allowance for loans individually evaluated for impairment	$	654		$	-	$	-		$	12		$	56		$	722
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, 2016	industrial		land		land		mortgage		Consumer		Total
Loans	$	736,841	$	192,348	$	21,496	$	1,319,520	$	35,170	$	2,305,375
Loans collectively evaluated for impairment	$	734,139	$	191,810	$	21,022	$	1,316,400	$	35,111	$	2,298,482
Loans individually evaluated for impairment	$	2,682	$	538	$	474	$	2,516	$	59	$	6,269
Loans acquired with deteriorated credit quality	$	20	$	-	$	-	$	604	$	-	$	624

				Construction
				and development
	Commercial			excluding
	and			undeveloped			Undeveloped			Real estate
	industrial			land			land			mortgage			Consumer			Total
Allowance for loan losses
At December 31, 2015	$	8,645		$	1,760		$	814		$	10,875		$	347		$	22,441
Provision (credit)		2,775			275			(130	)		(68	)		148			3,000
Charge-offs		(1,216	)		(133	)		-			(576	)		(568	)		(2,493	)
Recoveries		279			21			-			342			417			1,059
At December 31, 2016	$	10,483		$	1,923		$	684		$	10,573		$	344		$	24,007
Allowance for loans collectively evaluated for impairment	$	9,276		$	1,923		$	683		$	10,573		$	285		$	22,740
Allowance for loans individually evaluated for impairment	$	1,207		$	-		$	1		$	-		$	59		$	1,267
Allowance for loans acquired with deteriorated credit quality	$	-		$	-		$	-		$	-		$	-		$	-

The considerations by Bancorp in computing its allowance for loan losses are determined based on 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 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 development projects. In most cases, construction loans require interest only during construction. Upon completion or stabilization, the construction loan may 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, and can be affected by market conditions and time to develop land for ultimate sale. Credit risk is also affected by availability of development financing to the extent such financing is not being provided by Bancorp.  

● Real estate mortgage: Loans in this category are made to and secured by owner-occupied residential and commercial real estate and income-producing investment properties. For owner occupied residential and 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 borrower. Underlying properties are generally located in Bancorp's primary market areas. Cash flows of income producing investment properties may be adversely impacted by a downturn in the economy that may cause increased vacancy rates, which in turn, could have an effect on credit quality. Overall health of the economy, including 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, could have a significant effect on credit quality in this loan category.

Bancorp has loans that were acquired for which there was, at acquisition, evidence of deterioration of credit quality since origination and for which it was probable that all contractually required payments would

not

be collected. The carrying amount of those loans is included in the balance sheet amounts of loans at

September 30, 2017

and

December 31, 2016.

Changes in the fair value adjustment for acquired impaired loans are shown in the following table:

(in thousands)	Accretable discount			Non- accretable discount
Balance at December 31, 201 5	$	3		$	189
Accretion		(3	)		(41	)
Reclassifications from (to) non-accretable discount		-			-
Disposals		-			-
Balance at December 31, 2016	$	-		$	148
Accretion		-			-
Reclassifications from (to) non-accretable discount		-			-
Disposals		-			-
Balance at September 30, 2017	$	-		$	148

The following table

s present loans individually evaluated for impairment as of

September 30, 2017

and

December 31, 2016.

			Unpaid				Average
(in thousands)	Recorded		principal		Related		recorded
September 30, 2017	investment		balance		allowance		investment
Loans with no related allowance recorded:
Commercial and industrial	$	350	$	540	$	-	$	228
Construction and development, excluding undeveloped land		737		907		-		533
Undeveloped land		474		506		-		413
Real estate mortgage
Commercial investment		55		55		-		124
Owner occupied commercial		1,470		1,908		-		1,264
1-4 family residential		785		785		-		759
Home equity - first lien		-		-		-		-
Home equity - junior lien		81		81		-		224
Subtotal: Real estate mortgage		2,391		2,829		-		2,371
Consumer		-		17		-		-
Subtotal	$	3,952	$	4,799	$	-	$	3,545
Loans with an allowance recorded:
Commercial and industrial	$	1,787	$	2,321	$	654	$	2,343
Construction and development, excluding undeveloped land		-		-		-		-
Undeveloped land		-		-		-		60
Real estate mortgage
Commercial investment		-		-		-		-
Owner occupied commercial		-		-		-		-
1-4 family residential		12		12		12		3
Home equity - first lien		-		-		-		-
Home equity - junior lien		-		-		-		-
Subtotal: Real estate mortgage		12		12		12		3
Consumer		56		56		56		58
Subtotal	$	1,855	$	2,389	$	722	$	2,464
Total:
Commercial and industrial	$	2,137	$	2,861	$	654	$	2,571
Construction and development, excluding undeveloped land		737		907		-		533
Undeveloped land		474		506		-		473
Real estate mortgage
Commercial investment		55		55		-		124
Owner occupied commercial		1,470		1,908		-		1,264
1-4 family residential		797		797		12		762
Home equity - first lien		-		-		-		-
Home equity - junior lien		81		81		-		224
Subtotal: Real estate mortgage		2,403		2,841		12		2,374
Consumer		56		73		56		58
Total	$	5,807	$	7,188	$	722	$	6,009

			Unpaid				Average
(in thousands)	Recorded		principal		Related		recorded
December 31, 2016	investment		balance		allowance		investment
Loans with no related allowance recorded:
Commercial and industrial	$	322	$	465	$	-	$	1,947
Construction and development, excluding undeveloped land		538		708		-		108
Undeveloped land		233		265		-		76
Real estate mortgage
Commercial investment		107		107		-		193
Owner occupied commercial		1,042		1,479		-		1,356
1-4 family residential		895		896		-		962
Home equity - first lien		-		-		-		3
Home equity - junior lien		472		472		-		333
Subtotal: Real estate mortgage		2,516		2,954		-		2,847
Consumer		-		-		-		18
Subtotal	$	3,609	$	4,392	$	-	$	4,996
Loans with an allowance recorded:
Commercial and industrial	$	2,360	$	2,835	$	1,207	$	1,619
Construction and development, excluding undeveloped land		-		-		-		182
Undeveloped land		241		241		1		149
Real estate mortgage
Commercial investment		-		-		-		-
Owner occupied commercial		-		-		-		554
1-4 family residential		-		-		-		-
Home equity - first lien		-		-		-		-
Home equity - junior lien		-		-		-		-
Subtotal: Real estate mortgage		-		-		-		554
Consumer		59		59		59		63
Subtotal	$	2,660	$	3,135	$	1,267	$	2,567
Total:
Commercial and industrial	$	2,682	$	3,300	$	1,207	$	3,566
Construction and development, excluding undeveloped land		538		708		-		290
Undeveloped land		474		506		1		225
Real estate mortgage		-		-		-		-
Commercial investment		107		107		-		193
Owner occupied commercial		1,042		1,479		-		1,910
1-4 family residential		895		896		-		962
Home equity - first lien		-		-		-		3
Home equity - junior lien		472		472		-		333
Subtotal: Real estate mortgage		2,516		2,954		-		3,401
Consumer		59		59		59		81
Total	$	6,269	$	7,527	$	1,267	$	7,563

Differences between recorded investment amounts and unpaid principal balance amounts are due to partial

charge-offs and interest paid on non-accrual loans which have occurred over the life of loans. Unpaid principal balance is reduced by these items to arrive at the recorded investment in the loan.

Impaired loans include non-accrual loans and accruing loans accounted for as troubled debt restructurings (TDR

s), 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 loans totaling

$261

thousand past due more than

90

days and still accruing interest at

September 30, 2017,

compared with

$438

thousand at

December 31, 2016.

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

September 30, 2017

and

December 31, 2016.

(in thousands)	September 30, 2017		December 31, 2016
Commercial and industrial	$	1,256	$	1,767
Construction and development, excluding undeveloped land		737		538
Undeveloped land		474		474
Real estate mortgage
Commercial investment		55		107
Owner occupied commercial		1,470		1,042
1-4 family residential		785		984
Home equity - first lien		-		-
Home equity - junior lien		81		383
Subtotal: Real estate mortgage		2,391		2,516
Consumer		-		-
Total	$	4,858	$	5,295

In the course of working with borrowers, Bancorp

may

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

not

otherwise consider.

At

September 30, 2017

Bancorp had

$949

thousand of loans classified as TDRs, all of which were accruing interest consistent with their modified terms.

One

residential real estate loan with a recorded investment of

$12

thousand was modified and classified as a TDR in the

three

-month period ended

September 30, 2017.

Interest due and unpaid was capitalized into the principal balance resulting in the TDR classification. A specific reserve was established for the entire recorded investment of this loan. One additional loan,

a

commercial loan with a recorded investment of

$35

thousand at

September 30, 2017,

was modified and classified as a TDR previously in the

nine

-month period ended

September 30, 2017.

The pre and post-modification balance for this loan was

$39

thousand. 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.

At

September 30, 2016

Bancorp had

$999

thousand of accruing loans classified as TDR. Bancorp did

not

modify or classify any additional loans as TDR during the

three

or

nine

month periods ended

September 30, 2016.

No

loans classified and reported as

TDRs within the

twelve

months prior to

September 30, 2017

defaulted during the

three

or

nine

-month periods ended

September 30, 2017.

Likewise,

no

loans classified and reported as troubled debt restructured within the

twelve

months prior to

September 30, 2016

defaulted during the

three

-month or

nine

-month periods ended

September 30, 2016.

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

September 30, 2017,

had a total allowance allocation of

$142

thousand, compared with

$207

thousand at

December 31, 2016.

At

September 30, 2017

and

December 31, 2016,

Bancorp did

not

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

At

September 30, 2017

formal foreclosure proceedings were in process on

two

loans with a total recorded investment of

$75

thousand.

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

September 30, 2017

and

December 31, 2016.

													Recorded
(in thousands)							90 or more						investment
							days past						> 90 days
			30-59 days		60-89 days		due (includes		Total		Total		and
September 30, 2017	Current		past due		past due		non-accrual)		past due		loans		accruing
Commercial and industrial	$	747,316	$	2,149	$	7	$	1,256	$	3,412	$	750,728	$	-
Construction and development, excluding undeveloped land		173,573		-		-		737		737		174,310		-
Undeveloped land		20,515		-		-		474		474		20,989		-
Real estate mortgage
Commercial investment		574,088		2,667		-		55		2,722		576,810		-
Owner occupied commercial		395,924		47		363		1,470		1,880		397,804		-
1-4 family residential		259,729		330		602		1,046		1,978		261,707		261
Home equity - first lien		51,836		89		-		-		89		51,925		-
Home equity - junior lien		62,892		165		278		81		524		63,416		-
Subtotal: Real estate mortgage		1,344,469		3,298		1,243		2,652		7,193		1,351,662		261
Consumer		37,196		226		9		-		235		37,431		-
Total	$	2,323,069	$	5,673	$	1,259	$	5,119	$	12,051	$	2,335,120	$	261
December 31, 2016
Commercial and industrial	$	734,682	$	84	$	290	$	1,785	$	2,159	$	736,841	$	18
Construction and development, excluding undeveloped land		191,810		-		-		538		538		192,348		-
Undeveloped land		21,022		-		-		474		474		21,496		-
Real estate mortgage
Commercial investment		537,998		631		64		193		888		538,886		86
Owner occupied commercial		406,726		342		-		1,224		1,566		408,292		182
1-4 family residential		246,730		1,174		576		1,018		2,768		249,498		34
Home equity - first lien		55,027		231		21		46		298		55,325		46
Home equity - junior lien		66,911		99		126		383		608		67,519		72
Subtotal: Real estate mortgage		1,313,392		2,477		787		2,864		6,128		1,319,520		420
Consumer		34,965		28		105		72		205		35,170		-
Total	$	2,295,871	$	2,589	$	1,182	$	5,733	$	9,504	$	2,305,375	$	438

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 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 repayment on the basis of currently existing facts, conditions and values, highly questionable and improbable.

As of

September 30, 2017

and

December 31, 2016,

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

(in thousands)							Substandard				Total
September 30, 2017	Pass		OAEM		Substandard		non-performing		Doubtful		loans
Commercial and industrial	$	726,194	$	7,464	$	14,197	$	2,873	$	-	$	750,728
Construction and development, excluding undeveloped land		174,310		-		-		-		-		174,310
Undeveloped land		20,485		-		30		474		-		20,989
Real estate mortgage
Commercial investment		575,339		761		420		290		-		576,810
Owner occupied commercial		383,387		10,313		2,869		1,235		-		397,804
1-4 family residential		256,458		3,018		1,172		1,059		-		261,707
Home equity - first lien		51,923		2		-		-		-		51,925
Home equity - junior lien		63,029		73		233		81		-		63,416
Subtotal: Real estate mortgage		1,330,136		14,167		4,694		2,665		-		1,351,662
Consumer		37,269		102		4		56		-		37,431
Total	$	2,288,394	$	21,733	$	18,925	$	6,068	$	-	$	2,335,120
December 31, 2016
Commercial and industrial	$	714,025	$	14,266	$	5,850	$	2,700	$	-	$	736,841
Construction and development, excluding undeveloped land		191,455		-		355		538		-		192,348
Undeveloped land		21,022		-		-		474		-		21,496
Real estate mortgage
Commercial investment		538,688		-		5		193		-		538,886
Owner occupied commercial		396,997		7,960		2,111		1,224		-		408,292
1-4 family residential		247,888		-		592		1,018		-		249,498
Home equity - first lien		55,279		-		-		46		-		55,325
Home equity - junior lien		66,710		-		426		383		-		67,519
Subtotal: Real estate mortgage		1,305,562		7,960		3,134		2,864		-		1,319,520
Consumer		35,039		-		-		131		-		35,170
Total	$	2,267,103	$	22,226	$	9,339	$	6,707	$	-	$	2,305,375

XML

Note 4 - Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2017

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.

Evaluations have resulted in

no

indication of impairment. Bancorp currently has goodwill in the amount of

$682

thousand from the

1996

acquisition of an Indiana bank. 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

September 30, 2017,

the unamortized core deposit intangible was

$1.3

million, as compared to

$1.4

million at

December 31, 2016.

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

both

September 30, 2017

and

December 31, 2016

were

$2.7

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

$350.1

million and

$372.2

million at

September 30, 2017,

and

December 31, 2016,

respectively.

Changes in the net carrying amount of MSRs for the

nine

months ended

September 30, 2017

and

2016

are shown in the following table:

	For the nine months
	ended September 30,
(in thousands)	2017			2016
Balance at beginning of period	$	921		$	1,018
Additions for mortgage loans sold		143			105
Amortization		(222	)		(192	)
Balance at end of period	$	842		$	931

XML

Note 5 - Income Taxes

9 Months Ended

Sep. 30, 2017

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						Nine months ended
	September 30,						September 30,
(in thousands)	2017			2016			2017			2016
Current income tax expense
Federal	$	5,211		$	4,363		$	12,936		$	10,958
State		179			287			472			597
Total current income tax expense		5,390			4,650			13,408			11,555
Deferred income tax (benefit) expense
Federal		(1,583	)		(692	)		(2,240	)		(302	)
State		(44	)		(75	)		(30	)		(18	)
Total deferred income tax expense (benefit)		(1,627	)		(767	)		(2,270	)		(320	)
Change in valuation allowance		333			-			459			-
Total income tax expense	$	4,096		$	3,883		$	11,597		$	11,235

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

nine

months ended

September 30, 2017

and

2016

follows:

	Nine months ended September 30,
	2017			2016
U.S. federal statutory income tax rate		35.0	%		35.0	%
Tax credits		(4.6	)		(9.4	)
Excess tax benefits from share-based compensation arrangements		(3.0	)		-
Increase in cash surrender value of life insurance		(1.4	)		(0.9	)
Tax exempt interest income		(1.1	)		(1.3	)
State income taxes, net of federal benefit		0.7			0.9
Other, net		0.3			2.7
Effective income tax rate		25.9	%		27.0	%

State income tax expense represents tax

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

Bancorp

’s results for the

first

nine

months of

2017

reflect implementation of Accounting Standards Update

2016

-

09,

which provides guidance for the recognition of excess tax benefits or deficiencies related to share-based payment awards. Effective for fiscal years beginning after

December 15, 2016,

ASU

2016

-

09

changes the way these benefits and deficiencies are recorded. Prior to

2017

they were recorded in additional paid-in capital, and therefore did

not

affect earnings. Beginning in

2017,

these amounts are being recorded as tax expense or benefit in the income statement. For the

three

and

nine

month periods ending

September 30, 2017

Bancorp recorded benefits of

$241

thousand and

$1.4

million, respectively, within the provision for income tax expense for such awards.

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

September 30, 2017

and

December 31, 2016,

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

2012.

XML

Note 6 - Deposits

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Deposit Liabilities Disclosures [Text Block]

( 6 ) Deposits

The composition of

the Bank’s deposits outstanding at

September 30, 2017 (

unaudited) and

December 31, 2016

is as follows:

	September 30,		December 31,
	2017		2016
(in thousands)
Non-interest bearing demand	$	676,824	$	680,156
Interest bearing deposits:
Interest bearing demand		725,368		768,139
Savings		149,596		140,030
Money market		698,198		682,421
Time deposits of more than $250,000		33,270		40,427
Other time deposits		198,710		209,375
Total time deposits		231,980		249,802
Total interest bearing deposits		1,805,142		1,840,392
Total deposits	$	2,481,966	$	2,520,548

Maturities of time deposits

of more than

$250,000,

outstanding at

September 30, 2017,

are summarized as follows:

( in thousands)	Amount
3 months or less	$	11,463
O ver 3 through 6 months		3,938
Over 6 through 12 months		10,942
Over 1 through 3 years		6,410
Over 3 years		517
Total	$	33,270

XML

Note 7 - Securities Sold Under Agreements to Repurchase

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Repurchase Agreements, Resale Agreements, Securities Borrowed, and Securities Loaned Disclosure [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 $

71.9

million and

$67.6

million at

September 30, 2017

and

December 31, 2016,

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

September 30, 2017,

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 by and under the control of Bancorp.

XML

Note 8 - Federal Home Loan Bank Advances

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Federal Home Loan Bank Advances, Disclosure [Text Block]

( 8 ) Federal Home Loan Bank Advances

Bancorp had outstanding borrowings

totaling

$50.1

million and

$51.1

million at

September 30, 2017

and

December 31, 2016,

respectively, via

14

separate fixed-rate advances. As of

September 30, 2017,

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

$20.1

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

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

(In thousands)	September 30, 2017					December 31, 2016
Year	Advance		Fixed Rate			Advance		Fixed Rate
2017	$	30,000		1.24	%	$	30,000		0.70	%
2020		1,753		2.23			1,790		2.23
2021		306		2.12			359		2.12
2024		2,505		2.36			2,661		2.36
2025		5,615		2.43			6,025		2.43
2026		8,658		1.99			8,936		1.99
2028		1,273		1.48			1,304		1.48
Total	$	50,110		1.61	%	$	51,075		1.30	%

In addition to fixed-rate advances listed above,

at

September 30, 2017

Bancorp had a

$150

million cash management advance from the FHLB. This advance matured in the

first

week of

October, 2017

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.

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

at times utilizes these borrowings to match fund long-term fixed rate loans. At

September 30, 2017,

the amount of available credit from the FHLB totaled

$367.3

million.

XML

Note 9 - Other Comprehensive Income

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Comprehensive Income (Loss) Note [Text Block]

( 9 ) Other Comprehensive Income

The following table illustrates activity within the balances

of accumulated other comprehensive income by component, and is shown for the

nine

months ended

September 30, 2017

and

2016.

	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, 201 5	$	965		$	(60	)	$	(273	)	$	632
Net current period other comprehensive gain (loss)		4,110			(301	)		-			3,809
Balance at September 30, 2016	$	5,075		$	(361	)	$	(273	)	$	4,441
Balance at December 31, 2016	$	(1,211	)	$	(16	)	$	(272	)	$	(1,499	)
Net current period other comprehensive income gain		950			38			-			988
Amounts reclassified from other comprehensive income		(20	)		-			-			(20	)
Net current-period other comprehensive income		930			38			-			968
Balance at September 30, 2017	$	(281	)	$	22		$	(272	)	$	(531	)

XML

Note 10 - Preferred Stock

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Preferred Stock [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

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Earnings Per Share [Text Block]

( 11 ) Net Income Per Share

The following table reflects, for the

three

and

nine

months ended

September 30, 2017

and

2016,

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

	Three months ended				Nine months ended
(in thousands, except per share data)	September 30,				September 30,
	2017		2016		2017		2016
Net income	$	11,704	$	10,467	$	33,097	$	30,411
Average basic shares outstanding		22,542		22,385		22,524		22,325
Dilutive securities		422		418		460		386
Average shares outstanding including dilutive securities including dilutive securities		22,964		22,803		22,984		22,711
Net income per share, basic	$	0.52	$	0.47	$	1.47	$	1.36
Net income per share, diluted	$	0.51	$	0.46	$	1.44	$	1.34

XML

Note 12 - Defined Benefit Retirement Plan

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Pension and Other Postretirement Benefits Disclosure [Text Block]

( 12 ) Defined Benefit Retirement 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.

All

three

officers are fully vested as of

September 2017.

Actuarially determined pension costs are expensed and accrued over the service period, and benefits are paid from Bancorp’s assets. Net periodic benefits costs, which include interest cost and amortization of net losses, totaled

$34

thousand and

$33

thousand for the

three

-month periods ended

September 30, 2017

and

2016,

respectively. For the

nine

months ended

September 30, 2017

and

2016,

the net periodic benefit costs totaled

$103

thousand and

$100

thousand, respectively.

XML

Note 13 - Stock-based Compensation

9 Months Ended

Sep. 30, 2017

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.

No

additional shares were made available. As of

September 30, 2017,

there were

285,133

shares available for future awards.

Options, which have

not

been granted since

2007,

had a vesting schedule of

20%

per year

and as of

February 2017;

all options have been exercised or expired. Stock appreciation rights (“SARs”) have a vesting schedule of

20%

per year. SARs expire

ten

years after the grant date unless unvested grants are forfeited due to employment termination. SARs granted under the

2005

plan expire as late as

2025.

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

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

2015

and after, forfeitable dividends are deferred until shares are vested.

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

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. Beginning in

2015,

grants require a

one

year post-vesting holding period. For

2015

,

2016

and

2017,

the fair value of such grants incorporates a liquidity discount of

4.80%,

4.50%

and

5.12%,

respectively, related to the holding period.

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

equal to the 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						For nine months ended
	September 30,						September 30,
(in thousands)	2017			2016			2017			2016
Stock-based compensation expense before income taxes	$	670		$	573		$	2,012		$	1,646
Less: deferred tax benefit		(235	)		(200	)		(704	)		(576	)
Reduction of net income	$	435		$	373		$	1,308		$	1,070

Bancorp

’s net income for the

three

and

nine

-month periods ended

September 30, 2017

reflected the implementation of ASU

2016

-

09

which changed the way excess tax benefits and deficiencies related to share-based compensation are recorded. Prior to

2017

these were recorded directly to additional paid-in capital and, thus did

not

affect earnings. Beginning in

2017

these are recorded as a tax expense or benefit in the income statement. For the

three

and

nine

months ended

September 30, 2017

these benefits resulted in a

$241

thousand and a

$1.4

million increase in net income, respectively. This tax benefit is

not

reflected in the table above.

Bancorp expects to record an additional $

679

thousand of stock-based compensation expense in

2017

for equity grants outstanding as of

September 30, 2017.

As of

September 30, 2017,

Bancorp has

$4.9

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

$216

thousand during the

first

nine

months of

2017

for purchase of shares upon vesting of restricted stock units, net of cash received for options exercised. This compares to cash received of

$1.6

million during the

first

nine

months of

2016

for similar activity.

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 input of assumptions, changes to which can materially affect the fair value estimate. Fair value of restricted shares is equal to Bancorp’s closing stock price on the date of grant. The following assumptions were used in SAR valuations at the grant date in each year:

	2017			2016
Dividend yield		2.72	%		2.94	%
Expected volatility		19.47	%		19.31	%
Risk free interest rate		2.29	%		1.70	%
Expected life of SARs (in years)		7.0			7.3

Dividend yield and expected volatility are based on historical information for Bancorp for time periods corresponding to the expected life of options and SARs granted. Expected volatility is the price volatility of the underlying shares for the expected term measured 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 award. 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, 2016

and the

nine

month period ended

September 30, 2017

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, 2015
Vested and exercisable		656		$	14.02	-	19.44	$	15.75	$	6,191	$	3.39		3.7
Unvested		266			15.24	-	24.55		18.66		1,733		3.29		7.7
Total outstanding		922			14.02	-	24.55		16.59		7,924		3.36		4.8
Granted		88			25.76	-	33.08		25.84		1,866		3.56
Exercised		(272	)		14.02	-	17.89		16.38		4,155		3.73
Forfeited		(3	)		14.02	-	15.84		15.18		60		2.94
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		(47	)		14.02	-	17.89		15.52		1,168		3.27
Forfeited		-				-			-		-		-
At September 30, 2017
Vested and exercisable		519			14.02	-	25.76		16.39		11,218		3.15		4.3
Unvested		215			15.24	-	40.00		26.45		2,567		4.17		7.9
Total outstanding		734			14.02	-	40.00		19.17	$	13,785		3.45		5.3
Vested year-to-date		92		$	15.24	-	25.76	$	19.34	$	1,723	$	3.18

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.

46,410

shares had an intrinsic value of

zero

because the exercise price for those shares exceeded the current market price at

September 30, 2017.

There are

no

options outstanding as of

September 30, 2017;

all have been exercised or have expired.

A summary of

activity for restricted shares of common stock granted to officers for the periods ending

December 31, 2016

and

September 30, 2017

is outlined in the following table:

				Grant date
				weighted-
	Number			average cost
Unvested at December 31, 201 5		155,858		$	18.98
2016 activity:
Shares awarded		51,122			25.78
Restrictions lapsed and shares released		(49,265	)		17.98
Shares forfeited		(12,480	)		20.69
Unvested at December 31, 2016		145,235		$	21.57
2017 activity:
Shares awarded		28,625			44.85
Restrictions lapsed and shares released		(46,220	)		19.76
Shares forfeited		(7,154	)		25.03
Unvested at September 30, 2017		120,486		$	27.59

Bancorp

awarded PSUs to executive officers of Bancorp, the

three

-year performance period for which began

January 1

of the award year. Shares awarded in

2017

under the

2014

grant totaled

50,022.

Shares awarded in

2016

under the

2013

grant totaled

55,188.

The following table outlines

outstanding PSU grants:

	Vesting				Expected
Grant	period		Fair		shares to
year	in years		value		be awarded
2015		3	$	20.02		51,910
2016		3		22.61		58,786
2017		3		35.66		24,756

In the

first

quarter of

201

7,

Bancorp awarded

4,680

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

$220

thousand.

No

awards were made in the

second

or

third

quarters of

2017.

XML

Note 14 - Stock Split

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

( 14 ) Stock Split

In A

pril

2016

Bancorp declared a

3

for

2

stock split effected as a

50%

stock dividend payable in

May 2016.

Share and per share information has been adjusted for this split.

XML

Note 15 - Commitments and Contingent Liabilities

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

( 15 ) Commitments and Contingent Liabilities

As of

September 30, 2017,

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

September 30, 2017

commitments to extend credit of

$709.7

million, including standby letters of credit of

$17.6

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

$628.3

million, including letters of credit of

$15.6

million, as of

December 31, 2016.

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, if any, 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

September 30, 2017,

Bancorp had accrued

$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 part of the normal course of business Bancorp entered into an agreement to purchase

29

automatic teller machines (ATMs) over the next

three

years at a total price of

$1.2

million. Management was able to secure favorable pricing by contractually committing to purchase the machines.

Also, as of

September 30, 2017,

in the normal course of business, there were pending legal actions and administrative proceedings in which claims for damages are asserted and/or losses could be incurred. We record a liability for these matters if an unfavorable outcome is probable and the amount of loss can be reasonably estimated, including expected insurance coverage. For proceedings where the reasonable estimate of loss is a range, we record a best estimate of loss within the range. At

September 30, 2017

we have recorded a liability of

$266

thousand for such matters.

XML

Note 16 - Assets and Liabilities Measured and Reported at Fair Value

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Fair Value, Measurement Inputs, Disclosure [Text Block]

( 16 ) 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.

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

source 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

publicly traded 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 a counterparty

’s inability to perform and the change in value of derivative assets and liabilities attributable to credit risk was

not

significant during

2017.

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

(in thousands)	Fair value at September 30, 2017
Assets	Total		Level 1		Level 2		Level 3
Investment securities available-for-sale
Government sponsored enterprise obligations	$	372,664	$	-	$	372,664	$	-
Mortgage-backed securities - government agencies		146,720		-		146,720		-
Obligations of states and political subdivisions		51,622		-		51,622		-
Corporate equity securities		516		516		-		-
Total investment securities available-for-sale		571,522		516		571,006		-
Interest rate swaps		182		-		182		-
Total assets	$	571,704	$	516	$	571,188	$	-
Liabilities
Interest rate swaps	$	148	$	-	$	148	$	-

(in thousands)	Fair value at December 31, 2016
Assets	Total		Level 1		Level 2		Level 3
Investment securities available-for-sale
U.S. Treasury and other U.S. government obligations	$	74,998	$	74,998	$	-	$	-
Government sponsored enterprise obligations		268,090		-		268,090		-
Mortgage-backed securities - government agencies		168,843		-		168,843		-
Obligations of states and political subdivisions		57,444		-		57,444		-
Corporate equity securities		699		699		-		-
Total investment securities available-for-sale		570,074		75,697		494,377		-
Interest rate swaps		203		-		203		-
Total assets	$	570,277	$	75,697	$	494,580	$	-
Liabilities
Interest rate swaps	$	178	$	-	$	178	$	-

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

September 30, 2017

or

December 31, 2016.

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

September 30, 2017

and

December 31, 2016

there was

no

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

not

included in either table below for

September 30, 2017

or

December 31, 2016.

See Note

4

for more information regarding MSRs.

For impaired loans in the table below, fair value is calculated as carrying value of 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 val

ue.  Fair value of impaired loans was primarily measured based on the value of the 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 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

September 30, 2017,

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

$3.2

million, and the specific allowance totaled

$722

thousand, resulting in a fair value of

$2.5

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

$4.2

million, and the specific allowance allocation totaling

$1.3

million, resulting in a fair value of

$2.9

million at

December 31, 2016. 

Losses represent charge offs and changes in specific allowances for the period 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

September 30, 2017

and

December 31, 2016,

carrying value of all other real estate owned was

$2.6

million and

$5.0

million, respectively.

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

  Impaired loan amounts reported represent only those impaired loans with specific valuation allowances and collateral dependent impaired loans charged down to their carrying value.

(in thousands)	Fair value at September 30, 2017								Losses for 9 month
									period ended
	Total		Level 1		Level 2		Level 3		September 30, 2017
Impaired loans	$	2,530	$	-	$	-	$	2,530	$	(280	)
Other real estate owned		2,640		-		-		2,640		(171	)
Total	$	5,170	$	-	$	-	$	5,170	$	(451	)

(in thousands)	Fair value at December 31, 2016								Losses for 9 month
									period ended
	Total		Level 1		Level 2		Level 3		September 30, 2016
Impaired loans	$	2,933	$	-	$	-	$	2,933	$	(1,612	)
Other real estate owned		4,488		-		-		4,488		(62	)
Total	$	7,421	$	-	$	-	$	7,421	$	(1,674	)

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

nine

months ended

September 30, 2017,

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

September 30, 2017,

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

				Significant	Weighted
	Fair		Valuation	unobservable	average of
(dollars in thousands)	Value		technique	input	input
Impaired loans - collateral dependent	$	2,530	Appraisal	Appraisal discounts		15.0	%
Other real estate owned		2,640	Appraisal	Appraisal discounts		23.4

XML

Note 17 - Disclosure of Financial Instruments Not Reported at Fair Value

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Fair Value Disclosures [Text Block]

( 17 ) 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
September 30, 2017	amount		Fair value		Level 1		Level 2		Level 3
Financial assets
Cash and short-term investments	$	129,078	$	129,078	$	129,078	$	-	$	-
Mortgage loans held for sale		5,459		6,005		-		6,005		-
Federal Home Loan Bank stock and other securities		7,666		7,666		-		7,666		-
Loans, net		2,310,172		2,302,466		-		-		2,302,466
Accrued interest receivable		8,162		8,162		8,162		-		-
Financial liabilities
Deposits		2,481,966		2,480,641		-		-		2,480,641
Short-term borrowings		233,824		233,824		-		233,824		-
FHLB advances		50,110		50,070		-		50,070		-
Secured borrowings		18,351								18,210
Accrued interest payable		212		212		212		-		-

(in thousands)	Carrying
December 31, 2016	amount		Fair value		Level 1		Level 2		Level 3
Financial assets
Cash and short-term investments	$	47,973	$	47,973	$	47,973	$	-	$	-
Mortgage loans held for sale		3,213		3,481		-		3,481		-
Federal Home Loan Bank stock and other securities		6,347		6,347		-		6,347		-
Loans, net		2,281,368		2,284,569		-		-		2,284,569
Accrued interest receivable		6,878		6,878		6,878		-		-
Financial liabilities
Deposits		2,520,548		2,519,725		-		-		2,519,725
Short-term borrowings		114,969		114,969		-		114,969		-
FHLB advances		51,075		50,806		-		50,806		-
Secured borrowings		15,814								15,731
Accrued interest payable		144		144		144		-		-

Management used the following methods and assumptions to estimate the fair value of each class of financial instrument for which it is practicable to estimate the value.

Cash, short-term investments, accrued interest receivable/payable and short-term borrowings

For these short-term instruments, carrying amount is a reasonable estimate of fair value.

Mortgage loans held for sale

Mortgage loans held for sale are initially recorded at the lower of cost or market value. The portfolio is comprised of residential real estate loans and fair value is determined by market quotes for similar loans based on loan type, term, rate, size and the borrower

’s credit score.

Federal Home Loan Bank stock and other securities

For these securities without readily available market values, carrying amount is a reasonable estimate of fair value as it equals the amount due from FHLB or other issuer at upon redemption.

Loans, net

US GAAP prescribes the exit price concept for estimating fair value of loans. Because there is

not

an active market (exit price) for trading virtually all types of loans in Bancorp

’s portfolio, fair value of loans is estimated by discounting future cash flows using current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities (entrance price).

Deposits

Fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date. Fair value of fixed-rate certificates of deposits is estimated by discounting future cash flows using the rates currently offered for deposits of similar remaining maturities.

Federal Home Loan Bank advances

Fair value of FHLB advances is estimated by discounting future cash flows using estimates of current market rate for instruments with similar terms and remaining maturities.

Secured Borrowings

Secured borrowings represent sold participation loans for which 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. Secured borrowings are included in other liabilities on the consolidated balance sheets.

Commitments to extend credit and standby letters of credit

Fair values of commitments to extend credit are estimated using fees currently charged to enter into similar agreements and creditworthiness of customers. Fair values of standby letters of credit are based on fees currently charged for similar agreements or estimated cost to terminate them or otherwise settle obligations with counterparties at the reporting date.

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.

XML

Note 18 - Derivative Financial Instruments

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

( 18 ) Derivative Financial Instruments

Periodically, Bancorp enters into an interest rate swap transaction with a borrower, who desires to hedge their 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 consolidated 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 are expected to have an insignificant effect on earnings. Exchanges of cash flows related to undesignated interest rate swap agreements for the

first

nine

months of

2017

were offsetting and therefore had

no

net 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 exposure. Direct credit exposure is limited to the net difference between 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 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

September 30, 2017

and

December 31, 2016,

Bancorp had outstanding undesignated interest rate swap contracts as follows:

(dollar amounts in thousands)	Receiving					Paying
	September 30,		December 31,			September 30,			December 31,
	2017		2016			2017			2016
Notional amount	$	53,214	$	43,986		$	53,214		$	43,986
Weighted average maturity (years)		8.9		9.9			8.9			9.9
Fair value	$	148	$	(178	)	$	(148	)	$	178

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 hedges, and fair values as of

September 30, 2017

and

December 31, 2016.

(dollars in thousands)
							Fair value
Notional		Maturity	Receive (variable)	Pay fixed			assets (liabilities)
amount		date	index	swap rate			September 30, 2017		December 31, 2016
$	10,000	12/6/2021	US 3 Month LIBOR		1.89	%	$	26	$	16
	20,000	12/6/2020	US 3 Month LIBOR		1.79	%		8		9
$	30,000				1.82	%	$	34	$	25

XML

Note 19 - Regulatory Matters

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Regulatory Capital Requirements under Banking Regulations [Text Block]

( 19 ) Regulatory Matters

Bancorp and the Bank are subject to various capital requirements prescribed by banking regulations and administered by state and federal banking agencies.

The final rules implementing the Basel Committee on Banking Supervision's capital guidelines for U.S. banks (Basel III rules) became effective on

January 1, 2015

with full compliance with all of the requirements being phased in over a multi-year schedule, and fully phased in by

January 1, 2019.

The minimum capital level requirements applicable to banks and bank holding companies subject to the rules are:

• a total risk-based capital ratio of 8%

• a common equity tier 1 capital ratio of 4.5%

• a tier 1 risk-based capital ratio of 6%

• a tier 1 leverage ratio of 4%

Under these requirements, Bancorp and

the Bank must meet minimum amounts and percentages of Tier

1

capital, common equity Tier

1

capital, and total capital 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.

The Basel III rules also establish

ed a capital conservation buffer

of

2.5%,

to be phased in over

three

years through

December 31, 2018,

above the regulatory minimum risk-based capital ratios. When fully phased in the buffer will result in the following minimum ratios:

• 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

September 30, 2017,

Bancorp meets the requirements to be considered well capitalized under the rules, and is

not

subject to limitations due to the capital conservation buffer.

The following table

s set forth consolidated Bancorp’s and the Bank’s risk based capital amounts and ratios as of

September 30, 2017

and

December 31, 2016.

(dollars in thousands)	Actual					Minimum for adequately capitalized					Minimum for well capitalized
September 30, 2017	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk-based capital (1)
Consolidated	$	358,610		13.64	%	$	210,328		8.00	%	NA		NA
Bank		346,040		13.20			209,721		8.00		$	262,152		10.00	%
Common equity tier 1 risk-based capital
Consolidated		333,312		12.67			118,382		4.50		NA		NA
Bank		320,742		12.23			118,016		4.50			157,355		6.00
Tier 1 risk-based capital (1)
Consolidated		333,312		12.67			157,843		6.00		NA		NA
Bank		320,742		12.23			157,355		6.00			157,355		6.00
Leverage (2)
Consolidated		333,312		11.02			120,984		4.00		NA		NA
Bank		320,742		10.61			120,921		4.00			151,151		5.00

(dollars in thousands)	Actual					Minimum for adequately capitalized					Minimum for well capitalized
December 31, 2016	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk-based capital (1)
Consolidated	$	338,525		13.04	%	$	207,684		8.00	%	NA		NA
Bank		325,630		12.57			207,243		8.00		$	259,053		10.00	%
Common equity tier 1 risk-based capital
Consolidated		314,147		12.10			116,832		4.50		NA		NA
Bank		301,252		11.63			116,564		4.50			155,418		6.00
Tier 1 risk-based capital (1)
Consolidated		314,147		12.10			155,775		6.00		NA		NA
Bank		301,252		11.63			155,418		6.00			155,418		6.00
Leverage (2)
Consolidated		314,147		10.54			119,221		4.00		NA		NA
Bank		301,252		10.11			119,190		4.00			148,987		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.

XML

Note 20 - Segments

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

( 20 ) Segments

Bancorp

’s principal activities include commercial banking and wealth management and trust (WM&T). 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 securities brokerage activity. WM&T 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 WM&T consist of premises and equipment, net of accumulated depreciation.

Selected financial information by

business segment for the

three

and

nine

month periods ended

September 30, 2017

and

2016

follows:

			Wealth
	Commercial		management
(in thousands)	banking		and trust		Total
Three months ended September 30, 2017
Net interest income	$	26,089	$	75	$	26,164
Provision for loan losses		150		-		150
Wealth management and trust services		-		5,025		5,025
All other non-interest income		6,078		-		6,078
Non-interest expense		18,491		2,826		21,317
Income before income taxes		13,526		2,274		15,800
Income tax expense		3,284		812		4,096
Net income	$	10,242	$	1,462	$	11,704
Segment assets	$	3,153,886	$	2,027	$	3,155,913
Three months ended September 30, 2016
Net interest income	$	24,690	$	70	$	24,760
Provision for loan losses		1,250		-		1,250
Wealth management and trust services		-		4,800		4,800
All other non-interest income		6,558		-		6,558
Non-interest expense		17,722		2,796		20,518
Income before income taxes		12,276		2,074		14,350
Income tax expense		3,142		741		3,883
Net income	$	9,134	$	1,333	$	10,467
Segment assets	$	2,936,542	$	2,123	$	2,938,665

			Wealth
	Commercial		management
(in thousands)	banking		and trust		Total
Nine months ended September 30, 2017
Net interest income	$	76,350	$	230	$	76,580
Provision for loan losses		1,650		-		1,650
Wealth management and trust services		-		15,272		15,272
All other non-interest income		18,303		-		18,303
Non-interest expense		54,756		9,055		63,811
Income before income taxes		38,247		6,447		44,694
Income tax expense		9,295		2,302		11,597
Net income	$	28,952	$	4,145	$	33,097
Segment assets	$	3,153,886	$	2,027	$	3,155,913
Nine months ended September 30, 2016
Net interest income	$	71,985	$	194	$	72,179
Provision for loan losses		2,500		-		2,500
Wealth management and trust services		-		14,219		14,219
All other non-interest income		17,999		-		17,999
Non-interest expense		51,914		8,337		60,251
Income before income taxes		35,570		6,076		41,646
Income tax expense		9,064		2,171		11,235
Net income	$	26,506	$	3,905	$	30,411
Segment assets	$	2,936,542	$	2,123	$	2,938,665

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Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2017

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 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 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. In the

first

quarter of

2017,

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

24

quarters to

28

quarters. This extension of the historical period was applied to all classes and segments of the portfolio. The expansion of the look-back period for the historical loss rates used in the quantitative allocation caused management to review the overall methodology for the qualitative factors to ensure Bancorp was appropriately capturing the risk

not

addressed in the historical loss rates used in the quantitative allocation, resulting in the same expansion of the look-back period for the qualitative factors. Management 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. 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

September 30, 2017

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, changes 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 losses based on their judgments and estimates.

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Note 2 - Securities (Tables)

9 Months Ended

Sep. 30, 2017

Notes Tables

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

(in thousands)	Amortized		Unrealized
September 30, 2017	cost		Gains		Losses		Fair value
Government sponsored enterprise obligations	$	372,596	$	846	$	778	$	372,664
Mortgage-backed securities - government agencies		147,604		697		1,581		146,720
Obligations of states and political subdivisions		51,100		611		89		51,622
Corporate equity securities		653		-		137		516
Total securities available for sale	$	571,953	$	2,154	$	2,585	$	571,522
December 31, 2016
U.S. Treasury and other U.S. Government obligations	$	74,997	$	1	$	-	$	74,998
Government sponsored enterprise obligations		268,784		800		1,494		268,090
Mortgage-backed securities - government agencies		170,344		735		2,236		168,843
Obligations of states and political subdivisions		57,158		682		396		57,444
Corporate equity securities		653		46		-		699
Total securities available for sale	$	571,936	$	2,264	$	4,126	$	570,074

Investments Classified by Contractual Maturity Date [Table Text Block]

(in thousands)
Securities available-for-sale	Amortized cost		Fair value
Due within 1 year	$	216,651	$	216,696
Due after 1 but within 5 years		74,383		74,529
Due after 5 but within 10 years		14,085		14,031
Due after 10 years		118,577		119,030
Mortgage-backed securities  - government agencies		147,604		146,720
Corporate equity securities		653		516
Total securities available-for-sale	$	571,953	$	571,522

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
September 30, 2017	value		losses		value		losses		value		losses
Government sponsored enterprise obligations	$	190,462	$	135	$	70,176	$	643	$	260,638	$	778
Mortgage-backed securities - government agencies		13,227		117		65,781		1,464		79,008		1,581
Obligations of states and political subdivisions		9,307		13		6,287		76		15,594		89
Corporate equity securities		516		137		-		-		516		137
Total temporarily impaired securities	$	213,512	$	402	$	142,244	$	2,183	$	355,756	$	2,585
December 31, 2016
Government sponsored enterprise obligations	$	154,951	$	1,344	$	3,485	$	150	$	158,436	$	1,494
Mortgage-backed securities - government agencies		115,374		1,873		9,914		363		125,288		2,236
Obligations of states and political subdivisions		29,893		380		1,478		16		31,371		396
Total temporarily impaired securities	$	300,218	$	3,597	$	14,877	$	529	$	315,095	$	4,126

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Note 3 - Loans (Tables)

9 Months Ended

Sep. 30, 2017

Notes Tables

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

(in thousands)	September 30, 2017		December 31, 2016
Commercial and industrial	$	750,728	$	736,841
Construction and development, excluding undeveloped land		174,310		192,348
Undeveloped land		20,989		21,496
Real estate mortgage:
Commercial investment		576,810		538,886
Owner occupied commercial		397,804		408,292
1-4 family residential		261,707		249,498
Home equity - first lien		51,925		55,325
Home equity - junior lien		63,416		67,519
Subtotal: Real estate mortgage		1,351,662		1,319,520
Consumer		37,431		35,170
Total loans	$	2,335,120	$	2,305,375

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
September 30, 2017	industrial		land		land		mortgage		Consumer		Total
Loans	$	750,728	$	174,310	$	20,989	$	1,351,662	$	37,431	$	2,335,120
Loans collectively evaluated for impairment	$	748,591	$	173,573	$	20,515	$	1,348,774	$	37,375	$	2,328,828
Loans individually evaluated for impairment	$	2,137	$	737	$	474	$	2,403	$	56	$	5,807
Loans acquired with deteriorated credit quality	$	-	$	-	$	-	$	485	$	-	$	485

				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)		1,518			9		(85	)		54			154			1,650
Charge-offs		(770	)		-		-			(45	)		(418	)		(1,233	)
Recoveries		128			-		-			98			298			524
At September 30, 2017	$	11,359		$	1,932	$	599		$	10,680		$	378		$	24,948
Allowance for loans collectively evaluated for impairment	$	10,705		$	1,932	$	599		$	10,668		$	322		$	24,226
Allowance for loans individually evaluated for impairment	$	654		$	-	$	-		$	12		$	56		$	722
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, 2016	industrial		land		land		mortgage		Consumer		Total
Loans	$	736,841	$	192,348	$	21,496	$	1,319,520	$	35,170	$	2,305,375
Loans collectively evaluated for impairment	$	734,139	$	191,810	$	21,022	$	1,316,400	$	35,111	$	2,298,482
Loans individually evaluated for impairment	$	2,682	$	538	$	474	$	2,516	$	59	$	6,269
Loans acquired with deteriorated credit quality	$	20	$	-	$	-	$	604	$	-	$	624

				Construction
				and development
	Commercial			excluding
	and			undeveloped			Undeveloped			Real estate
	industrial			land			land			mortgage			Consumer			Total
Allowance for loan losses
At December 31, 2015	$	8,645		$	1,760		$	814		$	10,875		$	347		$	22,441
Provision (credit)		2,775			275			(130	)		(68	)		148			3,000
Charge-offs		(1,216	)		(133	)		-			(576	)		(568	)		(2,493	)
Recoveries		279			21			-			342			417			1,059
At December 31, 2016	$	10,483		$	1,923		$	684		$	10,573		$	344		$	24,007
Allowance for loans collectively evaluated for impairment	$	9,276		$	1,923		$	683		$	10,573		$	285		$	22,740
Allowance for loans individually evaluated for impairment	$	1,207		$	-		$	1		$	-		$	59		$	1,267
Allowance for loans acquired with deteriorated credit quality	$	-		$	-		$	-		$	-		$	-		$	-

Schedule of Certain Loans Acquired in Transfer Not Accounted for As Debt Securities, Accretable Yield Movement [Table Text Block]

(in thousands)	Accretable discount			Non- accretable discount
Balance at December 31, 201 5	$	3		$	189
Accretion		(3	)		(41	)
Reclassifications from (to) non-accretable discount		-			-
Disposals		-			-
Balance at December 31, 2016	$	-		$	148
Accretion		-			-
Reclassifications from (to) non-accretable discount		-			-
Disposals		-			-
Balance at September 30, 2017	$	-		$	148

Impaired Financing Receivables [Table Text Block]

			Unpaid				Average
(in thousands)	Recorded		principal		Related		recorded
September 30, 2017	investment		balance		allowance		investment
Loans with no related allowance recorded:
Commercial and industrial	$	350	$	540	$	-	$	228
Construction and development, excluding undeveloped land		737		907		-		533
Undeveloped land		474		506		-		413
Real estate mortgage
Commercial investment		55		55		-		124
Owner occupied commercial		1,470		1,908		-		1,264
1-4 family residential		785		785		-		759
Home equity - first lien		-		-		-		-
Home equity - junior lien		81		81		-		224
Subtotal: Real estate mortgage		2,391		2,829		-		2,371
Consumer		-		17		-		-
Subtotal	$	3,952	$	4,799	$	-	$	3,545
Loans with an allowance recorded:
Commercial and industrial	$	1,787	$	2,321	$	654	$	2,343
Construction and development, excluding undeveloped land		-		-		-		-
Undeveloped land		-		-		-		60
Real estate mortgage
Commercial investment		-		-		-		-
Owner occupied commercial		-		-		-		-
1-4 family residential		12		12		12		3
Home equity - first lien		-		-		-		-
Home equity - junior lien		-		-		-		-
Subtotal: Real estate mortgage		12		12		12		3
Consumer		56		56		56		58
Subtotal	$	1,855	$	2,389	$	722	$	2,464
Total:
Commercial and industrial	$	2,137	$	2,861	$	654	$	2,571
Construction and development, excluding undeveloped land		737		907		-		533
Undeveloped land		474		506		-		473
Real estate mortgage
Commercial investment		55		55		-		124
Owner occupied commercial		1,470		1,908		-		1,264
1-4 family residential		797		797		12		762
Home equity - first lien		-		-		-		-
Home equity - junior lien		81		81		-		224
Subtotal: Real estate mortgage		2,403		2,841		12		2,374
Consumer		56		73		56		58
Total	$	5,807	$	7,188	$	722	$	6,009

			Unpaid				Average
(in thousands)	Recorded		principal		Related		recorded
December 31, 2016	investment		balance		allowance		investment
Loans with no related allowance recorded:
Commercial and industrial	$	322	$	465	$	-	$	1,947
Construction and development, excluding undeveloped land		538		708		-		108
Undeveloped land		233		265		-		76
Real estate mortgage
Commercial investment		107		107		-		193
Owner occupied commercial		1,042		1,479		-		1,356
1-4 family residential		895		896		-		962
Home equity - first lien		-		-		-		3
Home equity - junior lien		472		472		-		333
Subtotal: Real estate mortgage		2,516		2,954		-		2,847
Consumer		-		-		-		18
Subtotal	$	3,609	$	4,392	$	-	$	4,996
Loans with an allowance recorded:
Commercial and industrial	$	2,360	$	2,835	$	1,207	$	1,619
Construction and development, excluding undeveloped land		-		-		-		182
Undeveloped land		241		241		1		149
Real estate mortgage
Commercial investment		-		-		-		-
Owner occupied commercial		-		-		-		554
1-4 family residential		-		-		-		-
Home equity - first lien		-		-		-		-
Home equity - junior lien		-		-		-		-
Subtotal: Real estate mortgage		-		-		-		554
Consumer		59		59		59		63
Subtotal	$	2,660	$	3,135	$	1,267	$	2,567
Total:
Commercial and industrial	$	2,682	$	3,300	$	1,207	$	3,566
Construction and development, excluding undeveloped land		538		708		-		290
Undeveloped land		474		506		1		225
Real estate mortgage		-		-		-		-
Commercial investment		107		107		-		193
Owner occupied commercial		1,042		1,479		-		1,910
1-4 family residential		895		896		-		962
Home equity - first lien		-		-		-		3
Home equity - junior lien		472		472		-		333
Subtotal: Real estate mortgage		2,516		2,954		-		3,401
Consumer		59		59		59		81
Total	$	6,269	$	7,527	$	1,267	$	7,563

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

(in thousands)	September 30, 2017		December 31, 2016
Commercial and industrial	$	1,256	$	1,767
Construction and development, excluding undeveloped land		737		538
Undeveloped land		474		474
Real estate mortgage
Commercial investment		55		107
Owner occupied commercial		1,470		1,042
1-4 family residential		785		984
Home equity - first lien		-		-
Home equity - junior lien		81		383
Subtotal: Real estate mortgage		2,391		2,516
Consumer		-		-
Total	$	4,858	$	5,295

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
September 30, 2017	Current		past due		past due		non-accrual)		past due		loans		accruing
Commercial and industrial	$	747,316	$	2,149	$	7	$	1,256	$	3,412	$	750,728	$	-
Construction and development, excluding undeveloped land		173,573		-		-		737		737		174,310		-
Undeveloped land		20,515		-		-		474		474		20,989		-
Real estate mortgage
Commercial investment		574,088		2,667		-		55		2,722		576,810		-
Owner occupied commercial		395,924		47		363		1,470		1,880		397,804		-
1-4 family residential		259,729		330		602		1,046		1,978		261,707		261
Home equity - first lien		51,836		89		-		-		89		51,925		-
Home equity - junior lien		62,892		165		278		81		524		63,416		-
Subtotal: Real estate mortgage		1,344,469		3,298		1,243		2,652		7,193		1,351,662		261
Consumer		37,196		226		9		-		235		37,431		-
Total	$	2,323,069	$	5,673	$	1,259	$	5,119	$	12,051	$	2,335,120	$	261
December 31, 2016
Commercial and industrial	$	734,682	$	84	$	290	$	1,785	$	2,159	$	736,841	$	18
Construction and development, excluding undeveloped land		191,810		-		-		538		538		192,348		-
Undeveloped land		21,022		-		-		474		474		21,496		-
Real estate mortgage
Commercial investment		537,998		631		64		193		888		538,886		86
Owner occupied commercial		406,726		342		-		1,224		1,566		408,292		182
1-4 family residential		246,730		1,174		576		1,018		2,768		249,498		34
Home equity - first lien		55,027		231		21		46		298		55,325		46
Home equity - junior lien		66,911		99		126		383		608		67,519		72
Subtotal: Real estate mortgage		1,313,392		2,477		787		2,864		6,128		1,319,520		420
Consumer		34,965		28		105		72		205		35,170		-
Total	$	2,295,871	$	2,589	$	1,182	$	5,733	$	9,504	$	2,305,375	$	438

Financing Receivable Credit Quality Indicators [Table Text Block]

(in thousands)							Substandard				Total
September 30, 2017	Pass		OAEM		Substandard		non-performing		Doubtful		loans
Commercial and industrial	$	726,194	$	7,464	$	14,197	$	2,873	$	-	$	750,728
Construction and development, excluding undeveloped land		174,310		-		-		-		-		174,310
Undeveloped land		20,485		-		30		474		-		20,989
Real estate mortgage
Commercial investment		575,339		761		420		290		-		576,810
Owner occupied commercial		383,387		10,313		2,869		1,235		-		397,804
1-4 family residential		256,458		3,018		1,172		1,059		-		261,707
Home equity - first lien		51,923		2		-		-		-		51,925
Home equity - junior lien		63,029		73		233		81		-		63,416
Subtotal: Real estate mortgage		1,330,136		14,167		4,694		2,665		-		1,351,662
Consumer		37,269		102		4		56		-		37,431
Total	$	2,288,394	$	21,733	$	18,925	$	6,068	$	-	$	2,335,120
December 31, 2016
Commercial and industrial	$	714,025	$	14,266	$	5,850	$	2,700	$	-	$	736,841
Construction and development, excluding undeveloped land		191,455		-		355		538		-		192,348
Undeveloped land		21,022		-		-		474		-		21,496
Real estate mortgage
Commercial investment		538,688		-		5		193		-		538,886
Owner occupied commercial		396,997		7,960		2,111		1,224		-		408,292
1-4 family residential		247,888		-		592		1,018		-		249,498
Home equity - first lien		55,279		-		-		46		-		55,325
Home equity - junior lien		66,710		-		426		383		-		67,519
Subtotal: Real estate mortgage		1,305,562		7,960		3,134		2,864		-		1,319,520
Consumer		35,039		-		-		131		-		35,170
Total	$	2,267,103	$	22,226	$	9,339	$	6,707	$	-	$	2,305,375

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Note 4 - Goodwill and Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2017

Notes Tables

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

	For the nine months
	ended September 30,
(in thousands)	2017			2016
Balance at beginning of period	$	921		$	1,018
Additions for mortgage loans sold		143			105
Amortization		(222	)		(192	)
Balance at end of period	$	842		$	931

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Note 5 - Income Taxes (Tables)

9 Months Ended

Sep. 30, 2017

Notes Tables

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

	Three months ended						Nine months ended
	September 30,						September 30,
(in thousands)	2017			2016			2017			2016
Current income tax expense
Federal	$	5,211		$	4,363		$	12,936		$	10,958
State		179			287			472			597
Total current income tax expense		5,390			4,650			13,408			11,555
Deferred income tax (benefit) expense
Federal		(1,583	)		(692	)		(2,240	)		(302	)
State		(44	)		(75	)		(30	)		(18	)
Total deferred income tax expense (benefit)		(1,627	)		(767	)		(2,270	)		(320	)
Change in valuation allowance		333			-			459			-
Total income tax expense	$	4,096		$	3,883		$	11,597		$	11,235

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

	Nine months ended September 30,
	2017			2016
U.S. federal statutory income tax rate		35.0	%		35.0	%
Tax credits		(4.6	)		(9.4	)
Excess tax benefits from share-based compensation arrangements		(3.0	)		-
Increase in cash surrender value of life insurance		(1.4	)		(0.9	)
Tax exempt interest income		(1.1	)		(1.3	)
State income taxes, net of federal benefit		0.7			0.9
Other, net		0.3			2.7
Effective income tax rate		25.9	%		27.0	%

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Note 6 - Deposits (Tables)

9 Months Ended

Sep. 30, 2017

Notes Tables

Deposit Liabilities, Type [Table Text Block]

	September 30,		December 31,
	2017		2016
(in thousands)
Non-interest bearing demand	$	676,824	$	680,156
Interest bearing deposits:
Interest bearing demand		725,368		768,139
Savings		149,596		140,030
Money market		698,198		682,421
Time deposits of more than $250,000		33,270		40,427
Other time deposits		198,710		209,375
Total time deposits		231,980		249,802
Total interest bearing deposits		1,805,142		1,840,392
Total deposits	$	2,481,966	$	2,520,548

Time Deposit Maturities [Table Text Block]

( in thousands)	Amount
3 months or less	$	11,463
O ver 3 through 6 months		3,938
Over 6 through 12 months		10,942
Over 1 through 3 years		6,410
Over 3 years		517
Total	$	33,270

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Note 8 - Federal Home Loan Bank Advances (Tables)

9 Months Ended

Sep. 30, 2017

Notes Tables

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

(In thousands)	September 30, 2017					December 31, 2016
Year	Advance		Fixed Rate			Advance		Fixed Rate
2017	$	30,000		1.24	%	$	30,000		0.70	%
2020		1,753		2.23			1,790		2.23
2021		306		2.12			359		2.12
2024		2,505		2.36			2,661		2.36
2025		5,615		2.43			6,025		2.43
2026		8,658		1.99			8,936		1.99
2028		1,273		1.48			1,304		1.48
Total	$	50,110		1.61	%	$	51,075		1.30	%

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Note 9 - Other Comprehensive Income (Tables)

9 Months Ended

Sep. 30, 2017

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, 201 5	$	965		$	(60	)	$	(273	)	$	632
Net current period other comprehensive gain (loss)		4,110			(301	)		-			3,809
Balance at September 30, 2016	$	5,075		$	(361	)	$	(273	)	$	4,441
Balance at December 31, 2016	$	(1,211	)	$	(16	)	$	(272	)	$	(1,499	)
Net current period other comprehensive income gain		950			38			-			988
Amounts reclassified from other comprehensive income		(20	)		-			-			(20	)
Net current-period other comprehensive income		930			38			-			968
Balance at September 30, 2017	$	(281	)	$	22		$	(272	)	$	(531	)

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Note 11 - Net Income Per Share (Tables)

9 Months Ended

Sep. 30, 2017

Notes Tables

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

	Three months ended				Nine months ended
(in thousands, except per share data)	September 30,				September 30,
	2017		2016		2017		2016
Net income	$	11,704	$	10,467	$	33,097	$	30,411
Average basic shares outstanding		22,542		22,385		22,524		22,325
Dilutive securities		422		418		460		386
Average shares outstanding including dilutive securities including dilutive securities		22,964		22,803		22,984		22,711
Net income per share, basic	$	0.52	$	0.47	$	1.47	$	1.36
Net income per share, diluted	$	0.51	$	0.46	$	1.44	$	1.34

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Note 13 - Stock-based Compensation (Tables)

9 Months Ended

Sep. 30, 2017

Notes Tables

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

	For three months ended						For nine months ended
	September 30,						September 30,
(in thousands)	2017			2016			2017			2016
Stock-based compensation expense before income taxes	$	670		$	573		$	2,012		$	1,646
Less: deferred tax benefit		(235	)		(200	)		(704	)		(576	)
Reduction of net income	$	435		$	373		$	1,308		$	1,070

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

	2017			2016
Dividend yield		2.72	%		2.94	%
Expected volatility		19.47	%		19.31	%
Risk free interest rate		2.29	%		1.70	%
Expected life of SARs (in years)		7.0			7.3

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, 2015
Vested and exercisable		656		$	14.02	-	19.44	$	15.75	$	6,191	$	3.39		3.7
Unvested		266			15.24	-	24.55		18.66		1,733		3.29		7.7
Total outstanding		922			14.02	-	24.55		16.59		7,924		3.36		4.8
Granted		88			25.76	-	33.08		25.84		1,866		3.56
Exercised		(272	)		14.02	-	17.89		16.38		4,155		3.73
Forfeited		(3	)		14.02	-	15.84		15.18		60		2.94
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		(47	)		14.02	-	17.89		15.52		1,168		3.27
Forfeited		-				-			-		-		-
At September 30, 2017
Vested and exercisable		519			14.02	-	25.76		16.39		11,218		3.15		4.3
Unvested		215			15.24	-	40.00		26.45		2,567		4.17		7.9
Total outstanding		734			14.02	-	40.00		19.17	$	13,785		3.45		5.3
Vested year-to-date		92		$	15.24	-	25.76	$	19.34	$	1,723	$	3.18

Schedule of Nonvested Share Activity [Table Text Block]

				Grant date
				weighted-
	Number			average cost
Unvested at December 31, 201 5		155,858		$	18.98
2016 activity:
Shares awarded		51,122			25.78
Restrictions lapsed and shares released		(49,265	)		17.98
Shares forfeited		(12,480	)		20.69
Unvested at December 31, 2016		145,235		$	21.57
2017 activity:
Shares awarded		28,625			44.85
Restrictions lapsed and shares released		(46,220	)		19.76
Shares forfeited		(7,154	)		25.03
Unvested at September 30, 2017		120,486		$	27.59

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
2015		3	$	20.02		51,910
2016		3		22.61		58,786
2017		3		35.66		24,756

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Note 16 - Assets and Liabilities Measured and Reported at Fair Value (Tables)

9 Months Ended

Sep. 30, 2017

Notes Tables

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

(in thousands)	Fair value at September 30, 2017
Assets	Total		Level 1		Level 2		Level 3
Investment securities available-for-sale
Government sponsored enterprise obligations	$	372,664	$	-	$	372,664	$	-
Mortgage-backed securities - government agencies		146,720		-		146,720		-
Obligations of states and political subdivisions		51,622		-		51,622		-
Corporate equity securities		516		516		-		-
Total investment securities available-for-sale		571,522		516		571,006		-
Interest rate swaps		182		-		182		-
Total assets	$	571,704	$	516	$	571,188	$	-
Liabilities
Interest rate swaps	$	148	$	-	$	148	$	-

(in thousands)	Fair value at December 31, 2016
Assets	Total		Level 1		Level 2		Level 3
Investment securities available-for-sale
U.S. Treasury and other U.S. government obligations	$	74,998	$	74,998	$	-	$	-
Government sponsored enterprise obligations		268,090		-		268,090		-
Mortgage-backed securities - government agencies		168,843		-		168,843		-
Obligations of states and political subdivisions		57,444		-		57,444		-
Corporate equity securities		699		699		-		-
Total investment securities available-for-sale		570,074		75,697		494,377		-
Interest rate swaps		203		-		203		-
Total assets	$	570,277	$	75,697	$	494,580	$	-
Liabilities
Interest rate swaps	$	178	$	-	$	178	$	-

Fair Value Measurements, Nonrecurring [Table Text Block]

(in thousands)	Fair value at September 30, 2017								Losses for 9 month
									period ended
	Total		Level 1		Level 2		Level 3		September 30, 2017
Impaired loans	$	2,530	$	-	$	-	$	2,530	$	(280	)
Other real estate owned		2,640		-		-		2,640		(171	)
Total	$	5,170	$	-	$	-	$	5,170	$	(451	)

(in thousands)	Fair value at December 31, 2016								Losses for 9 month
									period ended
	Total		Level 1		Level 2		Level 3		September 30, 2016
Impaired loans	$	2,933	$	-	$	-	$	2,933	$	(1,612	)
Other real estate owned		4,488		-		-		4,488		(62	)
Total	$	7,421	$	-	$	-	$	7,421	$	(1,674	)

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	$	2,530	Appraisal	Appraisal discounts		15.0	%
Other real estate owned		2,640	Appraisal	Appraisal discounts		23.4

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Note 17 - Disclosure of Financial Instruments Not Reported at Fair Value (Tables)

9 Months Ended

Sep. 30, 2017

Notes Tables

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

(in thousands)	Carrying
September 30, 2017	amount		Fair value		Level 1		Level 2		Level 3
Financial assets
Cash and short-term investments	$	129,078	$	129,078	$	129,078	$	-	$	-
Mortgage loans held for sale		5,459		6,005		-		6,005		-
Federal Home Loan Bank stock and other securities		7,666		7,666		-		7,666		-
Loans, net		2,310,172		2,302,466		-		-		2,302,466
Accrued interest receivable		8,162		8,162		8,162		-		-
Financial liabilities
Deposits		2,481,966		2,480,641		-		-		2,480,641
Short-term borrowings		233,824		233,824		-		233,824		-
FHLB advances		50,110		50,070		-		50,070		-
Secured borrowings		18,351								18,210
Accrued interest payable		212		212		212		-		-

(in thousands)	Carrying
December 31, 2016	amount		Fair value		Level 1		Level 2		Level 3
Financial assets
Cash and short-term investments	$	47,973	$	47,973	$	47,973	$	-	$	-
Mortgage loans held for sale		3,213		3,481		-		3,481		-
Federal Home Loan Bank stock and other securities		6,347		6,347		-		6,347		-
Loans, net		2,281,368		2,284,569		-		-		2,284,569
Accrued interest receivable		6,878		6,878		6,878		-		-
Financial liabilities
Deposits		2,520,548		2,519,725		-		-		2,519,725
Short-term borrowings		114,969		114,969		-		114,969		-
FHLB advances		51,075		50,806		-		50,806		-
Secured borrowings		15,814								15,731
Accrued interest payable		144		144		144		-		-

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Note 18 - Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2017

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			September 30, 2017		December 31, 2016
$	10,000	12/6/2021	US 3 Month LIBOR		1.89	%	$	26	$	16
	20,000	12/6/2020	US 3 Month LIBOR		1.79	%		8		9
$	30,000				1.82	%	$	34	$	25

Not Designated as Hedging Instrument [Member]

Notes Tables

Schedule of Interest Rate Derivatives [Table Text Block]

(dollar amounts in thousands)	Receiving					Paying
	September 30,		December 31,			September 30,			December 31,
	2017		2016			2017			2016
Notional amount	$	53,214	$	43,986		$	53,214		$	43,986
Weighted average maturity (years)		8.9		9.9			8.9			9.9
Fair value	$	148	$	(178	)	$	(148	)	$	178

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Note 19 - Regulatory Matters (Tables)

9 Months Ended

Sep. 30, 2017

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
September 30, 2017	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk-based capital (1)
Consolidated	$	358,610		13.64	%	$	210,328		8.00	%	NA		NA
Bank		346,040		13.20			209,721		8.00		$	262,152		10.00	%
Common equity tier 1 risk-based capital
Consolidated		333,312		12.67			118,382		4.50		NA		NA
Bank		320,742		12.23			118,016		4.50			157,355		6.00
Tier 1 risk-based capital (1)
Consolidated		333,312		12.67			157,843		6.00		NA		NA
Bank		320,742		12.23			157,355		6.00			157,355		6.00
Leverage (2)
Consolidated		333,312		11.02			120,984		4.00		NA		NA
Bank		320,742		10.61			120,921		4.00			151,151		5.00

(dollars in thousands)	Actual					Minimum for adequately capitalized					Minimum for well capitalized
December 31, 2016	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk-based capital (1)
Consolidated	$	338,525		13.04	%	$	207,684		8.00	%	NA		NA
Bank		325,630		12.57			207,243		8.00		$	259,053		10.00	%
Common equity tier 1 risk-based capital
Consolidated		314,147		12.10			116,832		4.50		NA		NA
Bank		301,252		11.63			116,564		4.50			155,418		6.00
Tier 1 risk-based capital (1)
Consolidated		314,147		12.10			155,775		6.00		NA		NA
Bank		301,252		11.63			155,418		6.00			155,418		6.00
Leverage (2)
Consolidated		314,147		10.54			119,221		4.00		NA		NA
Bank		301,252		10.11			119,190		4.00			148,987		5.00

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Note 20 - Segments (Tables)

9 Months Ended

Sep. 30, 2017

Notes Tables

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

			Wealth
	Commercial		management
(in thousands)	banking		and trust		Total
Three months ended September 30, 2017
Net interest income	$	26,089	$	75	$	26,164
Provision for loan losses		150		-		150
Wealth management and trust services		-		5,025		5,025
All other non-interest income		6,078		-		6,078
Non-interest expense		18,491		2,826		21,317
Income before income taxes		13,526		2,274		15,800
Income tax expense		3,284		812		4,096
Net income	$	10,242	$	1,462	$	11,704
Segment assets	$	3,153,886	$	2,027	$	3,155,913
Three months ended September 30, 2016
Net interest income	$	24,690	$	70	$	24,760
Provision for loan losses		1,250		-		1,250
Wealth management and trust services		-		4,800		4,800
All other non-interest income		6,558		-		6,558
Non-interest expense		17,722		2,796		20,518
Income before income taxes		12,276		2,074		14,350
Income tax expense		3,142		741		3,883
Net income	$	9,134	$	1,333	$	10,467
Segment assets	$	2,936,542	$	2,123	$	2,938,665

			Wealth
	Commercial		management
(in thousands)	banking		and trust		Total
Nine months ended September 30, 2017
Net interest income	$	76,350	$	230	$	76,580
Provision for loan losses		1,650		-		1,650
Wealth management and trust services		-		15,272		15,272
All other non-interest income		18,303		-		18,303
Non-interest expense		54,756		9,055		63,811
Income before income taxes		38,247		6,447		44,694
Income tax expense		9,295		2,302		11,597
Net income	$	28,952	$	4,145	$	33,097
Segment assets	$	3,153,886	$	2,027	$	3,155,913
Nine months ended September 30, 2016
Net interest income	$	71,985	$	194	$	72,179
Provision for loan losses		2,500		-		2,500
Wealth management and trust services		-		14,219		14,219
All other non-interest income		17,999		-		17,999
Non-interest expense		51,914		8,337		60,251
Income before income taxes		35,570		6,076		41,646
Income tax expense		9,064		2,171		11,235
Net income	$	26,506	$	3,905	$	30,411
Segment assets	$	2,936,542	$	2,123	$	2,938,665

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Note 1 - Summary of Significant Accounting Policies (Details Textual)	9 Months Ended
	Sep. 30, 2017
Period Look-back, Quarters	24
Period Look-back, Extended, Quarters	28

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Note 2 - Securities (Details Textual) xbrli-pure in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017 USD ($)	Sep. 30, 2016	Sep. 30, 2017 USD ($)	Sep. 30, 2016	Dec. 31, 2016 USD ($)
Held-to-maturity Securities	$ 0		$ 0		$ 0
Number of Securities Sold	0	0	0	0
Available-for-sale Securities Pledged as Collateral	$ 329,700		$ 329,700		$ 380,400
Other than Temporary Impairment Losses, Investments, Portion Recognized in Earnings, Net			$ 0

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Note 2 - Securities - Available-for-sale Securities (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Securities available-for-sale, amortized cost	$ 571,953	$ 571,936
Securities available-for-sale, unrealized gains	2,154	2,264
Securities available-for-sale, unrealized losses	2,585	4,126
Securities available-for-sale, fair value	571,522	570,074
US Government-sponsored Enterprises Debt Securities [Member]
Securities available-for-sale, amortized cost	372,596	268,784
Securities available-for-sale, unrealized gains	846	800
Securities available-for-sale, unrealized losses	778	1,494
Securities available-for-sale, fair value	372,664	268,090
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Securities available-for-sale, amortized cost	147,604	170,344
Securities available-for-sale, unrealized gains	697	735
Securities available-for-sale, unrealized losses	1,581	2,236
Securities available-for-sale, fair value	146,720	168,843
US States and Political Subdivisions Debt Securities [Member]
Securities available-for-sale, amortized cost	51,100	57,158
Securities available-for-sale, unrealized gains	611	682
Securities available-for-sale, unrealized losses	89	396
Securities available-for-sale, fair value	51,622	57,444
Common Stock [Member]
Securities available-for-sale, amortized cost	653	653
Securities available-for-sale, unrealized gains		46
Securities available-for-sale, unrealized losses	137
Securities available-for-sale, fair value	$ 516	699
US Treasury Securities [Member]
Securities available-for-sale, amortized cost		74,997
Securities available-for-sale, unrealized gains		1
Securities available-for-sale, unrealized losses
Securities available-for-sale, fair value		$ 74,998

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Note 2 - Securities - Available-for-sale Securities by Contractual Maturity (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Due within 1 year, amortized cost	$ 216,651
Due within 1 year, fair value	216,696
Due after 1 but within 5 years, amortized cost	74,383
Due after 1 but within 5 years, fair value	74,529
Due after 5 but within 10 years, amortized cost	14,085
Due after 5 but within 10 years, fair value	14,031
Due after 10 years, amortized cost	118,577
Due after 10 years, fair value	119,030
Mortgage-backed securities – government agencies, amortized cost	147,604
Mortgage-backed securities – government agencies, fair value	146,720
Corporate equity securities, amortized cost	653
Corporate equity securities, fair value	516
Total securities available-for-sale, amortized cost	571,953	$ 571,936
Total securities available-for-sale, fair value	$ 571,522	$ 570,074

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Note 2 - Securities - Securities With Unrealized Losses (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Securities available-for-sale, less than 12 months, fair value	$ 213,512	$ 300,218
Securities available-for-sale, less than 12 months, unrealized losses	402	3,597
Securities available-for-sale, 12 months or more, fair value	142,244	14,877
Securities available-for-sale, 12 months or more, unrealized losses	2,183	529
Securities available-for-sale, fair value	355,756	315,095
Securities available-for-sale, unrealized losses	2,585	4,126
US Government-sponsored Enterprises Debt Securities [Member]
Securities available-for-sale, less than 12 months, fair value	190,462	154,951
Securities available-for-sale, less than 12 months, unrealized losses	135	1,344
Securities available-for-sale, 12 months or more, fair value	70,176	3,485
Securities available-for-sale, 12 months or more, unrealized losses	643	150
Securities available-for-sale, fair value	260,638	158,436
Securities available-for-sale, unrealized losses	778	1,494
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Securities available-for-sale, less than 12 months, fair value	13,227	115,374
Securities available-for-sale, less than 12 months, unrealized losses	117	1,873
Securities available-for-sale, 12 months or more, fair value	65,781	9,914
Securities available-for-sale, 12 months or more, unrealized losses	1,464	363
Securities available-for-sale, fair value	79,008	125,288
Securities available-for-sale, unrealized losses	1,581	2,236
US States and Political Subdivisions Debt Securities [Member]
Securities available-for-sale, less than 12 months, fair value	9,307	29,893
Securities available-for-sale, less than 12 months, unrealized losses	13	380
Securities available-for-sale, 12 months or more, fair value	6,287	1,478
Securities available-for-sale, 12 months or more, unrealized losses	76	16
Securities available-for-sale, fair value	15,594	31,371
Securities available-for-sale, unrealized losses	89	$ 396
Corporate Debt Securities [Member]
Securities available-for-sale, less than 12 months, fair value	516
Securities available-for-sale, less than 12 months, unrealized losses	137
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	516
Securities available-for-sale, unrealized losses	$ 137

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Note 3 - Loans (Details Textual) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)	Dec. 31, 2016 USD ($)
Financing Receivable, Recorded Investment, 90 Days Past Due and Still Accruing	$ 261		$ 261		$ 438
Financing Receivable, Modifications, Recorded Investment	$ 949	$ 999	$ 949	$ 999
Financing Receivable, Modifications, Number of Contracts		0		0
Financing Receivable, Modifications, Subsequent Default, Number of Contracts	0		0
Allowance for Credit Losses, Change in Method of Calculating Impairment	$ 142		$ 142		207
Loans and Leases Receivable, Impaired, Commitment to Lend	$ 0		$ 0		0
Mortgage Loans in Process of Foreclosure, Number	2		2
Mortgage Loans in Process of Foreclosure, Amount	$ 75		$ 75
Real Estate Mortgage Portfolio Segment [Member]
Financing Receivable, Recorded Investment, 90 Days Past Due and Still Accruing	261		261		$ 420
Real Estate Mortgage Portfolio Segment [Member] | Residential Loans [Member]
Financing Receivable, Modifications, Recorded Investment	$ 12		12
Financing Receivable, Modifications, Number of Contracts	1
Commercial Portfolio Segment [Member]
Financing Receivable, Modifications, Recorded Investment	$ 35		35
Financing Receivable, Modifications, Pre-Modification Recorded Investment			39
Financing Receivable, Modifications, Number of Contracts	1
Financing Receivable, Modifications, Post-Modification Recorded Investment			$ 39

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Note 3 - Loans - Loans by Loan Portfolio Class (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Loans	$ 2,335,120	$ 2,305,375
Commercial and Industrial Portfolio Segment [Member]
Loans	750,728	736,841
Construction and Development Excluding Undeveloped Land Portfolio Segment [Member]
Loans	174,310	192,348
Undevelopment Land Portfolio Segment [Member]
Loans	20,989	21,496
Real Estate Mortgage Portfolio Segment [Member]
Loans	1,351,662	1,319,520
Real Estate Mortgage Portfolio Segment [Member] | Commercial Investment [Member]
Loans	576,810	538,886
Real Estate Mortgage Portfolio Segment [Member] | Owner Occupied Commercial [Member]
Loans	397,804	408,292
Real Estate Mortgage Portfolio Segment [Member] | One to Four Family Residential [Member]
Loans	261,707	249,498
Real Estate Mortgage Portfolio Segment [Member] | Home Equity First Lien [Member]
Loans	51,925	55,325
Real Estate Mortgage Portfolio Segment [Member] | Home Equity Junior Lien [Member]
Loans	63,416	67,519
Consumer Portfolio Segment [Member]
Loans	$ 37,431	$ 35,170

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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		9 Months Ended		12 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016	Sep. 30, 2017	Dec. 31, 2016
Loans						$ 2,335,120	$ 2,305,375
Loans collectively evaluated for impairment						2,328,828	2,298,482
Loans individually evaluated for impairment						5,807	6,269
Balance			$ 24,007	$ 22,441	$ 22,441
Provision for loan losses	$ 150	$ 1,250	1,650	2,500	3,000
Charge-offs			(1,233)		(2,493)
Recoveries			524		1,059
Balance	24,948		24,948		24,007
Allowance for loans collectively evaluated for impairment						24,226	22,740
Allowance for loans individually evaluated for impairment						722	1,267
Allowance for loans acquired with deteriorated credit quality	24,948		24,948	22,441	24,007	24,948	24,007
Receivables Acquired with Deteriorated Credit Quality [Member]
Loans						485	624
Balance
Balance
Allowance for loans acquired with deteriorated credit quality
Commercial and Industrial Portfolio Segment [Member]
Loans						750,728	736,841
Loans collectively evaluated for impairment						748,591	734,139
Loans individually evaluated for impairment						2,137	2,682
Balance			10,483	8,645	8,645
Provision for loan losses			1,518		2,775
Charge-offs			(770)		(1,216)
Recoveries			128		279
Balance	11,359		11,359		10,483
Allowance for loans collectively evaluated for impairment						10,705	9,276
Allowance for loans individually evaluated for impairment						654	1,207
Allowance for loans acquired with deteriorated credit quality	11,359		10,483	8,645	10,483	11,359	10,483
Commercial and Industrial Portfolio Segment [Member] | Receivables Acquired with Deteriorated Credit Quality [Member]
Loans							20
Balance
Balance
Allowance for loans acquired with deteriorated credit quality
Construction and Development Excluding Undeveloped Land Portfolio Segment [Member]
Loans						174,310	192,348
Loans collectively evaluated for impairment						173,573	191,810
Loans individually evaluated for impairment						737	538
Balance			1,923	1,760	1,760
Provision for loan losses			9		275
Charge-offs					(133)
Recoveries					21
Balance	1,932		1,932		1,923
Allowance for loans collectively evaluated for impairment						1,932	1,923
Allowance for loans individually evaluated for impairment
Allowance for loans acquired with deteriorated credit quality	1,932		1,923	1,760	1,923	1,932	1,923
Construction and Development Excluding Undeveloped Land Portfolio Segment [Member] | Receivables Acquired with Deteriorated Credit Quality [Member]
Loans
Balance
Balance
Allowance for loans acquired with deteriorated credit quality
Undevelopment Land Portfolio Segment [Member]
Loans						20,989	21,496
Loans collectively evaluated for impairment						20,515	21,022
Loans individually evaluated for impairment						474	474
Balance			684	814	814
Provision for loan losses			(85)		(130)
Charge-offs
Recoveries
Balance	599		599		684
Allowance for loans collectively evaluated for impairment						599	683
Allowance for loans individually evaluated for impairment							1
Allowance for loans acquired with deteriorated credit quality	599		684	814	684	599	684
Undevelopment Land Portfolio Segment [Member] | Receivables Acquired with Deteriorated Credit Quality [Member]
Loans
Balance
Balance
Allowance for loans acquired with deteriorated credit quality
Real Estate Mortgage Portfolio Segment [Member]
Loans						1,351,662	1,319,520
Loans collectively evaluated for impairment						1,348,774	1,316,400
Loans individually evaluated for impairment						2,403	2,516
Balance			10,573	10,875	10,875
Provision for loan losses			54		(68)
Charge-offs			(45)		(576)
Recoveries			98		342
Balance	10,680		10,680		10,573
Allowance for loans collectively evaluated for impairment						10,668	10,573
Allowance for loans individually evaluated for impairment						12
Allowance for loans acquired with deteriorated credit quality	10,680		10,573	10,875	10,573	10,680	10,573
Real Estate Mortgage Portfolio Segment [Member] | Receivables Acquired with Deteriorated Credit Quality [Member]
Loans						485	604
Balance
Balance
Allowance for loans acquired with deteriorated credit quality
Consumer Portfolio Segment [Member]
Loans						37,431	35,170
Loans collectively evaluated for impairment						37,375	35,111
Loans individually evaluated for impairment						56	59
Balance			344	347	347
Provision for loan losses			154		148
Charge-offs			(418)		(568)
Recoveries			298		417
Balance	378		378		344
Allowance for loans collectively evaluated for impairment						322	285
Allowance for loans individually evaluated for impairment						56	59
Allowance for loans acquired with deteriorated credit quality	378		344	$ 347	344	378	344
Consumer Portfolio Segment [Member] | Receivables Acquired with Deteriorated Credit Quality [Member]
Loans
Balance
Balance
Allowance for loans acquired with deteriorated credit quality

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Note 3 - Loans - Acquired Impaired Loans (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Accretable discount		$ 3
Accretion		(3)
Accretable discount
Non- accretable discount	148	189
Non- accretable discount, accretion		(41)
Non- accretable discount	$ 148	$ 148

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Note 3 - Loans - Loans Individually Evaluated for Impairment (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Loans with no related allowance recorded, recorded investment	$ 3,952	$ 3,609
Loans with no related allowance recorded, unpaid principal balance	4,799	4,392
Loans with no related allowance recorded, average recorded investment	3,545	4,996
Loans with an allowance recorded, recorded investment	1,855	2,660
Loans with an allowance recorded, unpaid principal balance	2,389	3,135
Related allowance	722	1,267
Loans with an allowance recorded, average recorded investment	2,464	2,567
Recorded investment	5,807	6,269
Unpaid principal balance	7,188	7,527
Average recorded investment	6,009	7,563
Commercial and Industrial Portfolio Segment [Member]
Loans with no related allowance recorded, recorded investment	350	322
Loans with no related allowance recorded, unpaid principal balance	540	465
Loans with no related allowance recorded, average recorded investment	228	1,947
Loans with an allowance recorded, recorded investment	1,787	2,360
Loans with an allowance recorded, unpaid principal balance	2,321	2,835
Related allowance	654	1,207
Loans with an allowance recorded, average recorded investment	2,343	1,619
Recorded investment	2,137	2,682
Unpaid principal balance	2,861	3,300
Average recorded investment	2,571	3,566
Construction and Development Excluding Undeveloped Land Portfolio Segment [Member]
Loans with no related allowance recorded, recorded investment	737	538
Loans with no related allowance recorded, unpaid principal balance	907	708
Loans with no related allowance recorded, average recorded investment	533	108
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		182
Recorded investment	737	538
Unpaid principal balance	907	708
Average recorded investment	533	290
Undevelopment Land Portfolio Segment [Member]
Loans with no related allowance recorded, recorded investment	474	233
Loans with no related allowance recorded, unpaid principal balance	506	265
Loans with no related allowance recorded, average recorded investment	413	76
Loans with an allowance recorded, recorded investment		241
Loans with an allowance recorded, unpaid principal balance		241
Related allowance		1
Loans with an allowance recorded, average recorded investment	60	149
Recorded investment	474	474
Unpaid principal balance	506	506
Average recorded investment	473	225
Real Estate Mortgage Portfolio Segment [Member]
Loans with no related allowance recorded, recorded investment	2,391	2,516
Loans with no related allowance recorded, unpaid principal balance	2,829	2,954
Loans with no related allowance recorded, average recorded investment	2,371	2,847
Loans with an allowance recorded, recorded investment	12
Loans with an allowance recorded, unpaid principal balance	12
Related allowance	12
Loans with an allowance recorded, average recorded investment	3	554
Recorded investment	2,403	2,516
Unpaid principal balance	2,841	2,954
Average recorded investment	2,374	3,401
Real Estate Mortgage Portfolio Segment [Member] | Commercial Investment [Member]
Loans with no related allowance recorded, recorded investment	55	107
Loans with no related allowance recorded, unpaid principal balance	55	107
Loans with no related allowance recorded, average recorded investment	124	193
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	55	107
Unpaid principal balance	55	107
Average recorded investment	124	193
Real Estate Mortgage Portfolio Segment [Member] | Owner Occupied Commercial [Member]
Loans with no related allowance recorded, recorded investment	1,470	1,042
Loans with no related allowance recorded, unpaid principal balance	1,908	1,479
Loans with no related allowance recorded, average recorded investment	1,264	1,356
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		554
Recorded investment	1,470	1,042
Unpaid principal balance	1,908	1,479
Average recorded investment	1,264	1,910
Real Estate Mortgage Portfolio Segment [Member] | One to Four Family Residential [Member]
Loans with no related allowance recorded, recorded investment	785	895
Loans with no related allowance recorded, unpaid principal balance	785	896
Loans with no related allowance recorded, average recorded investment	759	962
Loans with an allowance recorded, recorded investment	12
Loans with an allowance recorded, unpaid principal balance	12
Related allowance	12
Loans with an allowance recorded, average recorded investment	3
Recorded investment	797	895
Unpaid principal balance	797	896
Average recorded investment	762	962
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		3
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		3
Real Estate Mortgage Portfolio Segment [Member] | Home Equity Junior Lien [Member]
Loans with no related allowance recorded, recorded investment	81	472
Loans with no related allowance recorded, unpaid principal balance	81	472
Loans with no related allowance recorded, average recorded investment	224	333
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	81	472
Unpaid principal balance	81	472
Average recorded investment	224	333
Consumer Portfolio Segment [Member]
Loans with no related allowance recorded, recorded investment
Loans with no related allowance recorded, unpaid principal balance	17
Loans with no related allowance recorded, average recorded investment		18
Loans with an allowance recorded, recorded investment	56	59
Loans with an allowance recorded, unpaid principal balance	56	59
Related allowance	56	59
Loans with an allowance recorded, average recorded investment	58	63
Recorded investment	56	59
Unpaid principal balance	73	59
Average recorded investment	$ 58	$ 81

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Note 3 - Loans - Non-accrual Loans (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Non-accrual loans	$ 4,858	$ 5,295
Commercial and Industrial Portfolio Segment [Member]
Non-accrual loans	1,256	1,767
Construction and Development Excluding Undeveloped Land Portfolio Segment [Member]
Non-accrual loans	737	538
Undevelopment Land Portfolio Segment [Member]
Non-accrual loans	474	474
Real Estate Mortgage Portfolio Segment [Member]
Non-accrual loans	2,391	2,516
Real Estate Mortgage Portfolio Segment [Member] | Commercial Investment [Member]
Non-accrual loans	55	107
Real Estate Mortgage Portfolio Segment [Member] | Owner Occupied Commercial [Member]
Non-accrual loans	1,470	1,042
Real Estate Mortgage Portfolio Segment [Member] | One to Four Family Residential [Member]
Non-accrual loans	785	984
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	81	383
Consumer Portfolio Segment [Member]
Non-accrual loans

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Note 3 - Loans - Aging of the Recorded Investment in Loans (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Current	$ 2,323,069	$ 2,295,871
Past due	12,051	9,504
Loans	2,335,120	2,305,375
Recorded investment greater than 90 days and accruing	261	438
Financing Receivables, 30 to 59 Days Past Due [Member]
Past due	5,673	2,589
Financing Receivables, 60 to 89 Days Past Due [Member]
Past due	1,259	1,182
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Past due	5,119	5,733
Commercial and Industrial Portfolio Segment [Member]
Current	747,316	734,682
Past due	3,412	2,159
Loans	750,728	736,841
Recorded investment greater than 90 days and accruing		18
Commercial and Industrial Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Past due	2,149	84
Commercial and Industrial Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Past due	7	290
Commercial and Industrial Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Past due	1,256	1,785
Construction and Development Excluding Undeveloped Land Portfolio Segment [Member]
Current	173,573	191,810
Past due	737	538
Loans	174,310	192,348
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
Construction and Development Excluding Undeveloped Land Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Past due	737	538
Undevelopment Land Portfolio Segment [Member]
Current	20,515	21,022
Past due	474	474
Loans	20,989	21,496
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	474	474
Real Estate Mortgage Portfolio Segment [Member]
Current	1,344,469	1,313,392
Past due	7,193	6,128
Loans	1,351,662	1,319,520
Recorded investment greater than 90 days and accruing	261	420
Real Estate Mortgage Portfolio Segment [Member] | Commercial Investment [Member]
Current	574,088	537,998
Past due	2,722	888
Loans	576,810	538,886
Recorded investment greater than 90 days and accruing		86
Real Estate Mortgage Portfolio Segment [Member] | Owner Occupied Commercial [Member]
Current	395,924	406,726
Past due	1,880	1,566
Loans	397,804	408,292
Recorded investment greater than 90 days and accruing		182
Real Estate Mortgage Portfolio Segment [Member] | One to Four Family Residential [Member]
Current	259,729	246,730
Past due	1,978	2,768
Loans	261,707	249,498
Recorded investment greater than 90 days and accruing	261	34
Real Estate Mortgage Portfolio Segment [Member] | Home Equity First Lien [Member]
Current	51,836	55,027
Past due	89	298
Loans	51,925	55,325
Recorded investment greater than 90 days and accruing		46
Real Estate Mortgage Portfolio Segment [Member] | Home Equity Junior Lien [Member]
Current	62,892	66,911
Past due	524	608
Loans	63,416	67,519
Recorded investment greater than 90 days and accruing		72
Real Estate Mortgage Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Past due	3,298	2,477
Real Estate Mortgage Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member] | Commercial Investment [Member]
Past due	2,667	631
Real Estate Mortgage Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member] | Owner Occupied Commercial [Member]
Past due	47	342
Real Estate Mortgage Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member] | One to Four Family Residential [Member]
Past due	330	1,174
Real Estate Mortgage Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member] | Home Equity First Lien [Member]
Past due	89	231
Real Estate Mortgage Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member] | Home Equity Junior Lien [Member]
Past due	165	99
Real Estate Mortgage Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Past due	1,243	787
Real Estate Mortgage Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member] | Commercial Investment [Member]
Past due		64
Real Estate Mortgage Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member] | Owner Occupied Commercial [Member]
Past due	363
Real Estate Mortgage Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member] | One to Four Family Residential [Member]
Past due	602	576
Real Estate Mortgage Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member] | Home Equity First Lien [Member]
Past due		21
Real Estate Mortgage Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member] | Home Equity Junior Lien [Member]
Past due	278	126
Real Estate Mortgage Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Past due	2,652	2,864
Real Estate Mortgage Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Commercial Investment [Member]
Past due	55	193
Real Estate Mortgage Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Owner Occupied Commercial [Member]
Past due	1,470	1,224
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	1,046	1,018
Real Estate Mortgage Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Home Equity First Lien [Member]
Past due		46
Real Estate Mortgage Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Home Equity Junior Lien [Member]
Past due	81	383
Consumer Portfolio Segment [Member]
Current	37,196	34,965
Past due	235	205
Loans	37,431	35,170
Recorded investment greater than 90 days and accruing
Consumer Portfolio Segment [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Past due	226	28
Consumer Portfolio Segment [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Past due	9	105
Consumer Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Past due		$ 72

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Note 3 - Loans - Internally Assigned Risk Grades of Loans (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Loans	$ 2,335,120	$ 2,305,375
Commercial and Industrial Portfolio Segment [Member]
Loans	750,728	736,841
Construction and Development Excluding Undeveloped Land Portfolio Segment [Member]
Loans	174,310	192,348
Undevelopment Land Portfolio Segment [Member]
Loans	20,989	21,496
Real Estate Mortgage Portfolio Segment [Member]
Loans	1,351,662	1,319,520
Real Estate Mortgage Portfolio Segment [Member] | Commercial Investment [Member]
Loans	576,810	538,886
Real Estate Mortgage Portfolio Segment [Member] | Owner Occupied Commercial [Member]
Loans	397,804	408,292
Real Estate Mortgage Portfolio Segment [Member] | One to Four Family Residential [Member]
Loans	261,707	249,498
Real Estate Mortgage Portfolio Segment [Member] | Home Equity First Lien [Member]
Loans	51,925	55,325
Real Estate Mortgage Portfolio Segment [Member] | Home Equity Junior Lien [Member]
Loans	63,416	67,519
Consumer Portfolio Segment [Member]
Loans	37,431	35,170
Pass [Member]
Loans	2,288,394	2,267,103
Pass [Member] | Commercial and Industrial Portfolio Segment [Member]
Loans	726,194	714,025
Pass [Member] | Construction and Development Excluding Undeveloped Land Portfolio Segment [Member]
Loans	174,310	191,455
Pass [Member] | Undevelopment Land Portfolio Segment [Member]
Loans	20,485	21,022
Pass [Member] | Real Estate Mortgage Portfolio Segment [Member]
Loans	1,330,136	1,305,562
Pass [Member] | Real Estate Mortgage Portfolio Segment [Member] | Commercial Investment [Member]
Loans	575,339	538,688
Pass [Member] | Real Estate Mortgage Portfolio Segment [Member] | Owner Occupied Commercial [Member]
Loans	383,387	396,997
Pass [Member] | Real Estate Mortgage Portfolio Segment [Member] | One to Four Family Residential [Member]
Loans	256,458	247,888
Pass [Member] | Real Estate Mortgage Portfolio Segment [Member] | Home Equity First Lien [Member]
Loans	51,923	55,279
Pass [Member] | Real Estate Mortgage Portfolio Segment [Member] | Home Equity Junior Lien [Member]
Loans	63,029	66,710
Pass [Member] | Consumer Portfolio Segment [Member]
Loans	37,269	35,039
Special Mention [Member]
Loans	21,733	22,226
Special Mention [Member] | Commercial and Industrial Portfolio Segment [Member]
Loans	7,464	14,266
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	14,167	7,960
Special Mention [Member] | Real Estate Mortgage Portfolio Segment [Member] | Commercial Investment [Member]
Loans	761
Special Mention [Member] | Real Estate Mortgage Portfolio Segment [Member] | Owner Occupied Commercial [Member]
Loans	10,313	7,960
Special Mention [Member] | Real Estate Mortgage Portfolio Segment [Member] | One to Four Family Residential [Member]
Loans	3,018
Special Mention [Member] | Real Estate Mortgage Portfolio Segment [Member] | Home Equity First Lien [Member]
Loans	2
Special Mention [Member] | Real Estate Mortgage Portfolio Segment [Member] | Home Equity Junior Lien [Member]
Loans	73
Special Mention [Member] | Consumer Portfolio Segment [Member]
Loans	102
Substandard [Member] | Performing Financial Instruments [Member]
Loans	18,925	9,339
Substandard [Member] | Nonperforming Financial Instruments [Member]
Loans	6,068	6,707
Substandard [Member] | Commercial and Industrial Portfolio Segment [Member] | Performing Financial Instruments [Member]
Loans	14,197	5,850
Substandard [Member] | Commercial and Industrial Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Loans	2,873	2,700
Substandard [Member] | Construction and Development Excluding Undeveloped Land Portfolio Segment [Member] | Performing Financial Instruments [Member]
Loans		355
Substandard [Member] | Construction and Development Excluding Undeveloped Land Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Loans		538
Substandard [Member] | Undevelopment Land Portfolio Segment [Member] | Performing Financial Instruments [Member]
Loans	30
Substandard [Member] | Undevelopment Land Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Loans	474	474
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Performing Financial Instruments [Member]
Loans	4,694	3,134
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Performing Financial Instruments [Member] | Commercial Investment [Member]
Loans	420	5
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Performing Financial Instruments [Member] | Owner Occupied Commercial [Member]
Loans	2,869	2,111
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Performing Financial Instruments [Member] | One to Four Family Residential [Member]
Loans	1,172	592
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	233	426
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Loans	2,665	2,864
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Nonperforming Financial Instruments [Member] | Commercial Investment [Member]
Loans	290	193
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Nonperforming Financial Instruments [Member] | Owner Occupied Commercial [Member]
Loans	1,235	1,224
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Nonperforming Financial Instruments [Member] | One to Four Family Residential [Member]
Loans	1,059	1,018
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Nonperforming Financial Instruments [Member] | Home Equity First Lien [Member]
Loans		46
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Nonperforming Financial Instruments [Member] | Home Equity Junior Lien [Member]
Loans	81	383
Substandard [Member] | Consumer Portfolio Segment [Member] | Performing Financial Instruments [Member]
Loans	4
Substandard [Member] | Consumer Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Loans	56	131
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	Sep. 30, 2017	Dec. 31, 2016	Dec. 31, 2013
Finite-lived Intangible Assets, Fair Value Disclosure	$ 2,700	$ 2,700
Loans Serviced for Others Outstanding Principal Balance	350,100	372,200
Core Deposits [Member]
Finite-Lived Intangible Assets, Net	1,300	$ 1,400
Indiana Bank [Member] | Commercial Banking [Member]
Goodwill	$ 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	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Balance at beginning of period	$ 921	$ 1,018
Additions for mortgage loans sold	143	105
Amortization	(222)	(192)
Balance at end of period	$ 842	$ 931

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Note 5 - Income Taxes (Details Textual) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Employee Service Share-based Compensation, Tax Benefit from Compensation Expense	$ 235	$ 200	$ 704	$ 576
Accounting Standards Update 2016-09 [Member]
Employee Service Share-based Compensation, Tax Benefit from Compensation Expense	$ 241		$ 1,400

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Note 5 - Income Taxes - Components of Income Tax Expense (Benefit) from Operations (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Federal	$ 5,211	$ 4,363	$ 12,936	$ 10,958
State	179	287	472	597
Total current income tax expense	5,390	4,650	13,408	11,555
Federal	(1,583)	(692)	(2,240)	(302)
State	(44)	(75)	(30)	(18)
Total deferred income tax expense (benefit)	(1,627)	(767)	(2,270)	(320)
Change in valuation allowance	333		459
Total income tax expense	$ 4,096	$ 3,883	$ 11,597	$ 11,235

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Note 5 - Income Taxes - Difference Between Statutory and Effective Tax Rates (Details)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
U.S. federal statutory income tax rate	35.00%	35.00%
Tax credits	(4.60%)	(9.40%)
Excess tax benefits from share-based compensation arrangements	(3.00%)
Increase in cash surrender value of life insurance	(1.40%)	(0.90%)
Tax exempt interest income	(1.10%)	(1.30%)
State income taxes, net of federal benefit	0.70%	0.90%
Other, net	0.30%	2.70%
Effective income tax rate	25.90%	27.00%

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Note 6 - Deposits - Composition of Deposits (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Non-interest bearing	$ 676,824	$ 680,156
Interest bearing demand	725,368	768,139
Savings	149,596	140,030
Money market	698,198	682,421
Time deposits of more than $250,000	33,270	40,427
Other time deposits	198,710	209,375
Total time deposits	231,980	249,802
Total interest bearing deposits	1,805,142	1,840,392
Total deposits	$ 2,481,966	$ 2,520,548

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Note 6 - Deposits - Maturities of Time Deposits (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
3 months or less	$ 11,463
Over 3 through 6 months	3,938
Over 6 through 12 months	10,942
Over 1 through 3 years	6,410
Over 3 years	517
Total	$ 33,270	$ 40,427

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Note 7 - Securities Sold Under Agreements to Repurchase (Details Textual) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Securities Sold under Agreements to Repurchase	$ 71,863	$ 67,595

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Note 8 - Federal Home Loan Bank Advances (Details Textual) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2017 USD ($)	Dec. 31, 2016 USD ($)
Advances from Federal Home Loan Banks	$ 50,110	$ 51,075
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	20,100
Federal Home Loan Bank, Advances, General Debt Obligations, Maximum Amount Available	150,000
Federal Home Loan Bank, Advances, General Debt Obligations, Amount of Available, Unused Funds	$ 367,300

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Note 8 - Federal Home Loan Bank Advances - Contractual Maturities and Average Effective Rates of Outstanding Advances (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Advance, 2017	$ 30,000	$ 30,000
Fixed rate, 2017	1.24%	0.70%
Advance, 2020	$ 1,753
Fixed rate, 2020	2.23%
Advance, 2020		$ 1,790
Fixed rate, 2020		2.23%
Advance, 2021	$ 306
Fixed rate, 2021	2.12%
Advance, 2021		$ 359
Fixed rate, 2021		2.12%
Advance, 2024	$ 2,505
Fixed rate, 2024	2.36%
Advance, 2024		$ 2,661
Fixed rate, 2024		2.36%
Advance, 2025	$ 5,615
Fixed rate, 2025	2.43%
Advance, 2025	$ 8,658	$ 6,025
Fixed rate, 2025	1.99%	2.43%
Advance, 2026		$ 8,936
Fixed rate, 2026		1.99%
Advance, 2028	$ 1,273
Fixed rate, 2028	1.48%
Advance, 2028		$ 1,304
Fixed rate, 2028		1.48%
Advance	$ 50,110	$ 51,075
Weighted Average [Member]
Fixed rate	1.61%	1.30%

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Note 9 - Other Comprehensive Income - Accumulated Other Comprehensive Income (Loss) by Component (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Balance			$ 313,872	$ 286,519
Net current period other comprehensive gain (loss)	$ 79	$ (1,010)	968	3,809
Reclassification adjustment for securities (gains) realized in income (net of tax of $(11), $0, $(11), and $0, respectively)	(20)		(20)
Balance	334,255	311,570	334,255	311,570
Accumulated Net Investment Gain (Loss) Attributable to Parent [Member]
Balance			(1,211)	965
Net current period other comprehensive gain (loss)			950	4,110
Reclassification adjustment for securities (gains) realized in income (net of tax of $(11), $0, $(11), and $0, respectively)			(20)
Balance	(281)	5,075	(281)	5,075
Accumulated Net Gain (Loss) from Cash Flow Hedges Attributable to Parent [Member]
Balance			(16)	(60)
Net current period other comprehensive gain (loss)			38	(301)
Reclassification adjustment for securities (gains) realized in income (net of tax of $(11), $0, $(11), and $0, respectively)
Balance	22	(361)	22	(361)
Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member]
Balance			(272)	(273)
Net current period other comprehensive gain (loss)
Reclassification adjustment for securities (gains) realized in income (net of tax of $(11), $0, $(11), and $0, respectively)
Balance	(272)	(273)	(272)	(273)
AOCI Attributable to Parent [Member]
Balance			(1,499)	632
Net current period other comprehensive gain (loss)			968	3,809
Reclassification adjustment for securities (gains) realized in income (net of tax of $(11), $0, $(11), and $0, respectively)			(20)
Balance	$ (531)	$ 4,441	$ (531)	$ 4,441

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Note 10 - Preferred Stock (Details Textual) - $ / shares $ / shares in Thousands	Sep. 30, 2017	Dec. 31, 2016
Preferred Stock, No Par Value	$ 0	$ 0
Preferred Stock, Shares Authorized	1,000,000	1,000,000
Preferred Stock, Shares Issued	0	0

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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		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Net income	$ 11,704	$ 10,467	$ 33,097	$ 30,411
Basic (in shares)	22,542	22,385	22,524	22,325
Dilutive securities (in shares)	422	418	460	386
Average shares outstanding including dilutive securities including dilutive securities (in shares)	22,964	22,803	22,984	22,711
Basic (in dollars per share)	$ 0.52	$ 0.47	$ 1.47	$ 1.36
Diluted (in dollars per share)	$ 0.51	$ 0.46	$ 1.44	$ 1.34

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Note 12 - Defined Benefit Retirement Plan (Details Textual) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2016 USD ($)
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
Defined Benefit Plan, Number of Current Officers Fully Vested			3
Defined Benefit Plan, Net Periodic Benefit Cost (Credit)	$ 34	$ 33	$ 103	$ 100

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Note 13 - Stock-based Compensation (Details Textual) - USD ($) $ in Thousands	1 Months Ended		3 Months Ended				9 Months Ended		12 Months Ended
	Jan. 31, 2017	Jan. 31, 2016	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016	Dec. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award, Number of Plans			1				1
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant			285,133				285,133
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition							5 years
Employee Service Share-based Compensation, Tax Benefit from Compensation Expense			$ 235			$ 200	$ 704	$ 576
Share-based Compensation Arrangement by Share-based Payment Award, Expected Additional Compensation Cost Remainder of Year			679				679
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized			$ 4,900				4,900
Proceeds (Used for) and Received from Settlement of Stock Awards							$ (216)	$ 1,599
Share-based Compensation Arrangement by Share-based Payment Award, Shares, No Intrinsic Value			46,410				46,410
Accounting Standards Update 2016-09 [Member]
Employee Service Share-based Compensation, Tax Benefit from Compensation Expense			$ 241				$ 1,400
Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage							20.00%
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]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition							5 years
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period							28,625		51,122
Restricted Stock [Member] | Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period							1 year
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			5.12%				5.12%		4.50%	4.80%
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period	50,022	55,188
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period			0	0
Restricted Stock Units (RSUs) [Member] | Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period					4,680
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Fair Value Granted					$ 220

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Note 13 - Stock-based Compensation - Stock-based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Stock-based compensation expense before income taxes	$ 670	$ 573	$ 2,012	$ 1,646
Less: deferred tax benefit	(235)	(200)	(704)	(576)
Reduction of net income	$ 435	$ 373	$ 1,308	$ 1,070

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Note 13 - Stock-based Compensation - Fair Value Assumptions (Details) - Stock Options and Stock Appreciation Rights SARs [Member]	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Dividend yield	2.72%	2.94%
Expected volatility	19.47%	19.31%
Risk free interest rate	2.29%	1.70%
Expected life of SARs (in years) (Year)	7 years	7 years 109 days

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Note 13 - Stock-based Compensation - Stock Option and SARs Activity (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016	Dec. 31, 2015
Award Vested and Exercisable [Member]
Options and SARs (in shares)	519	475	656
Exercise price (in dollars per share)	$ 16.39	$ 15.72	$ 15.75
Aggregate intrinsic value	$ 11,218	$ 14,820	$ 6,191
Weighted average fair value (in dollars per share)	$ 3.15	$ 3.16	$ 3.39
Weighted average remaining contractual life (Year)	4 years 109 days	4 years 109 days	3 years 255 days
Options and SARs (in shares)	(519)	(475)	(656)
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)	$ 25.76	$ 24.56	$ 19.44
Award Unvested [Member]
Options and SARs (in shares)	215	260	266
Exercise price (in dollars per share)	$ 26.45	$ 21.53	$ 18.66
Aggregate intrinsic value	$ 2,567	$ 6,623	$ 1,733
Weighted average fair value (in dollars per share)	$ 4.17	$ 3.43	$ 3.29
Weighted average remaining contractual life (Year)	7 years 328 days	7 years 292 days	7 years 255 days
Options and SARs (in shares)	(215)	(260)	(266)
Award Unvested [Member] | Minimum [Member]
Exercise price (in dollars per share)	$ 15.24	$ 15.24	$ 15.24
Award Unvested [Member] | Maximum [Member]
Exercise price (in dollars per share)	$ 40	$ 33.08	$ 24.55
Award Outstanding [Member]
Options and SARs (in shares)	734	735	922
Exercise price (in dollars per share)	$ 19.17	$ 17.78	$ 16.59
Aggregate intrinsic value	$ 13,785	$ 21,443	$ 7,924
Weighted average fair value (in dollars per share)	$ 3.45	$ 3.26	$ 3.36
Weighted average remaining contractual life (Year)	5 years 109 days	5 years 182 days	4 years 292 days
Options and SARs (in shares)	(734)	(735)	(922)
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	$ 33.08	$ 24.55
Award Granted [Member]
Options and SARs (in shares)		46	88
Exercise price (in dollars per share)		$ 40	$ 25.84
Aggregate intrinsic value			$ 1,866
Weighted average fair value (in dollars per share)		$ 6.34	$ 3.56
Weighted average remaining contractual life (Year)
Options and SARs (in shares)		(46)	(88)
Award Granted [Member] | Minimum [Member]
Exercise price (in dollars per share)		$ 40	$ 25.76
Award Granted [Member] | Maximum [Member]
Exercise price (in dollars per share)		$ 40	$ 33.08
Award Exercised [Member]
Options and SARs (in shares)		47	272
Exercise price (in dollars per share)		$ 15.52	$ 16.38
Aggregate intrinsic value		$ 1,168	$ 4,155
Weighted average fair value (in dollars per share)		$ 3.27	$ 3.73
Weighted average remaining contractual life (Year)
Options and SARs (in shares)		(47)	(272)
Award Exercised [Member] | Minimum [Member]
Exercise price (in dollars per share)		$ 14.02	$ 14.02
Award Exercised [Member] | Maximum [Member]
Exercise price (in dollars per share)		$ 17.89	$ 17.89
Award Forfeited [Member]
Options and SARs (in shares)			3
Exercise price (in dollars per share)			$ 15.18
Aggregate intrinsic value			$ 60
Weighted average fair value (in dollars per share)			$ 2.94
Weighted average remaining contractual life (Year)
Options and SARs (in shares)			(3)
Award Forfeited [Member] | Minimum [Member]
Exercise price (in dollars per share)			$ 14.02
Award Forfeited [Member] | Maximum [Member]
Exercise price (in dollars per share)			$ 15.84
Award Vested [Member]
Options and SARs (in shares)	92
Exercise price (in dollars per share)	$ 19.34
Aggregate intrinsic value	$ 1,723
Weighted average fair value (in dollars per share)	$ 3.18
Weighted average remaining contractual life (Year)
Options and SARs (in shares)	(92)
Award Vested [Member] | Minimum [Member]
Exercise price (in dollars per share)	$ 15.24
Award Vested [Member] | Maximum [Member]
Exercise price (in dollars per share)	$ 25.76

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Note 13 - Stock-based Compensation - Restricted Stock (Details) - Restricted Stock [Member] - $ / shares	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Unvested (in shares)	145,235	155,858
Unvested, grant date weighted average cost (in dollars per share)	$ 21.57	$ 18.98
Awarded (in shares)	28,625	51,122
Shares awarded, grant date weighted average cost (in dollars per share)	$ 44.85	$ 25.78
Restrictions lapsed and released (in shares)	(46,220)	(49,265)
Restrictions lapsed and shares released, grant date weighted average cost (in dollars per share)	$ 19.76	$ 17.98
Forfeited (in shares)	(7,154)	(12,480)
Shares forfeited, grant date weighted average cost (in dollars per share)	$ 25.03	$ 20.69
Unvested (in shares)	120,486	145,235
Unvested, grant date weighted average cost (in dollars per share)	$ 27.59	$ 21.57

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Note 13 - Stock-based Compensation - Performance-based Restricted Stock Units (Details) - $ / shares	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016	Dec. 31, 2015
Expected shares to be awarded (in shares)	285,133
Performance Shares [Member]
Vesting period in years (Year)	3 years
Performance Shares [Member] | Executive Officer [Member]
Vesting period in years (Year)	3 years	3 years	3 years
Shares awarded, grant date weighted average cost (in dollars per share)	$ 35.66	$ 22.61	$ 20.02
Expected shares to be awarded (in shares)	24,756	58,786	51,910

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Note 14 - Stock Split (Details Textual)		9 Months Ended
	Apr. 29, 2016	Sep. 30, 2016
Stockholders' Equity Note, Stock Split, Conversion Ratio		3
Stock Dividend, Percentage	50.00%
Stock Split To [Member]
Stockholders' Equity Note, Stock Split, Conversion Ratio	3
Stock Split From [Member]
Stockholders' Equity Note, Stock Split, Conversion Ratio	2

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Note 15 - Commitments and Contingent Liabilities (Details Textual) $ in Thousands	9 Months Ended
	Sep. 30, 2017 USD ($)	Dec. 31, 2016 USD ($)
Loss Contingency Accrual	$ 350
ATM [Member]
Long-term Purchase Commitment, Minimum Quantity Required	29
Long-term Purchase Commitment, Amount	$ 1,200
Standby Letters of Credit [Member]
Fair Value Disclosure, Off-balance Sheet Risks, Amount, Liability	$ 17,600	$ 15,600
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
Unasserted Claim [Member]
Loss Contingency Accrual	$ 266
Commitments to Extend Credit and Standby Letters of Credit [Member]
Fair Value Disclosure, Off-balance Sheet Risks, Amount, Liability	$ 709,700	$ 628,300

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Note 16 - Assets and Liabilities Measured and Reported at Fair Value (Details Textual) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Impaired Financing Receivable, Related Allowance	$ 722	$ 1,267
Impaired Financing Receivable, with Related Allowance, Recorded Investment	1,855	2,660
Other Real Estate, Foreclosed Assets, and Repossessed Assets	2,600	5,000
Impaired Loans [Member]
Assets, Fair Value Disclosure	2,500
Impaired Loans [Member] | Appraisal Discount Method [Member]
Assets, Fair Value Disclosure		2,900
Mortgage Servicing Rights [Member]
Impaired Financing Receivable, Related Allowance	0	0
Fair Value, Measurements, Recurring [Member]
Assets, Fair Value Disclosure	571,704	570,277
Fair Value, Inputs, Level 3 [Member] | Impaired Loans [Member] | Appraisal Discount Method [Member]
Assets, Fair Value Disclosure	2,530
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 16 - Assets and Liabilities Measured and Reported at Fair Value - Assets Measured at Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Securities available-for-sale, fair value	$ 571,522	$ 570,074
Fair Value, Measurements, Recurring [Member]
Securities available-for-sale, fair value	571,522	570,074
Interest rate swaps	182	203
Total assets	571,704	570,277
Interest rate swaps	148	178
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available-for-sale, fair value	516	75,697
Interest rate swaps
Total assets	516	75,697
Interest rate swaps
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available-for-sale, fair value	571,006	494,377
Interest rate swaps	182	203
Total assets	571,188	494,580
Interest rate swaps	148	178
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
US Government-sponsored Enterprises Debt Securities [Member]
Securities available-for-sale, fair value	372,664	268,090
US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Measurements, Recurring [Member]
Securities available-for-sale, fair value	372,664	268,090
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	372,664	268,090
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		74,998
US Treasury and Government [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available-for-sale, fair value		74,998
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	146,720	168,843
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member] | Fair Value, Measurements, Recurring [Member]
Securities available-for-sale, fair value	146,720	168,843
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	146,720	168,843
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	51,622	57,444
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Measurements, Recurring [Member]
Securities available-for-sale, fair value	51,622	57,444
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	51,622	57,444
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
Common Stock [Member]
Securities available-for-sale, fair value	516	699
Common Stock [Member] | Fair Value, Measurements, Recurring [Member]
Securities available-for-sale, fair value	516	699
Common Stock [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available-for-sale, fair value	516	699
Common Stock [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available-for-sale, fair value
Common Stock [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Securities available-for-sale, fair value

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Note 16 - Assets and Liabilities Measured and Reported at Fair Value - Assets Measured at Fair Value on a Non-recurring Basis (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Other real estate owned	$ 39	$ 382
Fair Value, Measurements, Nonrecurring [Member]
Impaired loans	2,530		$ 2,933
Impaired loans	(280)	(1,612)
Other real estate owned	2,640		4,488
Other real estate owned	(171)	(62)
Total	5,170		7,421
Total	(451)	$ (1,674)
Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 1 [Member]
Impaired loans
Other real estate owned
Total
Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 2 [Member]
Impaired loans
Other real estate owned
Total
Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member]
Impaired loans	2,530		2,933
Other real estate owned	2,640		4,488
Total	$ 5,170		$ 7,421

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Note 16 - Assets and Liabilities Measured and Reported at Fair Value - Significant Unobservable Inputs (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Impaired Loans [Member]
Assets, Fair Value Disclosure	$ 2,500
Impaired Loans [Member] | Appraisal Discount Method [Member]
Assets, Fair Value Disclosure		$ 2,900
Impaired Loans [Member] | Fair Value, Inputs, Level 3 [Member] | Appraisal Discount Method [Member]
Assets, Fair Value Disclosure	$ 2,530
Impaired Loans [Member] | Fair Value, Inputs, Level 3 [Member] | Appraisal Discount Method [Member] | Weighted Average [Member]
Weighted average of input	15.00%
Other Real Estate Owned [Member] | Fair Value, Inputs, Level 3 [Member] | Appraisal Discount Method [Member]
Assets, Fair Value Disclosure	$ 2,640
Other Real Estate Owned [Member] | Fair Value, Inputs, Level 3 [Member] | Appraisal Discount Method [Member] | Weighted Average [Member]
Weighted average of input	23.40%

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Note 17 - 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	Sep. 30, 2017	Dec. 31, 2016
Financial assets
Cash and short-term investments	$ 129,078	$ 47,973
Accrued interest receivable	8,162	6,878
Financial liabilities
Accrued interest payable	212	144
Reported Value Measurement [Member]
Financial assets
Cash and short-term investments	129,078	47,973
Mortgage loans held for sale	5,459	3,213
Federal Home Loan Bank stock and other securities	7,666	6,347
Loans, net	2,310,172	2,281,368
Accrued interest receivable	8,162	6,878
Financial liabilities
Deposits	2,481,966	2,520,548
Short-term borrowings	233,824	114,969
FHLB advances	50,110	51,075
Secured borrowings	18,351	15,814
Accrued interest payable	212	144
Estimate of Fair Value Measurement [Member]
Financial assets
Cash and short-term investments	129,078	47,973
Mortgage loans held for sale	6,005	3,481
Federal Home Loan Bank stock and other securities	7,666	6,347
Loans, net	2,302,466	2,284,569
Accrued interest receivable	8,162	6,878
Financial liabilities
Deposits	2,480,641	2,519,725
Short-term borrowings	233,824	114,969
FHLB advances	50,070	50,806
Secured borrowings
Accrued interest payable	212	144
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Financial assets
Cash and short-term investments	129,078	47,973
Mortgage loans held for sale
Federal Home Loan Bank stock and other securities
Loans, net
Accrued interest receivable	8,162	6,878
Financial liabilities
Deposits
Short-term borrowings
FHLB advances
Secured borrowings
Accrued interest payable	212	144
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Financial assets
Cash and short-term investments
Mortgage loans held for sale	6,005	3,481
Federal Home Loan Bank stock and other securities	7,666	6,347
Loans, net
Accrued interest receivable
Financial liabilities
Deposits
Short-term borrowings	233,824	114,969
FHLB advances	50,070	50,806
Secured borrowings
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	2,302,466	2,284,569
Accrued interest receivable
Financial liabilities
Deposits	2,480,641	2,519,725
Short-term borrowings
FHLB advances
Secured borrowings	18,210	15,731
Accrued interest payable

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Note 18 - Derivative Financial Instruments (Details Textual) - Cash Flow Hedging [Member] - Designated as Hedging Instrument [Member] - USD ($) $ in Thousands	Sep. 30, 2017	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 18 - Derivative Financial Instruments - Outstanding Undesignated Interest Rate Swap Contracts (Details) - Not Designated as Hedging Instrument [Member] - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Receiving [Member]
Notional amount	$ 53,214	$ 43,986
Weighted average maturity (years) (Year)	8 years 328 days	9 years 328 days
Fair value	$ 148	$ (178)
Paying [Member]
Notional amount	$ 53,214	$ 43,986
Weighted average maturity (years) (Year)	8 years 328 days	9 years 328 days
Fair value	$ (148)	$ 178

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Note 18 - Derivative Financial Instruments - Derivative Position Designated As a Cash Flow Hedge (Details) - Designated as Hedging Instrument [Member] - Cash Flow Hedging [Member] - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Dec. 31, 2016	Dec. 31, 2015
Notional amount	$ 30,000
Pay fixed swap rate	1.82%
Fair value	$ 34	$ 25
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	$ 26	16
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	$ 8	$ 9

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Note 19 - Regulatory Matters - Risk Based Capital Amounts and Ratios (Details) - USD ($) $ in Thousands		Sep. 30, 2017	Dec. 31, 2016
Total risk-based capital
Total risk-based capital, actual amount	[1]	$ 358,610	$ 338,525
Total risk-based capital, actual ratio	[1]	13.64%	13.04%
Total risk-based capital, minimum for adequately capitalized amount	[1]	$ 210,328	$ 207,684
Total risk-based capital, minimum for adequately capitalized ratio	[1]	8.00%	8.00%
Total risk-based capital, minimum for well capitalized amount	[1],[2]
Total risk-based capital, minimum for well capitalized ratio	[1],[2]
Common equity tier 1 risk-based capital
Common Equity Tier 1 risk-based capital, actual amount		$ 333,312	$ 314,147
Common Equity Tier 1 risk-based capital, actual ratio		12.67%	12.10%
Common Equity Tier 1 risk-based capital, minimum for adequately capitalized amount		$ 118,382	$ 116,832
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]	$ 333,312	$ 314,147
Tier 1 risk-based capital, actual ratio	[1]	12.67%	12.10%
Tier 1 risk-based capital, minimum for adequately capitalized amount	[1]	$ 157,843	$ 155,775
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]	$ 333,312	$ 314,147
Leverage, actual ratio	[3]	11.02%	10.54%
Leverage, minimum for adequately capitalized amount	[3]	$ 120,984	$ 119,221
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]	$ 346,040	$ 325,630
Total risk-based capital, actual ratio	[1]	13.20%	12.57%
Total risk-based capital, minimum for adequately capitalized amount	[1]	$ 209,721	$ 207,243
Total risk-based capital, minimum for adequately capitalized ratio	[1]	8.00%	8.00%
Total risk-based capital, minimum for well capitalized amount	[1]	$ 262,152	$ 259,053
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		$ 320,742	$ 301,252
Common Equity Tier 1 risk-based capital, actual ratio		12.23%	11.63%
Common Equity Tier 1 risk-based capital, minimum for adequately capitalized amount		$ 118,016	$ 116,564
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		$ 157,355	$ 155,418
Common Equity Tier 1 risk-based capital, minimum for well capitalized ratio		6.00%	6.00%
Tier 1 risk-based capital
Tier 1 risk-based capital, actual amount	[1]	$ 320,742	$ 301,252
Tier 1 risk-based capital, actual ratio	[1]	12.23%	11.63%
Tier 1 risk-based capital, minimum for adequately capitalized amount	[1]	$ 157,355	$ 155,418
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]	$ 157,355	$ 155,418
Tier 1 risk-based capital, minimum for well capitalized ratio	[1]	6.00%	6.00%
Leverage
Leverage, actual amount	[3]	$ 320,742	$ 301,252
Leverage, actual ratio	[3]	10.61%	10.11%
Leverage, minimum for adequately capitalized amount	[3]	$ 120,921	$ 119,190
Leverage, minimum for adequately capitalized ratio	[3]	4.00%	4.00%
Leverage, minimum for well capitalized amount	[3]	$ 151,151	$ 148,987
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 20 - Segments (Details Textual)	Sep. 30, 2017 USD ($)
Commercial Banking [Member] | Operating Segments [Member]
Goodwill	$ 682,000

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Note 20 - Segments - Financial Information by Business Segment (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Net interest income	$ 26,164	$ 24,760	$ 76,580	$ 72,179
Provision for loan losses	150	1,250	1,650	2,500	$ 3,000
Wealth management and trust services	5,025	4,800	15,272	14,219
All other non-interest income	6,078	6,558	18,303	17,999
Non-interest expense	21,317	20,518	63,811	60,251
Income before income taxes	15,800	14,350	44,694	41,646
Income tax expense	4,096	3,883	11,597	11,235
Net income	11,704	10,467	33,097	30,411
Segment assets	3,155,913	2,938,665	3,155,913	2,938,665	$ 3,039,481
Commercial Banking [Member]
Net interest income	26,089	24,690	76,350	71,985
Provision for loan losses	150	1,250	1,650	2,500
Wealth management and trust services
All other non-interest income	6,078	6,558	18,303	17,999
Non-interest expense	18,491	17,722	54,756	51,914
Income before income taxes	13,526	12,276	38,247	35,570
Income tax expense	3,284	3,142	9,295	9,064
Net income	10,242	9,134	28,952	26,506
Segment assets	3,153,886	2,936,542	3,153,886	2,936,542
Investment Management and Trust [Member]
Net interest income	75	70	230	194
Provision for loan losses
Wealth management and trust services	5,025	4,800	15,272	14,219
All other non-interest income
Non-interest expense	2,826	2,796	9,055	8,337
Income before income taxes	2,274	2,074	6,447	6,076
Income tax expense	812	741	2,302	2,171
Net income	1,462	1,333	4,145	3,905
Segment assets	$ 2,027	$ 2,123	$ 2,027	$ 2,123