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 June 30, 2019

or 

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

Commission File Number: 1-13661

STOCK YARDS BANCORP, INC. 

(Exact name of registrant as specified in its charter)

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

1040 East Main Street, Louisville, Kentucky	40206
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (502) 582-2571

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

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common stock, no par value	SYBT	The NASDAQ Stock Market, LLC

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 every Interactive Data File required to be submitted 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 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 ☐	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 outstanding of the registrant’s Common Stock, no par value, outstanding as of July 31, 2019, was 22,723,643.

1

Stock Yards Bancorp, inc. and subsidiary

TABLE OF CONTENTS

Item	Page
part I – financial information
Item 1.     Financial Statements.	4
Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations.	52
Item 3.     Quantitative and Qualitative Disclosures about Market Risk.	75
Item 4.     Controls and Procedures.	75
PART II – OTHER INFORMATION
Item 1.     Legal Proceedings	76
Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds.	76
Item 6.     Exhibits.	77
SIGNATURES

2

Stock Yards Bancorp, inc. and subsidiary

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:

Acronym	Definition	Acronym	Definition
AFS	Available for sale	HELOC	Home equity line of credit
Allowance	Allowance for loan and lease losses	HTM	Held to maturity
ASC	Accounting Standards Codification	King	King Bancorp, Inc.
ASU	Accounting Standards Update	KSBT	King Bancorp Statutory Trust I
AUM	Assets under management	LIBOR	London Interbank Offering Rate
Bancorp	Stock Yards Bancorp, Inc.	Loans	Loans and leases
Bank	Stock Yards Bank & Trust Co.	MSA	Metropolitan statistical area
BOLI	Bank owned life insurance	MSR	Mortgage servicing right
BPS	Basis point = 1/100th of one percent	NA	Not applicable
C&D	Construction and development	OAEM	Other assets especially mentioned
C&I	Commercial and industrial	OCI	Other comprehensive income
CECL	Current Expected Credit Losses	OREO	Other real estate owned
CEO	Chief Executive Officer	OTTI	Other than temporarily impaired
COSO	Committee of Sponsoring Organizations	PCI	Purchased credit impaired
CRA	Community Reinvestment Act of 1977	Provision	Provision for loan and lease losses
CRE	Commercial real estate	PSU	Performance stock unit
Dodd-Frank Act	Dodd-Frank Wall Street Reform and Consumer Protection Act	ROA	Return on average assets
EPS	Earnings per share	ROE	Return on average equity
EVP	Executive Vice President	RSA	Restricted stock award
FASB	Financial Accounting Standards Board	RSU	Restricted stock unit
FDIC	Federal Deposit Insurance Corporation	SAR	Stock appreciate right
FHA	Federal housing Administration	SEC	Securities and Exchange Commission
FHLB	Federal Home Loan Bank	SSUAR	Securities sold under agreements to repurchase
FHLMC	Federal Home Loan Mortgage Corporation	TBOC	THE Bank of Oldham County
FNMA	Federal National Mortgage Association	TCE	Tangible common equity
FRB	Federal Reserve Bank	TDR	Troubled Debt Restructuring
GAAP	U.S. Generally Accepted Accounting Principles	VA	U.S. Department of Veterans Affairs
GNMA	Government National Mortgage Association	WM&T	Wealth Management and Trust

3

Stock Yards Bancorp, inc. and subsidiary

Item 1.   Financial Statements

CONSOLIDATED BALANCE SHEETS

June 30, 2019 (unaudited) and December 31, 2018

(In thousands, except share data)
	June 30,		December 31,
	2019		2018
Assets
Cash and due from banks	$	51,264	$	51,892
Federal funds sold and interest bearing due from banks		64,775		147,047
Cash and cash equivalents		116,039		198,939
Mortgage loans held for sale		3,922		1,675
Securities available for sale		423,579		436,995
Federal Home Loan Bank stock, at cost		11,316		10,370
Loans and leases		2,763,880		2,548,171
Allowance for loan and lease losses		26,416		25,534
Net loans and leases		2,737,464		2,522,637
Premises and equipment, net		65,069		44,764
Bank owned life insurance		32,631		32,273
Accrued interest receivable		9,633		8,360
Goodwill		12,826		682
Core deposit intangible		2,461		1,057
Other assets		48,883		45,172
Total assets	$	3,463,823	$	3,302,924
Liabilities
Deposits:
Non-interest bearing	$	777,652	$	711,023
Interest bearing		2,105,801		2,083,333
Total deposits		2,883,453		2,794,356
Securities sold under agreements to repurchase		33,809		36,094
Federal funds purchased		12,012		10,247
Federal Home Loan Bank advances		84,279		48,177
Accrued interest payable		1,008		762
Other liabilities		59,897		46,788
Total liabilities		3,074,458		2,936,424
Commitments and contingent liabilities (note 15)		—		—
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 22,721,027 and 22,749,139 shares in 2019 and 2018, respectively		36,596		36,689
Additional paid-in capital		37,776		36,797
Retained earnings		313,927		298,156
Accumulated other comprehensive income (loss)		1,066		(5,142	)
Total stockholders’ equity		389,365		366,500
Total liabilities and stockholders’ equity	$	3,463,823	$	3,302,924

See accompanying notes to unaudited consolidated financial statements.

4

CONSOLIDATED STATEMENTS OF INCOME  (Unaudited)

For the three and six months ended June 30, 2019 and 2018

	Three months ended				Six months ended
(In thousands, except per share data)	June 30,				June 30,
	2019		2018		2019		2018
Interest income:
Loans and leases	$	33,419	$	29,456	$	64,963	$	56,518
Federal funds sold and interest bearing due from banks		830		163		1,563		431
Mortgage loans held for sale		43		44		80		79
Securities available for sale
Taxable		2,546		2,105		5,114		4,243
Tax-exempt		130		236		277		477
Total interest income		36,968		32,004		71,997		61,748
Interest expense:
Deposits		5,652		2,674		10,718		4,751
Securities sold under agreements to repurchase		28		30		53		67
Federal funds purchased and other short-term borrowing		64		397		124		483
Federal Home Loan Bank advances		424		229		645		464
Subordinated debentures		26		—		26		—
Total interest expense		6,194		3,330		11,566		5,765
Net interest income		30,774		28,674		60,431		55,983
Provision for loan and lease losses		—		1,235		600		1,970
Net interest income after provision		30,774		27,439		59,831		54,013
Non-interest income:
Wealth management and trust services		5,662		5,344		11,101		10,844
Deposit service charges		1,336		1,447		2,583		2,858
Debit and credit card income		2,168		1,689		3,912		3,197
Treasury management fees		1,202		1,113		2,359		2,160
Mortgage banking income		796		746		1,278		1,322
Net investment product sales commissions and fees		364		397		720		801
Bank owned life insurance		184		191		362		378
Other		551		508		1,010		784
Total non-interest income		12,263		11,435		23,325		22,344
Non-interest expenses:
Compensation		12,715		11,703		24,516		22,673
Employee benefits		2,908		2,512		5,550		5,145
Net occupancy and equipment		1,976		1,811		3,834		3,629
Technology and communication		1,848		1,685		3,621		3,315
Debit and credit card processing		631		579		1,218		1,145
Marketing and business development		903		805		1,528		1,451
Postage, printing, and supplies		410		400		816		791
Legal and professional		1,523		504		2,057		997
FDIC insurance		248		238		486		480
Amortization/impairment of investments in tax credit partnerships		52		58		104		58
Capital and deposit based taxes		967		862		1,871		1,714
Other		1,283		979		2,502		1,765
Total non-interest expenses		25,464		22,136		48,103		43,163
Income before income tax expense		17,573		16,738		35,053		33,194
Income tax expense		1,030		3,159		2,869		6,211
Net income	$	16,543	$	13,579	$	32,184	$	26,983
Net income per share, basic	$	0.73	$	0.60	$	1.42	$	1.19
Net income per share, diluted	$	0.72	$	0.59	$	1.40	$	1.17
Weighted average common shares:
Basic		22,689		22,625		22,675		22,601
Diluted		22,949		22,967		22,948		22,959

See accompanying notes to unaudited consolidated financial statements.

5

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

For the three and six months ended June 30, 2019 and 2018

	Three months ended						Six months ended
	June 30,						June 30,
(In thousands)	2019			2018			2019			2018
Net income	$	16,543		$	13,579		$	32,184		$	26,983
Other comprehensive income:
Change in unrealized gain (loss) on available for sale debt securities		5,021			(1,618	)		8,446			(6,325	)
Change in fair value of derivatives used in cash flow hedges		(321	)		99			(530	)		491
Total other comprehensive income (loss), before income tax		4,700			(1,519	)		7,916			(5,834	)
Tax effect		1,121			(319	)		1,708			(1,226	)
Total other comprehensive income (loss), net of tax		3,579			(1,200	)		6,208			(4,608	)
Comprehensive income	$	20,122		$	12,379		$	38,392		$	22,375

See accompanying notes to unaudited consolidated financial statements.

6

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited)

For the six months ended June 30, 2019  with quarterly subtotals

													Accumulated
	Common stock						Additional						other			Total
	Number of						paid-in			Retained			comprehensive			stockholders'
(In thousands, except per share data)	shares			Amount			capital			earnings			income (loss)			equity
Balance, January 1, 2019		22,749		$	36,689		$	36,797		$	298,156		$	(5,142	)	$	366,500
Activity for three months ended March 31, 2019:
Net income		—			—			—			15,641			—			15,641
Net change in accumulated other comprehensive income (loss)		—			—			—			—			2,629			2,629
Stock compensation expense		—			—			863			—			—			863
Stock issued for share-based awards, net of withholdings to satisfy employee tax obligations upon award		74			245			2,254			(4,452	)		—			(1,953	)
Cash dividends declared, $0.25 per share		—			—			—			(5,686	)		—			(5,686	)
Balance, March 31, 2019		22,823		$	36,934		$	39,914		$	303,659		$	(2,513	)	$	377,994
Activity for three months ended June 30, 2019:
Net income		—			—			—			16,543			—			16,543
Net change in accumulated other comprehensive income (loss)		—			—			—			—			3,579			3,579
Stock compensation expense		—			—			993			—			—			993
Common stock repurchased		(107	)		(357	)		(3,308	)		—			—			(3,665	)
Stock issued for share-based awards, net of withholdings to satisfy employee tax obligations upon award		5			19			182			(363	)		—			(162	)
Cash dividends declared, $0.26 per share		—			—			—			(5,917	)		—			(5,917	)
Shares cancelled		—			—			(5	)		5			—			—
Balance, June 30, 2019		22,721		$	36,596		$	37,776		$	313,927		$	1,066		$	389,365

See accompanying notes to unaudited consolidated financial statements.

7

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited)

For the six months ended June 30, 2018 with quarterly subtotals

													Accumulated
	Common stock						Additional						other			Total
	Number of						paid-in			Retained			comprehensive			stockholders'
(In thousands, except per share data)	shares			Amount			capital			earnings			loss			Total
Balance, January 1, 2018		22,679		$	36,457		$	31,924		$	267,193		$	(1,930	)	$	333,644
Activity for three months ended March 31, 2018:
Net income		—			—			—			13,404			—			13,404
Net change in accumulated other comprehensive loss		—			—			—			—			(3,408	)		(3,408	)
Reclassification adjustment under Accounting Standards Update 2018-02		—			—			—			506			(506	)		—
Stock compensation expense		—			—			823			—			—			823
Stock issued for share-based awards, net of withholdings to satisfy employee tax obligations upon award		52			174			205			(1,914	)		—			(1,535	)
Cash dividends declared, $0.23 per share		—			—			—			(5,226	)		—			(5,226	)
Shares cancelled		(1	)		(4	)		(35	)		39			—			—
Balance, March 31, 2018		22,730		$	36,627		$	32,917		$	274,002		$	(5,844	)	$	337,702
Activity for three months ended June 30, 2018:
Net income		—			—			—			13,579			—			13,579
Net change in accumulated other comprehensive loss		—			—			—			—			(1,200	)		(1,200	)
Stock compensation expense		—			—			1,212			—			—			1,212
Repurchase of common stock		—			—			—			—			—			—
Stock issued for share-based awards, net of withholdings to satisfy employee tax obligations upon award		17			57			618			(1,226	)		—			(551	)
Cash dividends declared, $0.23 per share		—			—			—			(5,227	)		—			(5,227	)
Shares cancelled		(1	)		(4	)		(32	)		36			—			—
Balance, June 30, 2018		22,746		$	36,680		$	34,715		$	281,164		$	(7,044	)	$	345,515

See accompanying notes to unaudited consolidated financial statements.

8

CONSOLIDATED STATEMENTS OF CASHFLOWS (Unaudited)

For the six months ended June 30, 2019 and 2018

(In thousands)	2019			2018
Operating activities:
Net income	$	32,184		$	26,983
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan and lease losses		600			1,970
Depreciation, amortization and accretion, net		1,679			2,680
Deferred income tax (benefit) expense		(3,959	)		40
Gain on sales of mortgage loans held for sale		(719	)		(769	)
Origination of mortgage loans held for sale		(38,081	)		(37,803	)
Proceeds from sale of mortgage loans held for sale		36,553			39,483
Bank owned life insurance income		(362	)		(378	)
Loss (gain) on the disposal of premises and equipment		6			(14	)
Gain on the sale of other real estate		(63	)		(109	)
Stock compensation expense		1,856			2,035
Excess tax benefits from share-based compensation arrangements		(392	)		(525	)
Net change in accrued interest receivable and other assets		(3,429	)		2,236
Net change in accrued interest payable and other liabilities		(3,974	)		247
Net cash provided by operating activities		21,899			36,076
Investing activities:
Purchases of securities available for sale		(373,761	)		(399,911	)
Proceeds from sales of securities		12,427			—
Proceeds from maturities and paydowns of securities available for sale		396,367			392,855
Purchase of Federal Home Loan Bank stock		—			(2,724	)
Proceeds from redemptions of Federal Home Loan Bank stock		591			—
Proceeds from redemption of Federal Reserve Bank stock		490			—
Proceeds from redemption of interest bearing due from banks		1,761			—
Net change in loans		(49,280	)		(170,843	)
Purchases of premises and equipment		(3,321	)		(2,694	)
Proceeds from disposal of premises and equipment		45			230
Proceeds from surrender of acquired bank bank owned life insurance		3,431			—
Proceeds from bank owned life insurance mortality benefit		909			—
Other investment activities		(1,532	)		(2,542	)
Proceeds from sale of foreclosed assets		868			2,860
Cash for acquisition, net of cash acquired		(24,684	)		—
Net cash used in investing activities		(35,689	)		(182,769	)
Financing activities:
Net change in deposits		(36,464	)		(37,834	)
Net change in securities sold under agreements to repurchase and federal funds purchased		(2,086	)		113,443
Proceeds from Federal Home Loan Bank advances		60,000			60,000
Repayments of Federal Home Loan Bank advances		(67,250	)		(60,637	)
Repayment of acquired bank holding company line of credit		(2,300	)		—
Redemption of acquired bank subordinated debentures		(3,609	)		—
Common stock repurchases		(5,780	)		(2,086	)
Cash dividends paid		(11,621	)		(10,441	)
Net cash provided by (used in) financing activities		(69,110	)		62,445
Net change in cash and cash equivalents		(82,900	)		(84,248	)
Cash and cash equivalents at beginning of period		198,939			139,248
Cash and cash equivalents at end of period	$	116,039		$	55,000

(continued)

9

CONSOLIDATED STATEMENTS OF CASHFLOWS (continued) (Unaudited)

For the six months ended June 30, 2019 and 2018

(In thousands)	2019		2018
Supplemental cash flow information:
Cash paid during the period for:
Income tax payments, net of refunds	$	5,382	$	1,800
Cash paid for interest		11,320		5,497
Supplemental non-cash activity:
Initital recognition of right-of-use lease assets	$	16,747	$	—
Initital recognition operating lease liabilities		18,067		—
Transfers from loans to real estate acquired in settlement of loans		—		471
Liabilities assumed in conjunction with King Bancorp acquisition:
Fair value of assets acquired	$	204,613	$	—
Cash paid in acqusition		28,000		—
Liabilities assumed	$	176,613	$	—

See accompanying notes to unaudited consolidated financial statements.

10

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(1) Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation – The consolidated financial statements include the accounts of Stock Yards Bancorp, Inc. (“Holding Company”), and its wholly-owned subsidiary, Stock Yards Bank & Trust Company (“Bank”). All significant inter-company transactions and accounts have been eliminated in consolidation. All companies are collectively referred to as “Bancorp” or the “Company.”

As a result of its acquisition of King, Bancorp, Inc. on May 1, 2019, Bancorp became the 100% successor owner of King Bancorp Statutory Trust I (“KBST”), an unconsolidated finance subsidiary. As permitted under the terms of KBST’s governing documents, Bancorp redeemed the trust-preferred securities at the par amount of approximately $3.6 million on June 17, 2019.

The Bank, chartered in 1904, is a Louisville, Kentucky-based, state-chartered non-member financial institution that provides services in the Louisville, Kentucky, Indianapolis, Indiana and Cincinnati, Ohio Metropolitan Statistical Areas (“MSAs”) through 43 full service banking center locations. 

As of June 30, 2019, Bancorp was divided into two reportable segments: Commercial Banking and Wealth Management & Trust (“WM&T”):

Commercial Banking provides a full range of loan and deposit products to individual consumers and businesses through commercial lending, retail lending, deposit services, treasury management services, private banking, online banking, mobile banking, merchant services, international banking, correspondent banking and other banking services. The Bank also offers securities brokerage services via its banking center network through an arrangement with a third party broker-dealer. 

WM&T, with over $3 billion in assets under management (“AUM”), provides custom-tailored financial planning, investment management, retirement planning and trust and estate services in all markets in which Bancorp operates.  

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, the financial statements do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. For further information, refer to the consolidated financial statements and notes thereto included in Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2018. Certain reclassifications have been made in the prior year financial statements to conform to current year classifications.

Significant Accounting Policies - In preparing the unaudited consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of certain assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of related revenues and expenses during the reporting period. Actual results could differ from those estimates. A description of significant accounting policies is presented in Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2018.

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

11

The allowance methodology is driven by risk ratings, historical losses, and qualitative factors. The level of the June 30, 2019 allowance reflected a number of factors, including credit quality metrics which were generally consistent with prior periods, and expansion of the historical look-back period from 32 to 36 quarters in March of 2019. This expansion of the historical period was applied to all classes and segments of the portfolio. Expansion of the look-back period for historical loss rates used in the quantitative allocation caused review of the overall methodology for qualitative factors to ensure we were appropriately capturing risk not addressed in the quantitative historical loss rate. Management believes 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. Based on the look-back period extension, the allowance level increased approximately $2.0 million for 2019. Key indicators of loan quality continued to trend at levels consistent with prior periods, however management recognizes that due to the cyclical nature of the lending business, these trends will likely normalize over the long term. Additional information regarding Bancorp’s methodology for evaluating the adequacy of the allowance can be read in Bancorp’s Annual Report on Form 10-K.

Accounting Standards Updates (“ASUs”)

The following ASU was issued prior to June 30, 2019 and is considered relevant to Bancorp’s financial statements. Generally, if an issued-but-not-yet-effective ASU with an expected immaterial impact to Bancorp has been disclosed in prior SEC filings, it will not be re-disclosed.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, (“CECL”). This ASU 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. The guidance is effective for annual and interim reporting periods beginning after December 15, 2019. Bancorp expects to recognize a one-time cumulative-effect adjustment to the allowance on January 1, 2020. Interagency guidance issued in December 2018 allows for a three year phase-in of the cumulative-effect adjustment for regulatory capital reporting.

As a result of this ASU, Bancorp could experience an increase in its allowance. Bancorp has formed a committee to oversee its transition to the CECL methodology. Bancorp has devoted internal resources and purchased a third party software solution to analyze, compute and report upon the CECL disclosure requirements. In addition, Bancorp has analyzed loan-level data and is determining its CECL loan segmentation and initial segment calculation methodologies.  Bancorp is currently exploring regression techniques and has begun to run forecasting scenarios.

Recently Adopted Accounting Standards

Bancorp adopted ASU 2016-02, Leases and related amendments using an alternative transition method, effective January 1, 2019 and upon adoption recorded $17 million of right-of-use lease assets and $18 million of operating lease liabilities on its balance sheet as of June 30, 2019. Prior periods have not been restated. The right-of-use lease asset and operating lease liability are recorded in premises and equipment and other liabilities, respectively, on the consolidated balance sheet. Bancorp elected all applicable practical expedients, including the option to expense short-term leases, which are defined as leases with a term of one year or less. Bancorp also elected not to separate lease components from non-lease components.

The adoption of this ASU did not have a meaningful impact on Bancorp's performance metrics, including regulatory capital ratios and return on average assets.  Additionally, Bancorp does not believe that the adoption of this ASU by its clients will have a significant impact on Bancorp's ability to underwrite credit when client financial statements are presented inclusive of the requirements of this ASU. See the note titled “Leases” for additional information on lease activities.

12

(2) Acquisition of King Bancorp, Inc.

On May 1, 2019, Bancorp completed its acquisition of King Bancorp, Inc, and its wholly-owned subsidiary King Southern Bank (“King”), for $28 million in cash. The acquisition expands the Company’s market area into nearby Nelson County, Kentucky, while growing its customer base in Louisville, Kentucky.

The following table provides a summary of the fair value of the assets acquired and liabilities assumed by Bancorp as of the acquisition date. As provided for under GAAP, management has up to 12 months following the date of acquisition to finalize the fair values of the acquired assets and assumed liabilities. The preliminary fair value adjustments and the preliminary fair values shown in the following table continue to be evaluated by management and may be subject to further adjustment.

Acquisition of King Bancorp, Inc.

Summary of Assets Aquired and Liabilities Assumed

	May 1, 2019
	As Recorded			Fair Value				As Recorded
(In thousands)	by King			Adjustments (1)				by Bancorp
Assets aquired:
Cash and due from banks	$	3,316		$	—			$	3,316
Interest bearing due from banks		1,761			—				1,761
Available for sale securities		12,404			23		a		12,427
Loans		165,744			(1,597	)	b		164,147
Allowance for loan and lease losses		(1,812	)		1,812		b		-
Loans, net		163,932			215				164,147
Federal Home Loan Bank stock, at cost		1,517			—				1,517
Federal Reserve Bank stock, at cost		490			—				490
Premises and equipment, net		4,358			(1,328	)	c		3,030
Core deposit intangible		—			1,519		d		1,519
Bank owned life insurance		3,431			—				3,431
Other real estate owned		325			(325	)	e		—
Other assets and accrued interest receivable		867			(36	)	f		831
Total assets acquired	$	192,401		$	68			$	192,469
Liabilities assumed:
Deposits
Non-interest bearing	$	24,939		$	—			$	24,939
Interest bearing		100,839			(252	)	g		100,587
Total deposits		125,778			(252	)			125,526
Federal funds purchased		1,566			—				1,566
Federal Home Loan Bank advances		43,718			(419	)	h		43,299
Subordinated Note		3,609			—				3,609
Holding Company line of credit		2,300			—				2,300
Other liabilities and accrued interest payable		313			—				313
Total liabilities assumed		177,284			(671	)			176,613
Net assets acquired	$	15,117		$	739			$	15,856
Cash consideration paid									(28,000	)
Goodwill								$	12,144

(1) Bancorp’s acquisition of King closed on May 1, 2019. Accordingly, the fair value adjustments shown are preliminary estimates of the purchase accounting adjustments. Management is continuing to evaluate each of these fair value adjustments and may revise one or more of such fair value adjustments in future periods based on this continuing evaluation. To the extent that any of these preliminary fair value adjustments are revised in future periods, the resultant fair values and the amount of goodwill recorded by the Company will change.

13

Explanation of fair value adjustments 

a.	Reflects the fair value adjustment based on Bancorp’s evaluation of the acquired investment portfolio.
b.	Reflects the fair value adjustment based on Bancorp’s evaluation of the acquired loan portfolio and to eliminate King’s recorded allowance.
c.	Reflects the fair value adjustment based on Bancorp’s evaluation of the premises and equipment acquired.

d.	Reflects the fair value adjustment for the core deposit intangible asset recorded as a result of the acquisition.
e.	Reflects the fair value adjustment based upon Bancorp’s evaluation of the foreclosed real estate acquired.
f.	Reflects the write-off of a miscellaneous other asset.

g.

Reflects the fair value adjustment based on the Company’s evaluation of the assumed time deposits.

h.

Reflects the fair value adjustment based upon Bancorp’s evaluation of the assumed FHLB advances. Goodwill of approximately $12 million, which is the excess of the acquisition consideration over the fair value of net assets acquired, is expected to be recorded in the King acquisition and is the result of expected operational synergies and other factors. This goodwill is all attributable to the Company’s Commercial Banking segment and is not expected to be deductible for tax purposes. To the extent that management revises any of the above fair value adjustments as a result of its continuing evaluation, the amount of goodwill recorded in the King acquisition will change. As a result of the King transaction, and based upon the proximity to existing branch locations, Bancorp expects to sell three acquired branch buildings in the third quarter of 2019, while retaining the associated customer relationships. These branches are considered held available for sale as of June 30, 2019. If consummated, goodwill will be adjusted in that period. Revenue attributed to King totaled $1.6 million for the three and six months ended June 30, 2019. Prior year pro-forma financial statements were not presented due to the immateriality of the transaction.

14

(3) Securities

All of Bancorp’s securities are classified as available for sale. Amortized cost, unrealized gains and losses, and fair value of securities follow:

(In thousands)	Amortized		Unrealized
June 30, 2019	cost		Gains		Losses			Fair value
Government sponsored enterprise obligations	$	266,579	$	1,755	$	(319	)	$	268,015
Mortgage backed securities - government agencies		131,447		938		(787	)		131,598
Obligations of states and political subdivisions		23,854		118		(6	)		23,966
Total securities available for sale	$	421,880	$	2,811	$	(1,112	)	$	423,579
December 31, 2018
Government sponsored enterprise obligations		264,234		156		(3,351	)		261,039
Mortgage backed securities - government agencies		149,748		282		(3,753	)		146,277
Obligations of states and political subdivisions		29,760		107		(188	)		29,679
Total securities available for sale	$	443,742	$	545	$	(7,292	)	$	436,995

At June 30, 2019 and December 31, 2018, there were no holdings of debt securities of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of stockholders’ equity.

There were no gains or losses on sales or calls of securities for the three-month and six month periods ending June 30, 2019 or 2018. Securities owned by King, totaling $12.4 million, were sold immediately following the acquisition with no gain or loss realized in the income statement.

A summary of securities available for sale by contractual maturity follows:

(In thousands)	Amortized cost		Fair value
Due within 1 year	$	132,158	$	132,133
Due after 1 year but within 5 years		56,040		56,033
Due after 5 years but within 10 years		7,157		7,232
Due after 10 years		95,078		96,583
Mortgage backed securities - government agencies		131,447		131,598
Total securities available for sale	$	421,880	$	423,579

Actual maturities may differ from contractual maturities because some issuers have the right to call or prepay obligations with or without prepayment penalties. The investment portfolio includes agency mortgage backed securities, which are guaranteed by agencies such as Federal Home Loan Mortgage Corporation (“FHLMC”), Federal National Mortgage Association (“FNMA”), and Government National Mortgage Association (“GNMA”). These securities differ from traditional debt securities primarily in that they may have uncertain principal payment dates and are priced based on estimated prepayment rates on the underlying collateral.

Securities with a carrying value of $336.5 million and $355.1 million were pledged at June 30, 2019 and December 31, 2018, respectively, to secure accounts of commercial depositors in cash management accounts, public deposits, and uninsured cash balances for WM&T accounts.

15

Securities with unrealized losses at June 30, 2019 and December 31, 2018, aggregated by investment category and length of time securities have been in a continuous unrealized loss position follows:

(In thousands)	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
June 30, 2019	value		losses			value		losses			value		losses
Government sponsored enterprise obligations	$	—	$	—		$	57,505	$	(319	)	$	57,505	$	(319	)
Mortgage-backed securities - government agencies		—		—			82,088		(787	)		82,088		(787	)
Obligations of states and political subdivisions		—		—			6,485		(6	)		6,485		(6	)
Total temporarily impaired securities	$	—	$	—		$	146,078	$	(1,112	)	$	146,078	$	(1,112	)
December 31, 2018
Government sponsored enterprise obligations		96,740		(38	)		149,320		(3,313	)		246,060		(3,351	)
Mortgage-backed securities - government agencies		3,108		(5	)		120,848		(3,748	)		123,956		(3,753	)
Obligations of states and political subdivisions		814		(1	)		17,639		(187	)		18,453		(188	)
Total temporarily impaired securities	$	100,662	$	(44	)	$	287,807	$	(7,248	)	$	388,469	$	(7,292	)

Applicable dates for determining when securities are in an unrealized loss position are June 30, 2019 and December 31, 2018. 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 “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 maturity and/or the interest rate environment returns to conditions similar to when these securities were purchased. These investments consist of 61 and 117 separate investment positions as of June 30, 2019 and December 31, 2018, respectively. Because management does not intend to sell the securities, 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 June 30, 2019.

The term “other-than-temporary” is not intended to indicate that the decline is permanent, but indicates that the prospects for a near-term recovery of value are not necessarily favorable, or that there is a general lack of evidence to support a realizable value equal to or greater than the carrying value of the investment. Once a decline in value is determined to be other-than-temporary, the value of the security is reduced and a corresponding charge to earnings is recognized for the anticipated credit losses.

Federal Home Loan Bank of Cincinnati (“FHLB”) stock is an investment held by Bancorp which is not readily marketable and is carried at cost adjusted for identified impairment. Impairment is evaluated on an annual basis in the fourth quarter. Holdings of FHLB stock are required for access to FHLB advances.

16

(4) Loans and leases

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

(In thousands)	June 30, 2019		December 31, 2018
Commercial and industrial	$	860,085	$	833,524
Construction and development, excluding undeveloped land(1)		222,632		225,050
Undeveloped land		35,169		30,092
Real estate mortgage:
Commercial investment		696,421		588,610
Owner occupied commercial		452,719		426,373
1-4 family residential		338,957		276,017
Home equity - first lien		46,012		49,500
Home equity - junior lien		67,948		70,947
Subtotal: Real estate mortgage		1,602,057		1,411,447
Consumer		43,937		48,058
Total loans(2)	$	2,763,880	$	2,548,171

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

(2) Total loans are presented inclusive of premiums, discounts, and net loan origination fees and costs.

Loans to directors and their related interests, including loans to companies for which directors are principal owners and executive officers totaled $53.7 million and $52.7 million, as of June 30, 2019 and December 31, 2018, respectively.

17

The following table summarizes loans acquired in the King acquisition based upon valuation method:

	May 1, 2019
	Contractual		Non-accretable			Accretable			Acquisition-day
(In thousands)	receivable		amount			amount			fair value
Commercial and industrial	$	8,249	$	—		$	(23	)	$	8,226
Construction and development		10,764		—			43			10,807
Raw Land		7,974		—			43			8,017
Real estate mortgage:
Commercial real estate		84,219		—			(408	)		83,811
1-4 family residential		50,556		—			322			50,878
Home equity - first lien		196		—			3			199
Home equity - junior lien		679		—			5			684
Subtotal: Real estate mortgage		135,650		—			(78	)		135,572
Consumer		1,528		—			(3	)		1,525
Total loans ASC 310-20		164,165		—			(18	)		164,147
Commercial and industrial
Construction and development		—		—			—			—
Raw Land		—		—			—			—
Real estate mortgage:
Commercial real estate		1,351		(1,351	)		—			—
1-4 family residential		228		(228	)		—			—
Home equity - first lien		—		—			—			—
Home equity - junior lien		—		—			—			—
Subtotal: Real estate mortgage		1,579		(1,579	)		—			—
Consumer		—		—			—			—
Total loans ASC 310 purchased- credit-impaired loans		1,579		(1,579	)		—			—
Total loans	$	165,744	$	(1,579	)	$	(18	)	$	164,147

Purchased-Credit-Impaired (“PCI”) Loans

The Bank acquired PCI loans on May 1, 2019 in its King acquisition and during the year ended December 31, 2012 in the TBOC acquisition. PCI loans are accounted for under ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality.

Management utilized the following PCI criteria for the May 1, 2019 King acquisition:

●     Loans assigned a non-accretable mark

●     Loans classified as substandard, doubtful or loss

●     Loans classified as non-accrual when acquired

●     Loans past due 90 days or more when acquired

18

The following table reconciles the contractually required and carrying amounts of all PCI loans:

In thousands	June 30, 2019			December 31, 2018
Contractually-required principal	$	1,864		$	432
Non-accretable amount		(1,577	)		—
Accretable amount		(57	)		(68	)
Carrying value of loans	$	230		$	364

The following table presents a rollforward of the accretable amount on all PCI loans:

	Three months ended						Six months ended
	June 30,						June 30,
(In thousands)	2019			2018			2019			2018
Balance, beginning of period	$	(62	)	$	(95	)	$	(68	)	$	(106	)
Transfers between non-accretable and accretable		—			—			—			—
Net accretion into interest income on loans, including loan fees		5			10			11			21
Generated from acquisition of King		—			—			—			—
Balance, end of period	$	(57	)	$	(85	)	$	(57	)	$	(85	)

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 well-defined weaknesses that jeopardize ultimate repayment of the debt. Default is a distinct possibility if the deficiencies are not corrected.

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

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

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Internally assigned risk grades of loans by loan portfolio class classification category follows:

(In thousands)							Substandard				Total
June 30, 2019	Pass		OAEM		Substandard		non-performing		Doubtful		loans
Commercial and industrial	$	817,645	$	23,907	$	18,241	$	292	$	—	$	860,085
Construction and development, excluding undeveloped land		222,632		—		—		—		—		222,632
Undeveloped land		35,169		—		—		—		—		35,169
Real estate mortgage:
Commercial investment		687,304		4,202		4,213		702		—		696,421
Owner occupied commercial		429,070		17,757		4,228		1,664		—		452,719
1-4 family residential		336,312		1,686		159		800		—		338,957
Home equity - first lien		46,012		—		—		—		—		46,012
Home equity - junior lien		67,236		224		18		470		—		67,948
Subtotal: Real estate mortgage		1,565,934		23,869		8,618		3,636		—		1,602,057
Consumer		43,937		—		—		—		—		43,937
Total	$	2,685,317	$	47,776	$	26,859	$	3,928	$	—	$	2,763,880
December 31, 2018
Commercial and industrial	$	803,073	$	11,516	$	18,703	$	232	$	—	$	833,524
Construction and development, excluding undeveloped land		220,532		4,200		—		318		—		225,050
Undeveloped land		29,618		—		—		474		—		30,092
Real estate mortgage:
Commercial investment		586,543		1,815		15		237		—		588,610
Owner occupied commercial		411,722		9,030		4,500		1,121		—		426,373
1-4 family residential		273,537		1,544		162		774		—		276,017
Home equity - first lien		49,500		—		—		—		—		49,500
Home equity - junior lien		70,437		249		19		242		—		70,947
Subtotal: Real estate mortgage		1,391,739		12,638		4,696		2,374		—		1,411,447
Consumer		48,058		—		—		—		—		48,058
Total	$	2,493,020	$	28,354	$	23,399	$	3,398	$	—	$	2,548,171

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The following table presents the activity in the allowance by loan portfolio class:

	Type of loan
			Construction
			and development,
Three months ended	Commercial		excluding
	and		undeveloped			Undeveloped			Real estate
(In thousands)	industrial		land			land			mortgage			Consumer			Total
Balance, April 1, 2019	$	11,762	$	1,884		$	662		$	12,001		$	155		$	26,464
Provision (credit)		92		(74	)		(61	)		10			33			-
Charge-offs		—		—			—			(13	)		(148	)		(161	)
Recoveries		4		—			—			32			77			113
Balance, June 30, 2019	$	11,858	$	1,810		$	601		$	12,030		$	117		$	26,416

				Construction
				and development,
	Commercial			excluding
	and			undeveloped			Undeveloped		Real estate
(In thousands)	industrial			land			land		mortgage			Consumer			Total
Balance, April 1, 2018	$	10,638		$	2,020		$	482	$	10,707		$	356		$	24,203
Provision (credit)		2,008			(82	)		19		(795	)		85			1,235
Charge-offs		(530	)		—			—		—			(117	)		(647	)
Recoveries		2			—			—		2			78			82
Balance, June 30, 2018	$	12,118		$	1,938		$	501	$	9,914		$	402		$	24,873

	Type of loan
				Construction
				and development,
Six months ended	Commercial			excluding
	and			undeveloped			Undeveloped			Real estate
(In thousands)	industrial			land			land			mortgage			Consumer			Total
Balance, January 1, 2019	$	11,965		$	1,760		$	752		$	10,681		$	376		$	25,534
Provision (credit)		(210	)		(153	)		(151	)		1,310			(196	)		600
Charge-offs		(3	)		—			—			(13	)		(244	)		(260	)
Recoveries		106			203			—			52			181			542
Balance, June 30, 2019	$	11,858		$	1,810		$	601		$	12,030		$	117		$	26,416

				Construction
				and development,
	Commercial			excluding
	and			undeveloped		Undeveloped			Real estate
(In thousands)	industrial			land		land			mortgage			Consumer			Total
Balance, January 1, 2018	$	11,276		$	1,724	$	521		$	11,012		$	352		$	24,885
Provision (credit)		2,769			214		(20	)		(1,104	)		111			1,970
Charge-offs		(1,939	)		—		—			—			(236	)		(2,175	)
Recoveries		12			—		—			6			175			193
Balance, June 30, 2018	$	12,118		$	1,938	$	501		$	9,914		$	402		$	24,873

21

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

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

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

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

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

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

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.

22

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

(In thousands)	June 30, 2019		December 31, 2018
Commercial and industrial	$	96	$	192
Construction and development, excluding undeveloped land		—		318
Undeveloped land		—		474
Real estate mortgage:
Commercial investment		305		138
Owner occupied commercial		1,444		586
1-4 family residential		715		760
Home equity - first lien		—		—
Home equity - junior lien		470		143
Subtotal: Real estate mortgage		2,934		1,627
Consumer		—		—
Total non-accrual loans	$	3,030	$	2,611

In the course of working with borrowers, Bancorp may elect to restructure the contractual terms of certain loans. TDRs occur when, for economic, legal, or other reasons related to a borrower’s financial difficulties, Bancorp grants a concession to the borrower that it would not otherwise consider. Bancorp did not recognize new TDRs, nor did any TDRs default, in the three and six months periods ended June 30, 2019 and 2018. Detail of outstanding TDRs follows:

	June 30, 2019						December 31, 2018
(In thousands)			Specific		Additional				Specific		Additional
			reserve		commitment				reserve		commitment
TDRs	Balance		allocation		to lend		Balance		allocation		to lend
Commercial and industrial	$	23	$	23	$	—	$	28	$	28	$	—
1-4 family residential		14		14		—		14		14		—
Total TDRs	$	37	$	37	$	—	$	42	$	42	$	—

As of June 30, 2019 formal foreclosure proceedings were in process on 1-4 family residential mortgage loans with a total recorded investment of $795 thousand, as compared with $528 thousand as of December 31, 2018.

23

The following tables present the balance in the recorded investment in loans and allowance for loans by portfolio loan class and based on impairment evaluation method:

(In thousands)	Loans								Allowance
June 30, 2019	Loans individually evaluated for impairment		Loans collectively evaluated for impairment		Loans acquired with deteriorated credit quality		Total loans		Loans individually evaluated for impairment		Loans collectively evaluated for impairment		Loans acquired with deteriorated credit quality		Total allowance
Commercial and industrial	$	119	$	859,966	$	—	$	860,085	$	23	$	11,835	$	—	$	11,858
Construction and development, excluding undeveloped land		—		222,632		—		222,632		—		1,810		—		1,810
Undeveloped land		—		35,169		—		35,169		—		601		—		601
Real estate mortgage		2,948		1,599,109		—		1,602,057		14		12,016		—		12,030
Consumer		—		43,937		—		43,937		—		117		—		117
Total	$	3,067	$	2,760,813	$	—	$	2,763,880	$	37	$	26,379	$	—	$	26,416

(In thousands)	Loans								Allowance
December 31, 2018	Loans individually evaluated for impairment		Loans collectively evaluated for impairment		Loans acquired with deteriorated credit quality		Total loans		Loans individually evaluated for impairment		Loans collectively evaluated for impairment		Loans acquired with deteriorated credit quality		Total allowance
Commercial and industrial	$	220	$	833,304	$	—	$	833,524	$	28	$	11,937	$	—	$	11,965
Construction and development, excluding undeveloped land		318		224,732		—		225,050		—		1,760		—		1,760
Undeveloped land		474		29,618		—		30,092		—		752		—		752
Real estate mortgage		1,641		1,409,806		—		1,411,447		14		10,667		—		10,681
Consumer		—		48,058		—		48,058		—		376		—		376
Total	$	2,653	$	2,545,518	$	—	$	2,548,171	$	42	$	25,492	$	—	$	25,534

24

The following tables present loans individually evaluated for impairment by loan portfolio class:

	As of						Three months ended				Six months ended
	June 30, 2019						June 30, 2019				June 30, 2019
			Unpaid				Average		Interest		Average		Interest
	Recorded		principal		Related		recorded		income		recorded		income
(In thousands)	investment		balance		allowance		investment		recognized		investment		recognized
Impaired loans with no related allowance:
Commercial and industrial	$	96	$	96	$	—	$	144	$	—	$	160	$	—
Construction and development, excluding undeveloped land		—		—		—		—		—		106		—
Undeveloped land		—		—		—		—		—		158		—
Real estate mortgage
Commercial investment		306		306		—		311		—		254		—
Owner occupied commercial		1,444		1,882		—		1,455		—		1,165		—
1-4 family residential		715		715		—		779		—		773		—
Home equity - first lien		—		-		—		—		—		—		—
Home equity - junior lien		469		469		—		462		—		356		—
Subtotal: Real estate mortgage		2,934		3,372		—		3,007		—		2,548		—
Consumer		—		—		—		—		—		—		—
Subtotal	$	3,030	$	3,468	$	—	$	3,151	$	—	$	2,972	$	—
Impaired loans with an allowance:
Commercial and industrial	$	23	$	23	$	23	$	24	$	—	$	26	$	1
Construction and development, excluding undeveloped land		—		—		—		—		—		—		—
Undeveloped land		—		—		—		—		—		—		—
Real estate mortgage
Commercial investment		—		—		—		—		—		—		—
Owner occupied commercial		—		—		—		—		—		—		—
1-4 family residential		14		14		14		14		—		14		—
Home equity - first lien		—		—		—		—		—		—		—
Home equity - junior lien		—		—		—		—		—		—		—
Subtotal: Real estate mortgage		14		14		14		14		—		14		—
Consumer		—		—		—		—		—		—		—
Subtotal	$	37	$	37	$	37	$	38	$	—	$	40	$	1
Total:
Commercial and industrial	$	119	$	119	$	23	$	168	$	—	$	186	$	1
Construction and development, excluding undeveloped land		—		—		—		—		—		106		—
Undeveloped land		—		—		—		—		—		158		—
Real estate mortgage
Commercial investment		306		306		—		311		—		254		—
Owner occupied commercial		1,444		1,882		—		1,455		—		1,165		—
1-4 family residential		729		729		14		793		—		787		—
Home equity - first lien		—		—		—		-		—		-		—
Home equity - junior lien		469		469		—		462		—		356		—
Subtotal: Real estate mortgage		2,948		3,386		14		3,021		—		2,562		—
Consumer		—		—		—		—		—		—		—
Total impaired loans	$	3,067	$	3,505	$	37	$	3,189	$	—	$	3,012	$	1

25

	As of						Three months ended				Six months ended
	December 31, 2018						June 30, 2018				June 30, 2018
			Unpaid				Average		Interest		Average		Interest
	Recorded		principal		Related		recorded		income		recorded		income
(In thousands)	investment		balance		allowance		investment		recognized		investment		recognized
Impaired loans with no related allowance:
Commercial and industrial	$	192	$	707	$	—	$	225	$	—	$	531	$	—
Construction and development, excluding undeveloped land		318		489		—		525		—		571		—
Undeveloped land		474		506		—		474		—		474		—
Real estate mortgage
Commercial investment		138		138		—		-		—		17		—
Owner occupied commercial		586		1,023		—		2,335		—		2,667		—
1-4 family residential		760		760		—		1,350		—		1,446		—
Home equity - first lien		—		-		—		-		—		-		—
Home equity - junior lien		143		143		—		17		—		22		—
Subtotal: Real estate mortgage		1,627		2,064		—		3,702		—		4,152		—
Consumer		—		—		—		46		—		30		—
Subtotal	$	2,611	$	3,766	$	—	$	4,972	$	—	$	5,758	$	—
Impaired loans with an allowance:
Commercial and industrial	$	28	$	28	$	28	$	3,074	$	—	$	2,061	$	—
Construction and development, excluding undeveloped land		—		—		—		—		—		—		—
Undeveloped land		—		—		—		48		—		32		—
Real estate mortgage
Commercial investment		—		—		—		—		—		—		—
Owner occupied commercial		—		—		—		1,645		—		1,097		—
1-4 family residential		14		14		14		14		—		14		—
Home equity - first lien		—		—		—		—		—		—		—
Home equity - junior lien		—		—		—		—		—		—		—
Subtotal: Real estate mortgage		14		14		14		1,659		—		1,111		—
Consumer		—		—		—		—		—		—		—
Subtotal	$	42	$	42	$	42	$	4,781	$	—	$	3,204	$	—
Total:
Commercial and industrial	$	220	$	735	$	28	$	3,299	$	—	$	2,592	$	—
Construction and development, excluding undeveloped land		318		489		—		525		—		571		—
Undeveloped land		474		506		—		522		—		506		—
Real estate mortgage
Commercial investment		138		138		—		-		—		17		—
Owner occupied commercial		586		1,023		—		3,980		—		3,764		—
1-4 family residential		774		774		14		1,364		—		1,460		—
Home equity - first lien		—		—		—		-		—		-		—
Home equity - junior lien		143		143		—		17		—		22		—
Subtotal: Real estate mortgage		1,641		2,078		14		5,361		—		5,263		—
Consumer		—		—		—		46		—		30		—
Total impaired loans	$	2,653	$	3,808	$	42	$	9,753	$	—	$	8,962	$	—

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

26

The following table presents the aging of the recorded investment in loans by portfolio class:

													Recorded
(In thousands)							90 or more						investment
							days past due						> 90 days
			30-59 days		60-89 days		(includes all		Total		Total		and
June 30, 2019	Current		past due		past due		non-accrual)		past due		loans		accruing
Commercial and industrial	$	858,853	$	572	$	391	$	269	$	1,232	$	860,085	$	173
Construction and development, excluding undeveloped land		222,632		—		—		—		—		222,632		—
Undeveloped land		35,169		—		—		—		—		35,169		—
Real estate mortgage:
Commercial investment		692,612		1		3,107		701		3,809		696,421		396
Owner occupied commercial		450,140		643		272		1,664		2,579		452,719		220
1-4 family residential		336,548		749		873		787		2,409		338,957		72
Home equity - first lien		45,963		49		—		—		49		46,012		—
Home equity - junior lien		67,408		70		—		470		540		67,948		—
Subtotal: Real estate mortgage		1,592,671		1,512		4,252		3,622		9,386		1,602,057		688
Consumer		43,901		9		27		—		36		43,937		—
Total	$	2,753,226	$	2,093	$	4,670	$	3,891	$	10,654	$	2,763,880	$	861
December 31, 2018
Commercial and industrial	$	832,923	$	197	$	200	$	204	$	601	$	833,524	$	12
Construction and development, excluding undeveloped land		224,732		—		—		318		318		225,050		—
Undeveloped land		29,552		66		—		474		540		30,092		—
Real estate mortgage:
Commercial investment		586,884		1,382		107		237		1,726		588,610		99
Owner occupied commercial		421,143		2,732		1,377		1,121		5,230		426,373		535
1-4 family residential		274,547		374		336		760		1,470		276,017		—
Home equity - first lien		49,321		179		—		—		179		49,500		—
Home equity - junior lien		70,467		182		56		242		480		70,947		99
Subtotal: Real estate mortgage		1,402,362		4,849		1,876		2,360		9,085		1,411,447		733
Consumer		48,058		—		—		—		—		48,058		—
Total	$	2,537,627	$	5,112	$	2,076	$	3,356	$	10,544	$	2,548,171	$	745

27

(5) Goodwill and Intangible Assets

Goodwill, recorded on the acquisition date of an entity, represents $12.1 million related to the May 1, 2019 King acquisition and $682 thousand related to the 1996 purchase of a bank in southern Indiana. As provided for under GAAP, management has up to 12 months following the date of acquisition to finalize the fair values of the acquired assets and assumed liabilities. During this measurement period, Bancorp may record subsequent adjustments to goodwill for provisional amounts recorded at the acquisition date.

The goodwill balance at June 30, 2019 relates entirely to the Commercial Banking segment of Bancorp. GAAP requires that goodwill and intangible assets with indefinite useful lives not be amortized, but instead be tested for impairment at least annually. Impairment exists when a reporting unit’s carrying value of goodwill exceeds its fair value. Bancorp’s annual goodwill impairment test is conducted as of December 31 of each year or more often as situations dictate. At December 31, 2018, Bancorp’s Commercial Banking reporting unit had positive equity and Bancorp elected to perform a qualitative assessment to determine if it was more-likely-than-not that the fair value of the reporting unit exceeded its carrying value, including goodwill. The qualitative assessment indicated that it was not more-likely-than-not that the carrying value of the reporting unit exceeded its fair value. Therefore, Bancorp did not complete the two-step impairment test as of December 31, 2018.

Changes in the carrying value of goodwill follows:

	Three months ended				Six months ended
	June 30,				June 30,
(In thousands)	2019		2018		2019		2018
Balance at beginning of period	$	682	$	682	$	682	$	682
Goodwill acquired		12,144		—		12,144		—
Impairment		—		—		—		—
Balance at end of period	$	12,826	$	682	$	12,826	$	682

The Company recorded core deposit intangible assets of $1.5 million and $2.5 million in association with its May 1, 2019 King and 2013 TBOC acquisitions, respectively.

Details regarding the King acquisition are discussed in the Acquisitions footnote. Changes in the net carrying amount of core deposit intangibles follow:

	Three months ended						Six months ended
	June 30,						June 30,
(In thousands)	2019			2018			2019			2018
Balance at beginning of period	$	1,015		$	1,182		$	1,056		$	1,225
Core deposit intangible acquired		1,519			—			1,519			—
Amortization		(73	)		(43	)		(114	)		(86	)
Balance at end of period	$	2,461		$	1,139		$	2,461		$	1,139

Mortgage servicing rights (“MSRs”), a component of other assets, 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 June 30, 2019 and December 31, 2018 were $2.9 million and $3.6 million, respectively.

Total outstanding principal balances of loans serviced for others were $325.1 million and $327.9 million at June 30, 2019, and December 31, 2018, respectively.

28

Changes in the net carrying amount of MSRs follows:

	Three months ended						Six months ended
	June 30,						June 30,
(In thousands)	2019			2018			2019			2018
Balance at beginning of period	$	1,070		$	861		$	1,022		$	875
Additions for mortgage loans sold		134			74			214			95
Amortization		(36	)		(37	)		(68	)		(72	)
Balance at end of period	$	1,168		$	898		$	1,168		$	898

(6) Income Taxes

In March 2019, the Kentucky Legislature passed HB354 requiring financial institutions to transition from a capital based franchise tax to the Kentucky corporate income tax beginning in 2021. Historically, the franchise tax, a component of non-interest expenses, was assessed at 1.1% of net capital and averaged $2.5 million annually over the prior two year-end periods. The Kentucky corporate income tax will be assessed at 5% of Kentucky taxable income and will be included as a component of current and deferred state income tax expense. Associated with this change, during the first quarter of 2019, Bancorp established a Kentucky state deferred tax asset related to existing temporary differences estimated to reverse after the effective date of the law change. Bancorp recorded a corresponding state tax benefit, net of federal impact of $1.3 million, or approximately $0.06 per diluted share for the first quarter 2019.  While this is positive in the short-term, Bancorp anticipates an unfavorable impact of approximately $200 thousand per year beginning in 2021.

In April 2019, the Kentucky legislature passed HB458 allowing banks and their holding companies to be combined together for Kentucky tax return filings. The combined filing will allow Bancorp’s holding company net operating losses to offset against net revenue generated by The Bank and reduce Bancorp’s tax liability. Bancorp recorded s state tax benefit associated with this change of $2.4 million in the second quarter of 2019, or approximately $0.11 per diluted share for the three and six month periods ended June 30, 2019.

Components of income tax expense (benefit) from operations follow:

	Three months ended						Six months ended
	June 30,						June 30,
(In thousands)	2019			2018			2019			2018
Current income tax expense:
Federal	$	3,772		$	3,426		$	6,498		$	5,862
State		189			182			330			310
Total current income tax expense		3,961			3,608			6,828			6,172
Deferred income tax expense (benefit) :
Federal		224			(421	)		789			46
State		(3,155	)		(28	)		(4,768	)		(7	)
Total deferred income tax expense		(2,931	)		(449	)		(3,979	)		39
Change in valuation allowance		—			—			20			—
Total income tax expense	$	1,030		$	3,159		$	2,869		$	6,211

29

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

	Three months ended						Six months ended
	June 30,						June 30,
	2019			2018			2019			2018
U.S. federal statutory income tax rate		21.0	%		21.0	%		21.0	%		21.0	%
Kentucky state income tax enactments		(14.1	)		—			(10.7	)		—
Excess tax benefits from stock-based compensation arrangements		(0.4	)		(1.2	)		(1.1	)		(1.5	)
Increase in cash surrender value of life insurance		(0.6	)		(1.2	)		(0.9	)		(0.6	)
Tax credits		(0.7	)		(0.7	)		(0.7	)		(0.5	)
Tax exempt interest income		(0.3	)		(0.5	)		(0.3	)		(0.5	)
State income taxes, net of federal benefit		0.8			0.7			0.8			0.7
Other, net		0.2			0.8			0.1			0.1
Effective income tax rate		5.9	%		18.9	%		8.2	%		18.7	%

Currently, state income tax expense represents tax owed to the state of Indiana. Kentucky and Ohio state bank taxes are currently based on capital levels, and are recorded as other non-interest expense. See comment above regarding recent changes in Kentucky tax law.

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 June 30, 2019 and December 31, 2018, 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 2015.

(7) Deposits

The composition of the Bank’s deposits follows:

(In thousands)	June 30, 2019		December 31, 2018
Non-interest bearing demand deposits	$	777,652	$	711,023
Interest bearing deposits:
Interest bearing demand		824,324		892,867
Savings		171,471		155,007
Money market		675,221		688,744
Time deposits of $250 thousand or more		71,952		55,182
Other time deposits(1)		362,833		291,533
Total time deposits		434,785		346,715
Total interest bearing deposits		2,105,801		2,083,333
Total deposits	$	2,883,453	$	2,794,356

(1) Includes $29.8 million in brokered deposits as of both June 30, 2019 and December 31, 2018.

Deposits totaling $125.5 million were acquired on May 1, 2019, associated with the King acquisition.

30

(8) Securities Sold Under Agreements to Repurchase

SSUAR represent a funding source of Bancorp and are primarily used by commercial customers in conjunction with collateralized corporate cash management accounts. Such repurchase agreements are considered financing agreements and mature within one business day from the transaction date. At June 30, 2019, all of these financing arrangements had overnight maturities and were secured by government sponsored enterprise obligations and government agency mortgage-backed securities which were owned and controlled by Bancorp.

Information concerning SSUAR follows:

(Dollars in thousands)	June 30, 2019			December 31, 2018
Outstanding balance at end of period	$	33,809		$	36,094
Weighted average interest rate at end of period		0.31	%		0.24	%

	Three months ended						Six months ended
	June 30,						June 30,
(Dollars in thousands)	2019			2018			2019			2018
Average outstanding balance during the period	$	39,969		$	61,993		$	38,755		$	66,609
Average interest rate during the period		0.28	%		0.21	%		0.28	%		0.20
Maximum outstanding at any month end during the period	$	43,160		$	60,801		$	43,160		$	74,725

(9) Federal Home Loan Bank Advances

Bancorp had outstanding 58 separate advances totaling $84.3 million as of June 30, 2019, as compared with 14 separate advances totaling $48.2 million as of December 31, 2018. As a result of the King acquisition, Bancorp assumed 46 advances totaling $43.3 million, with maturities ranging from 2019 to 2028. These advances were discounted to fair value as of the acquisition date. See the acquisition footnote for details. As of June 30, 2019, for 16 advances totaling $51 million, all of which are non-callable, interest payments are due monthly, with principal due at maturity. For the remaining advances, principal and interest payments are due monthly based on an amortization schedule.

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

(In thousands)	June 30, 2019					December 31, 2018
Maturity			Weighted average					Weighted average
Year	Advance		Fixed Rate			Advance		Fixed Rate
2019	$	30,850		2.42	%	$	30,000		2.54	%
2020		20,390		2.38			1,691		2.23
2021		2,561		2.46			215		2.12
2023		579		1.01			—		—
2024		2,131		2.36			2,240		2.36
2025		4,192		2.42			4,626		2.42
2026		8,470		1.95			8,185		1.99
2027		8,771		1.75			—		—
2028		6,335		2.38			1,220		1.49
Total	$	84,279		2.28	%	$	48,177		2.39	%

31

FHLB advances are collateralized by certain commercial and residential real estate mortgage loans under a blanket mortgage collateral pledge agreement and FHLB stock. Bancorp views these advances to be an effective alternative to brokered deposits to fund loan growth. At June 30, 2019, and December 31, 2018, the amount of available credit from the FHLB totaled $484.0 million, and $537.0 million, respectively. Bancorp also had $105 million in federal funds lines available from correspondent banks at both June 30, 2019, and December 31, 2018.

(10) Other Comprehensive Income (Loss)

The following tables illustrate activity within the balances in accumulated other comprehensive income (“OCI”) by component:

	Net unrealized			Net unrealized			Minimum
	gains (losses)			gains (losses)			pension
Three months ended June 30, 2019	on securities			on cash			liability
(In thousands)	available for sale			flow hedges			adjustment			Total
Balance, beginning of period	$	(2,536	)	$	234		$	(211	)	$	(2,513	)
Net current period other comprehensive income (loss)		3,827			(248	)		—			3,579
Balance, end of period	$	1,291		$	(14	)	$	(211	)	$	1,066
Three months ended June 30, 2018
Balance, beginning of period	$	(5,995	)	$	544		$	(393	)	$	(5,844	)
Net current period other comprehensive income (loss)		(1,279	)		79			—			(1,200	)
Balance, end of period	$	(7,274	)	$	623		$	(393	)	$	(7,044	)

32

	Net unrealized			Net unrealized			Minimum
	gains (losses)			gains (losses)			pension
Six months ended June 30, 2019	on securities			on cash			liability
(In thousands)	available for sale			flow hedges			adjustment			Total
Balance, beginning of period	$	(5,330	)	$	408		$	(220	)	$	(5,142	)
Net current period other comprehensive income (loss)		6,621			(422	)		9			6,208
Balance, end of period	$	1,291		$	(14	)	$	(211	)	$	1,066
Six months ended June 30, 2018
Balance, beginning of period	$	(1,781	)	$	193		$	(342	)	$	(1,930	)
Net current period other comprehensive income (loss)		(4,997	)		389			—		$	(4,608	)
Reclassification adjustment for adoption of ASU 2018-02		(496	)		41			(51	)		(506	)
Balance, end of period	$	(7,274	)	$	623		$	(393	)	$	(7,044	)

(11) 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.

(12) Net Income Per Share

The following table reflects, for the three months ended June 30, 2019 and 2018, net income (numerator) and average shares outstanding (denominator) for basic and diluted net income per share computations:

	Three months ended				Six months ended
	June 30,				June 30,
(In thousands, except per share data)	2019		2018		2019		2018
Net income	$	16,543	$	13,579	$	32,184	$	26,983
Weighted average shares outstanding - basic		22,689		22,625		22,675		22,601
Dilutive securities		260		342		273		358
Weighted average shares outstanding- diluted		22,949		22,967		22,948		22,959
Net income per share, basic	$	0.73	$	0.60	$	1.42	$	1.19
Net income per share, diluted		0.72		0.59		1.40		1.17

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Stock appreciation rights (“SARs”) excluded from the earnings per share calculation because their impact was antidilutive follows:

	Three				Six
	months ended				months ended
(In thousands)	June 30,				June 30,
	2019		2018		2019		2018
Antidilutive SARs		200		93		200		93

These shares while antidilutive, could however, be dilutive to earnings per share (“EPS”) in the future.

(13) Defined Benefit Plan

Bancorp sponsors an unfunded, non-qualified, defined benefit retirement plan for three key officers (one current and two retired), and has no plans to increase the number of or benefits to participants. All participants are fully vested. Actuarially determined pension costs are expensed and accrued over the service period, and benefits are paid from Bancorp’s assets. Bancorp maintains life insurance policies, for which it is the beneficiary, on participants and certain former executives. Income from these policies is utilized to offset costs of benefits. Net periodic benefit cost was immaterial for all respective periods.

(14) Stock-Based Compensation

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

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. In 2018 shareholders approved an additional 500 thousand shares for issuance under the plan. As of June 30, 2019, there were 505 thousand shares available for future awards.

Stock Options – Bancorp had no stock options outstanding as of June 30, 2019 and December 31, 2018.

SARs – SARs granted have a vesting schedule of 20% per year and expire 10 years after the grant date unless forfeited due to employment termination.

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

	2019			2018
Dividend yield		2.54	%		2.56	%
Expected volatility		20.39	%		20.17	%
Risk free interest rate		2.52	%		2.96	%
Expected life of SARs (in years)		7.2			7.0

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

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Restricted stock awards (“RSAs”) – RSAs granted to officers vest over 5 years. For all grants prior to 2015, grantees are entitled to dividend payments during the vesting period. For grants in 2015 and forward, forfeitable dividends are deferred until shares are vested. Fair value of RSAs is equal to the market value of the shares on the date of grant.

Grants of performance stock units (“PSUs”) – PSUs vest based upon service and a 3-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 market value of the underlying shares on the date of grant, adjusted for non-payment of dividends. Grants require a 1 year post-vesting holding period and the fair value of such grants incorporates a liquidity discount related to the holding period of 4.1%, 4.3% and 5.1% for 2019, 2018, and 2017, respectively.

Grants of restricted stock units (“RSUs”) – RSUs are only granted to non-employee 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 equals market value of underlying shares on the date of grant.

Bancorp utilized cash of $272 thousand during the first six months of 2019 for the purchase of shares upon the vesting of RSUs. This compares with cash used of $155 thousand during the first six months of 2018 for the purchase of shares.

In the first quarter of 2019, Bancorp awarded 9,834 RSUs to non-employee directors of Bancorp with a grant date fair value of $330 thousand.

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Bancorp has recognized stock-based compensation expense for SARs, RSAs, and PSUs within compensation expense, and RSUs for directors within other non-interest expense, as follows:

	Three months ended June 30, 2019
(In thousands)	Stock Appreciation Rights			Restricted Stock Awards			Restricted Stock Units			Performance Stock Units			Total
Expense	$	86		$	306		$	83		$	518		$	993
Deferred tax benefit		(18	)		(65	)		(17	)		(109	)		(209	)
Total net expense	$	68		$	241		$	66		$	409		$	784

	Three months ended June 30, 2018
(In thousands)	Stock Appreciation Rights			Restricted Stock Awards			Restricted Stock Units			Performance Stock Units			Total
Expense	$	77		$	275		$	62		$	798		$	1,212
Deferred tax benefit		(16	)		(58	)		(13	)		(167	)		(254	)
Total net expense	$	61		$	217		$	49		$	631		$	958

	Six months ended June 30, 2019
(In thousands)	Stock Appreciation Rights			Restricted Stock Awards			Restricted Stock Units			Performance Stock Units			Total
Expense	$	170		$	599		$	164		$	923		$	1,856
Deferred tax benefit		(36	)		(126	)		(34	)		(194	)		(390	)
Total net expense	$	134		$	473		$	130		$	729		$	1,466

	Six months ended June 30, 2018
(In thousands)	Stock Appreciation Rights			Restricted Stock Awards			Restricted Stock Units			Performance Stock Units			Total
Expense	$	150		$	551		$	124		$	1,210		$	2,035
Deferred tax benefit		(32	)		(116	)		(26	)		(253	)		(427	)
Total net expense	$	118		$	435		$	98		$	957		$	1,608

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As of June 30, 2019, Bancorp has $7.4 million of unrecognized stock-based compensation expense estimated to be recorded as follows:

(In thousands) Year ended	Stock Appreciation Rights		Restricted Stock Awards		Restricted Stock Units		Performance Stock Units		Total
Remainder of 2019	$	175	$	599	$	166	$	999	$	1,939
2020		306		1,049		2		1,325		2,682
2021		248		830		—		466		1,544
2022		193		559		—		—		752
2023		118		308		—		—		426
2024		11		25		—		—		36
Total estimated expense	$	1,051	$	3,370	$	168	$	2,790	$	7,379

The following table summarizes SARs activity and related information:

													Weighted
							Weighted				Weighted		average
							average		Aggregate		average		remaining
				Exercise			exercise		intrinsic		fair		contractual
(In thousands, except per share data)	SARs			price			price		value(1)		value		life (in years)
Outstanding, January 1, 2018		704		$14.02	-	$40.00	$	19.51	$	12,923	$	3.47		5.1
Granted		100		35.90	-	39.32		37.75		—		6.07
Exercised		(73	)	14.02	-	19.37		15.32		1,654		3.43
Forfeited		—			-			-		—		—
Outstanding, December 31, 2018		731		$14.02	-	$40.00	$	22.42	$	8,422	$	3.82		5.2
Outstanding, January 1, 2019		731		$14.02	-	$40.00	$	22.42	$	8,422	$	3.82
Granted		53		36.65	-	38.18		37.01		—		6.24
Exercised		(47	)	14.02	-	22.96		17.16		830		3.62
Forfeited		—			-			-		—		—
Outstanding, June 30, 2019		737		$14.02	-	$40.00	$	23.79	$	9,505	$	4.01		5.0
Vested and exercisable		525		$14.02	-	$40.00	$	19.20	$	8,975	$	3.38		3.5
Unvested		212		22.96	-	40.00		35.14		530		5.58		8.5
Outstanding, June 30, 2019		737		$14.02	-	$40.00	$	23.79	$	9,505	$	4.01		5.0
Vested at June 30, 2019		79		$19.37	-	$40.00	$	27.39	$	740	$	4.55

(1) - Intrinsic value for SARs is defined as the amount by which the current market price of the underlying stock exceeds the exercise or grant price.

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The following table summarizes activity for RSAs granted to officers:

				Grant date
				weighted
(In thousands, except per share data)	RSAs			average cost
Unvested at January 1, 2018		119		$	27.62
Shares awarded		40			35.89
Restrictions lapsed and shares released		(44	)		23.62
Shares forfeited		(5	)		31.35
Unvested at December 31, 2018		110		$	32.09
Unvested at January 1, 2019		110		$	32.09
Shares awarded		39			34.88
Restrictions lapsed and shares released		(39	)		28.70
Shares forfeited		—			—
Unvested at June 30, 2019		110		$	34.32

Expected shares to be awarded for PSUs granted to executive officers of Bancorp, the three-year performance period for which began January 1 of the award year are as follows:

	Vesting				Expected
Grant	period		Fair		shares to
year	in years		value		be awarded
2017		3	$	35.66		61,893
2018		3		31.54		71,932
2019		3		32.03		43,602

(15) Commitments and Contingent Liabilities

As of June 30, 2019 and December 31, 2018, Bancorp had various commitments outstanding that arose in the normal course of business, such as unused commitments or lines of credit and commitments made to lend in the future, which are properly not reflected in the consolidated financial statements. Total off balance sheet commitments to extend credit follows:

(In thousands)	June 30, 2019		December 31, 2018
Commercial and Industrial	$	381,824	$	309,920
Construction - Commercial		224,641		163,314
Construction - Residential		15,631		16,050
Home Equity		154,030		147,907
Credit Cards		21,222		20,003
Overdrafts		21,777		21,751
Letters of credit		23,359		20,891
Other		43,572		33,369
Future loan commitments		213,687		101,399
Total off balance sheet commitments to extend credit	$	1,099,743	$	834,604

Commitments to extend credit are an agreement to lend to a customer as long as collateral is available as agreed upon and there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Bancorp uses the same credit and collateral policies in making commitments and conditional guarantees as for on-balance sheet instruments. Bancorp evaluates each customer’s creditworthiness on a case by case basis. The amount of collateral obtained is based on management’s credit evaluation of the customer. Collateral held varies but may include accounts receivable, inventory, securities, 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 June 30, 2019 and December 31, 2018, Bancorp had accrued $350 thousand in other liabilities for inherent risks related to unfunded credit commitments.

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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 1 to 2 years.

As of June 30, 2019, in the normal course of business, there were pending legal actions and proceedings in which claims for damages are asserted. Management, after discussion with legal counsel, believes the ultimate result of these legal actions and proceedings will not have a material adverse effect on the consolidated financial position or results of operations of Bancorp.

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

Fair value represents the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

● Level 1: Valuation is based upon quoted (unadjusted) 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 maximization of use of observable inputs and minimization of 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.

At June 30, 2019 and December 31, 2018, Bancorp’s securities available for sale portfolio and interest rate swaps were recorded at fair value on a recurring basis.

All available for sale 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 observable in the market place and can be derived from or supported by observable data. These measurements are classified as Level 2.

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

Mortgage servicing rights, impaired loans and OREO are 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.

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Carrying values of assets measured at fair value on a recurring basis follows:

(In thousands)	Fair value at June 30, 2019
Assets	Total		Level 1		Level 2		Level 3
Securities available for sale:
Government sponsored enterprise obligations	$	268,015	$	—	$	268,015	$	—
Mortgage backed securities - government agencies		131,598		—		131,598		—
Obligations of states and political subdivisions		23,966		—		23,966		—
Total Securities available for sale		423,579		—		423,579		—
Interest rate swaps		1,813		—		1,813		—
Total assets	$	425,392	$	—	$	425,392	$	—
Liabilities
Interest rate swaps	$	1,849	$	—	$	1,849	$	—

(In thousands)	Fair value at December 31, 2018
Assets	Total		Level 1		Level 2		Level 3
Securities available for sale:
Government sponsored enterprise obligations	$	261,039	$	—	$	261,039	$	—
Mortgage backed securities - government agencies		146,277		—		146,277		—
Obligations of states and political subdivisions		29,679		—		29,679		—
Total Securities available for sale		436,995		—		436,995		—
Interest rate swaps		1,035		—		1,035		—
Total assets	$	438,030	$	—	$	438,030	$	—
Liabilities
Interest rate swaps	$	543	$	—	$	543	$	—

For the securities portfolio, Bancorp monitors the valuation technique used by pricing agencies to ascertain when transfers between levels have occurred. The nature of other assets and liabilities measured at fair value is such that transfers in and out of any level are expected to be rare. For the three and six months ended June 30, 2019, there were no transfers between Levels 1, 2, or 3.

Bancorp had nofinancial instruments classified within Level 3 of the valuation hierarchy for assets and liabilities measured at fair value on a recurring basis at June 30, 2019 or December 31, 2018.

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Discussion of assets measured at fair value on a non-recurring basis follows:

Mortgage Servicing Rights – On at least a quarterly basis, MSRs are evaluated for impairment based upon the fair value of the MSRs as compared to carrying amount. 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 June 30, 2019 and December 31, 2018, there was novaluation allowance for the mortgage servicing rights, as the fair value exceeded the cost. Accordingly, the MSRs are not included in the following tabular disclosure for June 30, 2019 or December 31, 2018.

Impaired loans - Collateral-dependent impaired loans generally reflect partial charge-downs to their respective fair value, which is commonly based on recent real estate appraisals or other sources of valuations based upon the underlying collateral. Also, fair value is calculated as the carrying value of loans with a specific valuation allowance, less the specific valuation allowance. Fair value of impaired loans was primarily measured based on the value of collateral securing these loans. Impaired loans are classified within Level 3 of the fair value hierarchy. Collateral may be real estate and/or business assets including equipment, inventory, and/or accounts receivable. Bancorp determines the value of real estate collateral based on independent appraisals performed by qualified licensed appraisers. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Appraised values are discounted for costs to sell and may be discounted further based on management’s historical knowledge, changes in market conditions from the date of the most recent appraisal, and/or management’s expertise and knowledge of the customer and the customer’s business. Such discounts by management are subjective and are typically significant unobservable inputs for determining fair value. For other assets, Bancorp relies on both internal and third party assessments of asset value, based on information provided by the borrower, following methodologies similar to those described for real estate. As of June 30, 2019, total impaired collateral dependent loans charged down to their fair value and impaired loans with a valuation allowance were $389 thousand, and the specific allowance totaled $37 thousand, resulting in a fair value of $352 thousand, compared with total collateral dependent loans charged down to their fair value and impaired loans with a valuation allowance of $967 thousand, and the specific allowance allocation totaling $42 thousand, resulting in a fair value of $925 thousand at December 31, 2018. Losses represent charge offs and changes in specific allowances for the periods indicated.

Other real estate owned (“OREO”) - Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate 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 following table, 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 June 30, 2019 and December 31, 2018, carrying value of all other real estate owned was $563 thousand and $1.0 million, respectively.

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

(In thousands)	Fair value at June 30, 2019								Losses recorded:
									Three months		Six months
									ended		ended
	Total		Level 1		Level 2		Level 3		June 30, 2019		June 30, 2019
Impaired loans	$	352	$	—	$	—	$	352	$	—	$	—
Other real estate owned		239		—		—		239		—		—

(In thousands)	Fair value at December 31, 2018								Losses recorded:
									Three months		Six months
									ended		ended
	Total		Level 1		Level 2		Level 3		June 30, 2018		June 30, 2018
Impaired loans	$	925	$	—	$	—	$	925	$	304	$	1,419
Other real estate owned		239		—		—		239		—		—

For Level 3 assets measured at fair value on a non-recurring basis as of June 30, 2019 and December 31, 2018, the significant unobservable inputs used in the fair value measurements are presented below.

June 30, 2019
	Fair		Valuation	Unobservable	(weighted
(Dollars in thousands)	value		technique	inputs	average)
Impaired loans - collateral dependent	$	352	Appraisal	Appraisal discounts		10.0	%
Other real estate owned		239	Appraisal	Appraisal discounts		22.0

December 31, 2018
	Fair		Valuation	Unobservable	(weighted
(Dollars in thousands)	value		technique	inputs	average)
Impaired loans - collateral dependent	$	925	Appraisal	Appraisal discounts		9.9	%
Other real estate owned		1,018	Appraisal	Appraisal discounts		12.2

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

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
June 30, 2019	amount		Fair value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	116,039	$	116,039	$	116,039	$	—	$	—
Mortgage loans held for sale		3,922		4,023		—		4,023		—
Federal Home Loan Bank stock		11,316		11,316		—		11,316		—
Loans, net		2,737,464		2,749,157		—		—		2,749,157
Accrued interest receivable		9,633		9,633		9,633		—		—
Liabilities
Non-interest bearing deposits		777,652		777,652		777,652		—		—
Transaction deposits		1,671,016		1,671,016		—		1,671,016		—
Time deposits		434,785		436,451		—		436,451		—
Securities sold under agreement to repurchase		33,809		33,809		—		33,809		—
Federal funds purchased		12,012		12,012		—		12,012		—
FHLB advances		84,279		84,505		—		84,505		—
Accrued interest payable		1,008		1,008		1,008		—		—

(In thousands)	Carrying
December 31, 2018	amount		Fair value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	198,939	$	198,939	$	198,939	$	—	$	—
Mortgage loans held for sale		1,675		1,743		—		1,743		—
Federal Home Loan Bank stock		10,370		10,370		—		10,370		—
Loans, net		2,522,637		2,508,587		—		—		2,508,587
Accrued interest receivable		8,360		8,360		8,360		—		—
Liabilities
Non-interest bearing deposits		711,023		711,023		711,023		—		—
Transaction deposits		1,736,618		1,736,618		—		1,736,618		—
Time deposits		346,715		345,273		—		345,273		—
Securities sold under agreement to repurchase		36,094		36,094		—		36,094		—
Federal funds purchased		10,247		10,247		—		10,247		—
FHLB advances		48,177		47,227		—		47,227		—
Accrued interest payable		762		762		762		—		—

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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(18) Derivative Financial Instruments

Periodically, Bancorp enters into interest rate swap transactions with borrowers who desire to hedge exposure to rising interest rates, while at the same time entering into an offsetting interest rate swap, with substantially matching terms, with another approved independent counterparty. These are undesignated derivative instruments and are recognized on the balance sheet at fair value. Because of matching terms of offsetting contracts and collateral provisions mitigating any non-performance risk, changes in fair value subsequent to initial recognition have an insignificant effect on earnings. Exchanges of cash flows related to undesignated interest rate swap agreements for the first six months of 2019 were offsetting and therefore had no effect on Bancorp’s earnings or cash flows.

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

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At June 30, 2019 and December 31, 2018, Bancorp had outstanding undesignated interest rate swap contracts as follows:

(Dollars in thousands)	Receiving				Paying
	June 30,		December 31,		June 30,		December 31,
	2019		2018		2019		2018
Notional amount	$	60,607	$	55,505	$	60,607	$	55,505
Weighted average maturity (years)		7.4		8.0		7.4		8.0
Fair value	$	1,813	$	519	$	1,835	$	543

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

The following table details Bancorp’s derivative position designated as a cash flow hedge, and the fair values as of June 30, 2019 and December 31, 2018.

(Dollars in thousands)
							Fair value
Notional		Maturity	Receive (variable)	Pay fixed			assets (liabilities)
amount		date	index	swap rate			June 30, 2019			December 31, 2018
$	10,000	12/6/2021	US 3 Month LIBOR		1.89	%	$	(37	)	$	193
	20,000	12/6/2020	US 3 Month LIBOR		1.79	%		23			323
$	30,000				1.82	%	$	(14	)	$	516

(19) Regulatory Matters

Bancorp and the Bank are subject to capital regulations in accordance with Basel III, as administered by banking regulators.  Regulatory agencies measure capital adequacy within a framework that makes capital requirements, in part, dependent on the individual risk profiles of financial institutions. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on Bancorp’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Holding Company and the Bank must meet specific capital guidelines that involve quantitative measures of Bancorp’s assets, liabilities and certain off-balance sheet items, as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators regarding components, risk weightings and other factors.

Banking regulators have categorized the Bank as well-capitalized. For prompt corrective action, the regulations in accordance with Basel III define “well capitalized” as a 6.5% Common Equity Tier 1 Risk-Based Capital ratio, an 8.0% Tier 1 Risk-Based Capital ratio, a 10.0% Total Risk-Based Capital ratio and a 5.0% Tier 1 Leverage ratio. Additionally, in order to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, Bancorp and Bank must hold a capital conservation buffer composed of Common Equity Tier 1 Risk-Based Capital above their minimum risk-based capital requirements. The capital conservation buffer phased in from 2016 to 2019 on the following schedule: a capital conservation buffer of 0.625% effective January 1, 2016; 1.25% effective January 1, 2017; 1.875% effective January 1, 2018; and a fully phased in capital conservation buffer of 2.5% on January 1, 2019.

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Bancorp continues to exceed the regulatory requirements for Total Risk Based Capital, Common Equity Tier I Risk Based, Tier I Risk Based Capital and Tier I Leverage Capital. Bancorp and the Bank intend to maintain a capital position that meets or exceeds the “well-capitalized” requirements as defined by the FRB and the FDIC, in addition to the Capital Conservation Buffer.

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

(Dollars in thousands)	Actual					Minimum for adequately capitalized					Minimum for well capitalized
June 30, 2019	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk-based capital (1)
Consolidated	$	400,314		12.67	%	$	252,821		8.00	%	NA		NA
Bank		392,705		12.45			252,265		8.00		$	315,331		10.00	%
Common equity tier 1 risk-based capital
Consolidated		373,548		11.82			142,212		4.50		NA		NA
Bank		365,939		11.60			141,899		4.50			204,965		6.50
Tier 1 risk-based capital (1)
Consolidated		373,548		11.82			189,616		6.00		NA		NA
Bank		365,939		11.60			189,198		6.00			252,265		8.00
Leverage (2)
Consolidated		373,548		10.91			136,955		4.00		NA		NA
Bank		365,939		10.70			136,784		4.00			170,980		5.00

(Dollars in thousands)	Actual					Minimum for adequately capitalized					Minimum for well capitalized
December 31, 2018	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk-based capital (1)
Consolidated	$	396,019		13.91	%	$	227,714		8.00	%	NA		NA
Bank		385,637		13.56			227,462		8.00		$	284,327		10.00	%
Common equity tier 1 risk-based capital
Consolidated		370,135		13.00			128,089		4.50		NA		NA
Bank		359,753		12.65			127,947		4.50			184,813		6.50
Tier 1 risk-based capital (1)
Consolidated		370,135		13.00			170,785		6.00		NA		NA
Bank		359,753		12.65			170,596		6.00			227,462		8.00
Leverage (2)
Consolidated		370,135		11.33			130,698		4.00		NA		NA
Bank		359,753		11.02			130,569		4.00			163,211		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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(20) Segments

Bancorp’s principal activities include commercial banking and 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 investment products sales 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 Bancorp are involved in the commercial banking segment. Goodwill of $12.8 million, of which $682 thousand relates to a bank acquisition in 1996, and $12.1 million resulted from the King acquisition, has been assigned to the commercial banking segment. Assets assigned to WM&T primarily consist of net premises and equipment.

Selected financial information by business segment for the three and six month periods ended June 30, 2019 and 2018 follows: 

			Wealth
	Commercial		Management
(In thousands)	Banking		and Trust		Total Company
Three months ended June 30, 2019
Net interest income	$	30,690	$	84	$	30,774
Provision		—		—		—
Wealth management and trust services		—		5,662		5,662
All other non-interest income		6,601		—		6,601
Non-interest expenses		22,297		3,167		25,464
Income before income tax expense		14,994		2,579		17,573
Income tax expense		471		559		1,030
Net income	$	14,523	$	2,020	$	16,543
Segment assets	$	3,462,105	$	1,718	$	3,463,823
Three months ended June 30, 2018
Net interest income	$	28,612	$	62	$	28,674
Provision		1,235		—		1,235
Wealth management and trust services		—		5,344		5,344
All other non-interest income		6,091		—		6,091
Non-interest expenses		18,938		3,198		22,136
Income before income tax expense		14,530		2,208		16,738
Income tax expense		2,644		515		3,159
Net income	$	11,886	$	1,693	$	13,579
Segment assets	$	3,321,948	$	1,892	$	3,323,840

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			Wealth
	Commercial		management
(In thousands)	Banking		and Trust		Total Company
Six months ended June 30, 2019
Net interest income	$	60,271	$	160	$	60,431
Provision		600		—		600
Wealth management and trust services		—		11,101		11,101
All other non-interest income		12,224		—		12,224
Non-interest expenses		41,903		6,200		48,103
Income before income tax expense		29,992		5,061		35,053
Income tax expense		1,771		1,098		2,869
Net income	$	28,221	$	3,963	$	32,184
Segment assets	$	3,462,105	$	1,718	$	3,463,823
Six months ended June 30, 2018
Net interest income	$	55,850	$	133	$	55,983
Provision		1,970		—		1,970
Wealth management and trust services		—		10,844		10,844
All other non-interest income		11,500		—		11,500
Non-interest expenses		36,798		6,365		43,163
Income before income tax expense		28,582		4,612		33,194
Income tax expense		5,210		1,001		6,211
Net income	$	23,372	$	3,611	$	26,983
Segment assets	$	3,321,948	$	1,892	$	3,323,840

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(21) Revenue from Contracts with Customers

All of Bancorp’s revenue from contracts with customers in the scope of ASC 606 is recognized within non-interest income. The table below presents Bancorp’s sources of non-interest income with items outside the scope of ASC 606 noted as such:

	Three months ended June 30, 2019						Three months ended June 30, 2018
(Dollars in thousands)	Commercial		WM&T		Total		Commercial		WM&T		Total
Wealth management and trust services	$	—	$	5,662	$	5,662	$	—	$	5,344	$	5,344
Deposit service charges		1,336		—		1,336		1,447		—		1,447
Debit and credit card income		2,168		—		2,168		1,689		—		1,689
Treasury management fees		1,202		—		1,202		1,113		—		1,113
Mortgage banking income(1)		796		—		796		746		—		746
Net investment product sales commissions and fees		364		—		364		397		—		397
Bank owned life insurance(1)		184		—		184		191		—		191
Other(2)		551		—		551		508		—		508
Total non-interest income	$	6,601	$	5,662	$	12,263	$	6,091	$	5,344	$	11,435

	Six months ended June 30, 2019						Six months ended June 30, 2018
(Dollars in thousands)	Commercial		WM&T		Total		Commercial		WM&T		Total
Wealth management and trust services	$	—	$	11,101	$	11,101	$	—	$	10,844	$	10,844
Deposit service charges		2,583		—		2,583		2,858		—		2,858
Debit and credit card income		3,912		—		3,912		3,197		—		3,197
Treasury management fees		2,359		—		2,359		2,160		—		2,160
Mortgage banking income(1)		1,278		—		1,278		1,322		—		1,322
Net investment product sales commissions and fees		720		—		720		801		—		801
Bank owned life insurance(1)		362		—		362		378		—		378
Other(2)		1,010		—		1,010		784		—		784
Total non-interest income	$	12,224	$	11,101	$	23,325	$	11,500	$	10,844	$	22,344

(1) Outside of the scope of ASC 606

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

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

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

WM&T provides customers fiduciary and investment management services as agreed upon in asset management contracts. The contracts require WM&T to provide a series of distinct services for which fees are earned over time. The contracts are cancellable upon demand with fees typically based upon the asset value of investments. Revenue is accrued and recognized monthly based upon month-end asset values and collected from the customer predominately in the following month except for a small percentage of fees collected quarterly. Incentive compensation related to WM&T activities is considered a cost of obtaining the contract. Contracts between WM&T and clients do not permit performance based fees and accordingly, none of the fees earned by WM&T are performance based. Trust fees receivable as of June 30, 2019 were $2.1 million compared with $1.9 million as of December 31, 2018.

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Investment products sales commissions and fees represent the Bank’s share of transaction fees and wrap fees resulting from investment services and programs provided through an agent relationship with a third party broker-dealer. Transaction fees are assessed at the time of the transaction. Those fees are collected and recognized on a monthly basis. Trailing fees are based upon market value and are assessed, collected, and recognized on a quarterly basis. Because the Bank acts as an agent in arranging the relationship between the customer and third party provider, and does not control the services rendered, investment product sales commissions and fees are reported net of related costs, including nominal incentive compensation, and trading activity charges of $257 and $261 thousand, for the six month periods ended June 30, 2019, and 2018 respectively.

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

Bancorp did not establish any contract assets or liabilities as a result of adopting ASC 606, nor were any recognized during the first six months of 2019.

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

(22) Leases

Bancorp has operating leases for various branch locations with terms remaining from 3 months to 14 years, some of which include options to extend the leases in 5 year increments. Options reasonably expected to be exercised are included in determination of the right of use asset. Bancorp elected the practical expedient to expense short-term lease expense associated with leases with original terms 12 months or less. Bancorp elected not to separate non-lease components from lease components for its operating leases. The right-of-use lease asset and operating lease liability are recorded in others assets and other liabilities, respectively, on the consolidated balance sheet.

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Balance sheet, income statement, and cash flow detail regarding operating leases follows:

(In thousands)
Balance Sheet	June 30, 2019
Operating lease right-of-use assets	$	16,056		included in premises and equipment
Operating lease liabilities		17,373		included in other liabilities
Weighted average remaining lease term (in years)	12.42
Weighted average discount rate		3.61	%
Maturities of lease liabilities:
One year or less	$	1,949
Year 2		1,929
Year 3		1,919
Year 4		1,955
Year 5		1,935
Greater than 5 years		11,870
Total lease payments	$	21,557
Less imputed interest		4,184
Total	$	17,373

(In thousands)	Three months ended		Six months ended
Income Statement	June 30, 2019		June 30, 2019
Components of lease expense:
Operating lease cost	$	489	$	997
Variable lease cost		24		63
Less sublease income		13		27
Total lease cost	$	500	$	1,033

(In thousands)	Six months ended
Cash flow Statement	June 30, 2019
Supplemental cash flow information:
Operating cash flows from operating leases	$	694

As of June 30, 2019 Bancorp had not entered into any lease agreements that had yet to commence.

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

This item discusses the results and operations for Stock Yards Bancorp, Inc. (“Holding Company”), and its wholly-owned subsidiary, Stock Yards Bank & Trust Company (“Bank”) for the three and six months ended June 30, 2019 and compares these periods with the same periods of the previous year. All significant inter-company transactions and accounts have been eliminated in consolidation. All companies are collectively referred to as “Bancorp” or the “Company.”

As a result of its acquisition of King, Bancorp, Inc. on May 1, 2019, Bancorp became the 100% successor owner of King Bancorp Statutory Trust I (“KBST”), an unconsolidated finance subsidiary. As permitted under the terms of KBST’s governing documents, Bancorp redeemed the trust-preferred securities at the par amount of approximately $3.6 million on June 17, 2019.

Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and accompanying notes presented in Part 1 Item 1 “Financial Statements.”

Stock Yards Bancorp, Inc. is a financial holding company headquartered in Louisville, Kentucky.

The Bank, chartered in 1904, is a state-chartered non-member financial institution that provides services in the Louisville, Kentucky, Indianapolis, Indiana and Cincinnati, Ohio Metropolitan Statistical Areas (“MSAs”) through 43 full service banking center locations. 

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.

Acquisition of King Bancorp, Inc. and its wholly-owned subsidiary King Southern Bank (“King”)

On May 1, 2019, Bancorp completed its acquisition of King Bancorp Inc., and its wholly-owned subsidiary King Southern Bank (collectively referred to as “King”), for $28 million in cash. The acquisition expands the Company’s market area into nearby Nelson County, Kentucky, while expanding the customer base in Louisville, Kentucky. At May 1, 2019, King reported approximately $192 million in total assets, approximately $164 million in loans, and approximately $126 million in deposits.

As a result of the completion of the acquisition, Bancorp incurred pre-tax transaction charges totaling $1.3 million for the three and six months ended June 30, 2019. Net income from the King acquisition is expected to be accretive to Bancorp’s overall operating results on a quarterly basis going forward.

Issued but Not Yet Effective Accounting Standards Updates (“ASUs”)

For disclosure regarding the impact to Bancorp’s financial statements of issued-but-not-yet-effective ASUs, see Footnote 1 “Basis of Presentation and Summary of Significant Accounting Policies” of Part I Item 1 “Financial Statements.”

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Business Segment Overview

As of June 30, 2019, Bancorp was divided into two reportable segments: Commercial Banking and Wealth Management & Trust (“WM&T”):

Commercial Banking provides a full range of loan and deposit products to individual consumers and businesses through commercial lending, retail lending, deposit services, treasury management services, private banking, online banking, mobile banking, merchant services, international banking, correspondent banking and other banking services. The Bank also offers securities brokerage services via its banking center network through an arrangement with a third party broker-dealer. 

WM&T, with over $3 billion in assets under management (“AUM”), provides custom-tailored financial planning, investment management, retirement planning and trust and estate services in all markets in which Bancorp operates. 

Summary - Three and Six Months Ended June 30, 2019 Compared to the Three and Six Months Ended June 30, 2018

Three months ended June 30, (In thousands, except per share data)	2019			2018			$ Change		% Change
Net income	$	16,543		$	13,579		$	2,964		21.8	%
Diluted earnings per share	$	0.72		$	0.59		$	0.13		22.0	%
Annualized return on average assets		1.93	%		1.74	%	19 bps			10.9	%
Annualized return on average equity		17.40	%		15.94	%	146 bps			9.2	%

Six months ended June 30, (In thousands, except per share data)	2019			2018			$ Change		% Change
Net income	$	32,184		$	26,983		$	5,201		19.3	%
Diluted earnings per share	$	1.40		$	1.17		$	0.23		19.7	%
Annualized return on average assets		1.93	%		1.75	%	18 bps			10.3	%
Annualized return on average equity		17.25	%		16.05	%	120 bps			7.5	%

Overview of six months ended June 30, 2019 compared with same period in 2018

Bancorp completed the first six months of 2019 with record net income of $32.2 million, a 19.3% increase over the comparable period in 2018. The increase is primarily due to higher net interest income driven by year-over-year average loan growth, higher non-interest income led by WM&T and debit and credit card income, and a lower effective income tax rate resulting from Kentucky tax law changes. Diluted earnings per share for the first six months of 2019 were $1.40, compared to $1.17 for the first six months of 2018.

Key factors affecting Bancorp’s results for the six months ended June 30, 2019 included:

● Average loans increased $115.4 million, or 4.7%, year over year as a result of strong loan production and the May 1, 2019 King acquisition, contributing to a 16.6% increase in interest income. Total average deposits increased 9.8% to support loan growth, reflecting strong growth in time deposits and the impact of the King acquisition;

● Net interest income increased $4.4 million or 7.9% for the six months ended June 30, 2019, due largely to a $8.4 million increase in interest income earned on loans;

● Net interest margin rose 1 basis point compared with the same period of 2018 as interest income stemming from asset growth offset increased interest expense resulting from deposit rate increases;

● Credit quality metrics remained sound, including net loan loss recoveries for the first six months of 2019, leading to reduced provision for loan and lease losses (“provision”) of $600 thousand, as compared with $2.0 million for the comparable 2018 period;

● WM&T, buoyed by a strong second quarter market and new business generation, achieved 2.4% revenue growth year over year;

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● Card income and treasury management fees, bolstered by increased volume and usage, continued to stand out as diversifying non-interest revenue streams; and

● Bancorp’s effective income tax rate declined to 8.2% for the six months ended June 30, 2019 based on changes made to Kentucky state tax law during the first and second quarters of 2019.  

Net interest income increased $4.4 million, or 7.9%, for the first six months of 2019, as compared with the same period in 2018. Net interest margin increased to 3.85% for the first six months of 2019, compared with 3.84% for the same period of 2018. Increasing average rates earned on interest earning assets, along with the impact of increased volumes of loans and short-term investments contributed to higher interest income for the first six months of 2019, as interest income increased $10.2 million, or 16.6%, over the same period in 2018. Average earning asset growth attributable to the May 1, 2019 King acquisition totaled $56 million for the six-month comparison period. Higher long-term borrowing costs assumed in the King acquisition, along with a shift in deposits from non-interest bearing accounts to interest bearing accounts resulted in an increase in interest expense of $5.8 million. Interest paying liabilities assumed as part of the King acquisition contributed $47.1 million of the total $149.6 million average interest bearing liabilities growth for the six month comparison. The average balance of time deposits increased $144.8 million, or 61.2% in the first six months of 2019, as compared with the same period in 2018, as a result primarily of targeted marketing campaigns initiated in 2018 to support loan growth and add liquidity to the balance sheet. The corresponding cost of time deposits increased from 0.86% for the first six months of 2018 to 1.93% for the same period in 2019.

For the six-month period ended June 30, 2019, Bancorp recorded a $600 thousand provision, compared with $2.0 million for the same period in 2018. The provision represents a charge to earnings necessary to maintain an allowance that, in management’s estimation, is adequate to provide coverage for the inherent losses on outstanding loans. The provision reflects many factors including trends in the portfolio, as well as changes in quantitative and qualitative factors. Reflecting continued strong credit quality metrics, and net recoveries of $282 thousand in the first six months of 2019, the allowance to total loans was 0.96% as of June 30, 2019, compared with 0.96% as of June 30, 2018. In management’s opinion, the allowance remained adequate to cover potential losses within the portfolio.

Total non-interest income for the first six months of 2019 increased $981 thousand, or 4.4%, compared with the same period in 2018. Non-interest income comprised 27.9% of total revenues, defined as net interest income and non-interest income, as compared with 28.5% for the same period in 2018. Bancorp’s WM&T services comprised 47.6% of Bancorp’s non-interest income. Debit and credit card revenue, as a result of increasing transaction volumes and incentives paid by the credit card processor, increased $715 thousand, or 22.4% in the first six months of 2019, as compared with the same period in 2018. Treasury management fees, a steadily growing source of revenue for Bancorp, increased $199 thousand, or 9.2%, in the first half of 2019, as compared with the first half of 2018. These items offset declines of $275 thousand, and $81 thousand, for deposit service charges and investment product sales commissions and fees, respectively, for the first six months of 2019, as compared with 2018.

Total non-interest expense in the first six months of 2019 increased $4.9 million, or 11.4%, compared with the same period in 2018. Increases in compensation, technology and communication, legal and professional fees, and other expenses drove the increase. Costs associated with the King acquisition recognized during 2019 totaled $1.3 million approximately, or $0.05 net income per diluted share, and were spread primarily between compensation and legal and professional fees. Bancorp's efficiency ratio, reflecting the one-time transaction costs associated with the King acquisition recognized in the first six months of 2019 was 57.36%, as compared with 54.98% in the same period in 2018.

Bancorp recorded income tax expense of $2.9 million for the first six months of 2019, compared to $6.2 million for the same period in 2018.  The effective rate for the corresponding six month periods was 8.2% and 18.7%, respectively.  The decrease in the effective tax rate from 2018 to 2019 related primarily to Kentucky state tax law changes as discussed below:

● In March 2019, the Kentucky Legislature passed HB354 requiring financial institutions to transition from a capital based franchise tax to the Kentucky corporate income tax beginning in 2021. Historically, the franchise tax, a component of non-interest expenses, was assessed at 1.1% of net capital and averaged $2.5 million annually over the prior two year-end periods. The Kentucky corporate income tax will be assessed at 5% of Kentucky taxable income and will be included as a component of current and deferred state income tax expense. Associated with this change, during the first quarter of 2019, Bancorp established a Kentucky state deferred tax asset related to existing temporary differences estimated to reverse after the effective date of the law change. Bancorp recorded a corresponding state tax benefit, net of federal impact of $1.3 million, or approximately $0.06 per diluted share for the first six months of 2019.  While this is positive in the short-term, Bancorp anticipates an unfavorable impact of approximately $200 thousand per year beginning in 2021.

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● In April 2019, the Kentucky legislature passed HB458 allowing banks and their holding companies to be combined together for Kentucky tax return filings beginning in 2021. The combined filing will allow Bancorp’s Holding Company net operating losses to offset against net revenue generated by The Bank and reduce Bancorp’s tax liability. Bancorp recorded a state tax benefit associated with this change of $2.4 million in the second quarter of 2019, or approximately $0.11 per diluted share for the first six months of 2019. 

The ratio of stockholder’s equity to total assets was 11.24% as of June 30, 2019, as compared with 11.10% at December 31, 2018, and 10.40% at June 30, 2018. Total equity increased $22.9 million in the first six months of 2019, as net income of $32.2 million was offset by dividends declared of $11.6 million and stock repurchases totaling $5.8 million. Bancorp’s ratio of tangible common equity (“TCE”) to total tangible assets was 10.85% as of June 30, 2019, compared with 11.05% at December 31, 2018, and 10.35% at June 30, 2018, with the decline attributable to the KSB acquisition. TCE, (a non-U.S. Generally Accepted Accounting Principle (“GAAP”) measure), is a measure of a company's capital which is useful in evaluating the quality and adequacy of capital. See the Non-GAAP Financial Measures section for details on reconcilement to GAAP measures.

Results of Operations

Net income of $16.5 million for the three months ended June 30, 2019 increased $3.0 million, or 21.8%, from $13.6 million for the comparable 2018 period. Basic net income per share was $0.73 for the second quarter of 2019, an increase of 21.7% from the $0.60 for the second quarter of 2018. Net income per share on a diluted basis was $0.72 for the second quarter of 2019, an increase of 22.0% from the $0.59 for the same period in 2018. See Note 12 for additional information related to net income per share.

Annualized return on average assets and annualized return on average stockholders’ equity were 1.93% and 17.40%, respectively, for the second quarter of 2019, compared with 1.74% and 15.94%, respectively, for the same period in 2018.

Net income of $32.2 million for the six months ended June 30, 2019 increased $5.2 million, or 19.3%, from $27.0 million for the comparable 2018 period. Basic net income per share was $1.42 for the first six months of 2019, an increase of 19.3% from the $1.19 for the same period of 2018. Net income per share on a diluted basis was $1.40 for the first half of 2019, an increase of 19.7% from the $1.17 for the same period in 2018. See Note 12 for additional information related to net income per share.

Annualized return on average assets and annualized return on average stockholders’ equity were 1.93% and 17.25%, respectively, for the six months ended June 30, 2019, compared with 1.75% and 16.05%, respectively, for the same period in 2018.

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Net Interest Income

The following tables present average balance sheets for the three and six month periods ended June 30, 2019 and 2018 along with the related calculation of tax-equivalent net interest income, net interest margin and net interest spread for the related periods. See the notes following the tables for further explanation.

	Three months ended June 30,
	2019							2018
	Average				Average			Average				Average
(Dollars in thousands)	balances		Interest		rate			balances		Interest		rate
Earning assets:
Federal funds sold and interest bearing due from banks	$	137,130	$	830		2.43	%	$	36,985	$	163		1.77	%
Mortgage loans held for sale		3,794		43		4.55			2,975		44		5.93
Securities available for sale:
Taxable		410,201		2,395		2.34			358,637		1,996		2.23
Tax-exempt		25,190		162		2.58			42,732		288		2.70
FHLB stock		10,590		151		5.72			8,925		109		4.90
Loans, net of unearned income		2,658,036		33,442		5.05			2,523,450		29,489		4.69
Total earning assets		3,244,941		37,023		4.58			2,973,704		32,089		4.33
Less allowance for loan losses		27,190							24,433
		3,217,751							2,949,271
Non-earning assets:
Cash and due from banks		43,955							40,607
Premises and equipment, net		64,238							42,000
Accrued interest receivable and other assets		110,231							100,616
Total assets	$	3,436,175						$	3,132,494
Interest bearing liabilities:
Deposits:
Interest bearing demand deposits	$	843,768	$	1,408		0.67	%	$	792,193	$	839		0.42	%
Savings deposits		169,883		109		0.26			158,561		61		0.15
Money market deposits		689,954		2,079		1.21			657,230		1,206		0.74
Time deposits		409,163		2,056		2.02			238,746		568		0.95
Total interest bearing deposits		2,112,768		5,652		1.07			1,846,730		2,674		0.58
Securities sold under agreements to repurchase		39,969		28		0.28			61,993		33		0.21
Federal funds purchased and other short term borrowings		11,774		64		2.18			88,180		394		1.79
FHLB advances		72,923		424		2.33			48,929		229		1.88
Subordinated debt		1,497		26		6.97			—		—		—
Total interest bearing liabilities		2,238,931		6,194		1.11			2,045,832		3,330		0.65
Non-interest bearing liabilities:
Non-interest bearing demand deposits		754,592							701,642
Accrued interest payable and other liabilities		61,382							43,383
Total liabilities		3,054,905							2,790,857
Stockholders’ equity		381,270							341,637
Total liabilities and stockholder's equity	$	3,436,175						$	3,132,494
Net interest income			$	30,829						$	28,759
Net interest spread						3.47	%						3.68	%
Net interest margin						3.81	%						3.88	%

56

	Six months ended June 30,
	2019							2018
	Average				Average			Average				Average
(Dollars in thousands)	balances		Interest		rate			balances		Interest		rate
Earning assets:
Federal funds sold and interest bearing due from banks	$	129,701	$	1,563		2.43	%	$	53,991	$	431		1.61	%
Mortgage loans held for sale		2,766		80		5.83			2,539		79		6.27
Securities available for sale:
Taxable		410,018		4,806		2.36			365,935		4,024		2.22
Tax-exempt		26,480		337		2.57			43,558		583		2.70
FHLB stock		10,392		308		5.98			8,310		219		5.31
Loans, net of unearned income		2,593,712		65,014		5.05			2,478,305		56,590		4.60
Total earning assets		3,173,069		72,108		4.58			2,952,638		61,926		4.23
Less allowance for loan losses		26,662							24,746
		3,146,407							2,927,892
Non-earning assets:
Cash and due from banks		42,810							40,298
Premises and equipment, net		63,083							41,945
Accrued interest receivable and other assets		101,872							101,672
Total assets	$	3,354,172						$	3,111,807
Interest bearing liabilities:
Deposits:
Interest bearing demand deposits	$	852,347	$	2,811		0.67	%	$	804,810	$	1,462		0.37	%
Savings deposits		163,504		205		0.25			156,594		117		0.15
Money market deposits		683,767		4,054		1.20			671,883		2,159		0.65
Time deposits		381,358		3,648		1.93			236,577		1,013		0.86
Total interest bearing deposits		2,080,976		10,718		1.04			1,869,864		4,751		0.51
Securities sold under agreements to repurchase		38,755		53		0.28			66,609		67		0.20
Federal funds purchased and other short term borrowings		11,602		124		2.16			57,391		483		1.70
FHLB advances		60,512		645		2.15			49,087		464		1.91
Subordinated debt		752		26		6.97			—		—		—
Total interest bearing liabilities		2,192,597		11,566		1.06			2,042,951		5,765		0.57
Non-interest bearing liabilities:
Non-interest bearing demand deposits		724,896							685,873
Accrued interest payable and other liabilities		60,481							43,866
Total liabilities		2,977,974							2,772,690
Stockholders’ equity		376,198							339,117
Total liabilities and stockholder's equity	$	3,354,172						$	3,111,807
Net interest income			$	60,542						$	56,161
Net interest spread						3.52	%						3.66	%
Net interest margin						3.85	%						3.84	%

57

Notes to the average balance and interest rate tables:

● Average balances for loans include the principal balance of non-accrual loans, as well as all loan premiums, discounts, fees and costs, and exclude participation loans accounted for as secured borrowings. Participation loans averaged $10.0 million and $17.1 million, respectively, for the three month periods ended June 30, 2019 and 2018, and $10.2 million and $17.6 million, respectively for the six month periods ended June 30, 2019 and 2018.

● Interest income on a fully tax equivalent basis includes additional amounts of interest income that would have been earned if investments in certain tax-exempt interest earning assets had been made in assets subject to federal taxes yielding the same after-tax income. Interest income on municipal securities and tax-exempt loans has been calculated on a fully tax equivalent basis using a federal income tax rate of 21% for 2019 and 2018. Approximate tax equivalent adjustments to interest income were $55 thousand and $85 thousand, respectively, for the three month periods ended June 30, 2019 and 2018, and $111 thousand and $178 thousand for the respective six month periods ended June 30, 2019 and 2018.

● Interest income includes loan fees of $295 thousand and $297 thousand for the three months ended June 30, 2019, and 2018, respectively, and $776 thousand and $514 thousand for the respective six month periods ended June 30, 2019 and 2018.

● Net interest income, the most significant component of the Bank's earnings represents 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 cost of 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 impacted by both interest rate spread and the level of non-interest bearing sources of funds, primarily consisting of demand deposits and stockholders’ equity.

Net interest spread and net interest margin were 3.47% and 3.81%, respectively, for the second quarter of 2019, and 3.68% and 3.88%, respectively, for the second quarter of 2018. Net interest margin was challenged in the second quarter of 2019 primarily due to the following:

● While the Company has not aggressively pursued deposits since mid-2018, nor has it significantly raised rates, it has become more rate sensitive as deposit balances have migrated from non-interest bearing accounts to interest bearing accounts.

● Asset yields were impacted by the downward trending of the overall rate environment, as fixed rate loan pricing and LIBOR based loans were impacted.

● The second quarter 2018 margin was elevated by prepayment fees collected, with a much lighter impact experienced in the second quarter of 2019.

● The King portfolio mix of earning assets and interest bearing liabilities had a slightly negative impact on margin overall.

Fully taxable equivalent net interest income of $30.8 million for the three months ended June 30, 2019 increased $2.1 million, or 7.2%, from $28.8 million for the same period in 2018. Fully taxable equivalent interest income increased $4.9 million or 15.4% for the second quarter of 2019, as compared with the second quarter of 2018, due primarily to increased average loan balances stemming from loan growth fueled by record loan production and the King acquisition, as well as increased rates earned on loans. Wall Street Journal Prime interest rate was 50 to 75 basis points (“bps”) higher for much of the first half of 2019, as compared with 2018, which benefited short-term loan and investment pricing. Taxable securities, and federal funds sold and interest bearing due from banks average balances also increased in the first half of 2019, as compared with 2018, as a result of Bancorp deploying excess liquidity into short-term investments, which earned higher yields year over year. In total, average earning assets increased $271.2 million or 9.1% to $3.2 billion for the three month period ended June 30, 2019, as compared with the same period in 2018, with the average rate on earnings assets increasing 25 bps to 4.58%. Earning assets resulting from the King acquisition averaged $119.6 million, and yielded 5.28% for the three months ended June 30, 2019.

58

Interest expense increased due primarily to rising deposit costs, growth in interest bearing demand deposits and time deposits, and deposits assumed in the King acquisition. While the Company has not aggressively pursued deposits since mid-2018, nor has it significantly raised rates, deposit balances migrated from non-interest bearing accounts to interest bearing accounts during the period. Average interest bearing liabilities increased $193.0 million, or 9.4%, to $2.2 billion for the three month period ended June 30, 2019, as compared with the same period in 2018. Average interest bearing liabilities resulting from the King acquisition totaled $93.8 million in the second quarter. Growth in average interest bearing deposits was partially offset by declines in securities sold under agreements to repurchase (“SSUARs”). The average cost of interest bearing liabilities increased 46 bps to 1.11% for the second quarter of 2019, as compared with the second quarter of 2018. Bancorp increased rates paid on money market accounts in the first half of 2018 in addition to launching a marketing campaign promoting certificate of deposit accounts. Costs of money market deposit accounts and time deposits increased 47 bps, and 107 bps, respectively, in the second quarter of 2019, as compared with the same period in 2018. The average balance of securities sold under agreements to repurchase (“SSUARs”) decreased $22.0 million, or 35.5%, as customers migrated from lower yielding collateralized products to higher yielding non-collateralized deposits.

Fully taxable equivalent net interest income of $60.5 million for the six months ended June 30, 2019 increased $4.4 million, or 7.8%, from $56.2 million for the same period in 2018. Positive effects of increased average balances on loans, resulting primarily from strong second quarter loan growth coupled with loans added in the King acquisition, and increased balances and rates on other earning assets, were partially offset by the negative effect of increasing rates for all funding sources. Interest earning assets and interest bearing liabilities increased $220.4 million, or 7.5%, and $149.6 million, or 7.3%, respectively, for the six month periods ended June 30, 2019 and June 30, 2018. Net interest spread and net interest margin were 3.52% and 3.85%, respectively, for the first six months of 2019 and 3.66% and 3.84%, respectively, for the first six months of 2018.

Going forward, yield curve inversion could pose a significant challenge if loans were to be originated and repriced at a relatively low five-year portion of the treasury yield curve, while deposits and other funding sources priced or re-priced based upon a higher short end of the curve.

The Federal Reserve Bank (“FRB”) reduced the federal funds rate 25 bps in late July, with the prime lending rate experiencing a corresponding 25 bps decrease. Bancorp’s strategy in response to the rate reduction is to reduce deposit rates in order to fully offset the loss in revenue. Future rate decreases could have a negative impact on net interest margin, as additional reductions in deposit rates may not be sufficient to offset the potential loss in revenue.

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 and interest bearing liabilities. By estimating effects of interest rate fluctuations, the model can 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 or expected results.

59

The June 30, 2019 simulation analysis, which shows minimal interest rate sensitivity, indicates that increases in interest rates of 100 to 200 basis points would have a positive effect on net interest income, and decreases of 100 to 200 basis points in interest rates would have a negative effect on net interest income. The mix of assets and liabilities acquired in the King transaction slightly increased Bancorp’s exposure to falling rates. The overall minimal increase in net interest income in the rising rate scenarios is primarily due to variable rate loans and short-term investments repricing more quickly than deposits and short-term borrowings. Asset balances subject to immediate repricing cause an estimated decline in net interest income in down 100 and 200 basis point rate scenarios, as rates on non-maturity deposits cannot be lowered sufficiently to offset declining interest income. These estimates are summarized below.

	Change in Rates
		-200			-100		+100			+200
	Basis Points			Basis Points			Basis Points			Basis Points
% Change from base net interest income at June 30, 2019		-10.14	%		-1.37	%		3.01	%		6.03	%

Approximately 60% of Bancorp’s loan portfolio has fixed rates with 40% priced at variable rates. Bancorp’s variable rate loans are above their floors and will reprice as rates change.

Undesignated derivative instruments described in Note 17 to Bancorp’s consolidated financial statements are recognized on the consolidated balance sheet at fair value, with changes in fair value recorded in other non-interest income as interest rates fluctuate. 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.

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Provision for Loan and Lease Losses

The provision reflects results of an allowance methodology that is driven by risk ratings, historical losses, specific loan loss allocations, and qualitative factors. Bancorp recorded provision of $0 and $600 thousand for the three and six month periods ended June 30, 2019, respectively, as compared with $1.2 million and $2.0 million for the same periods in 2018. The provision represents a charge to earnings necessary to maintain an allowance that, in management’s evaluation, is adequate to provide coverage for the inherent losses on outstanding loans. The provision reflects many factors including trends in the portfolio, as well as changes in quantitative and qualitative factors. Continued strong credit metrics and net recoveries of $282 thousand for the first six months of 2019 resulted in an allowance to total loans of 0.96% as of June 30, 2019, compared with 0.96% as of June 30, 2018. In management’s opinion, the allowance remained adequate to cover potential losses within the portfolio.

Key indicators of loan quality remained consistent with the prior year with the exception of increased classified balances, defined as other assets especially mentioned (“OAEM”), substandard, and non-performing loans, which increased $23.4 million during the first half of 2019, as compared with December 31, 2018. The increase was concentrated in OAEM loans, as two commercial relationships, which were well-secured, moved from the Watch category into OAEM. Consistent with Bancorp’s methodology, the historical look-back period was extended from 32 to 36 quarters in the first quarter of 2019 to all classes and segments of the portfolio. Management believes the expansion of the look-back period more accurately represents the current level of risk in the loan portfolio, and captures the effects of a full economic cycle. Based on the look-back period extension, the allowance level increased approximately $2.0 million for 2019. Additional information regarding Bancorp’s methodology for evaluating the adequacy of the allowance can be read in the Company’s Annual Report on Form 10-K.

Non-performing loans, consisting of TDRs, non-accrual loans, and loans over 90 days past due still accruing, increased to $3.9 million at June 30, 2019 from $3.4 million at December 31, 2018, while decreasing $3.5 million from $7.4 million at June 30, 2018. Bancorp considers the present asset quality metrics to be exceptional; however, recognizing the cyclical nature of the lending business, this trend is expected to normalize over the long term.

Bancorp’s loan portfolio is diversified with no significant concentrations of credit. Geographically, most loans are extended to borrowers in the metropolitan areas of Louisville, Indianapolis and Cincinnati. The adequacy of the allowance is monitored on an ongoing basis and it is the opinion of management that the balance of the allowance at June 30, 2019 is adequate to absorb probable losses inherent in the loan portfolio as of the financial statement date.

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An analysis of the changes in the allowance and selected ratios follows:

(Dollars in thousands)	Three months ended June 30,						Six months ended June 30,
	2019			2018			2019			2018
Balance at the beginning of the period	$	26,464		$	24,203		$	25,534		$	24,885
Provision		—			1,235			600			1,970
Total charge-offs		161			647			260			2,175
Total recoveries		(113	)		(82	)		(542	)		(193	)
Total net loan charge-offs (recoveries)		48			565			(282	)		1,982
Balance at the end of the period	$	26,416		$	24,873		$	26,416		$	24,873
Average loans, net of unearned income	$	2,658,036		$	2,523,450		$	2,593,712		$	2,478,305
Provision to average loans (1)		0.00	%		0.05	%		0.02	%		0.08	%
Net loan charge-offs (recoveries) to average loans (1)		0.00	%		0.02	%		(0.01	)%		0.08	%
Allowance to average loans		0.99	%		0.99	%		1.02	%		1.00	%
Allowance to total loans		0.96	%		0.96	%		0.96	%		0.96	%

(1) Amounts not annualized

Loans are charged off when deemed uncollectible and a loss is identified or after underlying collateral has been liquidated; however, collection efforts may continue and future recoveries may occur. Periodically, loans are partially charged off to net realizable value based upon collateral analysis and collection status. One significant commercial and industrial loan relationship totaling $1.3 million was charged off to its net realizable value in the first quarter of 2018, which resulted in increased net charge offs for the six month period ending June 30, 2018. The increase in the allowance in the second quarter of 2019 as compared with the same period in 2018 was mainly due to qualitative considerations and net recoveries of $282 thousand.

An analysis of net charge-offs (recoveries) by loan portfolio segment follows:

	Three months						Six months
(In thousands)	ended June 30,						ended June 30,
	2019			2018			2019			2018
Commercial and industrial	$	(4	)	$	528		$	(103	)	$	1,927
Construction and development, excluding undeveloped land		—			—			(203	)		—
Undeveloped land		—			—			—			—
Real estate mortgage - commercial investment		(1	)		—			(1	)		(2	)
Real estate mortgage - owner occupied commercial		—			—			(20	)		—
Real estate mortgage - 1-4 family residential		(17	)		—			(17	)		—
Home equity		(1	)		(2	)		(1	)		(4	)
Consumer		71			39			63			61
Total net loan charge-offs (recoveries)	$	48		$	565		$	(282	)	$	1,982

62

Non-interest Income and Non-interest Expenses

	Three months ended June 30,										Six months ended June 30,
(Dollars in thousands)	2019		2018		$ Change			% Change			2019		2018		$ Change			% Change
Non-interest income:
Wealth management and trust services	$	5,662	$	5,344	$	318			6.0	%	$	11,101	$	10,844	$	257			2.4	%
Deposit service charges		1,336		1,447		(111	)		(7.7	)		2,583		2,858		(275	)		(9.6	)
Debit and credit card income		2,168		1,689		479			28.4			3,912		3,197		715			22.4
Treasury management fees		1,202		1,113		89			8.0			2,359		2,160		199			9.2
Mortgage banking income		796		746		50			6.7			1,278		1,322		(44	)		(3.3	)
Net investment product sales commissions and fees		364		397		(33	)		(8.3	)		720		801		(81	)		(10.1	)
Bank owned life insurance		184		191		(7	)		(3.7	)		362		378		(16	)		(4.2	)
Other		551		508		43			8.5			1,010		784		226			28.8
Total non-interest income	$	12,263	$	11,435	$	828			7.2	%	$	23,325	$	22,344	$	981			4.4	%
Non-interest expenses:
Compensation	$	12,715	$	11,703	$	1,012			8.6	%	$	24,516	$	22,673	$	1,843			8.1	%
Employee benefits		2,908		2,512		396			15.8			5,550		5,145		405			7.9
Net occupancy and equipment		1,976		1,811		165			9.1			3,834		3,629		205			5.6
Technology and communication		1,848		1,685		163			9.7			3,621		3,315		306			9.2
Debit and credit card processing		631		579		52			9.0			1,218		1,145		73			6.4
Marketing and business development		903		805		98			12.2			1,528		1,451		77			5.3
Postage, printing, and supplies		410		400		10			2.5			816		791		25			3.2
Legal and professional		1,523		504		1,019			202.2			2,057		997		1,060			106.3
FDIC insurance		248		238		10			4.2			486		480		6			1.3
Amortization/impairment of investment in tax credit partnerships		52		58		(6	)		(10.3	)		104		58		46			79.3
Capital and deposit based taxes		967		862		105			12.2			1,871		1,714		157			9.2
Other		1,283		979		304			31.1			2,502		1,765		737			41.8
Total non-interest expenses	$	25,464	$	22,136	$	3,328			15.0	%	$	48,103	$	43,163	$	4,940			11.4	%

Non-interest income – WM&T

The largest component of non-interest income is WM&T revenue. The magnitude of WM&T revenue distinguishes Bancorp from other community banks of similar asset size. Trust assets under management totaled $3.07 billion at June 30, 2019, a 7.6% increase compared with $2.85 billion at June 30, 2018, and a 11.0% increase from $2.76 billion at December 31, 2018. AUM are stated at market value. WM&T revenue, which represents approximately 46.2% of non-interest income, increased $318 thousand, or 6.0%, and $257 thousand, or 2.4%, respectively, for the three and six month periods ended June 30, 2019, as compared with the same periods in 2018 consistent with increased new business generation and strong market performance for the quarter.

Recurring fees earned for managing accounts are based on a percentage of market value of AUM and are typically assessed on a monthly basis. Recurring fees, which generally comprise over 97% of the WM&T revenue, increased $225 thousand, or 4.3% and $142 thousand or 1.3%, respectively, for the three and six month periods ended June 30, 2019, as compared with the same periods in 2018. Some revenues of the WM&T department, most notably executor, insurance, and some employee benefit plan-related fees, are non-recurring in nature and the timing of these revenues corresponds with the related administrative activities, and is also based on the market value of AUM. Total non-recurring fees increased $93 thousand or 103.3% and $115 thousand or 59.5% for the respective three and six month periods ended June 30, 2019, as compared with the same time periods of 2018. Contracts between WM&T and their clients do not permit performance based fees and accordingly, none of the fees earned by WM&T are performance based. Management believes the WM&T department will continue to factor significantly in Bancorp’s financial results and provide strategic diversity to revenue streams.

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Trust Assets Under Management by Account Type
	June 30, 2019				June 30, 2018
(In thousands)	Managed		Non- managed (1)		Managed		Non- managed (1)
Investment advisory accounts	$	1,263,348	$	20,251	$	1,118,499	$	18,121
Personal trust accounts		562,655		89,794		561,701		80,723
Personal individual retirement acounts		394,429		2,632		360,046		1,802
Corporate retirement accounts		48,073		397,708		49,548		394,067
Foundation and endowment accounts		216,789		1,247		196,268		-
Total accounts	$	2,485,294	$	511,632	$	2,286,062	$	494,713
Custody and safekeeping accounts		—		71,402		—		70,875
	$	2,485,294	$	583,034	$	2,286,062	$	565,588
Total managed and non-managed assets	$	3,068,328			$	2,851,650

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

The table above provides information regarding AUM by WM&T. This table demonstrates that as of June 30, 2019:

•     Approximately 81% of AUM 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 managed assets are in investment advisory, personal trust, and agency accounts.

	June 30,
(In thousands)	2019		2018
Interest bearing deposits	$	129,561	$	95,387
US Treasury and government agency obligations		56,083		47,574
State, county and municipal obligations		134,268		140,372
Money market mutual funds		4,461		7,670
Equity mutual funds		603,308		580,199
Other mutual funds - fixed, balanced, and municipal		307,068		302,400
Other notes and bonds		175,014		142,123
Common and preferred stocks		949,410		844,004
Real estate mortgages		342		361
Real estate		50,001		51,124
Other miscellaneous assets (1)		75,778		74,848
Total managed assets	$	2,485,294	$	2,286,062

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

64

The table above presents data regarding WM&T managed assets by class of investment. Managed assets are invested in instruments for which market values can be readily determined, the majority of which are sensitive to market fluctuations. This table demonstrates that as of June 30, 2019:

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

• WM&T has no proprietary mutual funds.

Fiduciary and Related Trust Services Income
	Three months ended June 30,				Six months ended June 30,
(In thousands)	2019		2018		2019		2018
Investment advisory accounts	$	2,246	$	2,070	$	4,377	$	4,149
Personal trust accounts		1,894		1,864		3,698		3,782
Personal individual retirement accounts		931		869		1,821		1,742
Corporate retirement accounts		316		361		643		740
Foundation and endowment accounts		140		134		273		285
Custody and safekeeping accounts		30		30		61		86
Brokerage and insurance services		13		7		38		30
Other		92		9		190		30
Total WM&T services	$	5,662	$	5,344	$	11,101	$	10,844

The table above provides information regarding fee income earned by Bancorp’s WM&T department. 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 is tailored based on account type and other factors. For example, fee structures are in place for investment management, irrevocable trusts, revocable trusts, individual retirement accounts (“IRAs”), and accounts holding only fixed income securities. There are also fee structures for estate settlements, which are non-recurring, and retirement plan services which typically consist of a one-time conversion fee with recurring AUM fees to follow. All fees are based on the market value of each account and are tiered based on account size, with larger relationships paying a lower percentage of AUM in fees. Fees are agreed upon at the time the account is opened and these and any subsequent revisions are communicated in writing to the customer. Fees earned are not performance based nor are they based on investment strategy or transactions.

Additional sources of non-interest income

Deposit service charges decreased $111 thousand, or 7.7%, and $275 thousand, or 9.6%, respectively, for the three and six month periods ended June 30, 2019, as compared with the same periods in 2018. Service charge income is driven by transaction volume, which can fluctuate from period to period. Both the quarterly and year-to-date decreases are consistent with the decline in fees earned on overdrawn checking accounts. While management expects this source of revenue to slowly decline due to anticipated changes in customer behavior, including reduced check volume, and ongoing regulatory restrictions, the decline is anticipated to be less significant than what was experienced in the first half of 2019.

Debit and credit card revenue increased $479 thousand, or 28.4%, and $715 thousand, or 22.4%, for the respective three and six month periods ended June 30, 2019, as compared with the same periods in 2018. The increases in both the three and six month comparisons reflected increased volume resulting from continued growth in the customer base. Volume, which is dependent on customer behavior and new accounts, is expected to continue to increase. Credit card interchange income increased $184 thousand, or 52.17%, and debit card interchange and ancillary fees increased $295 thousand or 22.0%, in the second quarter of 2019, as compared with the same period in 2018. Second quarter 2019 debit card revenue included a non-recurring fee of $176 thousand from its card processor for reaching activity incentive thresholds. For the first six months of 2019, credit card interchange income increased $328 thousand, or 48.8%, and debit card interchange and ancillary fees increased $387 thousand or 15.3%, as compared with the same period in 2018.

Treasury management fees primarily consists of fees earned for cash management services provided to commercial customers. This category has been a growing source of revenue for Bancorp including increases in the second quarter of 2019 of $89 thousand or 8.0%, and $199 thousand, or 9.2%, for the first six months of 2019, as compared with the same periods in 2018. Bancorp continues to expect growth in this income category in 2019 based upon an expanding customer base, as more existing customers take advantage of these services.

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Mortgage banking income primarily includes gains on sales of mortgage loans. Bancorp’s mortgage banking department originates residential mortgage loans to be sold in the secondary market, primarily to the Federal National Mortgage Association (“FNMA”). Interest rates on the loans sold to FNMA are locked with the borrower and investor prior to closing the loans, thus Bancorp bears no interest rate risk related to loans sold. The department offers conventional, Veterans Administration (“VA”) and Federal Housing Authority (“FHA”) financing, for purchases and refinances, as well as programs for first-time home buyers. Interest rates on mortgage loans directly impact the volume of business transacted by the mortgage banking department. Mortgage banking revenue increased $50 thousand, or 6.7%, while decreasing $44 thousand, or 3.3%, for the respective three and six month periods ended June 30, 2019, as compared with the same periods in 2018. Transaction volume increased in the second quarter of 2019, as declining mortgage rates resulted in increased refinancing activity. Bancorp anticipates refinancing activity to continue to increase into the third quarter provided mortgage rates continue to decline.

Net investment product sales commissions and fees decreased $33 thousand, or 8.3%, and $81 thousand, or 10.1%, respectively, for the quarterly and six month periods ended June 30, 2019, as compared with the same periods in 2018. The decreases correspond primarily to overall brokerage volume, as market volatility has somewhat discouraged investment activity in 2019. 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”) assets represent the cash surrender value of life insurance policies on certain key employees who have provided consent for Bancorp to be the beneficiary of a portion of such policies. The related change in cash surrender value and any death benefits received under the policies are recorded as non-interest income. This income serves to offset the cost of various employee benefits. Income related to BOLI decreased $7 thousand, or 3.7%, and $16 thousand, or 4.2%, respectively, for the three and six month periods ended June 30, 2019 as compared with the same time periods in 2018, as a result of lower crediting rates on investments.

Other non-interest income increased $43 thousand, or 8.5%, for the second quarter of 2019, as compared with the same period in 2018, and $226 thousand, or 28.8%, for the first six months of 2019, as compared with the same period in 2018. In the first quarter of 2019 Bancorp recognized income of $126 thousand related to incentive received to relocate a banking center location and recorded income of $130 thousand in the second quarter of 2019 related to a historic tax-credit investment tax distribution. The impact of King on non-interest income has been and is expected to continue to be nominal in 2019.

Non-interest expenses

Compensation, which includes salaries, incentives, bonuses, and stock based compensation, increased $1.0 million, or 8.6%, and $1.8 million, or 8.1%, respectively, for the quarterly and six-month periods ended June 30, 2019, as compared with the same periods in 2018. Non-recurring severance and employee retention expenses resulting from the King acquisition totaled $437 thousand for the three and six month periods ended June 30, 2019. Personnel additions related to Bancorp’s growth, including the King acquisition drove the remainder of the increase. At June 30, 2019, Bancorp had 615 full-time equivalent employees including 28 employees added from the King acquisition, as compared with 581 at June 30, 2018.

Employee benefits consists of all personnel related expense not included in compensation, with the most significant items being health insurance, payroll taxes, and retirement plan contributions. Employee benefits increased $396 thousand, or 15.8%, and $405 thousand, or 7.9%, respectively for the three and six month periods ended June 30, 2019, as compared with the same periods in 2018. Increased 401K match contributions, higher health insurance claims paid by the Company, and higher employee recruiting costs resulted in the increases. King acquisition related one-time employee benefit expenses totaled $57 thousand for the three and six month periods ended June 30, 2019.

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Net occupancy and equipment expense increased $165 thousand, or 9.1%, and $205 thousand, or 5.6%, respectively, for the three and six month periods ended June 30, 2019, as compared with the same periods in 2018. Bancorp added five branch locations in the King acquisition, which impacted this category beginning in May 2019, adding $80 thousand of additional expense for the three and six month periods ended June 30, 2019. Bancorp expect to divest of three acquired branch locations in Louisville during the third quarter of 2019 due to their proximity to existing Bancorp branches. This category primarily includes rent, depreciation, and maintenance, variances for which were not individually significant. Costs of capital asset additions flow through the statement of income over the lives of the assets in the form of depreciation expense.

Technology and communications expense increased $163 thousand, or 9.7%, and $306, or 9.2%, respectively, for the three and six month periods ended June 30, 2019, as compared with the same periods in 2018 due largely to increases in computer infrastructure upgrades 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 customer delivery channels, information security, and internal resources. King related one-time technology and communication expenses totaled $104 thousand for the three and six month periods ended June 30, 2019.    

Bancorp outsources processing for debit and credit card operations, which generate significant revenue for the Company. These expenses increase as transaction volume increases, offsetting a portion of corresponding revenue growth. Debit and credit card processing expense increased $52 thousand, or 9.0%, and $73 thousand, or 6.4%, for the three month and six month periods ended June 30, 2019, respectively, as compared with the same periods in 2018, as a result of a growing customer base and increased transaction volume.

Marketing and business development expenses include all costs associated with promoting Bancorp, community investment, retaining customers, and acquiring new business. Marketing and business development expenses increased $98 thousand, or 12.2%, in the second quarter of 2019, as compared with the second quarter of 2018. Marketing and business development expenses increased $77 thousand, or 5.3%, for the six months ended June 30, 2019. The 2019 increases were largely due to increased community support expenses, which can fluctuate between periods due to the nature and timing of the expense, but is expected to trend to historical annual levels over the remainder of 2019.

Postage, printing and supplies expenses increased $10 thousand, or 2.5%, and $25 thousand, or 3.2%, in the respective three and six month periods ended June 30, 2019, as compared with the same time periods in 2018, primarily due to the King acquisition.

Legal and professional fees increased $1.0 million to $1.5 million for the second quarter of 2019 from $504 thousand in the second quarter of 2018. Legal and professional fees increased $1.1 million to $2.1 million for the first half of 2019 from $997 thousand for the first six months of 2018. One-time costs associated with the King acquisition totaled nearly $900 thousand for the three and six month periods ended June 30, 2019. Additional costs associated with consulting engagements also contributed to the period increases.

FDIC insurance expense was flat quarter over quarter and year over year. The assessment is calculated by the FDIC, and any fluctuation in expense is directly related to changes in Bancorp’s balance sheet.

Amortization/impairment of investments in tax credit partnerships was flat in the second quarter of 2019 as compared with the second quarter of 2018, while increasing slightly year-to-date as compared with the same time period in 2018. Bancorp did not record any expense in the first quarter of 2018. Tax credit partnerships generate federal income tax credits, and for each of Bancorp’s investments in tax credit partnerships, the tax benefit compared with related expenses results in a positive effect on net income. Amounts of credits and corresponding expenses can vary widely depending upon timing and magnitude of the investments. See the Income Taxes section below for details on amortization and income tax impact for these credits.

Other non-interest expenses increased $304 thousand, or 31.1%, and $737 thousand, or 41.8%, respectively, for the three and six month periods ended June 30, 2019, as compared with the same periods in 2018. The quarterly and year-to-date increases were primarily attributed to the following:

● Quarterly

o Director compensation increased $88 thousand.

o Rewards expense tied to Bancorp’s growing credit card program increased $87 thousand.

o Core deposit intangible amortization increased $30 thousand as a result of the King acquisition

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● Year-to-date

o Director compensation increased $221 thousand.

o Rewards expense tied to Bancorp’s growing credit card program increased $140 thousand.

o Expense related to bad debt collection increased $80 thousand.

o Fraud related losses increased $76 thousand

o Gain on sales of other real estate decreased $45 thousand

o Core deposit intangible amortization increased $28 thousand as a result of the King acquisition.

Income Taxes

Bancorp recorded income tax expense of $1.0 million and $2.9 million, respectively, for the three and six month periods ended June 30, 2019, compared with $3.2 million and $6.2 million for the same periods in 2018.  The effective rate for the corresponding three and six month periods in 2019 were 5.9% and 8.2%, respectively, and 18.9% and 18.7%, respectively, for 2018  The decrease in the effective tax rate from 2018 to 2019 related primarily to two Kentucky state tax law changes. 

In March 2019, Kentucky State legislation was enacted requiring financial institutions to transition from a bank franchise tax to the Kentucky corporate income tax beginning in 2021.  In April 2019,  an additional Kentucky tax law change was enacted allowing banks and their holding companies to be combined together for Kentucky tax return filings also beginning in 2021.  The combined filing will allow Bancorp’s Holding Company net operating losses to offset against net revenue generated by the Bank and reduce Bancorp’s tax liability. Bancorp recorded significant tax benefits associated with these changes in the first and second quarters of 2019.  During the first six months of 2019, Bancorp recognized a state deferred tax asset and corresponding state income tax benefit of $3.8 million, or approximately $0.16 per diluted share. See the income taxes footnote for more detail.

Commitments

As detailed in the Commitments footnote, 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.

Other commitments discussed in Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2018, have not materially changed since that report was filed, relative to qualitative and quantitative disclosures of fixed and determinable contractual obligations.

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Financial Condition

Balance Sheet

Total assets increased $160.9 million to $3.5 billion as of June 30, 2019, from $3.3 million at December 31, 2018. Bancorp acquired assets totaling approximately $192 million on May 1, 2019 in connection with the King acquisition. In the first six months of 2019 increases in loans, premises and equipment, and other assets were offset by decreases in cash and cash equivalents, and available for sale securities. Gross loans increased $215.7 million, or 8.5%, including $160.5 million in loans acquired from King. Strong loan production in the second quarter and first six months of 2019 contributed to non-acquisition, or legacy, loan growth of $51.6 million or 2.0% for the six months ended June 30, 2019. Cash and cash equivalents decreased $82.9 million or 41.7%, as excess liquidity was used to fund loan growth and the King acquisition.  Securities available for sale decreased $13.4 million, or 3.1%, over the first six months of 2019, as maturing security cash flows were not reinvested but held in the form of short-term liquidity.  This decline was offset somewhat by market value improvement in the portfolio with net unrealized gains at June 30, 2019 of $1.7 million as compared with net unrealized losses of $6.7 million at December 31, 2018. Premises and equipment increased $20.3 million or 45.4%, primarily the result establishing a right of use lease asset upon adopting ASU 2016-02, Leases in the first quarter of 2019 and the addition of five King branches. Other assets increased $17.3 million or 36.8% as of June 30, 2019, as compared with December 31, 2018 due primarily to the recognition of $12.1 million in goodwill related to the King acquisition.

Total liabilities increased $138.0 million or 4.7% to $3.1 billion as of June 30, 2019, from $2.9 billion as of December 31, 2018. Liabilities assumed in the King acquisition totaled $176.6 million. Total deposits increased $89.1 million, or 3.2%, as $125.5 million in deposits assumed from the King transaction offset expected seasonal decreases in Bancorp’s non-interest bearing deposits, and interest bearing demand deposit accounts.  For the six month period ending June 30, 2019, non-interest bearing demand deposits increased $66.6 million, or 9.4%, while interest bearing deposits increased $22.5 million, or 1.1%. Securities sold under agreements to repurchase (“SSUAR”) decreased $2.3 million, or 6.3%, due to normal cyclical activity, and the continuation of customers migrating to higher-yielding, non-collateralized deposits. Federal funds purchased increased $1.8 million, or 17.2%, period to period, as Bancorp uses short-term lines of credit to manage its overall liquidity position. Federal Home Loan Bank (“FHLB”) advances increased $36.1 million, or 74.9%, as Bancorp retained the fixed rate long term advances that were held at King in connection with overall balance sheet funding. Other liabilities increased $13.1 million, or 28.0%, largely due to the adoption of ASU 2016-02, Leases, in the first quarter of 2019.

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Loan Portfolio Composition

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

(In thousands)	June 30, 2019		December 31, 2018
Commercial and industrial	$	860,085	$	833,524
Construction and development, excluding undeveloped land(1)		222,632		225,050
Undeveloped land		35,169		30,092
Real estate mortgage:
Commercial investment		696,421		588,610
Owner occupied commercial		452,719		426,373
1-4 family residential		338,957		276,017
Home equity - first lien		46,012		49,500
Home equity - junior lien		67,948		70,947
Subtotal: Real estate mortgage		1,602,057		1,411,447
Consumer		43,937		48,058
Total loans(2)	$	2,763,880	$	2,548,171

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

(2) Unaccreted discounts include accretable and non-accretable discounts and primarily relate to Bancorp's TBOC and King acquisitions in 2012,and 2019, respectively.

Bancorp occasionally enters into loan participation agreements with other banks to diversify credit risk.  For certain participation loans sold, Bancorp has retained effective control of the loans, typically by restricting the participating institutions from pledging or selling their ownership share of the loan without permission from Bancorp.  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 portfolio segments with a corresponding liability recorded in other liabilities.  At June 30, 2019 and December 31, 2018, the total participated portions of loans of this nature were $9.9 million and $10.5 million, respectively.

Allowance for Loan and Lease Losses

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

The allowance methodology is driven by risk ratings, historical losses, and qualitative factors. The level of the June 30, 2019 allowance reflected a number of factors, including credit quality metrics which were generally consistent with those experienced in the preceding 12 months, and expansion of the historical look-back period from 32 quarters to 36 quarters. This expansion of the historical period was applied to all classes and segments of the portfolio. Expansion of the look-back period for historical loss rates used in the quantitative allocation caused review of the overall methodology for qualitative factors to ensure we were appropriately capturing risk not addressed in the quantitative historical loss rate. Management believes extension of the look-back period is appropriate to ensure capture of the impact of a full economic cycle and more accurately represents the current level of risk inherent in the loan portfolio. Key indicators of loan quality continued to trend at levels consistent with prior periods, however management recognizes that due to the cyclical nature of the lending business, these trends will likely normalize over the long term. Additional information regarding Bancorp’s methodology for evaluating the adequacy of the allowance can be read in Bancorp’s Annual Report on Form 10-K.

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As of June 30, 2019 the allowance was $26.4 million, a $882 thousand increase from the December 31, 2018 balance of $25.5 million.  For the comparative periods, the allowance as a percent of year-to-date average loans was 1.02% and 1.01%, respectively.  The allowance as a percent of period end loans, as of each period end, 0.96% and 1.00%, respectively. The allowance balance is reflective of continued strong credit metrics and net recoveries of $282 thousand for the first six months of 2019.  As of June 30, 2019, and December 31, 2018, the allowance remained adequate to cover potential losses in the loan portfolio, in management’s opinion.

Non-performing Loans and Assets

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

(Dollars in thousands)	June 30, 2019			December 31, 2018
Non-accrual loans(1)	$	3,030		$	2,611
Troubled debt restructurings		37			42
Loans past due 90 days or more and still accruing		861			745
Total non-performing loans		3,928			3,398
Other real estate owned		563			1,018
Total non-performing assets	$	4,491		$	4,416
Non-performing loans as a percentage of total loans		0.14	%		0.13	%
Non-performing assets as a percentage of total assets		0.13	%		0.13	%

(1) No TDRs previously accruing were transferred to non-accrual during the three and six month periods ending June 30, 2019. No TDRs were on non-accrual as of June 30, 2019 or December 31, 2018.

In total, non-performing assets as of June 30, 2019 were comprised of 26 loans, ranging in amount from $1 thousand to $528 thousand, two accruing TDRs, and foreclosed real estate held for sale. Foreclosed real estate held at June 30, 2019 included a 1-4 family residential property and a commercial real estate property.

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

(In thousands)	June 30, 2019		December 31, 2018
Commercial and industrial	$	96	$	192
Construction and development, excluding undeveloped land		—		318
Undeveloped land		—		474
Real estate mortgage
Commercial investment		305		138
Owner occupied commercial		1,444		586
1-4 family residential		715		760
Home equity - first lien		—		—
Home equity - junior lien		470		143
Subtotal: Real estate mortgage		2,934		1,627
Consumer		—		—
Total non-accrual loans	$	3,030	$	2,611

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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 supply of such 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 due from accounts with banks.  Federal funds sold and interest bearing due from bank accounts totaled $64.8 million at June 30, 2019. These investments normally have overnight maturities and are used for general daily liquidity purposes.

Available for sale securities totaled $423.6 million, at June 30, 2019, with $132.1 million in securities expected to mature over the next 12 months.  Combined with federal funds sold and interest bearing due from bank accounts, these offer substantial resources to meet either new loan demand or reductions in Bancorp’s deposit funding base. Bancorp pledges portions of the securities portfolio to secure public fund deposits, cash balances of certain WM&T accounts, and SSUAR. At June 30, 2019, total investment securities pledged for these purposes comprised 79.4% of the available for sale investment portfolio, leaving approximately $87.1 million of unpledged securities.

Bancorp has a significant base of non-maturity customer deposits, defined as demand, savings, money market deposit accounts and time deposits less than or equal to $250,000 (excluding brokered deposits). At June 30, 2019, such deposits totaled $2.8 billion and represented 96.5% of Bancorp’s total deposits, as compared with $2.7 billion, or 97.0% of total deposits at December 31, 2018.  Because these deposits are less volatile and are often tied to other products of Bancorp through long lasting relationships they do not put significant pressure on liquidity.  As market conditions continue to improve, these balances may decrease, placing pressure on Bancorp’s liquidity position.  Bancorp began adding liquidity to the balance sheet in 2018 sheet through targeted certificate of deposit marketing campaigns.  The campaigns generated over $100 million in certificate of deposit growth in 2018. 

As of June 30, 2019, and December 31, 2018, Bancorp had brokered deposits of $29.8 million.

Included in total deposit balances at June 30, 2019 is $157.4 million of public funds deposits generally comprised of accounts from local government agencies and public school districts in the markets Bancorp operates within. As a result of property tax collections in the latter part of each year these accounts provide seasonal excess balances that originate with tax payments and decline leading into the subsequent tax season.  While this excess liquidity is maintained in low-yielding short-term investments and consequently negatively impacts net interest margin, it has a positive impact on net interest income.

Other sources of funds available to meet daily needs include the sales of SSUAR.  As a member of the FHLB of Cincinnati, Bancorp has access to credit products offered by the FHLB.  Bancorp views these borrowings as a low cost alternative to brokered deposits.  At June 30, 2019, available credit from the FHLB totaled $484.0 million, as compared with $537.0 million as of December 31, 2018.  Additionally, Bancorp had available federal funds purchased lines with correspondent banks totaling $105.0 million at both June 30, 2019, and December 31, 2018.  

Bancorp’s principal source of cash is dividends paid to it as sole shareholder of the Bank.  At June 30, 2019, the Bank could pay up to $49.7 million in dividends to Bancorp without regulatory approval subject to the ongoing capital requirements of the Bank.  The Bank paid the Holding Company a $28 million dividend in April, 2019, to consummate the acquisition of King and this did not significantly hamper the Bank’s ability to pay future dividends.

Capital Resources

At June 30, 2019, stockholders’ equity totaled $389.4 million, an increase of $22.9 million, or 6.2%, since December 31, 2018.  See the Consolidated Statement of Changes in Stockholders’ Equity for further detail of changes in equity since 2018.  One component of equity is accumulated other comprehensive income (loss) which, for Bancorp, consists of net unrealized gains or losses on securities available for sale and hedging instruments, as well as a minimum pension liability, each net of income taxes. Accumulated other comprehensive income was $1.1 million at June 30, 2019 compared with a loss of $5.1 million on December 31, 2018. The fluctuation in other comprehensive income is reflective of the changing interest rate environment during 2019 and corresponding impact upon the valuation of Bancorp’s available for sale securities portfolio.

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The following table sets forth Bancorp’s and the Bank’s risk based capital ratios:

	June 30,			December 31,
	2019			2018
Total risk-based capital(1)
Consolidated		12.67	%		13.91	%
Bank		12.45			13.56
Common equity tier 1 risk-based capital(1)
Consolidated		11.82			13.00
Bank		11.60			12.65
Tier 1 risk-based capital(1)
Consolidated		11.82			13.00
Bank		11.60			12.65
Leverage(2)
Consolidated		10.91			11.33
Bank		10.70			11.02

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

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

Bancorp and the Bank are subject to capital regulations in accordance with Basel III, as administered by banking regulators.  Regulatory agencies measure capital adequacy within a framework that makes capital requirements, in part, dependent on the individual risk profiles of financial institutions. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on Bancorp’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Holding Company and the Bank must meet specific capital guidelines that involve quantitative measures of Bancorp’s assets, liabilities and certain off-balance sheet items, as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators regarding components, risk weightings and other factors.

Banking regulators have categorized the Bank as well-capitalized. For prompt corrective action, the regulations in accordance with Basel III define “well capitalized” as a 6.5% common equity tier 1 risk-based capital ratio, an 8.0% tier 1 risk-based capital ratio, a 10.0% total risk-based capital ratio and a 5.0% leverage ratio. Additionally, in order to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, Bancorp and Bank must hold a capital conservation buffer composed of common equity tier 1 risk-based capital above their minimum risk-based capital requirements. The capital conservation buffer phased in from 2016 to 2019 on the following schedule: 0.625% effective January 1, 2016; 1.25% effective January 1, 2017; 1.875% effective January 1, 2018; and a fully phased in capital conservation buffer of 2.5% on January 1, 2019.

Bancorp continues to exceed the regulatory requirements for total risk-based capital, common equity tier I risk-based capital, tier I risk-based capital and leverage capital. Bancorp and the Bank intend to maintain a capital position that meets or exceeds the “well-capitalized” requirements as defined by the FRB and the FDIC, in addition to the capital conservation buffer.

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Non-GAAP Financial Measures

The following table provides a reconciliation of total stockholders’ equity in accordance with GAAP to tangible stockholders’ equity, a non-GAAP disclosure. Bancorp provides the tangible book value per share, a non-GAAP measure, in addition to those defined by banking regulators, because of its widespread use by investors as a means to evaluate capital adequacy.

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

(In thousands, except per share data)	June 30, 2019			December 31, 2018
Total stockholders' equity - GAAP	$	389,365		$	366,500
Less: Goodwill		(12,826	)		(682	)
Less: Core deposit intangible		(2,461	)		(1,057	)
Tangible common equity - Non-GAAP	$	374,078		$	364,761
Total assets - GAAP	$	3,463,823		$	3,302,924
Less: Goodwill		(12,826	)		(682	)
Less: Core deposit intangible		(2,461	)		(1,057	)
Tangible assets - Non-GAAP	$	3,448,536		$	3,301,185
Total stockholders' equity to total assets - GAAP		11.24	%		11.10	%
Tangible common equity to tangible assets - Non-GAAP		10.85			11.05
Total shares outstanding		22,721			22,749
Book value per share - GAAP	$	17.14		$	16.11
Tangible common equity per share - Non-GAAP		16.46			16.03

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 GAAP:

	Three months ended						Six months ended
	June 30,						June 30,
(Dollars in thousands)	2019			2018			2019			2018
Non-interest expenses	$	25,464		$	22,136		$	48,103		$	43,163
Net interest income (tax-equivalent)		30,829			28,759			60,542			56,161
Non-interest income		12,263			11,435			23,325			22,344
Total revenue	$	43,092		$	40,194		$	83,867		$	78,505
Efficiency ratio - GAAP		59.09	%		55.07	%		57.36	%		54.98	%

	Three months ended						Six months ended
	June 30,						June 30,
	2019			2018			2019			2018
Non-interest expenses	$	25,464		$	22,136		$	48,103		$	43,163
Less: amortization of investments in tax credit partnerships		(52	)		(58	)		(104	)		(58	)
Adjusted non-interest expense		25,412			22,078			47,999			43,105
Net interest income (tax-equivalent)		30,829			28,759			60,542			56,161
Non-interest income		12,263			11,435			23,325			22,344
Total revenue	$	43,092		$	40,194		$	83,867		$	78,505
Adjusted efficiency ratio - Non-GAAP		58.97	%		54.93	%		57.23	%		54.91	%

Item 3.      Quantitative and Qualitative Disclosures about Market Risk.

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

Item 4.      Controls and Procedures.

As of the end of the period covered by this report, an evaluation was carried out by Stock Yards Bancorp, Inc.’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective as of the end of the period covered by this report. In addition, no change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) occurred during the fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

75

PART II – OTHER INFORMATION

Item 1.      Legal Proceedings.   

In the ordinary course of operations, Bancorp and the Bank are defendants in various legal proceedings. There is no proceeding pending or threatened litigation, to the knowledge of management, in which an adverse decision could result in a material adverse change in the business or consolidated financial position of Bancorp or the Bank.

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 June 30, 2019.

	Total number of shares purchased(1)		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs		Average price paid per share		Maximum number of shares that may yet be purchased under the plans or programs
Apr 1 - April 30		110	$	34.35		—		—
May 1 - May 31		26,260		33.83		26,260		33.83
June 1 - June 30		83,770		34.29		81,078		34.25
Total		110,140	$	34.18		107,338		34.15		892,662

(1) Activity includes 2,802 shares of stock withheld to pay taxes due upon exercise of stock appreciation rights, vesting of restricted stock, and vesting of performance stock units.

Effective May 22, 2019, Bancorp’s Board of Directors approved a share repurchase program authorizing the repurchase of 1,000,000 shares or approximately 4% of the Company’s total common shares outstanding. Stock repurchases are expected to be made from time to time on the open market or in privately negotiated transactions, subject to applicable securities law. The plan, which will expire in two years unless otherwise extended or completed at an earlier date, does not obligate the Company to repurchase any specific dollar amount or number of shares prior to the plan’s expiration. As of June 30, 2019, Bancorp had 892,662 shares that could be repurchased under its current share repurchase program.

There were no equity securities of the registrant sold without registration during the quarter covered by this report.

76

Item 6.      Exhibits.

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

Exhibit
Number	Description of exhibit
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
32	Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 902 of the Sarbanes-Oxley Act
101	The following financial statements from the Stock Yards Bancorp, Inc. June 30, 2019 Quarterly Report on Form 10-Q, filed on August 6, 2019, formatted in Inline Extensible Business Reporting Language (iXBRL):

(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

77

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.
	(Registrant)
Date: August 6 , 2019	By:	/s/ James A. Hillebrand
		James A. Hillebrand,
		Chief Executive Officer
Date: August 6 , 2019		/s/ T. Clay Stinnett
		T. Clay Stinnett, Executive Vice President,
		Treasurer and Chief Financial Officer (Principal Financial Officer)

78

EX-31.1

Exhibit 31.1

SECTION 302 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, James A. Hillebrand, 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: August 6, 2019	By:	/s/ James A. Hillebrand
		James A. Hillebrand  Chief Executive Officer

EX-31.2

Exhibit 31.2

SECTION 302 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, T. Clay Stinnett, 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: August 6, 2019	By:	/s/ T. Clay Stinnett
		T. Clay Stinnett, Executive Vice President, Treasurer and Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350

In connection with this quarterly report of Stock Yards Bancorp, Inc. on Form 10-Q for the period ending June 30, 2019 (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: August 6, 2019	By:	/s/ James A. Hillebrand
		James A. Hillebrand
		Chief Executive Officer
Date: August 6, 2019	By:	/s/ T. Clay Stinnett
		T. Clay Stinnett,
		Executive Vice President, Treasurer and
		Chief Financial Officer

The foregoing certification is being furnished solely pursuant to 18 U.S.C. section 1350 and is not being filed as part of the report or as a separate document.

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	6 Months Ended
	Jun. 30, 2019	Jul. 31, 2019
Document Information [Line Items]
Entity Central Index Key	0000835324
Entity Shell Company	false
Entity Registrant Name	Stock Yards Bancorp, Inc.
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2019
Entity Small Business	false
Entity Emerging Growth Company	false
Document Quarterly Report	true
Document Transition Report	false
Document Type	10-Q
Document Period End Date	Jun. 30, 2019
Entity File Number	1-13661
Entity Incorporation, State or Country Code	KY
Entity Tax Identification Number	61-1137529
Entity Address, Address Line One	1040 East Main Street
Entity Address, City or Town	Louisville,
Entity Address, State or Province	KY
Entity Address, Postal Zip Code	40206
City Area Code	502
Local Phone Number	582-2571
Title of 12(b) Security	Common stock
Trading Symbol	SYBT
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		22,723,643

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands		Jun. 30, 2019	Dec. 31, 2018
Assets
Cash and due from banks		$ 51,264	$ 51,892
Federal funds sold and interest bearing due from banks		64,775	147,047
Cash and cash equivalents		116,039	198,939
Mortgage loans held for sale		3,922	1,675
Securities available for sale		423,579	436,995
Federal Home Loan Bank stock, at cost		11,316	10,370
Loans and leases	[1]	2,763,880	2,548,171
Allowance for loan and lease losses		26,416	25,534
Net loans and leases		2,737,464	2,522,637
Premises and equipment, net		65,069	44,764
Bank owned life insurance		32,631	32,273
Accrued interest receivable		9,633	8,360
Goodwill		12,826	682
Core deposit intangible		2,461	1,057
Other assets		48,883	45,172
Total assets		3,463,823	3,302,924
Liabilities
Non-interest bearing		777,652	711,023
Interest bearing		2,105,801	2,083,333
Total deposits		2,883,453	2,794,356
Securities sold under agreements to repurchase		33,809	36,094
Federal funds purchased		12,012	10,247
Federal Home Loan Bank advances		84,279	48,177
Accrued interest payable		1,008	762
Other liabilities		59,897	46,788
Total liabilities		3,074,458	2,936,424
Commitments and contingent liabilities (note 15)		0	0
Stockholders’ equity
Preferred stock, no par value. Authorized 1,000,000 shares; no shares issued or outstanding		0	0
Common stock, no par value. Authorized 40,000,000 shares; issued and outstanding 22,721,027 and 22,749,139 shares in 2019 and 2018, respectively		36,596	36,689
Additional paid-in capital		37,776	36,797
Retained earnings		313,927	298,156
Accumulated other comprehensive income (loss)		1,066	(5,142)
Total stockholders’ equity		389,365	366,500
Total liabilities and stockholders’ equity		$ 3,463,823	$ 3,302,924

[1] Total loans are presented inclusive of premiums, discounts, and net loan origination fees and costs.

XML

Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares $ / shares in Thousands	Jun. 30, 2019	Dec. 31, 2018
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)	22,721,027	22,749,139
Common stock, shares outstanding (in shares)	22,721,027	22,749,139

XML

Consolidated Statements of Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Interest income:
Loans and leases		$ 33,419	$ 29,456	$ 64,963	$ 56,518
Federal funds sold and interest bearing due from banks		830	163	1,563	431
Mortgage loans held for sale		43	44	80	79
Securities available for sale
Taxable		2,546	2,105	5,114	4,243
Tax-exempt		130	236	277	477
Total interest income		36,968	32,004	71,997	61,748
Interest expense:
Deposits		5,652	2,674	10,718	4,751
Securities sold under agreements to repurchase		28	30	53	67
Federal funds purchased and other short-term borrowing		64	397	124	483
Federal Home Loan Bank advances		424	229	645	464
Subordinated debentures		26	0	26	0
Total interest expense		6,194	3,330	11,566	5,765
Net interest income		30,774	28,674	60,431	55,983
Provision for loan and lease losses		0	1,235	600	1,970
Net interest income after provision		30,774	27,439	59,831	54,013
Non-interest income:
Non-interest income		5,662	5,344	11,101	10,844
Mortgage banking income	[1]	796	746	1,278	1,322
Bank owned life insurance	[1]	184	191	362	378
Total non-interest income		12,263	11,435	23,325	22,344
Non-interest expenses:
Compensation		12,715	11,703	24,516	22,673
Employee benefits		2,908	2,512	5,550	5,145
Net occupancy and equipment		1,976	1,811	3,834	3,629
Technology and communication		1,848	1,685	3,621	3,315
Debit and credit card processing		631	579	1,218	1,145
Marketing and business development		903	805	1,528	1,451
Postage, printing, and supplies		410	400	816	791
Legal and professional		1,523	504	2,057	997
FDIC insurance		248	238	486	480
Amortization/impairment of investments in tax credit partnerships		52	58	104	58
Capital and deposit based taxes		967	862	1,871	1,714
Other		1,283	979	2,502	1,765
Total non-interest expenses		25,464	22,136	48,103	43,163
Income before income tax expense		17,573	16,738	35,053	33,194
Income tax expense		1,030	3,159	2,869	6,211
Net income		$ 16,543	$ 13,579	$ 32,184	$ 26,983
Net income per share, basic (in dollars per share)		$ 0.73	$ 0.60	$ 1.42	$ 1.19
Net income per share, diluted (in dollars per share)		$ 0.72	$ 0.59	$ 1.40	$ 1.17
Weighted average common shares:
Basic (in shares)		22,689	22,625	22,675	22,601
Diluted (in shares)		22,949	22,967	22,948	22,959
Fiduciary and Trust [Member]
Non-interest income:
Non-interest income		$ 5,662	$ 5,344	$ 11,101	$ 10,844
Deposit Account [Member]
Non-interest income:
Non-interest income		1,336	1,447	2,583	2,858
Credit and Debit Card [Member]
Non-interest income:
Non-interest income		2,168	1,689	3,912	3,197
Treasury Management [Member]
Non-interest income:
Non-interest income		1,202	1,113	2,359	2,160
Investment Advisory, Management and Administrative Service [Member]
Non-interest income:
Non-interest income		364	397	720	801
Product and Service, Other [Member]
Non-interest income:
Non-interest income		$ 551	$ 508	$ 1,010	$ 784

[1] Outside of the scope of ASC 606

XML

Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Net income	$ 16,543	$ 13,579	$ 32,184	$ 26,983
Other comprehensive income:
Change in unrealized gain (loss) on available for sale debt securities	5,021	(1,618)	8,446	(6,325)
Change in fair value of derivatives used in cash flow hedges	(321)	99	(530)	491
Total other comprehensive income (loss), before income tax	4,700	(1,519)	7,916	(5,834)
Tax effect	1,121	(319)	1,708	(1,226)
Total other comprehensive income (loss), net of tax	3,579	(1,200)	6,208	(4,608)
Comprehensive income	$ 20,122	$ 12,379	$ 38,392	$ 22,375

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, 2017	22,679
Balance at Dec. 31, 2017	$ 36,457	$ 31,924	$ 267,193	$ (1,930)	$ 333,644
Net income	0	0	13,404	0	13,404
Net change in accumulated other comprehensive income (loss)	0	0	0	(3,408)	(3,408)
Stock compensation expense	$ 0	823	0	0	823
Stock issued for share-based awards, net of withholdings to satisfy employee tax obligations upon award (in shares)	52
Stock issued for share-based awards, net of withholdings to satisfy employee tax obligations upon award	$ 174	205	(1,914)	0	(1,535)
Cash dividends declared	0	0	(5,226)	0	(5,226)
Shares cancelled	(4)	(35)	39	0	0
Reclassification adjustment under Accounting Standards Update 2018-02	$ 0	0	506	(506)	0
Shares cancelled (in shares)	(1)
Balance (in shares) at Mar. 31, 2018	22,730
Balance at Mar. 31, 2018	$ 36,627	32,917	274,002	(5,844)	337,702
Balance (in shares) at Dec. 31, 2017	22,679
Balance at Dec. 31, 2017	$ 36,457	31,924	267,193	(1,930)	333,644
Net income					26,983
Net change in accumulated other comprehensive income (loss)				(4,608)	(4,608)
Reclassification adjustment under Accounting Standards Update 2018-02				(506)
Balance (in shares) at Jun. 30, 2018	22,746
Balance at Jun. 30, 2018	$ 36,680	34,715	281,164	(7,044)	345,515
Balance (in shares) at Mar. 31, 2018	22,730
Balance at Mar. 31, 2018	$ 36,627	32,917	274,002	(5,844)	337,702
Net income	0	0	13,579	0	13,579
Net change in accumulated other comprehensive income (loss)	0	0	0	(1,200)	(1,200)
Stock compensation expense	$ 0	1,212	0	0	1,212
Stock issued for share-based awards, net of withholdings to satisfy employee tax obligations upon award (in shares)	17
Stock issued for share-based awards, net of withholdings to satisfy employee tax obligations upon award	$ 57	618	(1,226)	0	(551)
Cash dividends declared	0	0	(5,227)	0	(5,227)
Common stock repurchased	0	0	0	0	0
Shares cancelled	$ (4)	(32)	36	0	0
Shares cancelled (in shares)	(1)
Balance (in shares) at Jun. 30, 2018	22,746
Balance at Jun. 30, 2018	$ 36,680	34,715	281,164	(7,044)	345,515
Balance (in shares) at Dec. 31, 2018	22,749
Balance at Dec. 31, 2018	$ 36,689	36,797	298,156	(5,142)	366,500
Net income	0	0	15,641	0	15,641
Net change in accumulated other comprehensive income (loss)	0	0	0	2,629	2,629
Stock compensation expense	$ 0	863	0	0	863
Stock issued for share-based awards, net of withholdings to satisfy employee tax obligations upon award (in shares)	74
Stock issued for share-based awards, net of withholdings to satisfy employee tax obligations upon award	$ 245	2,254	(4,452)	0	(1,953)
Cash dividends declared	$ 0	0	(5,686)	0	(5,686)
Balance (in shares) at Mar. 31, 2019	22,823
Balance at Mar. 31, 2019	$ 36,934	39,914	303,659	(2,513)	377,994
Balance (in shares) at Dec. 31, 2018	22,749
Balance at Dec. 31, 2018	$ 36,689	36,797	298,156	(5,142)	366,500
Net income					32,184
Net change in accumulated other comprehensive income (loss)				6,208	6,208
Balance (in shares) at Jun. 30, 2019	22,721
Balance at Jun. 30, 2019	$ 36,596	37,776	313,927	1,066	389,365
Balance (in shares) at Mar. 31, 2019	22,823
Balance at Mar. 31, 2019	$ 36,934	39,914	303,659	(2,513)	377,994
Net income	0	0	16,543	0	16,543
Net change in accumulated other comprehensive income (loss)	0	0	0	3,579	3,579
Stock compensation expense	$ 0	993	0	0	993
Stock issued for share-based awards, net of withholdings to satisfy employee tax obligations upon award (in shares)	5
Stock issued for share-based awards, net of withholdings to satisfy employee tax obligations upon award	$ 19	182	(363)	0	(162)
Cash dividends declared	$ 0	0	(5,917)	0	(5,917)
Common stock repurchased (in shares)	(107)
Common stock repurchased	$ (357)	(3,308)		0	(3,665)
Adjustments to retained earnings, common stock repurchased			0
Shares cancelled	$ 0	(5)	5	0	0
Balance (in shares) at Jun. 30, 2019	22,721
Balance at Jun. 30, 2019	$ 36,596	$ 37,776	$ 313,927	$ 1,066	$ 389,365

XML

Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (Parentheticals) - $ / shares	3 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018
Retained Earnings [Member]
Cash dividends declared (in dollars per share)	$ 0.26	$ 0.25
Cash dividends declared (in dollars per share)			$ 0.23	$ 0.23

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands		6 Months Ended
		Jun. 30, 2019	Jun. 30, 2018
Operating activities:
Net income		$ 32,184	$ 26,983
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan and lease losses		600	1,970
Depreciation, amortization and accretion, net		1,679	2,680
Deferred income tax (benefit) expense		(3,959)	40
Gain on sales of mortgage loans held for sale		(719)	(769)
Origination of mortgage loans held for sale		(38,081)	(37,803)
Proceeds from sale of mortgage loans held for sale		36,553	39,483
Bank owned life insurance income	[1]	(362)	(378)
Loss (gain) on the disposal of premises and equipment		6	(14)
Gain on the sale of other real estate		(63)	(109)
Stock compensation expense		1,856	2,035
Excess tax benefits from share-based compensation arrangements		(392)	(525)
Net change in accrued interest receivable and other assets		(3,429)	2,236
Net change in accrued interest payable and other liabilities		(3,974)	247
Net cash provided by operating activities		21,899	36,076
Investing activities:
Purchases of securities available for sale		(373,761)	(399,911)
Proceeds from sales of securities		12,427	0
Proceeds from maturities and paydowns of securities available for sale		396,367	392,855
Purchase of Federal Home Loan Bank stock		0	(2,724)
Proceeds from redemptions of Federal Home Loan Bank stock		591	0
Proceeds from redemption of Federal Reserve Bank stock		490	0
Proceeds from redemption of interest bearing due from banks		1,761	0
Net change in loans		(49,280)	(170,843)
Purchases of premises and equipment		(3,321)	(2,694)
Proceeds from disposal of premises and equipment		45	230
Proceeds from surrender of acquired bank bank owned life insurance		3,431	0
Proceeds from bank owned life insurance mortality benefit		909	0
Other investment activities		(1,532)	(2,542)
Proceeds from sale of foreclosed assets		868	2,860
Cash for acquisition, net of cash acquired		(24,684)	0
Net cash used in investing activities		(35,689)	(182,769)
Financing activities:
Net change in deposits		(36,464)	(37,834)
Net change in securities sold under agreements to repurchase and federal funds purchased		(2,086)	113,443
Proceeds from Federal Home Loan Bank advances		60,000	60,000
Repayments of Federal Home Loan Bank advances		(67,250)	(60,637)
Repayment of acquired bank holding company line of credit		(2,300)	0
Redemption of acquired bank subordinated debentures		(3,609)	0
Common stock repurchases		(5,780)	(2,086)
Cash dividends paid		(11,621)	(10,441)
Net cash provided by (used in) financing activities		(69,110)	62,445
Net change in cash and cash equivalents		(82,900)	(84,248)
Cash and cash equivalents at beginning of period		198,939	139,248
Cash and cash equivalents at end of period		116,039	55,000
Supplemental cash flow information:
Income tax payments, net of refunds		5,382	1,800
Cash paid for interest		11,320	5,497
Supplemental non-cash activity:
Initital recognition of right-of-use lease assets		16,747	0
Initital recognition operating lease liabilities		18,067	0
Transfers from loans to real estate acquired in settlement of loans		0	471
Fair value of assets acquired		204,613	0
Cash paid in acqusition		28,000	0
Liabilities assumed		$ 176,613	$ 0

[1] Outside of the scope of ASC 606

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Note 1 - Basis of Presentation and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Significant Accounting Policies [Text Block]

(1) Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation – The consolidated financial statements include the accounts of Stock Yards Bancorp, Inc. (“Holding Company”), and its wholly-owned subsidiary, Stock Yards Bank & Trust Company (“Bank”). All significant inter-company transactions and accounts have been eliminated in consolidation. All companies are collectively referred to as “Bancorp” or the “Company.”

As a result of its acquisition of King, Bancorp, Inc. on May 1, 2019, Bancorp became the 100% successor owner of King Bancorp Statutory Trust I (“KBST”), an unconsolidated finance subsidiary. As permitted under the terms of KBST’s governing documents, Bancorp redeemed the trust-preferred securities at the par amount of approximately $3.6 million on June 17, 2019.

The Bank, chartered in 1904, is a Louisville, Kentucky-based, state-chartered non-member financial institution that provides services in the Louisville, Kentucky, Indianapolis, Indiana and Cincinnati, Ohio Metropolitan Statistical Areas (“MSAs”) through 43 full service banking center locations. 

As of June 30, 2019, Bancorp was divided into two reportable segments: Commercial Banking and Wealth Management & Trust (“WM&T”):

Commercial Banking provides a full range of loan and deposit products to individual consumers and businesses through commercial lending, retail lending, deposit services, treasury management services, private banking, online banking, mobile banking, merchant services, international banking, correspondent banking and other banking services. The Bank also offers securities brokerage services via its banking center network through an arrangement with a third party broker-dealer. 

WM&T, with over $3 billion in assets under management (“AUM”), provides custom-tailored financial planning, investment management, retirement planning and trust and estate services in all markets in which Bancorp operates.  

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, the financial statements do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. For further information, refer to the consolidated financial statements and notes thereto included in Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2018. Certain reclassifications have been made in the prior year financial statements to conform to current year classifications.

Significant Accounting Policies - In preparing the unaudited consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of certain assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of related revenues and expenses during the reporting period. Actual results could differ from those estimates. A description of significant accounting policies is presented in Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2018.

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

The allowance methodology is driven by risk ratings, historical losses, and qualitative factors. The level of the June 30, 2019 allowance reflected a number of factors, including credit quality metrics which were generally consistent with prior periods, and expansion of the historical look-back period from 32 to 36 quarters in March of 2019. This expansion of the historical period was applied to all classes and segments of the portfolio. Expansion of the look-back period for historical loss rates used in the quantitative allocation caused review of the overall methodology for qualitative factors to ensure we were appropriately capturing risk not addressed in the quantitative historical loss rate. Management believes 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. Based on the look-back period extension, the allowance level increased approximately $2.0 million for 2019. Key indicators of loan quality continued to trend at levels consistent with prior periods, however management recognizes that due to the cyclical nature of the lending business, these trends will likely normalize over the long term. Additional information regarding Bancorp’s methodology for evaluating the adequacy of the allowance can be read in Bancorp’s Annual Report on Form 10-K.

Accounting Standards Updates (“ASUs”)

The following ASU was issued prior to June 30, 2019 and is considered relevant to Bancorp’s financial statements. Generally, if an issued-but-not-yet-effective ASU with an expected immaterial impact to Bancorp has been disclosed in prior SEC filings, it will not be re-disclosed.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, (“CECL”). This ASU 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. The guidance is effective for annual and interim reporting periods beginning after December 15, 2019. Bancorp expects to recognize a one-time cumulative-effect adjustment to the allowance on January 1, 2020. Interagency guidance issued in December 2018 allows for a three year phase-in of the cumulative-effect adjustment for regulatory capital reporting.

As a result of this ASU, Bancorp could experience an increase in its allowance. Bancorp has formed a committee to oversee its transition to the CECL methodology. Bancorp has devoted internal resources and purchased a third party software solution to analyze, compute and report upon the CECL disclosure requirements. In addition, Bancorp has analyzed loan-level data and is determining its CECL loan segmentation and initial segment calculation methodologies.  Bancorp is currently exploring regression techniques and has begun to run forecasting scenarios.

Recently Adopted Accounting Standards

Bancorp adopted ASU 2016-02, Leases and related amendments using an alternative transition method, effective January 1, 2019 and upon adoption recorded $17 million of right-of-use lease assets and $18 million of operating lease liabilities on its balance sheet as of June 30, 2019. Prior periods have not been restated. The right-of-use lease asset and operating lease liability are recorded in premises and equipment and other liabilities, respectively, on the consolidated balance sheet. Bancorp elected all applicable practical expedients, including the option to expense short-term leases, which are defined as leases with a term of one year or less. Bancorp also elected not to separate lease components from non-lease components.

The adoption of this ASU did not have a meaningful impact on Bancorp's performance metrics, including regulatory capital ratios and return on average assets.  Additionally, Bancorp does not believe that the adoption of this ASU by its clients will have a significant impact on Bancorp's ability to underwrite credit when client financial statements are presented inclusive of the requirements of this ASU. See the note titled “Leases” for additional information on lease activities.

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Note 2 - Acquisition of King Bancorp, Inc.

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Business Combination Disclosure [Text Block]

(2) Acquisition of King Bancorp, Inc.

On May 1, 2019, Bancorp completed its acquisition of King Bancorp, Inc, and its wholly-owned subsidiary King Southern Bank (“King”), for $28 million in cash. The acquisition expands the Company’s market area into nearby Nelson County, Kentucky, while growing its customer base in Louisville, Kentucky.

The following table provides a summary of the fair value of the assets acquired and liabilities assumed by Bancorp as of the acquisition date. As provided for under GAAP, management has up to 12 months following the date of acquisition to finalize the fair values of the acquired assets and assumed liabilities. The preliminary fair value adjustments and the preliminary fair values shown in the following table continue to be evaluated by management and may be subject to further adjustment.

Acquisition of King Bancorp, Inc.

Summary of Assets Aquired and Liabilities Assumed

	May 1, 2019
	As Recorded			Fair Value				As Recorded
(In thousands)	by King			Adjustments (1)				by Bancorp
Assets aquired:
Cash and due from banks	$	3,316		$	—			$	3,316
Interest bearing due from banks		1,761			—				1,761
Available for sale securities		12,404			23		a		12,427
Loans		165,744			(1,597	)	b		164,147
Allowance for loan and lease losses		(1,812	)		1,812		b		-
Loans, net		163,932			215				164,147
Federal Home Loan Bank stock, at cost		1,517			—				1,517
Federal Reserve Bank stock, at cost		490			—				490
Premises and equipment, net		4,358			(1,328	)	c		3,030
Core deposit intangible		—			1,519		d		1,519
Bank owned life insurance		3,431			—				3,431
Other real estate owned		325			(325	)	e		—
Other assets and accrued interest receivable		867			(36	)	f		831
Total assets acquired	$	192,401		$	68			$	192,469
Liabilities assumed:
Deposits
Non-interest bearing	$	24,939		$	—			$	24,939
Interest bearing		100,839			(252	)	g		100,587
Total deposits		125,778			(252	)			125,526
Federal funds purchased		1,566			—				1,566
Federal Home Loan Bank advances		43,718			(419	)	h		43,299
Subordinated Note		3,609			—				3,609
Holding Company line of credit		2,300			—				2,300
Other liabilities and accrued interest payable		313			—				313
Total liabilities assumed		177,284			(671	)			176,613
Net assets acquired	$	15,117		$	739			$	15,856
Cash consideration paid									(28,000	)
Goodwill								$	12,144

(1) Bancorp’s acquisition of King closed on May 1, 2019. Accordingly, the fair value adjustments shown are preliminary estimates of the purchase accounting adjustments. Management is continuing to evaluate each of these fair value adjustments and may revise one or more of such fair value adjustments in future periods based on this continuing evaluation. To the extent that any of these preliminary fair value adjustments are revised in future periods, the resultant fair values and the amount of goodwill recorded by the Company will change.

Explanation of fair value adjustments 

a.	Reflects the fair value adjustment based on Bancorp’s evaluation of the acquired investment portfolio.
b.	Reflects the fair value adjustment based on Bancorp’s evaluation of the acquired loan portfolio and to eliminate King’s recorded allowance.
c.	Reflects the fair value adjustment based on Bancorp’s evaluation of the premises and equipment acquired.

d.	Reflects the fair value adjustment for the core deposit intangible asset recorded as a result of the acquisition.
e.	Reflects the fair value adjustment based upon Bancorp’s evaluation of the foreclosed real estate acquired.
f.	Reflects the write-off of a miscellaneous other asset.

g.

Reflects the fair value adjustment based on the Company’s evaluation of the assumed time deposits.

h.

Reflects the fair value adjustment based upon Bancorp’s evaluation of the assumed FHLB advances. Goodwill of approximately $12 million, which is the excess of the acquisition consideration over the fair value of net assets acquired, is expected to be recorded in the King acquisition and is the result of expected operational synergies and other factors. This goodwill is all attributable to the Company’s Commercial Banking segment and is not expected to be deductible for tax purposes. To the extent that management revises any of the above fair value adjustments as a result of its continuing evaluation, the amount of goodwill recorded in the King acquisition will change. As a result of the King transaction, and based upon the proximity to existing branch locations, Bancorp expects to sell three acquired branch buildings in the third quarter of 2019, while retaining the associated customer relationships. These branches are considered held available for sale as of June 30, 2019. If consummated, goodwill will be adjusted in that period. Revenue attributed to King totaled $1.6 million for the three and six months ended June 30, 2019. Prior year pro-forma financial statements were not presented due to the immateriality of the transaction.

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Note 3 - Securities

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

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

(3) Securities

All of Bancorp’s securities are classified as available for sale. Amortized cost, unrealized gains and losses, and fair value of securities follow:

(In thousands)	Amortized		Unrealized
June 30, 2019	cost		Gains		Losses			Fair value
Government sponsored enterprise obligations	$	266,579	$	1,755	$	(319	)	$	268,015
Mortgage backed securities - government agencies		131,447		938		(787	)		131,598
Obligations of states and political subdivisions		23,854		118		(6	)		23,966
Total securities available for sale	$	421,880	$	2,811	$	(1,112	)	$	423,579
December 31, 2018
Government sponsored enterprise obligations		264,234		156		(3,351	)		261,039
Mortgage backed securities - government agencies		149,748		282		(3,753	)		146,277
Obligations of states and political subdivisions		29,760		107		(188	)		29,679
Total securities available for sale	$	443,742	$	545	$	(7,292	)	$	436,995

At June 30, 2019 and December 31, 2018, there were no holdings of debt securities of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of stockholders’ equity.

There were no gains or losses on sales or calls of securities for the three-month and six month periods ending June 30, 2019 or 2018. Securities owned by King, totaling $12.4 million, were sold immediately following the acquisition with no gain or loss realized in the income statement.

A summary of securities available for sale by contractual maturity follows:

(In thousands)	Amortized cost		Fair value
Due within 1 year	$	132,158	$	132,133
Due after 1 year but within 5 years		56,040		56,033
Due after 5 years but within 10 years		7,157		7,232
Due after 10 years		95,078		96,583
Mortgage backed securities - government agencies		131,447		131,598
Total securities available for sale	$	421,880	$	423,579

Actual maturities may differ from contractual maturities because some issuers have the right to call or prepay obligations with or without prepayment penalties. The investment portfolio includes agency mortgage backed securities, which are guaranteed by agencies such as Federal Home Loan Mortgage Corporation (“FHLMC”), Federal National Mortgage Association (“FNMA”), and Government National Mortgage Association (“GNMA”). These securities differ from traditional debt securities primarily in that they may have uncertain principal payment dates and are priced based on estimated prepayment rates on the underlying collateral.

Securities with a carrying value of $336.5 million and $355.1 million were pledged at June 30, 2019 and December 31, 2018, respectively, to secure accounts of commercial depositors in cash management accounts, public deposits, and uninsured cash balances for WM&T accounts.

Securities with unrealized losses at June 30, 2019 and December 31, 2018, aggregated by investment category and length of time securities have been in a continuous unrealized loss position follows:

(In thousands)	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
June 30, 2019	value		losses			value		losses			value		losses
Government sponsored enterprise obligations	$	—	$	—		$	57,505	$	(319	)	$	57,505	$	(319	)
Mortgage-backed securities - government agencies		—		—			82,088		(787	)		82,088		(787	)
Obligations of states and political subdivisions		—		—			6,485		(6	)		6,485		(6	)
Total temporarily impaired securities	$	—	$	—		$	146,078	$	(1,112	)	$	146,078	$	(1,112	)
December 31, 2018
Government sponsored enterprise obligations		96,740		(38	)		149,320		(3,313	)		246,060		(3,351	)
Mortgage-backed securities - government agencies		3,108		(5	)		120,848		(3,748	)		123,956		(3,753	)
Obligations of states and political subdivisions		814		(1	)		17,639		(187	)		18,453		(188	)
Total temporarily impaired securities	$	100,662	$	(44	)	$	287,807	$	(7,248	)	$	388,469	$	(7,292	)

Applicable dates for determining when securities are in an unrealized loss position are June 30, 2019 and December 31, 2018. 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 “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 maturity and/or the interest rate environment returns to conditions similar to when these securities were purchased. These investments consist of 61 and 117 separate investment positions as of June 30, 2019 and December 31, 2018, respectively. Because management does not intend to sell the securities, 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 June 30, 2019.

The term “other-than-temporary” is not intended to indicate that the decline is permanent, but indicates that the prospects for a near-term recovery of value are not necessarily favorable, or that there is a general lack of evidence to support a realizable value equal to or greater than the carrying value of the investment. Once a decline in value is determined to be other-than-temporary, the value of the security is reduced and a corresponding charge to earnings is recognized for the anticipated credit losses.

Federal Home Loan Bank of Cincinnati (“FHLB”) stock is an investment held by Bancorp which is not readily marketable and is carried at cost adjusted for identified impairment. Impairment is evaluated on an annual basis in the fourth quarter. Holdings of FHLB stock are required for access to FHLB advances.

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Note 4 - Loans and Leases

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

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

(4) Loans and leases

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

(In thousands)	June 30, 2019		December 31, 2018
Commercial and industrial	$	860,085	$	833,524
Construction and development, excluding undeveloped land(1)		222,632		225,050
Undeveloped land		35,169		30,092
Real estate mortgage:
Commercial investment		696,421		588,610
Owner occupied commercial		452,719		426,373
1-4 family residential		338,957		276,017
Home equity - first lien		46,012		49,500
Home equity - junior lien		67,948		70,947
Subtotal: Real estate mortgage		1,602,057		1,411,447
Consumer		43,937		48,058
Total loans(2)	$	2,763,880	$	2,548,171

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

(2) Total loans are presented inclusive of premiums, discounts, and net loan origination fees and costs.

Loans to directors and their related interests, including loans to companies for which directors are principal owners and executive officers totaled $53.7 million and $52.7 million, as of June 30, 2019 and December 31, 2018, respectively.

The following table summarizes loans acquired in the King acquisition based upon valuation method:

	May 1, 2019
	Contractual		Non-accretable			Accretable			Acquisition-day
(In thousands)	receivable		amount			amount			fair value
Commercial and industrial	$	8,249	$	—		$	(23	)	$	8,226
Construction and development		10,764		—			43			10,807
Raw Land		7,974		—			43			8,017
Real estate mortgage:
Commercial real estate		84,219		—			(408	)		83,811
1-4 family residential		50,556		—			322			50,878
Home equity - first lien		196		—			3			199
Home equity - junior lien		679		—			5			684
Subtotal: Real estate mortgage		135,650		—			(78	)		135,572
Consumer		1,528		—			(3	)		1,525
Total loans ASC 310-20		164,165		—			(18	)		164,147
Commercial and industrial
Construction and development		—		—			—			—
Raw Land		—		—			—			—
Real estate mortgage:
Commercial real estate		1,351		(1,351	)		—			—
1-4 family residential		228		(228	)		—			—
Home equity - first lien		—		—			—			—
Home equity - junior lien		—		—			—			—
Subtotal: Real estate mortgage		1,579		(1,579	)		—			—
Consumer		—		—			—			—
Total loans ASC 310 purchased- credit-impaired loans		1,579		(1,579	)		—			—
Total loans	$	165,744	$	(1,579	)	$	(18	)	$	164,147

Purchased-Credit-Impaired (“PCI”) Loans

The Bank acquired PCI loans on May 1, 2019 in its King acquisition and during the year ended December 31, 2012 in the TBOC acquisition. PCI loans are accounted for under ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality.

Management utilized the following PCI criteria for the May 1, 2019 King acquisition:

●     Loans assigned a non-accretable mark

●     Loans classified as substandard, doubtful or loss

●     Loans classified as non-accrual when acquired

●     Loans past due 90 days or more when acquired

The following table reconciles the contractually required and carrying amounts of all PCI loans:

In thousands	June 30, 2019			December 31, 2018
Contractually-required principal	$	1,864		$	432
Non-accretable amount		(1,577	)		—
Accretable amount		(57	)		(68	)
Carrying value of loans	$	230		$	364

The following table presents a rollforward of the accretable amount on all PCI loans:

	Three months ended						Six months ended
	June 30,						June 30,
(In thousands)	2019			2018			2019			2018
Balance, beginning of period	$	(62	)	$	(95	)	$	(68	)	$	(106	)
Transfers between non-accretable and accretable		—			—			—			—
Net accretion into interest income on loans, including loan fees		5			10			11			21
Generated from acquisition of King		—			—			—			—
Balance, end of period	$	(57	)	$	(85	)	$	(57	)	$	(85	)

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 well-defined weaknesses that jeopardize ultimate repayment of the debt. Default is a distinct possibility if the deficiencies are not corrected.

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

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

Internally assigned risk grades of loans by loan portfolio class classification category follows:

(In thousands)							Substandard				Total
June 30, 2019	Pass		OAEM		Substandard		non-performing		Doubtful		loans
Commercial and industrial	$	817,645	$	23,907	$	18,241	$	292	$	—	$	860,085
Construction and development, excluding undeveloped land		222,632		—		—		—		—		222,632
Undeveloped land		35,169		—		—		—		—		35,169
Real estate mortgage:
Commercial investment		687,304		4,202		4,213		702		—		696,421
Owner occupied commercial		429,070		17,757		4,228		1,664		—		452,719
1-4 family residential		336,312		1,686		159		800		—		338,957
Home equity - first lien		46,012		—		—		—		—		46,012
Home equity - junior lien		67,236		224		18		470		—		67,948
Subtotal: Real estate mortgage		1,565,934		23,869		8,618		3,636		—		1,602,057
Consumer		43,937		—		—		—		—		43,937
Total	$	2,685,317	$	47,776	$	26,859	$	3,928	$	—	$	2,763,880
December 31, 2018
Commercial and industrial	$	803,073	$	11,516	$	18,703	$	232	$	—	$	833,524
Construction and development, excluding undeveloped land		220,532		4,200		—		318		—		225,050
Undeveloped land		29,618		—		—		474		—		30,092
Real estate mortgage:
Commercial investment		586,543		1,815		15		237		—		588,610
Owner occupied commercial		411,722		9,030		4,500		1,121		—		426,373
1-4 family residential		273,537		1,544		162		774		—		276,017
Home equity - first lien		49,500		—		—		—		—		49,500
Home equity - junior lien		70,437		249		19		242		—		70,947
Subtotal: Real estate mortgage		1,391,739		12,638		4,696		2,374		—		1,411,447
Consumer		48,058		—		—		—		—		48,058
Total	$	2,493,020	$	28,354	$	23,399	$	3,398	$	—	$	2,548,171

The following table presents the activity in the allowance by loan portfolio class:

	Type of loan
			Construction
			and development,
Three months ended	Commercial		excluding
	and		undeveloped			Undeveloped			Real estate
(In thousands)	industrial		land			land			mortgage			Consumer			Total
Balance, April 1, 2019	$	11,762	$	1,884		$	662		$	12,001		$	155		$	26,464
Provision (credit)		92		(74	)		(61	)		10			33			-
Charge-offs		—		—			—			(13	)		(148	)		(161	)
Recoveries		4		—			—			32			77			113
Balance, June 30, 2019	$	11,858	$	1,810		$	601		$	12,030		$	117		$	26,416

				Construction
				and development,
	Commercial			excluding
	and			undeveloped			Undeveloped		Real estate
(In thousands)	industrial			land			land		mortgage			Consumer			Total
Balance, April 1, 2018	$	10,638		$	2,020		$	482	$	10,707		$	356		$	24,203
Provision (credit)		2,008			(82	)		19		(795	)		85			1,235
Charge-offs		(530	)		—			—		—			(117	)		(647	)
Recoveries		2			—			—		2			78			82
Balance, June 30, 2018	$	12,118		$	1,938		$	501	$	9,914		$	402		$	24,873

	Type of loan
				Construction
				and development,
Six months ended	Commercial			excluding
	and			undeveloped			Undeveloped			Real estate
(In thousands)	industrial			land			land			mortgage			Consumer			Total
Balance, January 1, 2019	$	11,965		$	1,760		$	752		$	10,681		$	376		$	25,534
Provision (credit)		(210	)		(153	)		(151	)		1,310			(196	)		600
Charge-offs		(3	)		—			—			(13	)		(244	)		(260	)
Recoveries		106			203			—			52			181			542
Balance, June 30, 2019	$	11,858		$	1,810		$	601		$	12,030		$	117		$	26,416

				Construction
				and development,
	Commercial			excluding
	and			undeveloped		Undeveloped			Real estate
(In thousands)	industrial			land		land			mortgage			Consumer			Total
Balance, January 1, 2018	$	11,276		$	1,724	$	521		$	11,012		$	352		$	24,885
Provision (credit)		2,769			214		(20	)		(1,104	)		111			1,970
Charge-offs		(1,939	)		—		—			—			(236	)		(2,175	)
Recoveries		12			—		—			6			175			193
Balance, June 30, 2018	$	12,118		$	1,938	$	501		$	9,914		$	402		$	24,873

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

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

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

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

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

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

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.

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

(In thousands)	June 30, 2019		December 31, 2018
Commercial and industrial	$	96	$	192
Construction and development, excluding undeveloped land		—		318
Undeveloped land		—		474
Real estate mortgage:
Commercial investment		305		138
Owner occupied commercial		1,444		586
1-4 family residential		715		760
Home equity - first lien		—		—
Home equity - junior lien		470		143
Subtotal: Real estate mortgage		2,934		1,627
Consumer		—		—
Total non-accrual loans	$	3,030	$	2,611

In the course of working with borrowers, Bancorp may elect to restructure the contractual terms of certain loans. TDRs occur when, for economic, legal, or other reasons related to a borrower’s financial difficulties, Bancorp grants a concession to the borrower that it would not otherwise consider. Bancorp did not recognize new TDRs, nor did any TDRs default, in the three and six months periods ended June 30, 2019 and 2018. Detail of outstanding TDRs follows:

	June 30, 2019						December 31, 2018
(In thousands)			Specific		Additional				Specific		Additional
			reserve		commitment				reserve		commitment
TDRs	Balance		allocation		to lend		Balance		allocation		to lend
Commercial and industrial	$	23	$	23	$	—	$	28	$	28	$	—
1-4 family residential		14		14		—		14		14		—
Total TDRs	$	37	$	37	$	—	$	42	$	42	$	—

As of June 30, 2019 formal foreclosure proceedings were in process on 1-4 family residential mortgage loans with a total recorded investment of $795 thousand, as compared with $528 thousand as of December 31, 2018.

The following tables present the balance in the recorded investment in loans and allowance for loans by portfolio loan class and based on impairment evaluation method:

(In thousands)	Loans								Allowance
June 30, 2019	Loans individually evaluated for impairment		Loans collectively evaluated for impairment		Loans acquired with deteriorated credit quality		Total loans		Loans individually evaluated for impairment		Loans collectively evaluated for impairment		Loans acquired with deteriorated credit quality		Total allowance
Commercial and industrial	$	119	$	859,966	$	—	$	860,085	$	23	$	11,835	$	—	$	11,858
Construction and development, excluding undeveloped land		—		222,632		—		222,632		—		1,810		—		1,810
Undeveloped land		—		35,169		—		35,169		—		601		—		601
Real estate mortgage		2,948		1,599,109		—		1,602,057		14		12,016		—		12,030
Consumer		—		43,937		—		43,937		—		117		—		117
Total	$	3,067	$	2,760,813	$	—	$	2,763,880	$	37	$	26,379	$	—	$	26,416

(In thousands)	Loans								Allowance
December 31, 2018	Loans individually evaluated for impairment		Loans collectively evaluated for impairment		Loans acquired with deteriorated credit quality		Total loans		Loans individually evaluated for impairment		Loans collectively evaluated for impairment		Loans acquired with deteriorated credit quality		Total allowance
Commercial and industrial	$	220	$	833,304	$	—	$	833,524	$	28	$	11,937	$	—	$	11,965
Construction and development, excluding undeveloped land		318		224,732		—		225,050		—		1,760		—		1,760
Undeveloped land		474		29,618		—		30,092		—		752		—		752
Real estate mortgage		1,641		1,409,806		—		1,411,447		14		10,667		—		10,681
Consumer		—		48,058		—		48,058		—		376		—		376
Total	$	2,653	$	2,545,518	$	—	$	2,548,171	$	42	$	25,492	$	—	$	25,534

The following tables present loans individually evaluated for impairment by loan portfolio class:

	As of						Three months ended				Six months ended
	June 30, 2019						June 30, 2019				June 30, 2019
			Unpaid				Average		Interest		Average		Interest
	Recorded		principal		Related		recorded		income		recorded		income
(In thousands)	investment		balance		allowance		investment		recognized		investment		recognized
Impaired loans with no related allowance:
Commercial and industrial	$	96	$	96	$	—	$	144	$	—	$	160	$	—
Construction and development, excluding undeveloped land		—		—		—		—		—		106		—
Undeveloped land		—		—		—		—		—		158		—
Real estate mortgage
Commercial investment		306		306		—		311		—		254		—
Owner occupied commercial		1,444		1,882		—		1,455		—		1,165		—
1-4 family residential		715		715		—		779		—		773		—
Home equity - first lien		—		-		—		—		—		—		—
Home equity - junior lien		469		469		—		462		—		356		—
Subtotal: Real estate mortgage		2,934		3,372		—		3,007		—		2,548		—
Consumer		—		—		—		—		—		—		—
Subtotal	$	3,030	$	3,468	$	—	$	3,151	$	—	$	2,972	$	—
Impaired loans with an allowance:
Commercial and industrial	$	23	$	23	$	23	$	24	$	—	$	26	$	1
Construction and development, excluding undeveloped land		—		—		—		—		—		—		—
Undeveloped land		—		—		—		—		—		—		—
Real estate mortgage
Commercial investment		—		—		—		—		—		—		—
Owner occupied commercial		—		—		—		—		—		—		—
1-4 family residential		14		14		14		14		—		14		—
Home equity - first lien		—		—		—		—		—		—		—
Home equity - junior lien		—		—		—		—		—		—		—
Subtotal: Real estate mortgage		14		14		14		14		—		14		—
Consumer		—		—		—		—		—		—		—
Subtotal	$	37	$	37	$	37	$	38	$	—	$	40	$	1
Total:
Commercial and industrial	$	119	$	119	$	23	$	168	$	—	$	186	$	1
Construction and development, excluding undeveloped land		—		—		—		—		—		106		—
Undeveloped land		—		—		—		—		—		158		—
Real estate mortgage
Commercial investment		306		306		—		311		—		254		—
Owner occupied commercial		1,444		1,882		—		1,455		—		1,165		—
1-4 family residential		729		729		14		793		—		787		—
Home equity - first lien		—		—		—		-		—		-		—
Home equity - junior lien		469		469		—		462		—		356		—
Subtotal: Real estate mortgage		2,948		3,386		14		3,021		—		2,562		—
Consumer		—		—		—		—		—		—		—
Total impaired loans	$	3,067	$	3,505	$	37	$	3,189	$	—	$	3,012	$	1

	As of						Three months ended				Six months ended
	December 31, 2018						June 30, 2018				June 30, 2018
			Unpaid				Average		Interest		Average		Interest
	Recorded		principal		Related		recorded		income		recorded		income
(In thousands)	investment		balance		allowance		investment		recognized		investment		recognized
Impaired loans with no related allowance:
Commercial and industrial	$	192	$	707	$	—	$	225	$	—	$	531	$	—
Construction and development, excluding undeveloped land		318		489		—		525		—		571		—
Undeveloped land		474		506		—		474		—		474		—
Real estate mortgage
Commercial investment		138		138		—		-		—		17		—
Owner occupied commercial		586		1,023		—		2,335		—		2,667		—
1-4 family residential		760		760		—		1,350		—		1,446		—
Home equity - first lien		—		-		—		-		—		-		—
Home equity - junior lien		143		143		—		17		—		22		—
Subtotal: Real estate mortgage		1,627		2,064		—		3,702		—		4,152		—
Consumer		—		—		—		46		—		30		—
Subtotal	$	2,611	$	3,766	$	—	$	4,972	$	—	$	5,758	$	—
Impaired loans with an allowance:
Commercial and industrial	$	28	$	28	$	28	$	3,074	$	—	$	2,061	$	—
Construction and development, excluding undeveloped land		—		—		—		—		—		—		—
Undeveloped land		—		—		—		48		—		32		—
Real estate mortgage
Commercial investment		—		—		—		—		—		—		—
Owner occupied commercial		—		—		—		1,645		—		1,097		—
1-4 family residential		14		14		14		14		—		14		—
Home equity - first lien		—		—		—		—		—		—		—
Home equity - junior lien		—		—		—		—		—		—		—
Subtotal: Real estate mortgage		14		14		14		1,659		—		1,111		—
Consumer		—		—		—		—		—		—		—
Subtotal	$	42	$	42	$	42	$	4,781	$	—	$	3,204	$	—
Total:
Commercial and industrial	$	220	$	735	$	28	$	3,299	$	—	$	2,592	$	—
Construction and development, excluding undeveloped land		318		489		—		525		—		571		—
Undeveloped land		474		506		—		522		—		506		—
Real estate mortgage
Commercial investment		138		138		—		-		—		17		—
Owner occupied commercial		586		1,023		—		3,980		—		3,764		—
1-4 family residential		774		774		14		1,364		—		1,460		—
Home equity - first lien		—		—		—		-		—		-		—
Home equity - junior lien		143		143		—		17		—		22		—
Subtotal: Real estate mortgage		1,641		2,078		14		5,361		—		5,263		—
Consumer		—		—		—		46		—		30		—
Total impaired loans	$	2,653	$	3,808	$	42	$	9,753	$	—	$	8,962	$	—

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

The following table presents the aging of the recorded investment in loans by portfolio class:

													Recorded
(In thousands)							90 or more						investment
							days past due						> 90 days
			30-59 days		60-89 days		(includes all		Total		Total		and
June 30, 2019	Current		past due		past due		non-accrual)		past due		loans		accruing
Commercial and industrial	$	858,853	$	572	$	391	$	269	$	1,232	$	860,085	$	173
Construction and development, excluding undeveloped land		222,632		—		—		—		—		222,632		—
Undeveloped land		35,169		—		—		—		—		35,169		—
Real estate mortgage:
Commercial investment		692,612		1		3,107		701		3,809		696,421		396
Owner occupied commercial		450,140		643		272		1,664		2,579		452,719		220
1-4 family residential		336,548		749		873		787		2,409		338,957		72
Home equity - first lien		45,963		49		—		—		49		46,012		—
Home equity - junior lien		67,408		70		—		470		540		67,948		—
Subtotal: Real estate mortgage		1,592,671		1,512		4,252		3,622		9,386		1,602,057		688
Consumer		43,901		9		27		—		36		43,937		—
Total	$	2,753,226	$	2,093	$	4,670	$	3,891	$	10,654	$	2,763,880	$	861
December 31, 2018
Commercial and industrial	$	832,923	$	197	$	200	$	204	$	601	$	833,524	$	12
Construction and development, excluding undeveloped land		224,732		—		—		318		318		225,050		—
Undeveloped land		29,552		66		—		474		540		30,092		—
Real estate mortgage:
Commercial investment		586,884		1,382		107		237		1,726		588,610		99
Owner occupied commercial		421,143		2,732		1,377		1,121		5,230		426,373		535
1-4 family residential		274,547		374		336		760		1,470		276,017		—
Home equity - first lien		49,321		179		—		—		179		49,500		—
Home equity - junior lien		70,467		182		56		242		480		70,947		99
Subtotal: Real estate mortgage		1,402,362		4,849		1,876		2,360		9,085		1,411,447		733
Consumer		48,058		—		—		—		—		48,058		—
Total	$	2,537,627	$	5,112	$	2,076	$	3,356	$	10,544	$	2,548,171	$	745

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Note 5 - Goodwill and Intangible Assets

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

(5) Goodwill and Intangible Assets

Goodwill, recorded on the acquisition date of an entity, represents $12.1 million related to the May 1, 2019 King acquisition and $682 thousand related to the 1996 purchase of a bank in southern Indiana. As provided for under GAAP, management has up to 12 months following the date of acquisition to finalize the fair values of the acquired assets and assumed liabilities. During this measurement period, Bancorp may record subsequent adjustments to goodwill for provisional amounts recorded at the acquisition date.

The goodwill balance at June 30, 2019 relates entirely to the Commercial Banking segment of Bancorp. GAAP requires that goodwill and intangible assets with indefinite useful lives not be amortized, but instead be tested for impairment at least annually. Impairment exists when a reporting unit’s carrying value of goodwill exceeds its fair value. Bancorp’s annual goodwill impairment test is conducted as of December 31 of each year or more often as situations dictate. At December 31, 2018, Bancorp’s Commercial Banking reporting unit had positive equity and Bancorp elected to perform a qualitative assessment to determine if it was more-likely-than-not that the fair value of the reporting unit exceeded its carrying value, including goodwill. The qualitative assessment indicated that it was not more-likely-than-not that the carrying value of the reporting unit exceeded its fair value. Therefore, Bancorp did not complete the two-step impairment test as of December 31, 2018.

Changes in the carrying value of goodwill follows:

	Three months ended				Six months ended
	June 30,				June 30,
(In thousands)	2019		2018		2019		2018
Balance at beginning of period	$	682	$	682	$	682	$	682
Goodwill acquired		12,144		—		12,144		—
Impairment		—		—		—		—
Balance at end of period	$	12,826	$	682	$	12,826	$	682

The Company recorded core deposit intangible assets of $1.5 million and $2.5 million in association with its May 1, 2019 King and 2013 TBOC acquisitions, respectively.

Details regarding the King acquisition are discussed in the Acquisitions footnote. Changes in the net carrying amount of core deposit intangibles follow:

	Three months ended						Six months ended
	June 30,						June 30,
(In thousands)	2019			2018			2019			2018
Balance at beginning of period	$	1,015		$	1,182		$	1,056		$	1,225
Core deposit intangible acquired		1,519			—			1,519			—
Amortization		(73	)		(43	)		(114	)		(86	)
Balance at end of period	$	2,461		$	1,139		$	2,461		$	1,139

Mortgage servicing rights (“MSRs”), a component of other assets, 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 June 30, 2019 and December 31, 2018 were $2.9 million and $3.6 million, respectively.

Total outstanding principal balances of loans serviced for others were $325.1 million and $327.9 million at June 30, 2019, and December 31, 2018, respectively.

Changes in the net carrying amount of MSRs follows:

	Three months ended						Six months ended
	June 30,						June 30,
(In thousands)	2019			2018			2019			2018
Balance at beginning of period	$	1,070		$	861		$	1,022		$	875
Additions for mortgage loans sold		134			74			214			95
Amortization		(36	)		(37	)		(68	)		(72	)
Balance at end of period	$	1,168		$	898		$	1,168		$	898

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Note 6 - Income Taxes

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Income Tax Disclosure [Text Block]

(6) Income Taxes

In March 2019, the Kentucky Legislature passed HB354 requiring financial institutions to transition from a capital based franchise tax to the Kentucky corporate income tax beginning in 2021. Historically, the franchise tax, a component of non-interest expenses, was assessed at 1.1% of net capital and averaged $2.5 million annually over the prior two year-end periods. The Kentucky corporate income tax will be assessed at 5% of Kentucky taxable income and will be included as a component of current and deferred state income tax expense. Associated with this change, during the first quarter of 2019, Bancorp established a Kentucky state deferred tax asset related to existing temporary differences estimated to reverse after the effective date of the law change. Bancorp recorded a corresponding state tax benefit, net of federal impact of $1.3 million, or approximately $0.06 per diluted share for the first quarter 2019.  While this is positive in the short-term, Bancorp anticipates an unfavorable impact of approximately $200 thousand per year beginning in 2021.

In April 2019, the Kentucky legislature passed HB458 allowing banks and their holding companies to be combined together for Kentucky tax return filings. The combined filing will allow Bancorp’s holding company net operating losses to offset against net revenue generated by The Bank and reduce Bancorp’s tax liability. Bancorp recorded s state tax benefit associated with this change of $2.4 million in the second quarter of 2019, or approximately $0.11 per diluted share for the three and six month periods ended June 30, 2019.

Components of income tax expense (benefit) from operations follow:

	Three months ended						Six months ended
	June 30,						June 30,
(In thousands)	2019			2018			2019			2018
Current income tax expense:
Federal	$	3,772		$	3,426		$	6,498		$	5,862
State		189			182			330			310
Total current income tax expense		3,961			3,608			6,828			6,172
Deferred income tax expense (benefit) :
Federal		224			(421	)		789			46
State		(3,155	)		(28	)		(4,768	)		(7	)
Total deferred income tax expense		(2,931	)		(449	)		(3,979	)		39
Change in valuation allowance		—			—			20			—
Total income tax expense	$	1,030		$	3,159		$	2,869		$	6,211

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

	Three months ended						Six months ended
	June 30,						June 30,
	2019			2018			2019			2018
U.S. federal statutory income tax rate		21.0	%		21.0	%		21.0	%		21.0	%
Kentucky state income tax enactments		(14.1	)		—			(10.7	)		—
Excess tax benefits from stock-based compensation arrangements		(0.4	)		(1.2	)		(1.1	)		(1.5	)
Increase in cash surrender value of life insurance		(0.6	)		(1.2	)		(0.9	)		(0.6	)
Tax credits		(0.7	)		(0.7	)		(0.7	)		(0.5	)
Tax exempt interest income		(0.3	)		(0.5	)		(0.3	)		(0.5	)
State income taxes, net of federal benefit		0.8			0.7			0.8			0.7
Other, net		0.2			0.8			0.1			0.1
Effective income tax rate		5.9	%		18.9	%		8.2	%		18.7	%

Currently, state income tax expense represents tax owed to the state of Indiana. Kentucky and Ohio state bank taxes are currently based on capital levels, and are recorded as other non-interest expense. See comment above regarding recent changes in Kentucky tax law.

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 June 30, 2019 and December 31, 2018, 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 2015.

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Note 7 - Deposits

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Deposit Liabilities Disclosures [Text Block]

(7) Deposits

The composition of the Bank’s deposits follows:

(In thousands)	June 30, 2019		December 31, 2018
Non-interest bearing demand deposits	$	777,652	$	711,023
Interest bearing deposits:
Interest bearing demand		824,324		892,867
Savings		171,471		155,007
Money market		675,221		688,744
Time deposits of $250 thousand or more		71,952		55,182
Other time deposits(1)		362,833		291,533
Total time deposits		434,785		346,715
Total interest bearing deposits		2,105,801		2,083,333
Total deposits	$	2,883,453	$	2,794,356

(1) Includes $29.8 million in brokered deposits as of both June 30, 2019 and December 31, 2018.

Deposits totaling $125.5 million were acquired on May 1, 2019, associated with the King acquisition.

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Note 8 - Securities Sold Under Agreements to Repurchase

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Repurchase Agreements, Resale Agreements, Securities Borrowed, and Securities Loaned Disclosure [Text Block]

(8) Securities Sold Under Agreements to Repurchase

SSUAR represent a funding source of Bancorp and are primarily used by commercial customers in conjunction with collateralized corporate cash management accounts. Such repurchase agreements are considered financing agreements and mature within one business day from the transaction date. At June 30, 2019, all of these financing arrangements had overnight maturities and were secured by government sponsored enterprise obligations and government agency mortgage-backed securities which were owned and controlled by Bancorp.

Information concerning SSUAR follows:

(Dollars in thousands)	June 30, 2019			December 31, 2018
Outstanding balance at end of period	$	33,809		$	36,094
Weighted average interest rate at end of period		0.31	%		0.24	%

	Three months ended						Six months ended
	June 30,						June 30,
(Dollars in thousands)	2019			2018			2019			2018
Average outstanding balance during the period	$	39,969		$	61,993		$	38,755		$	66,609
Average interest rate during the period		0.28	%		0.21	%		0.28	%		0.20
Maximum outstanding at any month end during the period	$	43,160		$	60,801		$	43,160		$	74,725

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Note 9 - Federal Home Loan Bank Advances

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Federal Home Loan Bank Advances, Disclosure [Text Block]

(9) Federal Home Loan Bank Advances

Bancorp had outstanding 58 separate advances totaling $84.3 million as of June 30, 2019, as compared with 14 separate advances totaling $48.2 million as of December 31, 2018. As a result of the King acquisition, Bancorp assumed 46 advances totaling $43.3 million, with maturities ranging from 2019 to 2028. These advances were discounted to fair value as of the acquisition date. See the acquisition footnote for details. As of June 30, 2019, for 16 advances totaling $51 million, all of which are non-callable, interest payments are due monthly, with principal due at maturity. For the remaining advances, principal and interest payments are due monthly based on an amortization schedule.

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

(In thousands)	June 30, 2019					December 31, 2018
Maturity			Weighted average					Weighted average
Year	Advance		Fixed Rate			Advance		Fixed Rate
2019	$	30,850		2.42	%	$	30,000		2.54	%
2020		20,390		2.38			1,691		2.23
2021		2,561		2.46			215		2.12
2023		579		1.01			—		—
2024		2,131		2.36			2,240		2.36
2025		4,192		2.42			4,626		2.42
2026		8,470		1.95			8,185		1.99
2027		8,771		1.75			—		—
2028		6,335		2.38			1,220		1.49
Total	$	84,279		2.28	%	$	48,177		2.39	%

FHLB advances are collateralized by certain commercial and residential real estate mortgage loans under a blanket mortgage collateral pledge agreement and FHLB stock. Bancorp views these advances to be an effective alternative to brokered deposits to fund loan growth. At June 30, 2019, and December 31, 2018, the amount of available credit from the FHLB totaled $484.0 million, and $537.0 million, respectively. Bancorp also had $105 million in federal funds lines available from correspondent banks at both June 30, 2019, and December 31, 2018.

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Note 10 - Other Comprehensive Income (Loss)

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Comprehensive Income (Loss) Note [Text Block]

(10) Other Comprehensive Income (Loss)

The following tables illustrate activity within the balances in accumulated other comprehensive income (“OCI”) by component:

	Net unrealized			Net unrealized			Minimum
	gains (losses)			gains (losses)			pension
Three months ended June 30, 2019	on securities			on cash			liability
(In thousands)	available for sale			flow hedges			adjustment			Total
Balance, beginning of period	$	(2,536	)	$	234		$	(211	)	$	(2,513	)
Net current period other comprehensive income (loss)		3,827			(248	)		—			3,579
Balance, end of period	$	1,291		$	(14	)	$	(211	)	$	1,066
Three months ended June 30, 2018
Balance, beginning of period	$	(5,995	)	$	544		$	(393	)	$	(5,844	)
Net current period other comprehensive income (loss)		(1,279	)		79			—			(1,200	)
Balance, end of period	$	(7,274	)	$	623		$	(393	)	$	(7,044	)

	Net unrealized			Net unrealized			Minimum
	gains (losses)			gains (losses)			pension
Six months ended June 30, 2019	on securities			on cash			liability
(In thousands)	available for sale			flow hedges			adjustment			Total
Balance, beginning of period	$	(5,330	)	$	408		$	(220	)	$	(5,142	)
Net current period other comprehensive income (loss)		6,621			(422	)		9			6,208
Balance, end of period	$	1,291		$	(14	)	$	(211	)	$	1,066
Six months ended June 30, 2018
Balance, beginning of period	$	(1,781	)	$	193		$	(342	)	$	(1,930	)
Net current period other comprehensive income (loss)		(4,997	)		389			—		$	(4,608	)
Reclassification adjustment for adoption of ASU 2018-02		(496	)		41			(51	)		(506	)
Balance, end of period	$	(7,274	)	$	623		$	(393	)	$	(7,044	)

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Note 11 - Preferred Stock

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Preferred Stock [Text Block]

(11) 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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Note 12 - Net Income Per Share

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Earnings Per Share [Text Block]

(12) Net Income Per Share

The following table reflects, for the three months ended June 30, 2019 and 2018, net income (numerator) and average shares outstanding (denominator) for basic and diluted net income per share computations:

	Three months ended				Six months ended
	June 30,				June 30,
(In thousands, except per share data)	2019		2018		2019		2018
Net income	$	16,543	$	13,579	$	32,184	$	26,983
Weighted average shares outstanding - basic		22,689		22,625		22,675		22,601
Dilutive securities		260		342		273		358
Weighted average shares outstanding- diluted		22,949		22,967		22,948		22,959
Net income per share, basic	$	0.73	$	0.60	$	1.42	$	1.19
Net income per share, diluted		0.72		0.59		1.40		1.17

Stock appreciation rights (“SARs”) excluded from the earnings per share calculation because their impact was antidilutive follows:

	Three				Six
	months ended				months ended
(In thousands)	June 30,				June 30,
	2019		2018		2019		2018
Antidilutive SARs		200		93		200		93

These shares while antidilutive, could however, be dilutive to earnings per share (“EPS”) in the future.

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Note 13 - Defined Benefit Plan

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Pension and Other Postretirement Benefits Disclosure [Text Block]

(13) Defined Benefit Plan

Bancorp sponsors an unfunded, non-qualified, defined benefit retirement plan for three key officers (one current and two retired), and has no plans to increase the number of or benefits to participants. All participants are fully vested. Actuarially determined pension costs are expensed and accrued over the service period, and benefits are paid from Bancorp’s assets. Bancorp maintains life insurance policies, for which it is the beneficiary, on participants and certain former executives. Income from these policies is utilized to offset costs of benefits. Net periodic benefit cost was immaterial for all respective periods.

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Note 14 - Stock-based Compensation

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

(14) Stock-Based Compensation

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

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. In 2018 shareholders approved an additional 500 thousand shares for issuance under the plan. As of June 30, 2019, there were 505 thousand shares available for future awards.

Stock Options – Bancorp had no stock options outstanding as of June 30, 2019 and December 31, 2018.

SARs – SARs granted have a vesting schedule of 20% per year and expire 10 years after the grant date unless forfeited due to employment termination.

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

	2019			2018
Dividend yield		2.54	%		2.56	%
Expected volatility		20.39	%		20.17	%
Risk free interest rate		2.52	%		2.96	%
Expected life of SARs (in years)		7.2			7.0

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

Restricted stock awards (“RSAs”) – RSAs granted to officers vest over 5 years. For all grants prior to 2015, grantees are entitled to dividend payments during the vesting period. For grants in 2015 and forward, forfeitable dividends are deferred until shares are vested. Fair value of RSAs is equal to the market value of the shares on the date of grant.

Grants of performance stock units (“PSUs”) – PSUs vest based upon service and a 3-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 market value of the underlying shares on the date of grant, adjusted for non-payment of dividends. Grants require a 1 year post-vesting holding period and the fair value of such grants incorporates a liquidity discount related to the holding period of 4.1%, 4.3% and 5.1% for 2019, 2018, and 2017, respectively.

Grants of restricted stock units (“RSUs”) – RSUs are only granted to non-employee 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 equals market value of underlying shares on the date of grant.

Bancorp utilized cash of $272 thousand during the first six months of 2019 for the purchase of shares upon the vesting of RSUs. This compares with cash used of $155 thousand during the first six months of 2018 for the purchase of shares.

In the first quarter of 2019, Bancorp awarded 9,834 RSUs to non-employee directors of Bancorp with a grant date fair value of $330 thousand.

Bancorp has recognized stock-based compensation expense for SARs, RSAs, and PSUs within compensation expense, and RSUs for directors within other non-interest expense, as follows:

	Three months ended June 30, 2019
(In thousands)	Stock Appreciation Rights			Restricted Stock Awards			Restricted Stock Units			Performance Stock Units			Total
Expense	$	86		$	306		$	83		$	518		$	993
Deferred tax benefit		(18	)		(65	)		(17	)		(109	)		(209	)
Total net expense	$	68		$	241		$	66		$	409		$	784

	Three months ended June 30, 2018
(In thousands)	Stock Appreciation Rights			Restricted Stock Awards			Restricted Stock Units			Performance Stock Units			Total
Expense	$	77		$	275		$	62		$	798		$	1,212
Deferred tax benefit		(16	)		(58	)		(13	)		(167	)		(254	)
Total net expense	$	61		$	217		$	49		$	631		$	958

	Six months ended June 30, 2019
(In thousands)	Stock Appreciation Rights			Restricted Stock Awards			Restricted Stock Units			Performance Stock Units			Total
Expense	$	170		$	599		$	164		$	923		$	1,856
Deferred tax benefit		(36	)		(126	)		(34	)		(194	)		(390	)
Total net expense	$	134		$	473		$	130		$	729		$	1,466

	Six months ended June 30, 2018
(In thousands)	Stock Appreciation Rights			Restricted Stock Awards			Restricted Stock Units			Performance Stock Units			Total
Expense	$	150		$	551		$	124		$	1,210		$	2,035
Deferred tax benefit		(32	)		(116	)		(26	)		(253	)		(427	)
Total net expense	$	118		$	435		$	98		$	957		$	1,608

As of June 30, 2019, Bancorp has $7.4 million of unrecognized stock-based compensation expense estimated to be recorded as follows:

(In thousands) Year ended	Stock Appreciation Rights		Restricted Stock Awards		Restricted Stock Units		Performance Stock Units		Total
Remainder of 2019	$	175	$	599	$	166	$	999	$	1,939
2020		306		1,049		2		1,325		2,682
2021		248		830		—		466		1,544
2022		193		559		—		—		752
2023		118		308		—		—		426
2024		11		25		—		—		36
Total estimated expense	$	1,051	$	3,370	$	168	$	2,790	$	7,379

The following table summarizes SARs activity and related information:

													Weighted
							Weighted				Weighted		average
							average		Aggregate		average		remaining
				Exercise			exercise		intrinsic		fair		contractual
(In thousands, except per share data)	SARs			price			price		value(1)		value		life (in years)
Outstanding, January 1, 2018		704		$14.02	-	$40.00	$	19.51	$	12,923	$	3.47		5.1
Granted		100		35.90	-	39.32		37.75		—		6.07
Exercised		(73	)	14.02	-	19.37		15.32		1,654		3.43
Forfeited		—			-			-		—		—
Outstanding, December 31, 2018		731		$14.02	-	$40.00	$	22.42	$	8,422	$	3.82		5.2
Outstanding, January 1, 2019		731		$14.02	-	$40.00	$	22.42	$	8,422	$	3.82
Granted		53		36.65	-	38.18		37.01		—		6.24
Exercised		(47	)	14.02	-	22.96		17.16		830		3.62
Forfeited		—			-			-		—		—
Outstanding, June 30, 2019		737		$14.02	-	$40.00	$	23.79	$	9,505	$	4.01		5.0
Vested and exercisable		525		$14.02	-	$40.00	$	19.20	$	8,975	$	3.38		3.5
Unvested		212		22.96	-	40.00		35.14		530		5.58		8.5
Outstanding, June 30, 2019		737		$14.02	-	$40.00	$	23.79	$	9,505	$	4.01		5.0
Vested at June 30, 2019		79		$19.37	-	$40.00	$	27.39	$	740	$	4.55

(1) - Intrinsic value for SARs is defined as the amount by which the current market price of the underlying stock exceeds the exercise or grant price.

The following table summarizes activity for RSAs granted to officers:

				Grant date
				weighted
(In thousands, except per share data)	RSAs			average cost
Unvested at January 1, 2018		119		$	27.62
Shares awarded		40			35.89
Restrictions lapsed and shares released		(44	)		23.62
Shares forfeited		(5	)		31.35
Unvested at December 31, 2018		110		$	32.09
Unvested at January 1, 2019		110		$	32.09
Shares awarded		39			34.88
Restrictions lapsed and shares released		(39	)		28.70
Shares forfeited		—			—
Unvested at June 30, 2019		110		$	34.32

Expected shares to be awarded for PSUs granted to executive officers of Bancorp, the three-year performance period for which began January 1 of the award year are as follows:

	Vesting				Expected
Grant	period		Fair		shares to
year	in years		value		be awarded
2017		3	$	35.66		61,893
2018		3		31.54		71,932
2019		3		32.03		43,602

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Note 15 - Commitments and Contingent Liabilities

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

(15) Commitments and Contingent Liabilities

As of June 30, 2019 and December 31, 2018, Bancorp had various commitments outstanding that arose in the normal course of business, such as unused commitments or lines of credit and commitments made to lend in the future, which are properly not reflected in the consolidated financial statements. Total off balance sheet commitments to extend credit follows:

(In thousands)	June 30, 2019		December 31, 2018
Commercial and Industrial	$	381,824	$	309,920
Construction - Commercial		224,641		163,314
Construction - Residential		15,631		16,050
Home Equity		154,030		147,907
Credit Cards		21,222		20,003
Overdrafts		21,777		21,751
Letters of credit		23,359		20,891
Other		43,572		33,369
Future loan commitments		213,687		101,399
Total off balance sheet commitments to extend credit	$	1,099,743	$	834,604

Commitments to extend credit are an agreement to lend to a customer as long as collateral is available as agreed upon and there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Bancorp uses the same credit and collateral policies in making commitments and conditional guarantees as for on-balance sheet instruments. Bancorp evaluates each customer’s creditworthiness on a case by case basis. The amount of collateral obtained is based on management’s credit evaluation of the customer. Collateral held varies but may include accounts receivable, inventory, securities, 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 June 30, 2019 and December 31, 2018, 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 1 to 2 years.

As of June 30, 2019, in the normal course of business, there were pending legal actions and proceedings in which claims for damages are asserted. Management, after discussion with legal counsel, believes the ultimate result of these legal actions and proceedings will not have a material adverse effect on the consolidated financial position or results of operations of Bancorp.

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

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

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

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

Fair value represents the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

● Level 1: Valuation is based upon quoted (unadjusted) 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 maximization of use of observable inputs and minimization of 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.

At June 30, 2019 and December 31, 2018, Bancorp’s securities available for sale portfolio and interest rate swaps were recorded at fair value on a recurring basis.

All available for sale 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 observable in the market place and can be derived from or supported by observable data. These measurements are classified as Level 2.

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

Mortgage servicing rights, impaired loans and OREO are 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.

Carrying values of assets measured at fair value on a recurring basis follows:

(In thousands)	Fair value at June 30, 2019
Assets	Total		Level 1		Level 2		Level 3
Securities available for sale:
Government sponsored enterprise obligations	$	268,015	$	—	$	268,015	$	—
Mortgage backed securities - government agencies		131,598		—		131,598		—
Obligations of states and political subdivisions		23,966		—		23,966		—
Total Securities available for sale		423,579		—		423,579		—
Interest rate swaps		1,813		—		1,813		—
Total assets	$	425,392	$	—	$	425,392	$	—
Liabilities
Interest rate swaps	$	1,849	$	—	$	1,849	$	—

(In thousands)	Fair value at December 31, 2018
Assets	Total		Level 1		Level 2		Level 3
Securities available for sale:
Government sponsored enterprise obligations	$	261,039	$	—	$	261,039	$	—
Mortgage backed securities - government agencies		146,277		—		146,277		—
Obligations of states and political subdivisions		29,679		—		29,679		—
Total Securities available for sale		436,995		—		436,995		—
Interest rate swaps		1,035		—		1,035		—
Total assets	$	438,030	$	—	$	438,030	$	—
Liabilities
Interest rate swaps	$	543	$	—	$	543	$	—

For the securities portfolio, Bancorp monitors the valuation technique used by pricing agencies to ascertain when transfers between levels have occurred. The nature of other assets and liabilities measured at fair value is such that transfers in and out of any level are expected to be rare. For the three and six months ended June 30, 2019, there were no transfers between Levels 1, 2, or 3.

Bancorp had nofinancial instruments classified within Level 3 of the valuation hierarchy for assets and liabilities measured at fair value on a recurring basis at June 30, 2019 or December 31, 2018.

Discussion of assets measured at fair value on a non-recurring basis follows:

Mortgage Servicing Rights – On at least a quarterly basis, MSRs are evaluated for impairment based upon the fair value of the MSRs as compared to carrying amount. 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 June 30, 2019 and December 31, 2018, there was novaluation allowance for the mortgage servicing rights, as the fair value exceeded the cost. Accordingly, the MSRs are not included in the following tabular disclosure for June 30, 2019 or December 31, 2018.

Impaired loans - Collateral-dependent impaired loans generally reflect partial charge-downs to their respective fair value, which is commonly based on recent real estate appraisals or other sources of valuations based upon the underlying collateral. Also, fair value is calculated as the carrying value of loans with a specific valuation allowance, less the specific valuation allowance. Fair value of impaired loans was primarily measured based on the value of collateral securing these loans. Impaired loans are classified within Level 3 of the fair value hierarchy. Collateral may be real estate and/or business assets including equipment, inventory, and/or accounts receivable. Bancorp determines the value of real estate collateral based on independent appraisals performed by qualified licensed appraisers. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Appraised values are discounted for costs to sell and may be discounted further based on management’s historical knowledge, changes in market conditions from the date of the most recent appraisal, and/or management’s expertise and knowledge of the customer and the customer’s business. Such discounts by management are subjective and are typically significant unobservable inputs for determining fair value. For other assets, Bancorp relies on both internal and third party assessments of asset value, based on information provided by the borrower, following methodologies similar to those described for real estate. As of June 30, 2019, total impaired collateral dependent loans charged down to their fair value and impaired loans with a valuation allowance were $389 thousand, and the specific allowance totaled $37 thousand, resulting in a fair value of $352 thousand, compared with total collateral dependent loans charged down to their fair value and impaired loans with a valuation allowance of $967 thousand, and the specific allowance allocation totaling $42 thousand, resulting in a fair value of $925 thousand at December 31, 2018. Losses represent charge offs and changes in specific allowances for the periods indicated.

Other real estate owned (“OREO”) - Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate 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 following table, 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 June 30, 2019 and December 31, 2018, carrying value of all other real estate owned was $563 thousand and $1.0 million, respectively.

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

(In thousands)	Fair value at June 30, 2019								Losses recorded:
									Three months		Six months
									ended		ended
	Total		Level 1		Level 2		Level 3		June 30, 2019		June 30, 2019
Impaired loans	$	352	$	—	$	—	$	352	$	—	$	—
Other real estate owned		239		—		—		239		—		—

(In thousands)	Fair value at December 31, 2018								Losses recorded:
									Three months		Six months
									ended		ended
	Total		Level 1		Level 2		Level 3		June 30, 2018		June 30, 2018
Impaired loans	$	925	$	—	$	—	$	925	$	304	$	1,419
Other real estate owned		239		—		—		239		—		—

For Level 3 assets measured at fair value on a non-recurring basis as of June 30, 2019 and December 31, 2018, the significant unobservable inputs used in the fair value measurements are presented below.

June 30, 2019
	Fair		Valuation	Unobservable	(weighted
(Dollars in thousands)	value		technique	inputs	average)
Impaired loans - collateral dependent	$	352	Appraisal	Appraisal discounts		10.0	%
Other real estate owned		239	Appraisal	Appraisal discounts		22.0

December 31, 2018
	Fair		Valuation	Unobservable	(weighted
(Dollars in thousands)	value		technique	inputs	average)
Impaired loans - collateral dependent	$	925	Appraisal	Appraisal discounts		9.9	%
Other real estate owned		1,018	Appraisal	Appraisal discounts		12.2

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

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Fair Value Disclosures [Text Block]

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

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
June 30, 2019	amount		Fair value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	116,039	$	116,039	$	116,039	$	—	$	—
Mortgage loans held for sale		3,922		4,023		—		4,023		—
Federal Home Loan Bank stock		11,316		11,316		—		11,316		—
Loans, net		2,737,464		2,749,157		—		—		2,749,157
Accrued interest receivable		9,633		9,633		9,633		—		—
Liabilities
Non-interest bearing deposits		777,652		777,652		777,652		—		—
Transaction deposits		1,671,016		1,671,016		—		1,671,016		—
Time deposits		434,785		436,451		—		436,451		—
Securities sold under agreement to repurchase		33,809		33,809		—		33,809		—
Federal funds purchased		12,012		12,012		—		12,012		—
FHLB advances		84,279		84,505		—		84,505		—
Accrued interest payable		1,008		1,008		1,008		—		—

(In thousands)	Carrying
December 31, 2018	amount		Fair value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	198,939	$	198,939	$	198,939	$	—	$	—
Mortgage loans held for sale		1,675		1,743		—		1,743		—
Federal Home Loan Bank stock		10,370		10,370		—		10,370		—
Loans, net		2,522,637		2,508,587		—		—		2,508,587
Accrued interest receivable		8,360		8,360		8,360		—		—
Liabilities
Non-interest bearing deposits		711,023		711,023		711,023		—		—
Transaction deposits		1,736,618		1,736,618		—		1,736,618		—
Time deposits		346,715		345,273		—		345,273		—
Securities sold under agreement to repurchase		36,094		36,094		—		36,094		—
Federal funds purchased		10,247		10,247		—		10,247		—
FHLB advances		48,177		47,227		—		47,227		—
Accrued interest payable		762		762		762		—		—

Limitations

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

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Note 18 - Derivative Financial Instruments

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

(18) Derivative Financial Instruments

Periodically, Bancorp enters into interest rate swap transactions with borrowers who desire to hedge exposure to rising interest rates, while at the same time entering into an offsetting interest rate swap, with substantially matching terms, with another approved independent counterparty. These are undesignated derivative instruments and are recognized on the balance sheet at fair value. Because of matching terms of offsetting contracts and collateral provisions mitigating any non-performance risk, changes in fair value subsequent to initial recognition have an insignificant effect on earnings. Exchanges of cash flows related to undesignated interest rate swap agreements for the first six months of 2019 were offsetting and therefore had no effect on Bancorp’s earnings or cash flows.

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

At June 30, 2019 and December 31, 2018, Bancorp had outstanding undesignated interest rate swap contracts as follows:

(Dollars in thousands)	Receiving				Paying
	June 30,		December 31,		June 30,		December 31,
	2019		2018		2019		2018
Notional amount	$	60,607	$	55,505	$	60,607	$	55,505
Weighted average maturity (years)		7.4		8.0		7.4		8.0
Fair value	$	1,813	$	519	$	1,835	$	543

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

The following table details Bancorp’s derivative position designated as a cash flow hedge, and the fair values as of June 30, 2019 and December 31, 2018.

(Dollars in thousands)
							Fair value
Notional		Maturity	Receive (variable)	Pay fixed			assets (liabilities)
amount		date	index	swap rate			June 30, 2019			December 31, 2018
$	10,000	12/6/2021	US 3 Month LIBOR		1.89	%	$	(37	)	$	193
	20,000	12/6/2020	US 3 Month LIBOR		1.79	%		23			323
$	30,000				1.82	%	$	(14	)	$	516

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Note 19 - Regulatory Matters

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Regulatory Capital Requirements under Banking Regulations [Text Block]

(19) Regulatory Matters

Bancorp and the Bank are subject to capital regulations in accordance with Basel III, as administered by banking regulators.  Regulatory agencies measure capital adequacy within a framework that makes capital requirements, in part, dependent on the individual risk profiles of financial institutions. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on Bancorp’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Holding Company and the Bank must meet specific capital guidelines that involve quantitative measures of Bancorp’s assets, liabilities and certain off-balance sheet items, as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators regarding components, risk weightings and other factors.

Banking regulators have categorized the Bank as well-capitalized. For prompt corrective action, the regulations in accordance with Basel III define “well capitalized” as a 6.5% Common Equity Tier 1 Risk-Based Capital ratio, an 8.0% Tier 1 Risk-Based Capital ratio, a 10.0% Total Risk-Based Capital ratio and a 5.0% Tier 1 Leverage ratio. Additionally, in order to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, Bancorp and Bank must hold a capital conservation buffer composed of Common Equity Tier 1 Risk-Based Capital above their minimum risk-based capital requirements. The capital conservation buffer phased in from 2016 to 2019 on the following schedule: a capital conservation buffer of 0.625% effective January 1, 2016; 1.25% effective January 1, 2017; 1.875% effective January 1, 2018; and a fully phased in capital conservation buffer of 2.5% on January 1, 2019.

Bancorp continues to exceed the regulatory requirements for Total Risk Based Capital, Common Equity Tier I Risk Based, Tier I Risk Based Capital and Tier I Leverage Capital. Bancorp and the Bank intend to maintain a capital position that meets or exceeds the “well-capitalized” requirements as defined by the FRB and the FDIC, in addition to the Capital Conservation Buffer.

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

(Dollars in thousands)	Actual					Minimum for adequately capitalized					Minimum for well capitalized
June 30, 2019	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk-based capital (1)
Consolidated	$	400,314		12.67	%	$	252,821		8.00	%	NA		NA
Bank		392,705		12.45			252,265		8.00		$	315,331		10.00	%
Common equity tier 1 risk-based capital
Consolidated		373,548		11.82			142,212		4.50		NA		NA
Bank		365,939		11.60			141,899		4.50			204,965		6.50
Tier 1 risk-based capital (1)
Consolidated		373,548		11.82			189,616		6.00		NA		NA
Bank		365,939		11.60			189,198		6.00			252,265		8.00
Leverage (2)
Consolidated		373,548		10.91			136,955		4.00		NA		NA
Bank		365,939		10.70			136,784		4.00			170,980		5.00

(Dollars in thousands)	Actual					Minimum for adequately capitalized					Minimum for well capitalized
December 31, 2018	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk-based capital (1)
Consolidated	$	396,019		13.91	%	$	227,714		8.00	%	NA		NA
Bank		385,637		13.56			227,462		8.00		$	284,327		10.00	%
Common equity tier 1 risk-based capital
Consolidated		370,135		13.00			128,089		4.50		NA		NA
Bank		359,753		12.65			127,947		4.50			184,813		6.50
Tier 1 risk-based capital (1)
Consolidated		370,135		13.00			170,785		6.00		NA		NA
Bank		359,753		12.65			170,596		6.00			227,462		8.00
Leverage (2)
Consolidated		370,135		11.33			130,698		4.00		NA		NA
Bank		359,753		11.02			130,569		4.00			163,211		5.00

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

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

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

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Note 20 - Segments

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

(20) Segments

Bancorp’s principal activities include commercial banking and 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 investment products sales 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 Bancorp are involved in the commercial banking segment. Goodwill of $12.8 million, of which $682 thousand relates to a bank acquisition in 1996, and $12.1 million resulted from the King acquisition, has been assigned to the commercial banking segment. Assets assigned to WM&T primarily consist of net premises and equipment.

Selected financial information by business segment for the three and six month periods ended June 30, 2019 and 2018 follows: 

			Wealth
	Commercial		Management
(In thousands)	Banking		and Trust		Total Company
Three months ended June 30, 2019
Net interest income	$	30,690	$	84	$	30,774
Provision		—		—		—
Wealth management and trust services		—		5,662		5,662
All other non-interest income		6,601		—		6,601
Non-interest expenses		22,297		3,167		25,464
Income before income tax expense		14,994		2,579		17,573
Income tax expense		471		559		1,030
Net income	$	14,523	$	2,020	$	16,543
Segment assets	$	3,462,105	$	1,718	$	3,463,823
Three months ended June 30, 2018
Net interest income	$	28,612	$	62	$	28,674
Provision		1,235		—		1,235
Wealth management and trust services		—		5,344		5,344
All other non-interest income		6,091		—		6,091
Non-interest expenses		18,938		3,198		22,136
Income before income tax expense		14,530		2,208		16,738
Income tax expense		2,644		515		3,159
Net income	$	11,886	$	1,693	$	13,579
Segment assets	$	3,321,948	$	1,892	$	3,323,840

			Wealth
	Commercial		management
(In thousands)	Banking		and Trust		Total Company
Six months ended June 30, 2019
Net interest income	$	60,271	$	160	$	60,431
Provision		600		—		600
Wealth management and trust services		—		11,101		11,101
All other non-interest income		12,224		—		12,224
Non-interest expenses		41,903		6,200		48,103
Income before income tax expense		29,992		5,061		35,053
Income tax expense		1,771		1,098		2,869
Net income	$	28,221	$	3,963	$	32,184
Segment assets	$	3,462,105	$	1,718	$	3,463,823
Six months ended June 30, 2018
Net interest income	$	55,850	$	133	$	55,983
Provision		1,970		—		1,970
Wealth management and trust services		—		10,844		10,844
All other non-interest income		11,500		—		11,500
Non-interest expenses		36,798		6,365		43,163
Income before income tax expense		28,582		4,612		33,194
Income tax expense		5,210		1,001		6,211
Net income	$	23,372	$	3,611	$	26,983
Segment assets	$	3,321,948	$	1,892	$	3,323,840

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Note 21 - Revenue From Contracts With Customers

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

(21) Revenue from Contracts with Customers

All of Bancorp’s revenue from contracts with customers in the scope of ASC 606 is recognized within non-interest income. The table below presents Bancorp’s sources of non-interest income with items outside the scope of ASC 606 noted as such:

	Three months ended June 30, 2019						Three months ended June 30, 2018
(Dollars in thousands)	Commercial		WM&T		Total		Commercial		WM&T		Total
Wealth management and trust services	$	—	$	5,662	$	5,662	$	—	$	5,344	$	5,344
Deposit service charges		1,336		—		1,336		1,447		—		1,447
Debit and credit card income		2,168		—		2,168		1,689		—		1,689
Treasury management fees		1,202		—		1,202		1,113		—		1,113
Mortgage banking income(1)		796		—		796		746		—		746
Net investment product sales commissions and fees		364		—		364		397		—		397
Bank owned life insurance(1)		184		—		184		191		—		191
Other(2)		551		—		551		508		—		508
Total non-interest income	$	6,601	$	5,662	$	12,263	$	6,091	$	5,344	$	11,435

	Six months ended June 30, 2019						Six months ended June 30, 2018
(Dollars in thousands)	Commercial		WM&T		Total		Commercial		WM&T		Total
Wealth management and trust services	$	—	$	11,101	$	11,101	$	—	$	10,844	$	10,844
Deposit service charges		2,583		—		2,583		2,858		—		2,858
Debit and credit card income		3,912		—		3,912		3,197		—		3,197
Treasury management fees		2,359		—		2,359		2,160		—		2,160
Mortgage banking income(1)		1,278		—		1,278		1,322		—		1,322
Net investment product sales commissions and fees		720		—		720		801		—		801
Bank owned life insurance(1)		362		—		362		378		—		378
Other(2)		1,010		—		1,010		784		—		784
Total non-interest income	$	12,224	$	11,101	$	23,325	$	11,500	$	10,844	$	22,344

(1) Outside of the scope of ASC 606

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

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

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

WM&T provides customers fiduciary and investment management services as agreed upon in asset management contracts. The contracts require WM&T to provide a series of distinct services for which fees are earned over time. The contracts are cancellable upon demand with fees typically based upon the asset value of investments. Revenue is accrued and recognized monthly based upon month-end asset values and collected from the customer predominately in the following month except for a small percentage of fees collected quarterly. Incentive compensation related to WM&T activities is considered a cost of obtaining the contract. Contracts between WM&T and clients do not permit performance based fees and accordingly, none of the fees earned by WM&T are performance based. Trust fees receivable as of June 30, 2019 were $2.1 million compared with $1.9 million as of December 31, 2018.

Investment products sales commissions and fees represent the Bank’s share of transaction fees and wrap fees resulting from investment services and programs provided through an agent relationship with a third party broker-dealer. Transaction fees are assessed at the time of the transaction. Those fees are collected and recognized on a monthly basis. Trailing fees are based upon market value and are assessed, collected, and recognized on a quarterly basis. Because the Bank acts as an agent in arranging the relationship between the customer and third party provider, and does not control the services rendered, investment product sales commissions and fees are reported net of related costs, including nominal incentive compensation, and trading activity charges of $257 and $261 thousand, for the six month periods ended June 30, 2019, and 2018 respectively.

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

Bancorp did not establish any contract assets or liabilities as a result of adopting ASC 606, nor were any recognized during the first six months of 2019.

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

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Note 22 - Leases

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

(22) Leases

Bancorp has operating leases for various branch locations with terms remaining from 3 months to 14 years, some of which include options to extend the leases in 5 year increments. Options reasonably expected to be exercised are included in determination of the right of use asset. Bancorp elected the practical expedient to expense short-term lease expense associated with leases with original terms 12 months or less. Bancorp elected not to separate non-lease components from lease components for its operating leases. The right-of-use lease asset and operating lease liability are recorded in others assets and other liabilities, respectively, on the consolidated balance sheet.

Balance sheet, income statement, and cash flow detail regarding operating leases follows:

(In thousands)
Balance Sheet	June 30, 2019
Operating lease right-of-use assets	$	16,056		included in premises and equipment
Operating lease liabilities		17,373		included in other liabilities
Weighted average remaining lease term (in years)	12.42
Weighted average discount rate		3.61	%
Maturities of lease liabilities:
One year or less	$	1,949
Year 2		1,929
Year 3		1,919
Year 4		1,955
Year 5		1,935
Greater than 5 years		11,870
Total lease payments	$	21,557
Less imputed interest		4,184
Total	$	17,373

(In thousands)	Three months ended		Six months ended
Income Statement	June 30, 2019		June 30, 2019
Components of lease expense:
Operating lease cost	$	489	$	997
Variable lease cost		24		63
Less sublease income		13		27
Total lease cost	$	500	$	1,033

(In thousands)	Six months ended
Cash flow Statement	June 30, 2019
Supplemental cash flow information:
Operating cash flows from operating leases	$	694

As of June 30, 2019 Bancorp had not entered into any lease agreements that had yet to commence.

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Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation – The consolidated financial statements include the accounts of Stock Yards Bancorp, Inc. (“Holding Company”), and its wholly-owned subsidiary, Stock Yards Bank & Trust Company (“Bank”). All significant inter-company transactions and accounts have been eliminated in consolidation. All companies are collectively referred to as “Bancorp” or the “Company.”

As a result of its acquisition of King, Bancorp, Inc. on May 1, 2019, Bancorp became the 100% successor owner of King Bancorp Statutory Trust I (“KBST”), an unconsolidated finance subsidiary. As permitted under the terms of KBST’s governing documents, Bancorp redeemed the trust-preferred securities at the par amount of approximately $3.6 million on June 17, 2019.

The Bank, chartered in 1904, is a Louisville, Kentucky-based, state-chartered non-member financial institution that provides services in the Louisville, Kentucky, Indianapolis, Indiana and Cincinnati, Ohio Metropolitan Statistical Areas (“MSAs”) through 43 full service banking center locations. 

As of June 30, 2019, Bancorp was divided into two reportable segments: Commercial Banking and Wealth Management & Trust (“WM&T”):

Commercial Banking provides a full range of loan and deposit products to individual consumers and businesses through commercial lending, retail lending, deposit services, treasury management services, private banking, online banking, mobile banking, merchant services, international banking, correspondent banking and other banking services. The Bank also offers securities brokerage services via its banking center network through an arrangement with a third party broker-dealer. 

WM&T, with over $3 billion in assets under management (“AUM”), provides custom-tailored financial planning, investment management, retirement planning and trust and estate services in all markets in which Bancorp operates.  

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, the financial statements do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. For further information, refer to the consolidated financial statements and notes thereto included in Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2018. Certain reclassifications have been made in the prior year financial statements to conform to current year classifications.

New Accounting Pronouncements, Policy [Policy Text Block]

Accounting Standards Updates (“ASUs”)

The following ASU was issued prior to June 30, 2019 and is considered relevant to Bancorp’s financial statements. Generally, if an issued-but-not-yet-effective ASU with an expected immaterial impact to Bancorp has been disclosed in prior SEC filings, it will not be re-disclosed.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, (“CECL”). This ASU 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. The guidance is effective for annual and interim reporting periods beginning after December 15, 2019. Bancorp expects to recognize a one-time cumulative-effect adjustment to the allowance on January 1, 2020. Interagency guidance issued in December 2018 allows for a three year phase-in of the cumulative-effect adjustment for regulatory capital reporting.

As a result of this ASU, Bancorp could experience an increase in its allowance. Bancorp has formed a committee to oversee its transition to the CECL methodology. Bancorp has devoted internal resources and purchased a third party software solution to analyze, compute and report upon the CECL disclosure requirements. In addition, Bancorp has analyzed loan-level data and is determining its CECL loan segmentation and initial segment calculation methodologies.  Bancorp is currently exploring regression techniques and has begun to run forecasting scenarios.

Recently Adopted Accounting Standards

Bancorp adopted ASU 2016-02, Leases and related amendments using an alternative transition method, effective January 1, 2019 and upon adoption recorded $17 million of right-of-use lease assets and $18 million of operating lease liabilities on its balance sheet as of June 30, 2019. Prior periods have not been restated. The right-of-use lease asset and operating lease liability are recorded in premises and equipment and other liabilities, respectively, on the consolidated balance sheet. Bancorp elected all applicable practical expedients, including the option to expense short-term leases, which are defined as leases with a term of one year or less. Bancorp also elected not to separate lease components from non-lease components.

The adoption of this ASU did not have a meaningful impact on Bancorp's performance metrics, including regulatory capital ratios and return on average assets.  Additionally, Bancorp does not believe that the adoption of this ASU by its clients will have a significant impact on Bancorp's ability to underwrite credit when client financial statements are presented inclusive of the requirements of this ASU. See the note titled “Leases” for additional information on lease activities.

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Note 2 - Acquisition of King Bancorp, Inc. (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

	May 1, 2019
	As Recorded			Fair Value				As Recorded
(In thousands)	by King			Adjustments (1)				by Bancorp
Assets aquired:
Cash and due from banks	$	3,316		$	—			$	3,316
Interest bearing due from banks		1,761			—				1,761
Available for sale securities		12,404			23		a		12,427
Loans		165,744			(1,597	)	b		164,147
Allowance for loan and lease losses		(1,812	)		1,812		b		-
Loans, net		163,932			215				164,147
Federal Home Loan Bank stock, at cost		1,517			—				1,517
Federal Reserve Bank stock, at cost		490			—				490
Premises and equipment, net		4,358			(1,328	)	c		3,030
Core deposit intangible		—			1,519		d		1,519
Bank owned life insurance		3,431			—				3,431
Other real estate owned		325			(325	)	e		—
Other assets and accrued interest receivable		867			(36	)	f		831
Total assets acquired	$	192,401		$	68			$	192,469
Liabilities assumed:
Deposits
Non-interest bearing	$	24,939		$	—			$	24,939
Interest bearing		100,839			(252	)	g		100,587
Total deposits		125,778			(252	)			125,526
Federal funds purchased		1,566			—				1,566
Federal Home Loan Bank advances		43,718			(419	)	h		43,299
Subordinated Note		3,609			—				3,609
Holding Company line of credit		2,300			—				2,300
Other liabilities and accrued interest payable		313			—				313
Total liabilities assumed		177,284			(671	)			176,613
Net assets acquired	$	15,117		$	739			$	15,856
Cash consideration paid									(28,000	)
Goodwill								$	12,144

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Note 3 - Securities (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

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

(In thousands)	Amortized		Unrealized
June 30, 2019	cost		Gains		Losses			Fair value
Government sponsored enterprise obligations	$	266,579	$	1,755	$	(319	)	$	268,015
Mortgage backed securities - government agencies		131,447		938		(787	)		131,598
Obligations of states and political subdivisions		23,854		118		(6	)		23,966
Total securities available for sale	$	421,880	$	2,811	$	(1,112	)	$	423,579
December 31, 2018
Government sponsored enterprise obligations		264,234		156		(3,351	)		261,039
Mortgage backed securities - government agencies		149,748		282		(3,753	)		146,277
Obligations of states and political subdivisions		29,760		107		(188	)		29,679
Total securities available for sale	$	443,742	$	545	$	(7,292	)	$	436,995

Investments Classified by Contractual Maturity Date [Table Text Block]

(In thousands)	Amortized cost		Fair value
Due within 1 year	$	132,158	$	132,133
Due after 1 year but within 5 years		56,040		56,033
Due after 5 years but within 10 years		7,157		7,232
Due after 10 years		95,078		96,583
Mortgage backed securities - government agencies		131,447		131,598
Total securities available for sale	$	421,880	$	423,579

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
June 30, 2019	value		losses			value		losses			value		losses
Government sponsored enterprise obligations	$	—	$	—		$	57,505	$	(319	)	$	57,505	$	(319	)
Mortgage-backed securities - government agencies		—		—			82,088		(787	)		82,088		(787	)
Obligations of states and political subdivisions		—		—			6,485		(6	)		6,485		(6	)
Total temporarily impaired securities	$	—	$	—		$	146,078	$	(1,112	)	$	146,078	$	(1,112	)
December 31, 2018
Government sponsored enterprise obligations		96,740		(38	)		149,320		(3,313	)		246,060		(3,351	)
Mortgage-backed securities - government agencies		3,108		(5	)		120,848		(3,748	)		123,956		(3,753	)
Obligations of states and political subdivisions		814		(1	)		17,639		(187	)		18,453		(188	)
Total temporarily impaired securities	$	100,662	$	(44	)	$	287,807	$	(7,248	)	$	388,469	$	(7,292	)

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Note 4 - Loans and Leases (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

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

(In thousands)	June 30, 2019		December 31, 2018
Commercial and industrial	$	860,085	$	833,524
Construction and development, excluding undeveloped land(1)		222,632		225,050
Undeveloped land		35,169		30,092
Real estate mortgage:
Commercial investment		696,421		588,610
Owner occupied commercial		452,719		426,373
1-4 family residential		338,957		276,017
Home equity - first lien		46,012		49,500
Home equity - junior lien		67,948		70,947
Subtotal: Real estate mortgage		1,602,057		1,411,447
Consumer		43,937		48,058
Total loans(2)	$	2,763,880	$	2,548,171

Schedule of Loans and Leases Receivable Outstanding Balances and Related Carrying Amounts for PCI Loans [Table Text Block]

In thousands	June 30, 2019			December 31, 2018
Contractually-required principal	$	1,864		$	432
Non-accretable amount		(1,577	)		—
Accretable amount		(57	)		(68	)
Carrying value of loans	$	230		$	364

Schedule of Loans and Leases Receivable Rollforward of the Accretable Amount on PCI Loans [Table Text Block]

	Three months ended						Six months ended
	June 30,						June 30,
(In thousands)	2019			2018			2019			2018
Balance, beginning of period	$	(62	)	$	(95	)	$	(68	)	$	(106	)
Transfers between non-accretable and accretable		—			—			—			—
Net accretion into interest income on loans, including loan fees		5			10			11			21
Generated from acquisition of King		—			—			—			—
Balance, end of period	$	(57	)	$	(85	)	$	(57	)	$	(85	)

Financing Receivable Credit Quality Indicators [Table Text Block]

(In thousands)							Substandard				Total
June 30, 2019	Pass		OAEM		Substandard		non-performing		Doubtful		loans
Commercial and industrial	$	817,645	$	23,907	$	18,241	$	292	$	—	$	860,085
Construction and development, excluding undeveloped land		222,632		—		—		—		—		222,632
Undeveloped land		35,169		—		—		—		—		35,169
Real estate mortgage:
Commercial investment		687,304		4,202		4,213		702		—		696,421
Owner occupied commercial		429,070		17,757		4,228		1,664		—		452,719
1-4 family residential		336,312		1,686		159		800		—		338,957
Home equity - first lien		46,012		—		—		—		—		46,012
Home equity - junior lien		67,236		224		18		470		—		67,948
Subtotal: Real estate mortgage		1,565,934		23,869		8,618		3,636		—		1,602,057
Consumer		43,937		—		—		—		—		43,937
Total	$	2,685,317	$	47,776	$	26,859	$	3,928	$	—	$	2,763,880
December 31, 2018
Commercial and industrial	$	803,073	$	11,516	$	18,703	$	232	$	—	$	833,524
Construction and development, excluding undeveloped land		220,532		4,200		—		318		—		225,050
Undeveloped land		29,618		—		—		474		—		30,092
Real estate mortgage:
Commercial investment		586,543		1,815		15		237		—		588,610
Owner occupied commercial		411,722		9,030		4,500		1,121		—		426,373
1-4 family residential		273,537		1,544		162		774		—		276,017
Home equity - first lien		49,500		—		—		—		—		49,500
Home equity - junior lien		70,437		249		19		242		—		70,947
Subtotal: Real estate mortgage		1,391,739		12,638		4,696		2,374		—		1,411,447
Consumer		48,058		—		—		—		—		48,058
Total	$	2,493,020	$	28,354	$	23,399	$	3,398	$	—	$	2,548,171

Financing Receivable, Allowance for Credit Loss [Table Text Block]

	Type of loan
			Construction
			and development,
Three months ended	Commercial		excluding
	and		undeveloped			Undeveloped			Real estate
(In thousands)	industrial		land			land			mortgage			Consumer			Total
Balance, April 1, 2019	$	11,762	$	1,884		$	662		$	12,001		$	155		$	26,464
Provision (credit)		92		(74	)		(61	)		10			33			-
Charge-offs		—		—			—			(13	)		(148	)		(161	)
Recoveries		4		—			—			32			77			113
Balance, June 30, 2019	$	11,858	$	1,810		$	601		$	12,030		$	117		$	26,416

				Construction
				and development,
	Commercial			excluding
	and			undeveloped			Undeveloped		Real estate
(In thousands)	industrial			land			land		mortgage			Consumer			Total
Balance, April 1, 2018	$	10,638		$	2,020		$	482	$	10,707		$	356		$	24,203
Provision (credit)		2,008			(82	)		19		(795	)		85			1,235
Charge-offs		(530	)		—			—		—			(117	)		(647	)
Recoveries		2			—			—		2			78			82
Balance, June 30, 2018	$	12,118		$	1,938		$	501	$	9,914		$	402		$	24,873

	Type of loan
				Construction
				and development,
Six months ended	Commercial			excluding
	and			undeveloped			Undeveloped			Real estate
(In thousands)	industrial			land			land			mortgage			Consumer			Total
Balance, January 1, 2019	$	11,965		$	1,760		$	752		$	10,681		$	376		$	25,534
Provision (credit)		(210	)		(153	)		(151	)		1,310			(196	)		600
Charge-offs		(3	)		—			—			(13	)		(244	)		(260	)
Recoveries		106			203			—			52			181			542
Balance, June 30, 2019	$	11,858		$	1,810		$	601		$	12,030		$	117		$	26,416

				Construction
				and development,
	Commercial			excluding
	and			undeveloped		Undeveloped			Real estate
(In thousands)	industrial			land		land			mortgage			Consumer			Total
Balance, January 1, 2018	$	11,276		$	1,724	$	521		$	11,012		$	352		$	24,885
Provision (credit)		2,769			214		(20	)		(1,104	)		111			1,970
Charge-offs		(1,939	)		—		—			—			(236	)		(2,175	)
Recoveries		12			—		—			6			175			193
Balance, June 30, 2018	$	12,118		$	1,938	$	501		$	9,914		$	402		$	24,873

(In thousands)	Loans								Allowance
June 30, 2019	Loans individually evaluated for impairment		Loans collectively evaluated for impairment		Loans acquired with deteriorated credit quality		Total loans		Loans individually evaluated for impairment		Loans collectively evaluated for impairment		Loans acquired with deteriorated credit quality		Total allowance
Commercial and industrial	$	119	$	859,966	$	—	$	860,085	$	23	$	11,835	$	—	$	11,858
Construction and development, excluding undeveloped land		—		222,632		—		222,632		—		1,810		—		1,810
Undeveloped land		—		35,169		—		35,169		—		601		—		601
Real estate mortgage		2,948		1,599,109		—		1,602,057		14		12,016		—		12,030
Consumer		—		43,937		—		43,937		—		117		—		117
Total	$	3,067	$	2,760,813	$	—	$	2,763,880	$	37	$	26,379	$	—	$	26,416

(In thousands)	Loans								Allowance
December 31, 2018	Loans individually evaluated for impairment		Loans collectively evaluated for impairment		Loans acquired with deteriorated credit quality		Total loans		Loans individually evaluated for impairment		Loans collectively evaluated for impairment		Loans acquired with deteriorated credit quality		Total allowance
Commercial and industrial	$	220	$	833,304	$	—	$	833,524	$	28	$	11,937	$	—	$	11,965
Construction and development, excluding undeveloped land		318		224,732		—		225,050		—		1,760		—		1,760
Undeveloped land		474		29,618		—		30,092		—		752		—		752
Real estate mortgage		1,641		1,409,806		—		1,411,447		14		10,667		—		10,681
Consumer		—		48,058		—		48,058		—		376		—		376
Total	$	2,653	$	2,545,518	$	—	$	2,548,171	$	42	$	25,492	$	—	$	25,534

Financing Receivable, Nonaccrual [Table Text Block]

(In thousands)	June 30, 2019		December 31, 2018
Commercial and industrial	$	96	$	192
Construction and development, excluding undeveloped land		—		318
Undeveloped land		—		474
Real estate mortgage:
Commercial investment		305		138
Owner occupied commercial		1,444		586
1-4 family residential		715		760
Home equity - first lien		—		—
Home equity - junior lien		470		143
Subtotal: Real estate mortgage		2,934		1,627
Consumer		—		—
Total non-accrual loans	$	3,030	$	2,611

Financing Receivable, Troubled Debt Restructuring [Table Text Block]

	June 30, 2019						December 31, 2018
(In thousands)			Specific		Additional				Specific		Additional
			reserve		commitment				reserve		commitment
TDRs	Balance		allocation		to lend		Balance		allocation		to lend
Commercial and industrial	$	23	$	23	$	—	$	28	$	28	$	—
1-4 family residential		14		14		—		14		14		—
Total TDRs	$	37	$	37	$	—	$	42	$	42	$	—

Impaired Financing Receivables [Table Text Block]

	As of						Three months ended				Six months ended
	June 30, 2019						June 30, 2019				June 30, 2019
			Unpaid				Average		Interest		Average		Interest
	Recorded		principal		Related		recorded		income		recorded		income
(In thousands)	investment		balance		allowance		investment		recognized		investment		recognized
Impaired loans with no related allowance:
Commercial and industrial	$	96	$	96	$	—	$	144	$	—	$	160	$	—
Construction and development, excluding undeveloped land		—		—		—		—		—		106		—
Undeveloped land		—		—		—		—		—		158		—
Real estate mortgage
Commercial investment		306		306		—		311		—		254		—
Owner occupied commercial		1,444		1,882		—		1,455		—		1,165		—
1-4 family residential		715		715		—		779		—		773		—
Home equity - first lien		—		-		—		—		—		—		—
Home equity - junior lien		469		469		—		462		—		356		—
Subtotal: Real estate mortgage		2,934		3,372		—		3,007		—		2,548		—
Consumer		—		—		—		—		—		—		—
Subtotal	$	3,030	$	3,468	$	—	$	3,151	$	—	$	2,972	$	—
Impaired loans with an allowance:
Commercial and industrial	$	23	$	23	$	23	$	24	$	—	$	26	$	1
Construction and development, excluding undeveloped land		—		—		—		—		—		—		—
Undeveloped land		—		—		—		—		—		—		—
Real estate mortgage
Commercial investment		—		—		—		—		—		—		—
Owner occupied commercial		—		—		—		—		—		—		—
1-4 family residential		14		14		14		14		—		14		—
Home equity - first lien		—		—		—		—		—		—		—
Home equity - junior lien		—		—		—		—		—		—		—
Subtotal: Real estate mortgage		14		14		14		14		—		14		—
Consumer		—		—		—		—		—		—		—
Subtotal	$	37	$	37	$	37	$	38	$	—	$	40	$	1
Total:
Commercial and industrial	$	119	$	119	$	23	$	168	$	—	$	186	$	1
Construction and development, excluding undeveloped land		—		—		—		—		—		106		—
Undeveloped land		—		—		—		—		—		158		—
Real estate mortgage
Commercial investment		306		306		—		311		—		254		—
Owner occupied commercial		1,444		1,882		—		1,455		—		1,165		—
1-4 family residential		729		729		14		793		—		787		—
Home equity - first lien		—		—		—		-		—		-		—
Home equity - junior lien		469		469		—		462		—		356		—
Subtotal: Real estate mortgage		2,948		3,386		14		3,021		—		2,562		—
Consumer		—		—		—		—		—		—		—
Total impaired loans	$	3,067	$	3,505	$	37	$	3,189	$	—	$	3,012	$	1

	As of						Three months ended				Six months ended
	December 31, 2018						June 30, 2018				June 30, 2018
			Unpaid				Average		Interest		Average		Interest
	Recorded		principal		Related		recorded		income		recorded		income
(In thousands)	investment		balance		allowance		investment		recognized		investment		recognized
Impaired loans with no related allowance:
Commercial and industrial	$	192	$	707	$	—	$	225	$	—	$	531	$	—
Construction and development, excluding undeveloped land		318		489		—		525		—		571		—
Undeveloped land		474		506		—		474		—		474		—
Real estate mortgage
Commercial investment		138		138		—		-		—		17		—
Owner occupied commercial		586		1,023		—		2,335		—		2,667		—
1-4 family residential		760		760		—		1,350		—		1,446		—
Home equity - first lien		—		-		—		-		—		-		—
Home equity - junior lien		143		143		—		17		—		22		—
Subtotal: Real estate mortgage		1,627		2,064		—		3,702		—		4,152		—
Consumer		—		—		—		46		—		30		—
Subtotal	$	2,611	$	3,766	$	—	$	4,972	$	—	$	5,758	$	—
Impaired loans with an allowance:
Commercial and industrial	$	28	$	28	$	28	$	3,074	$	—	$	2,061	$	—
Construction and development, excluding undeveloped land		—		—		—		—		—		—		—
Undeveloped land		—		—		—		48		—		32		—
Real estate mortgage
Commercial investment		—		—		—		—		—		—		—
Owner occupied commercial		—		—		—		1,645		—		1,097		—
1-4 family residential		14		14		14		14		—		14		—
Home equity - first lien		—		—		—		—		—		—		—
Home equity - junior lien		—		—		—		—		—		—		—
Subtotal: Real estate mortgage		14		14		14		1,659		—		1,111		—
Consumer		—		—		—		—		—		—		—
Subtotal	$	42	$	42	$	42	$	4,781	$	—	$	3,204	$	—
Total:
Commercial and industrial	$	220	$	735	$	28	$	3,299	$	—	$	2,592	$	—
Construction and development, excluding undeveloped land		318		489		—		525		—		571		—
Undeveloped land		474		506		—		522		—		506		—
Real estate mortgage
Commercial investment		138		138		—		-		—		17		—
Owner occupied commercial		586		1,023		—		3,980		—		3,764		—
1-4 family residential		774		774		14		1,364		—		1,460		—
Home equity - first lien		—		—		—		-		—		-		—
Home equity - junior lien		143		143		—		17		—		22		—
Subtotal: Real estate mortgage		1,641		2,078		14		5,361		—		5,263		—
Consumer		—		—		—		46		—		30		—
Total impaired loans	$	2,653	$	3,808	$	42	$	9,753	$	—	$	8,962	$	—

Financing Receivable, Past Due [Table Text Block]

													Recorded
(In thousands)							90 or more						investment
							days past due						> 90 days
			30-59 days		60-89 days		(includes all		Total		Total		and
June 30, 2019	Current		past due		past due		non-accrual)		past due		loans		accruing
Commercial and industrial	$	858,853	$	572	$	391	$	269	$	1,232	$	860,085	$	173
Construction and development, excluding undeveloped land		222,632		—		—		—		—		222,632		—
Undeveloped land		35,169		—		—		—		—		35,169		—
Real estate mortgage:
Commercial investment		692,612		1		3,107		701		3,809		696,421		396
Owner occupied commercial		450,140		643		272		1,664		2,579		452,719		220
1-4 family residential		336,548		749		873		787		2,409		338,957		72
Home equity - first lien		45,963		49		—		—		49		46,012		—
Home equity - junior lien		67,408		70		—		470		540		67,948		—
Subtotal: Real estate mortgage		1,592,671		1,512		4,252		3,622		9,386		1,602,057		688
Consumer		43,901		9		27		—		36		43,937		—
Total	$	2,753,226	$	2,093	$	4,670	$	3,891	$	10,654	$	2,763,880	$	861
December 31, 2018
Commercial and industrial	$	832,923	$	197	$	200	$	204	$	601	$	833,524	$	12
Construction and development, excluding undeveloped land		224,732		—		—		318		318		225,050		—
Undeveloped land		29,552		66		—		474		540		30,092		—
Real estate mortgage:
Commercial investment		586,884		1,382		107		237		1,726		588,610		99
Owner occupied commercial		421,143		2,732		1,377		1,121		5,230		426,373		535
1-4 family residential		274,547		374		336		760		1,470		276,017		—
Home equity - first lien		49,321		179		—		—		179		49,500		—
Home equity - junior lien		70,467		182		56		242		480		70,947		99
Subtotal: Real estate mortgage		1,402,362		4,849		1,876		2,360		9,085		1,411,447		733
Consumer		48,058		—		—		—		—		48,058		—
Total	$	2,537,627	$	5,112	$	2,076	$	3,356	$	10,544	$	2,548,171	$	745

King Bancorp Inc. [Member]

Notes Tables

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

	May 1, 2019
	Contractual		Non-accretable			Accretable			Acquisition-day
(In thousands)	receivable		amount			amount			fair value
Commercial and industrial	$	8,249	$	—		$	(23	)	$	8,226
Construction and development		10,764		—			43			10,807
Raw Land		7,974		—			43			8,017
Real estate mortgage:
Commercial real estate		84,219		—			(408	)		83,811
1-4 family residential		50,556		—			322			50,878
Home equity - first lien		196		—			3			199
Home equity - junior lien		679		—			5			684
Subtotal: Real estate mortgage		135,650		—			(78	)		135,572
Consumer		1,528		—			(3	)		1,525
Total loans ASC 310-20		164,165		—			(18	)		164,147
Commercial and industrial
Construction and development		—		—			—			—
Raw Land		—		—			—			—
Real estate mortgage:
Commercial real estate		1,351		(1,351	)		—			—
1-4 family residential		228		(228	)		—			—
Home equity - first lien		—		—			—			—
Home equity - junior lien		—		—			—			—
Subtotal: Real estate mortgage		1,579		(1,579	)		—			—
Consumer		—		—			—			—
Total loans ASC 310 purchased- credit-impaired loans		1,579		(1,579	)		—			—
Total loans	$	165,744	$	(1,579	)	$	(18	)	$	164,147

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Note 5 - Goodwill and Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Goodwill [Table Text Block]

	Three months ended				Six months ended
	June 30,				June 30,
(In thousands)	2019		2018		2019		2018
Balance at beginning of period	$	682	$	682	$	682	$	682
Goodwill acquired		12,144		—		12,144		—
Impairment		—		—		—		—
Balance at end of period	$	12,826	$	682	$	12,826	$	682

Finite-lived Intangible Assets Amortization Expense [Table Text Block]

	Three months ended						Six months ended
	June 30,						June 30,
(In thousands)	2019			2018			2019			2018
Balance at beginning of period	$	1,015		$	1,182		$	1,056		$	1,225
Core deposit intangible acquired		1,519			—			1,519			—
Amortization		(73	)		(43	)		(114	)		(86	)
Balance at end of period	$	2,461		$	1,139		$	2,461		$	1,139

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

	Three months ended						Six months ended
	June 30,						June 30,
(In thousands)	2019			2018			2019			2018
Balance at beginning of period	$	1,070		$	861		$	1,022		$	875
Additions for mortgage loans sold		134			74			214			95
Amortization		(36	)		(37	)		(68	)		(72	)
Balance at end of period	$	1,168		$	898		$	1,168		$	898

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Note 6 - Income Taxes (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

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

	Three months ended						Six months ended
	June 30,						June 30,
(In thousands)	2019			2018			2019			2018
Current income tax expense:
Federal	$	3,772		$	3,426		$	6,498		$	5,862
State		189			182			330			310
Total current income tax expense		3,961			3,608			6,828			6,172
Deferred income tax expense (benefit) :
Federal		224			(421	)		789			46
State		(3,155	)		(28	)		(4,768	)		(7	)
Total deferred income tax expense		(2,931	)		(449	)		(3,979	)		39
Change in valuation allowance		—			—			20			—
Total income tax expense	$	1,030		$	3,159		$	2,869		$	6,211

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

	Three months ended						Six months ended
	June 30,						June 30,
	2019			2018			2019			2018
U.S. federal statutory income tax rate		21.0	%		21.0	%		21.0	%		21.0	%
Kentucky state income tax enactments		(14.1	)		—			(10.7	)		—
Excess tax benefits from stock-based compensation arrangements		(0.4	)		(1.2	)		(1.1	)		(1.5	)
Increase in cash surrender value of life insurance		(0.6	)		(1.2	)		(0.9	)		(0.6	)
Tax credits		(0.7	)		(0.7	)		(0.7	)		(0.5	)
Tax exempt interest income		(0.3	)		(0.5	)		(0.3	)		(0.5	)
State income taxes, net of federal benefit		0.8			0.7			0.8			0.7
Other, net		0.2			0.8			0.1			0.1
Effective income tax rate		5.9	%		18.9	%		8.2	%		18.7	%

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Note 7 - Deposits (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Deposit Liabilities, Type [Table Text Block]

(In thousands)	June 30, 2019		December 31, 2018
Non-interest bearing demand deposits	$	777,652	$	711,023
Interest bearing deposits:
Interest bearing demand		824,324		892,867
Savings		171,471		155,007
Money market		675,221		688,744
Time deposits of $250 thousand or more		71,952		55,182
Other time deposits(1)		362,833		291,533
Total time deposits		434,785		346,715
Total interest bearing deposits		2,105,801		2,083,333
Total deposits	$	2,883,453	$	2,794,356

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Note 8 - Securities Sold Under Agreements to Repurchase (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Short-term Debt [Table Text Block]

(Dollars in thousands)	June 30, 2019			December 31, 2018
Outstanding balance at end of period	$	33,809		$	36,094
Weighted average interest rate at end of period		0.31	%		0.24	%

	Three months ended						Six months ended
	June 30,						June 30,
(Dollars in thousands)	2019			2018			2019			2018
Average outstanding balance during the period	$	39,969		$	61,993		$	38,755		$	66,609
Average interest rate during the period		0.28	%		0.21	%		0.28	%		0.20
Maximum outstanding at any month end during the period	$	43,160		$	60,801		$	43,160		$	74,725

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Note 9 - Federal Home Loan Bank Advances (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

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

(In thousands)	June 30, 2019					December 31, 2018
Maturity			Weighted average					Weighted average
Year	Advance		Fixed Rate			Advance		Fixed Rate
2019	$	30,850		2.42	%	$	30,000		2.54	%
2020		20,390		2.38			1,691		2.23
2021		2,561		2.46			215		2.12
2023		579		1.01			—		—
2024		2,131		2.36			2,240		2.36
2025		4,192		2.42			4,626		2.42
2026		8,470		1.95			8,185		1.99
2027		8,771		1.75			—		—
2028		6,335		2.38			1,220		1.49
Total	$	84,279		2.28	%	$	48,177		2.39	%

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Note 10 - Other Comprehensive Income (Loss) (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

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

	Net unrealized			Net unrealized			Minimum
	gains (losses)			gains (losses)			pension
Three months ended June 30, 2019	on securities			on cash			liability
(In thousands)	available for sale			flow hedges			adjustment			Total
Balance, beginning of period	$	(2,536	)	$	234		$	(211	)	$	(2,513	)
Net current period other comprehensive income (loss)		3,827			(248	)		—			3,579
Balance, end of period	$	1,291		$	(14	)	$	(211	)	$	1,066
Three months ended June 30, 2018
Balance, beginning of period	$	(5,995	)	$	544		$	(393	)	$	(5,844	)
Net current period other comprehensive income (loss)		(1,279	)		79			—			(1,200	)
Balance, end of period	$	(7,274	)	$	623		$	(393	)	$	(7,044	)

	Net unrealized			Net unrealized			Minimum
	gains (losses)			gains (losses)			pension
Six months ended June 30, 2019	on securities			on cash			liability
(In thousands)	available for sale			flow hedges			adjustment			Total
Balance, beginning of period	$	(5,330	)	$	408		$	(220	)	$	(5,142	)
Net current period other comprehensive income (loss)		6,621			(422	)		9			6,208
Balance, end of period	$	1,291		$	(14	)	$	(211	)	$	1,066
Six months ended June 30, 2018
Balance, beginning of period	$	(1,781	)	$	193		$	(342	)	$	(1,930	)
Net current period other comprehensive income (loss)		(4,997	)		389			—		$	(4,608	)
Reclassification adjustment for adoption of ASU 2018-02		(496	)		41			(51	)		(506	)
Balance, end of period	$	(7,274	)	$	623		$	(393	)	$	(7,044	)

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Note 12 - Net Income Per Share (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

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

	Three months ended				Six months ended
	June 30,				June 30,
(In thousands, except per share data)	2019		2018		2019		2018
Net income	$	16,543	$	13,579	$	32,184	$	26,983
Weighted average shares outstanding - basic		22,689		22,625		22,675		22,601
Dilutive securities		260		342		273		358
Weighted average shares outstanding- diluted		22,949		22,967		22,948		22,959
Net income per share, basic	$	0.73	$	0.60	$	1.42	$	1.19
Net income per share, diluted		0.72		0.59		1.40		1.17

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block]

	Three				Six
	months ended				months ended
(In thousands)	June 30,				June 30,
	2019		2018		2019		2018
Antidilutive SARs		200		93		200		93

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Note 14 - Stock-based Compensation (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

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

	2019			2018
Dividend yield		2.54	%		2.56	%
Expected volatility		20.39	%		20.17	%
Risk free interest rate		2.52	%		2.96	%
Expected life of SARs (in years)		7.2			7.0

Share-based Payment Arrangement, Expensed and Capitalized, Amount [Table Text Block]

	Three months ended June 30, 2019
(In thousands)	Stock Appreciation Rights			Restricted Stock Awards			Restricted Stock Units			Performance Stock Units			Total
Expense	$	86		$	306		$	83		$	518		$	993
Deferred tax benefit		(18	)		(65	)		(17	)		(109	)		(209	)
Total net expense	$	68		$	241		$	66		$	409		$	784

	Three months ended June 30, 2018
(In thousands)	Stock Appreciation Rights			Restricted Stock Awards			Restricted Stock Units			Performance Stock Units			Total
Expense	$	77		$	275		$	62		$	798		$	1,212
Deferred tax benefit		(16	)		(58	)		(13	)		(167	)		(254	)
Total net expense	$	61		$	217		$	49		$	631		$	958

	Six months ended June 30, 2019
(In thousands)	Stock Appreciation Rights			Restricted Stock Awards			Restricted Stock Units			Performance Stock Units			Total
Expense	$	170		$	599		$	164		$	923		$	1,856
Deferred tax benefit		(36	)		(126	)		(34	)		(194	)		(390	)
Total net expense	$	134		$	473		$	130		$	729		$	1,466

	Six months ended June 30, 2018
(In thousands)	Stock Appreciation Rights			Restricted Stock Awards			Restricted Stock Units			Performance Stock Units			Total
Expense	$	150		$	551		$	124		$	1,210		$	2,035
Deferred tax benefit		(32	)		(116	)		(26	)		(253	)		(427	)
Total net expense	$	118		$	435		$	98		$	957		$	1,608

Share-based Payment Arrangement, Nonvested Award, Cost [Table Text Block]

(In thousands) Year ended	Stock Appreciation Rights		Restricted Stock Awards		Restricted Stock Units		Performance Stock Units		Total
Remainder of 2019	$	175	$	599	$	166	$	999	$	1,939
2020		306		1,049		2		1,325		2,682
2021		248		830		—		466		1,544
2022		193		559		—		—		752
2023		118		308		—		—		426
2024		11		25		—		—		36
Total estimated expense	$	1,051	$	3,370	$	168	$	2,790	$	7,379

Share-based Payment Arrangement, Option and Stock Appreciation Rights, Activity [Table Text Block]

													Weighted
							Weighted				Weighted		average
							average		Aggregate		average		remaining
				Exercise			exercise		intrinsic		fair		contractual
(In thousands, except per share data)	SARs			price			price		value(1)		value		life (in years)
Outstanding, January 1, 2018		704		$14.02	-	$40.00	$	19.51	$	12,923	$	3.47		5.1
Granted		100		35.90	-	39.32		37.75		—		6.07
Exercised		(73	)	14.02	-	19.37		15.32		1,654		3.43
Forfeited		—			-			-		—		—
Outstanding, December 31, 2018		731		$14.02	-	$40.00	$	22.42	$	8,422	$	3.82		5.2
Outstanding, January 1, 2019		731		$14.02	-	$40.00	$	22.42	$	8,422	$	3.82
Granted		53		36.65	-	38.18		37.01		—		6.24
Exercised		(47	)	14.02	-	22.96		17.16		830		3.62
Forfeited		—			-			-		—		—
Outstanding, June 30, 2019		737		$14.02	-	$40.00	$	23.79	$	9,505	$	4.01		5.0
Vested and exercisable		525		$14.02	-	$40.00	$	19.20	$	8,975	$	3.38		3.5
Unvested		212		22.96	-	40.00		35.14		530		5.58		8.5
Outstanding, June 30, 2019		737		$14.02	-	$40.00	$	23.79	$	9,505	$	4.01		5.0
Vested at June 30, 2019		79		$19.37	-	$40.00	$	27.39	$	740	$	4.55

Schedule of Nonvested Share Activity [Table Text Block]

				Grant date
				weighted
(In thousands, except per share data)	RSAs			average cost
Unvested at January 1, 2018		119		$	27.62
Shares awarded		40			35.89
Restrictions lapsed and shares released		(44	)		23.62
Shares forfeited		(5	)		31.35
Unvested at December 31, 2018		110		$	32.09
Unvested at January 1, 2019		110		$	32.09
Shares awarded		39			34.88
Restrictions lapsed and shares released		(39	)		28.70
Shares forfeited		—			—
Unvested at June 30, 2019		110		$	34.32

Share-based Payment Arrangement, Restricted Stock Unit, Activity [Table Text Block]

	Vesting				Expected
Grant	period		Fair		shares to
year	in years		value		be awarded
2017		3	$	35.66		61,893
2018		3		31.54		71,932
2019		3		32.03		43,602

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Note 15 - Commitments and Contingent Liabilities (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Off Balance Sheet Commitments to Extend Credit [Table Text Block]

(In thousands)	June 30, 2019		December 31, 2018
Commercial and Industrial	$	381,824	$	309,920
Construction - Commercial		224,641		163,314
Construction - Residential		15,631		16,050
Home Equity		154,030		147,907
Credit Cards		21,222		20,003
Overdrafts		21,777		21,751
Letters of credit		23,359		20,891
Other		43,572		33,369
Future loan commitments		213,687		101,399
Total off balance sheet commitments to extend credit	$	1,099,743	$	834,604

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

6 Months Ended

Jun. 30, 2019

Notes Tables

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

(In thousands)	Fair value at June 30, 2019
Assets	Total		Level 1		Level 2		Level 3
Securities available for sale:
Government sponsored enterprise obligations	$	268,015	$	—	$	268,015	$	—
Mortgage backed securities - government agencies		131,598		—		131,598		—
Obligations of states and political subdivisions		23,966		—		23,966		—
Total Securities available for sale		423,579		—		423,579		—
Interest rate swaps		1,813		—		1,813		—
Total assets	$	425,392	$	—	$	425,392	$	—
Liabilities
Interest rate swaps	$	1,849	$	—	$	1,849	$	—

(In thousands)	Fair value at December 31, 2018
Assets	Total		Level 1		Level 2		Level 3
Securities available for sale:
Government sponsored enterprise obligations	$	261,039	$	—	$	261,039	$	—
Mortgage backed securities - government agencies		146,277		—		146,277		—
Obligations of states and political subdivisions		29,679		—		29,679		—
Total Securities available for sale		436,995		—		436,995		—
Interest rate swaps		1,035		—		1,035		—
Total assets	$	438,030	$	—	$	438,030	$	—
Liabilities
Interest rate swaps	$	543	$	—	$	543	$	—

Fair Value Measurements, Nonrecurring [Table Text Block]

(In thousands)	Fair value at June 30, 2019								Losses recorded:
									Three months		Six months
									ended		ended
	Total		Level 1		Level 2		Level 3		June 30, 2019		June 30, 2019
Impaired loans	$	352	$	—	$	—	$	352	$	—	$	—
Other real estate owned		239		—		—		239		—		—

(In thousands)	Fair value at December 31, 2018								Losses recorded:
									Three months		Six months
									ended		ended
	Total		Level 1		Level 2		Level 3		June 30, 2018		June 30, 2018
Impaired loans	$	925	$	—	$	—	$	925	$	304	$	1,419
Other real estate owned		239		—		—		239		—		—

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

June 30, 2019
	Fair		Valuation	Unobservable	(weighted
(Dollars in thousands)	value		technique	inputs	average)
Impaired loans - collateral dependent	$	352	Appraisal	Appraisal discounts		10.0	%
Other real estate owned		239	Appraisal	Appraisal discounts		22.0

December 31, 2018
	Fair		Valuation	Unobservable	(weighted
(Dollars in thousands)	value		technique	inputs	average)
Impaired loans - collateral dependent	$	925	Appraisal	Appraisal discounts		9.9	%
Other real estate owned		1,018	Appraisal	Appraisal discounts		12.2

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

6 Months Ended

Jun. 30, 2019

Notes Tables

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

(In thousands)	Carrying
June 30, 2019	amount		Fair value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	116,039	$	116,039	$	116,039	$	—	$	—
Mortgage loans held for sale		3,922		4,023		—		4,023		—
Federal Home Loan Bank stock		11,316		11,316		—		11,316		—
Loans, net		2,737,464		2,749,157		—		—		2,749,157
Accrued interest receivable		9,633		9,633		9,633		—		—
Liabilities
Non-interest bearing deposits		777,652		777,652		777,652		—		—
Transaction deposits		1,671,016		1,671,016		—		1,671,016		—
Time deposits		434,785		436,451		—		436,451		—
Securities sold under agreement to repurchase		33,809		33,809		—		33,809		—
Federal funds purchased		12,012		12,012		—		12,012		—
FHLB advances		84,279		84,505		—		84,505		—
Accrued interest payable		1,008		1,008		1,008		—		—

(In thousands)	Carrying
December 31, 2018	amount		Fair value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	198,939	$	198,939	$	198,939	$	—	$	—
Mortgage loans held for sale		1,675		1,743		—		1,743		—
Federal Home Loan Bank stock		10,370		10,370		—		10,370		—
Loans, net		2,522,637		2,508,587		—		—		2,508,587
Accrued interest receivable		8,360		8,360		8,360		—		—
Liabilities
Non-interest bearing deposits		711,023		711,023		711,023		—		—
Transaction deposits		1,736,618		1,736,618		—		1,736,618		—
Time deposits		346,715		345,273		—		345,273		—
Securities sold under agreement to repurchase		36,094		36,094		—		36,094		—
Federal funds purchased		10,247		10,247		—		10,247		—
FHLB advances		48,177		47,227		—		47,227		—
Accrued interest payable		762		762		762		—		—

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Note 18 - Derivative Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2019

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			June 30, 2019			December 31, 2018
$	10,000	12/6/2021	US 3 Month LIBOR		1.89	%	$	(37	)	$	193
	20,000	12/6/2020	US 3 Month LIBOR		1.79	%		23			323
$	30,000				1.82	%	$	(14	)	$	516

Not Designated as Hedging Instrument [Member]

Notes Tables

Schedule of Interest Rate Derivatives [Table Text Block]

(Dollars in thousands)	Receiving				Paying
	June 30,		December 31,		June 30,		December 31,
	2019		2018		2019		2018
Notional amount	$	60,607	$	55,505	$	60,607	$	55,505
Weighted average maturity (years)		7.4		8.0		7.4		8.0
Fair value	$	1,813	$	519	$	1,835	$	543

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Note 19 - Regulatory Matters (Tables)

6 Months Ended

Jun. 30, 2019

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
June 30, 2019	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk-based capital (1)
Consolidated	$	400,314		12.67	%	$	252,821		8.00	%	NA		NA
Bank		392,705		12.45			252,265		8.00		$	315,331		10.00	%
Common equity tier 1 risk-based capital
Consolidated		373,548		11.82			142,212		4.50		NA		NA
Bank		365,939		11.60			141,899		4.50			204,965		6.50
Tier 1 risk-based capital (1)
Consolidated		373,548		11.82			189,616		6.00		NA		NA
Bank		365,939		11.60			189,198		6.00			252,265		8.00
Leverage (2)
Consolidated		373,548		10.91			136,955		4.00		NA		NA
Bank		365,939		10.70			136,784		4.00			170,980		5.00

(Dollars in thousands)	Actual					Minimum for adequately capitalized					Minimum for well capitalized
December 31, 2018	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total risk-based capital (1)
Consolidated	$	396,019		13.91	%	$	227,714		8.00	%	NA		NA
Bank		385,637		13.56			227,462		8.00		$	284,327		10.00	%
Common equity tier 1 risk-based capital
Consolidated		370,135		13.00			128,089		4.50		NA		NA
Bank		359,753		12.65			127,947		4.50			184,813		6.50
Tier 1 risk-based capital (1)
Consolidated		370,135		13.00			170,785		6.00		NA		NA
Bank		359,753		12.65			170,596		6.00			227,462		8.00
Leverage (2)
Consolidated		370,135		11.33			130,698		4.00		NA		NA
Bank		359,753		11.02			130,569		4.00			163,211		5.00

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Note 20 - Segments (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

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

			Wealth
	Commercial		Management
(In thousands)	Banking		and Trust		Total Company
Three months ended June 30, 2019
Net interest income	$	30,690	$	84	$	30,774
Provision		—		—		—
Wealth management and trust services		—		5,662		5,662
All other non-interest income		6,601		—		6,601
Non-interest expenses		22,297		3,167		25,464
Income before income tax expense		14,994		2,579		17,573
Income tax expense		471		559		1,030
Net income	$	14,523	$	2,020	$	16,543
Segment assets	$	3,462,105	$	1,718	$	3,463,823
Three months ended June 30, 2018
Net interest income	$	28,612	$	62	$	28,674
Provision		1,235		—		1,235
Wealth management and trust services		—		5,344		5,344
All other non-interest income		6,091		—		6,091
Non-interest expenses		18,938		3,198		22,136
Income before income tax expense		14,530		2,208		16,738
Income tax expense		2,644		515		3,159
Net income	$	11,886	$	1,693	$	13,579
Segment assets	$	3,321,948	$	1,892	$	3,323,840

			Wealth
	Commercial		management
(In thousands)	Banking		and Trust		Total Company
Six months ended June 30, 2019
Net interest income	$	60,271	$	160	$	60,431
Provision		600		—		600
Wealth management and trust services		—		11,101		11,101
All other non-interest income		12,224		—		12,224
Non-interest expenses		41,903		6,200		48,103
Income before income tax expense		29,992		5,061		35,053
Income tax expense		1,771		1,098		2,869
Net income	$	28,221	$	3,963	$	32,184
Segment assets	$	3,462,105	$	1,718	$	3,463,823
Six months ended June 30, 2018
Net interest income	$	55,850	$	133	$	55,983
Provision		1,970		—		1,970
Wealth management and trust services		—		10,844		10,844
All other non-interest income		11,500		—		11,500
Non-interest expenses		36,798		6,365		43,163
Income before income tax expense		28,582		4,612		33,194
Income tax expense		5,210		1,001		6,211
Net income	$	23,372	$	3,611	$	26,983
Segment assets	$	3,321,948	$	1,892	$	3,323,840

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Note 21 - Revenue From Contracts With Customers (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Disaggregation of Revenue [Table Text Block]

	Three months ended June 30, 2019						Three months ended June 30, 2018
(Dollars in thousands)	Commercial		WM&T		Total		Commercial		WM&T		Total
Wealth management and trust services	$	—	$	5,662	$	5,662	$	—	$	5,344	$	5,344
Deposit service charges		1,336		—		1,336		1,447		—		1,447
Debit and credit card income		2,168		—		2,168		1,689		—		1,689
Treasury management fees		1,202		—		1,202		1,113		—		1,113
Mortgage banking income(1)		796		—		796		746		—		746
Net investment product sales commissions and fees		364		—		364		397		—		397
Bank owned life insurance(1)		184		—		184		191		—		191
Other(2)		551		—		551		508		—		508
Total non-interest income	$	6,601	$	5,662	$	12,263	$	6,091	$	5,344	$	11,435

	Six months ended June 30, 2019						Six months ended June 30, 2018
(Dollars in thousands)	Commercial		WM&T		Total		Commercial		WM&T		Total
Wealth management and trust services	$	—	$	11,101	$	11,101	$	—	$	10,844	$	10,844
Deposit service charges		2,583		—		2,583		2,858		—		2,858
Debit and credit card income		3,912		—		3,912		3,197		—		3,197
Treasury management fees		2,359		—		2,359		2,160		—		2,160
Mortgage banking income(1)		1,278		—		1,278		1,322		—		1,322
Net investment product sales commissions and fees		720		—		720		801		—		801
Bank owned life insurance(1)		362		—		362		378		—		378
Other(2)		1,010		—		1,010		784		—		784
Total non-interest income	$	12,224	$	11,101	$	23,325	$	11,500	$	10,844	$	22,344

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Note 22 - Leases (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Detail Regarding Operating Leases of Lessee [Table Text Block]

(In thousands)
Balance Sheet	June 30, 2019
Operating lease right-of-use assets	$	16,056		included in premises and equipment
Operating lease liabilities		17,373		included in other liabilities
Weighted average remaining lease term (in years)	12.42
Weighted average discount rate		3.61	%
Maturities of lease liabilities:
One year or less	$	1,949
Year 2		1,929
Year 3		1,919
Year 4		1,955
Year 5		1,935
Greater than 5 years		11,870
Total lease payments	$	21,557
Less imputed interest		4,184
Total	$	17,373

(In thousands)	Three months ended		Six months ended
Income Statement	June 30, 2019		June 30, 2019
Components of lease expense:
Operating lease cost	$	489	$	997
Variable lease cost		24		63
Less sublease income		13		27
Total lease cost	$	500	$	1,033

(In thousands)	Six months ended
Cash flow Statement	June 30, 2019
Supplemental cash flow information:
Operating cash flows from operating leases	$	694

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Note 1 - Basis of Presentation and Summary of Significant Accounting Policies (Details Textual) $ in Thousands		6 Months Ended
	Jun. 17, 2019 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	May 01, 2019	Jan. 01, 2019 USD ($)	Dec. 31, 2018 USD ($)
Repayments of Subordinated Debt, Total		$ 3,609	$ (0)
Number of Operating Segments		2
Assets, Total		$ 3,463,823	$ 3,323,840			$ 3,302,924
Allowance for Loan and Lease Losses, Period Increase (Decrease), Total		2,000
Operating Lease, Right-of-Use Asset		16,056			$ 17,000
Operating Lease, Liability, Total		17,373			$ 18,000
WM&T [Member]
Assets, Total		$ 3,000,000
Subordinated Notes Assumed in the king Acquisition [Member]
Repayments of Subordinated Debt, Total	$ 3,600
KBST [Member]
Noncontrolling Interest, Ownership Percentage by Parent				100.00%

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Note 2 - Acquisition of King Bancorp, Inc. (Details Textual) - USD ($) $ in Thousands		3 Months Ended
	May 01, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017
Goodwill, Ending Balance		$ 12,826	$ 682	$ 682	$ 682	$ 682	$ 682
King Bancorp Inc. [Member]
Payments to Acquire Businesses, Gross	$ 28,000
Goodwill, Ending Balance	$ 12,144	12,000
Business Acquisition, Pro Forma Revenue		$ 1,600

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Note 2 - Acquisition of King Bancorp, Inc. - Summary of Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands		May 01, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017
Liabilities assumed:
Goodwill, Ending Balance			$ 12,826	$ 682	$ 682	$ 682	$ 682	$ 682
King Bancorp Inc. [Member]
Assets aquired:
Available for sale securities		$ 12,427
Loans		164,147
Allowance for loan and lease losses		0
Loans, net		164,147
Federal Home Loan Bank stock, at cost		1,517
Federal Reserve Bank stock, at cost		490
Premises and equipment, net		3,030
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles		1,519
Bank owned life insurance		3,431
Other real estate owned		0
Other assets and accrued interest receivable		831
Total assets acquired		192,469
Liabilities assumed:
Non-interest bearing		24,939
Interest bearing		100,587
Total deposits		125,526
Federal funds purchased		1,566
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Federal Home Loan Bank Advances		43,299
Other liabilities and accrued interest payable		313
Total liabilities assumed		176,613
Net assets acquired		15,856
Cash consideration paid		(28,000)
Goodwill, Ending Balance		12,144	$ 12,000
King Bancorp Inc. [Member] | Subordinated Debt [Member]
Liabilities assumed:
Long-term debt		3,609
King Bancorp Inc. [Member] | Line of Credit [Member]
Liabilities assumed:
Long-term debt		2,300
King Bancorp Inc. [Member] | As Recorded By Acquiree [Member]
Assets aquired:
Available for sale securities		12,404
Loans		165,744
Allowance for loan and lease losses		(1,812)
Loans, net		163,932
Federal Home Loan Bank stock, at cost		1,517
Federal Reserve Bank stock, at cost		490
Premises and equipment, net		4,358
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles		0
Bank owned life insurance		3,431
Other real estate owned		325
Other assets and accrued interest receivable		867
Total assets acquired		192,401
Liabilities assumed:
Non-interest bearing		24,939
Interest bearing		100,839
Total deposits		125,778
Federal funds purchased		1,566
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Federal Home Loan Bank Advances		43,718
Other liabilities and accrued interest payable		313
Total liabilities assumed		177,284
Net assets acquired		15,117
King Bancorp Inc. [Member] | As Recorded By Acquiree [Member] | Subordinated Debt [Member]
Liabilities assumed:
Long-term debt		3,609
King Bancorp Inc. [Member] | As Recorded By Acquiree [Member] | Line of Credit [Member]
Liabilities assumed:
Long-term debt		2,300
King Bancorp Inc. [Member] | As Adjusted By Acuirer [Member]
Assets aquired:
Available for sale securities	[1],[2]	23
Loans	[1],[3]	(1,597)
Allowance for loan and lease losses	[1],[3]	1,812
Loans, net	[1]	215
Federal Home Loan Bank stock, at cost	[1]	0
Federal Reserve Bank stock, at cost	[1]	0
Premises and equipment, net	[1],[4]	(1,328)
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles	[1],[5]	1,519
Bank owned life insurance	[1]	0
Other real estate owned	[1],[6]	(325)
Other assets and accrued interest receivable	[1],[7]	(36)
Total assets acquired	[1]	68
Liabilities assumed:
Non-interest bearing	[1]	0
Interest bearing	[1],[8]	(252)
Total deposits		(252)
Federal funds purchased	[1]	0
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Federal Home Loan Bank Advances	[1],[9]	(419)
Other liabilities and accrued interest payable	[1]	0
Total liabilities assumed	[1]	(671)
Net assets acquired	[1]	739
King Bancorp Inc. [Member] | As Adjusted By Acuirer [Member] | Subordinated Debt [Member]
Liabilities assumed:
Long-term debt	[1]	0
King Bancorp Inc. [Member] | As Adjusted By Acuirer [Member] | Line of Credit [Member]
Liabilities assumed:
Long-term debt	[1]	0
King Bancorp Inc. [Member] | Cash [Member]
Assets aquired:
Cash and equivalents		3,316
King Bancorp Inc. [Member] | Cash [Member] | As Recorded By Acquiree [Member]
Assets aquired:
Cash and equivalents		3,316
King Bancorp Inc. [Member] | Cash [Member] | As Adjusted By Acuirer [Member]
Assets aquired:
Cash and equivalents	[1]	0
King Bancorp Inc. [Member] | Interest-bearing Deposits [Member]
Assets aquired:
Cash and equivalents		1,761
King Bancorp Inc. [Member] | Interest-bearing Deposits [Member] | As Recorded By Acquiree [Member]
Assets aquired:
Cash and equivalents		1,761
King Bancorp Inc. [Member] | Interest-bearing Deposits [Member] | As Adjusted By Acuirer [Member]
Assets aquired:
Cash and equivalents	[1]	$ 0

[1] Bancorp's acquisition of King closed on May 1, 2019. Accordingly, the fair value adjustments shown are preliminary estimates of the purchase accounting adjustments. Management is continuing to evaluate each of these fair value adjustments and may revise one or more of such fair value adjustments in future periods based on this continuing evaluation. To the extent that any of these preliminary fair value adjustments are revised in future periods, the resultant fair values and the amount of goodwill recorded by the Company will change.

[2] Reflects the fair value adjustment based on Bancorp's evaluation of the acquired investment portfolio.

[3] Reflects the fair value adjustment based on Bancorp's evaluation of the acquired loan portfolio and to eliminate King's recorded allowance.

[4] Reflects the fair value adjustment based on Bancorp's evaluation of the premises and equipment acquired.

[5] Reflects the fair value adjustment for the core deposit intangible asset recorded as a result of the acquisition.

[6] Reflects the fair value adjustment based upon Bancorp's evaluation of the foreclosed real estate acquired.

[7] Reflects the write-off of a miscellaneous other asset.

[8] Reflects the fair value adjustment based on the Company's evaluation of the assumed time deposits.

[9] Reflects the fair value adjustment based upon Bancorp's evaluation of the assumed FHLB advances.

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Note 3 - Securities (Details Textual) $ in Thousands		6 Months Ended
	May 01, 2019 USD ($)	Jun. 30, 2019 USD ($)	Dec. 31, 2018 USD ($)
Available-for-sale Securities, Gross Realized Gain (Loss), Total		$ 0
Proceeds from Sale of Debt Securities, Available-for-sale	$ 12,400
Debt Securities, Available-for-sale, Realized Gain (Loss), Total	$ 0
Debt Securities, Available-for-sale, Unrealized Loss Position, Number of Positions		61	117
Collateral Pledged [Member]
Debt Securities, Available-for-sale, Restricted		$ 336,500	$ 355,100

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Note 3 - Securities - Available-for-sale Securities (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Securities available-for-sale, amortized cost	$ 421,880	$ 443,742
Securities available-for-sale, unrealized gains	2,811	545
Securities available-for-sale, unrealized losses	(1,112)	(7,292)
Securities available-for-sale, fair value	423,579	436,995
US Government-sponsored Enterprises Debt Securities [Member]
Securities available-for-sale, amortized cost	266,579	264,234
Securities available-for-sale, unrealized gains	1,755	156
Securities available-for-sale, unrealized losses	(319)	(3,351)
Securities available-for-sale, fair value	268,015	261,039
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Securities available-for-sale, amortized cost	131,447	149,748
Securities available-for-sale, unrealized gains	938	282
Securities available-for-sale, unrealized losses	(787)	(3,753)
Securities available-for-sale, fair value	131,598	146,277
US States and Political Subdivisions Debt Securities [Member]
Securities available-for-sale, amortized cost	23,854	29,760
Securities available-for-sale, unrealized gains	118	107
Securities available-for-sale, unrealized losses	(6)	(188)
Securities available-for-sale, fair value	$ 23,966	$ 29,679

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Note 3 - Securities - Available-for-sale Securities by Contractual Maturity (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Due within 1 year, amortized cost	$ 132,158
Due within 1 year, fair value	132,133
Due after 1 but within 5 years, amortized cost	56,040
Due after 1 but within 5 years, fair value	56,033
Due after 5 but within 10 years, amortized cost	7,157
Due after 5 but within 10 years, fair value	7,232
Due after 10 years, amortized cost	95,078
Due after 10 years, fair value	96,583
Mortgage-backed securities – government agencies, amortized cost	131,447
Mortgage-backed securities – government agencies, fair value	131,598
Total securities available-for-sale, amortized cost	421,880	$ 443,742
Total securities available-for-sale, fair value	$ 423,579	$ 436,995

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Note 3 - Securities - Securities With Unrealized Losses (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Securities available-for-sale, less than 12 months, fair value	$ 0	$ 100,662
Securities available-for-sale, less than 12 months, unrealized losses	0	(44)
Securities available-for-sale, 12 months or more, fair value	146,078	287,807
Securities available-for-sale, 12 months or more, unrealized losses	(1,112)	(7,248)
Securities available-for-sale, fair value	146,078	388,469
Securities available-for-sale, unrealized losses	(1,112)	(7,292)
US Government-sponsored Enterprises Debt Securities [Member]
Securities available-for-sale, less than 12 months, fair value	0	96,740
Securities available-for-sale, less than 12 months, unrealized losses	0	(38)
Securities available-for-sale, 12 months or more, fair value	57,505	149,320
Securities available-for-sale, 12 months or more, unrealized losses	(319)	(3,313)
Securities available-for-sale, fair value	57,505	246,060
Securities available-for-sale, unrealized losses	(319)	(3,351)
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Securities available-for-sale, less than 12 months, fair value	0	3,108
Securities available-for-sale, less than 12 months, unrealized losses	0	(5)
Securities available-for-sale, 12 months or more, fair value	82,088	120,848
Securities available-for-sale, 12 months or more, unrealized losses	(787)	(3,748)
Securities available-for-sale, fair value	82,088	123,956
Securities available-for-sale, unrealized losses	(787)	(3,753)
US States and Political Subdivisions Debt Securities [Member]
Securities available-for-sale, less than 12 months, fair value	0	814
Securities available-for-sale, less than 12 months, unrealized losses	0	(1)
Securities available-for-sale, 12 months or more, fair value	6,485	17,639
Securities available-for-sale, 12 months or more, unrealized losses	(6)	(187)
Securities available-for-sale, fair value	6,485	18,453
Securities available-for-sale, unrealized losses	$ (6)	$ (188)

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Note 4 - Loans and Leases (Details Textual) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Loans and Leases Receivable, Related Parties, Ending Balance	$ 53,700	$ 52,700
Mortgage Loans in Process of Foreclosure, Amount	$ 795	$ 528

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Note 4 - Loans and Leases - Loans by Loan Portfolio Class (Details) - USD ($) $ in Thousands		Jun. 30, 2019	Dec. 31, 2018
Loans and leases	[1]	$ 2,763,880	$ 2,548,171
Commercial and Industrial Portfolio Segment [Member]
Loans and leases		860,085	833,524
Construction and Development Excluding Undeveloped Land Portfolio Segment [Member]
Loans and leases	[2]	222,632	225,050
Undevelopment Land Portfolio Segment [Member]
Loans and leases		35,169	30,092
Real Estate Mortgage Portfolio Segment [Member]
Loans and leases		1,602,057	1,411,447
Real Estate Mortgage Portfolio Segment [Member] | Commercial Investment [Member]
Loans and leases		696,421	588,610
Real Estate Mortgage Portfolio Segment [Member] | Owner Occupied Commercial [Member]
Loans and leases		452,719	426,373
Real Estate Mortgage Portfolio Segment [Member] | One to Four Family Residential [Member]
Loans and leases		338,957	276,017
Real Estate Mortgage Portfolio Segment [Member] | Home Equity First Lien [Member]
Loans and leases		46,012	49,500
Real Estate Mortgage Portfolio Segment [Member] | Home Equity Junior Lien [Member]
Loans and leases		67,948	70,947
Consumer Portfolio Segment [Member]
Loans and leases		$ 43,937	$ 48,058

[1] Total loans are presented inclusive of premiums, discounts, and net loan origination fees and costs.

[2] Consists of land acquired for development by the borrower, but for which no development has yet taken place.

XML

Note 4 - Loans and Leases - Loans Acquired in King Acquisition (Details) - USD ($) $ in Thousands	Jun. 30, 2019	May 01, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017
Loans	$ 1,864			$ 432
Loans	(1,577)			0
Loans	$ 57		$ 62	$ 68	$ 85	$ 95	$ 106
King Bancorp Inc. [Member]
Loans		$ 165,744
Loans		(18)
Loans		164,147
Loans		(1,579)
King Bancorp Inc. [Member] | Financial Asset Acquired and No Credit Deterioration [Member]
Loans		164,165
Loans		(18)
Loans		164,147
King Bancorp Inc. [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Loans		1,579
Loans		(1,579)
Loans		0
Loans		0
Commercial and Industrial Portfolio Segment [Member] | King Bancorp Inc. [Member] | Financial Asset Acquired and No Credit Deterioration [Member]
Loans		8,249
Loans		(23)
Loans		8,226
Construction and Development Excluding Undeveloped Land Portfolio Segment [Member] | King Bancorp Inc. [Member] | Financial Asset Acquired and No Credit Deterioration [Member]
Loans		10,764
Loans		43
Loans		10,807
Construction and Development Excluding Undeveloped Land Portfolio Segment [Member] | King Bancorp Inc. [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Loans		0
Loans		0
Loans		0
Loans		0
Undevelopment Land Portfolio Segment [Member] | King Bancorp Inc. [Member] | Financial Asset Acquired and No Credit Deterioration [Member]
Loans		7,974
Loans		43
Loans		8,017
Undevelopment Land Portfolio Segment [Member] | King Bancorp Inc. [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Loans		0
Loans		0
Loans		0
Loans		0
Real Estate Mortgage Portfolio Segment [Member] | King Bancorp Inc. [Member] | Financial Asset Acquired and No Credit Deterioration [Member]
Loans		135,650
Loans		(78)
Loans		135,572
Real Estate Mortgage Portfolio Segment [Member] | King Bancorp Inc. [Member] | Financial Asset Acquired and No Credit Deterioration [Member] | Commercial Real Estate [Member]
Loans		84,219
Loans		(408)
Loans		83,811
Real Estate Mortgage Portfolio Segment [Member] | King Bancorp Inc. [Member] | Financial Asset Acquired and No Credit Deterioration [Member] | One to Four Family Residential [Member]
Loans		50,556
Loans		322
Loans		50,878
Real Estate Mortgage Portfolio Segment [Member] | King Bancorp Inc. [Member] | Financial Asset Acquired and No Credit Deterioration [Member] | Home Equity First Lien [Member]
Loans		196
Loans		3
Loans		199
Real Estate Mortgage Portfolio Segment [Member] | King Bancorp Inc. [Member] | Financial Asset Acquired and No Credit Deterioration [Member] | Home Equity Junior Lien [Member]
Loans		679
Loans		5
Loans		684
Real Estate Mortgage Portfolio Segment [Member] | King Bancorp Inc. [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Loans		1,579
Loans		(1,579)
Loans		0
Loans		0
Real Estate Mortgage Portfolio Segment [Member] | King Bancorp Inc. [Member] | Financial Asset Acquired with Credit Deterioration [Member] | Commercial Real Estate [Member]
Loans		1,351
Loans		(1,351)
Loans		0
Loans		0
Real Estate Mortgage Portfolio Segment [Member] | King Bancorp Inc. [Member] | Financial Asset Acquired with Credit Deterioration [Member] | One to Four Family Residential [Member]
Loans		228
Loans		(228)
Loans		0
Loans		0
Real Estate Mortgage Portfolio Segment [Member] | King Bancorp Inc. [Member] | Financial Asset Acquired with Credit Deterioration [Member] | Home Equity First Lien [Member]
Loans		0
Loans		0
Loans		0
Loans		0
Real Estate Mortgage Portfolio Segment [Member] | King Bancorp Inc. [Member] | Financial Asset Acquired with Credit Deterioration [Member] | Home Equity Junior Lien [Member]
Loans		0
Loans		0
Loans		0
Loans		0
Consumer Portfolio Segment [Member] | King Bancorp Inc. [Member] | Financial Asset Acquired and No Credit Deterioration [Member]
Loans		1,528
Loans		(3)
Loans		1,525
Consumer Portfolio Segment [Member] | King Bancorp Inc. [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Loans		0
Loans		0
Loans		0
Loans		$ 0

XML

Note 4 - Loans and Leases - Reconciliation of PCI Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Contractually-required principal	$ 1,864	$ 432
Non-accretable amount	(1,577)	0
Accretable amount	(57)	(68)
Carrying value of loans	$ 230	$ 364

XML

Note 4 - Loans and Leases - Accretable Amount on PCI Loans (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Balance, beginning of period	$ (62)	$ (95)	$ (68)	$ (106)
Transfers between non-accretable and accretable	0	0	0	0
Net accretion into interest income on loans, including loan fees	5	10	11	21
Generated from acquisition of King	0	0	0	0
Balance, end of period	$ (57)	$ (85)	$ (57)	$ (85)

XML

Note 4 - Loans and Leases - Internally Assigned Risk Grades of Loans (Details) - USD ($) $ in Thousands		Jun. 30, 2019	Dec. 31, 2018
Loans and leases	[1]	$ 2,763,880	$ 2,548,171
Commercial and Industrial Portfolio Segment [Member]
Loans and leases		860,085	833,524
Construction and Development Excluding Undeveloped Land Portfolio Segment [Member]
Loans and leases	[2]	222,632	225,050
Undevelopment Land Portfolio Segment [Member]
Loans and leases		35,169	30,092
Real Estate Mortgage Portfolio Segment [Member]
Loans and leases		1,602,057	1,411,447
Real Estate Mortgage Portfolio Segment [Member] | Commercial Investment [Member]
Loans and leases		696,421	588,610
Real Estate Mortgage Portfolio Segment [Member] | Owner Occupied Commercial [Member]
Loans and leases		452,719	426,373
Real Estate Mortgage Portfolio Segment [Member] | One to Four Family Residential [Member]
Loans and leases		338,957	276,017
Real Estate Mortgage Portfolio Segment [Member] | Home Equity First Lien [Member]
Loans and leases		46,012	49,500
Real Estate Mortgage Portfolio Segment [Member] | Home Equity Junior Lien [Member]
Loans and leases		67,948	70,947
Consumer Portfolio Segment [Member]
Loans and leases		43,937	48,058
Pass [Member]
Loans and leases		2,685,317	2,493,020
Pass [Member] | Commercial and Industrial Portfolio Segment [Member]
Loans and leases		817,645	803,073
Pass [Member] | Construction and Development Excluding Undeveloped Land Portfolio Segment [Member]
Loans and leases		222,632	220,532
Pass [Member] | Undevelopment Land Portfolio Segment [Member]
Loans and leases		35,169	29,618
Pass [Member] | Real Estate Mortgage Portfolio Segment [Member]
Loans and leases		1,565,934	1,391,739
Pass [Member] | Real Estate Mortgage Portfolio Segment [Member] | Commercial Investment [Member]
Loans and leases		687,304	586,543
Pass [Member] | Real Estate Mortgage Portfolio Segment [Member] | Owner Occupied Commercial [Member]
Loans and leases		429,070	411,722
Pass [Member] | Real Estate Mortgage Portfolio Segment [Member] | One to Four Family Residential [Member]
Loans and leases		336,312	273,537
Pass [Member] | Real Estate Mortgage Portfolio Segment [Member] | Home Equity First Lien [Member]
Loans and leases		46,012	49,500
Pass [Member] | Real Estate Mortgage Portfolio Segment [Member] | Home Equity Junior Lien [Member]
Loans and leases		67,236	70,437
Pass [Member] | Consumer Portfolio Segment [Member]
Loans and leases		43,937	48,058
Special Mention [Member]
Loans and leases		47,776	28,354
Special Mention [Member] | Commercial and Industrial Portfolio Segment [Member]
Loans and leases		23,907	11,516
Special Mention [Member] | Construction and Development Excluding Undeveloped Land Portfolio Segment [Member]
Loans and leases		0	4,200
Special Mention [Member] | Undevelopment Land Portfolio Segment [Member]
Loans and leases		0	0
Special Mention [Member] | Real Estate Mortgage Portfolio Segment [Member]
Loans and leases		23,869	12,638
Special Mention [Member] | Real Estate Mortgage Portfolio Segment [Member] | Commercial Investment [Member]
Loans and leases		4,202	1,815
Special Mention [Member] | Real Estate Mortgage Portfolio Segment [Member] | Owner Occupied Commercial [Member]
Loans and leases		17,757	9,030
Special Mention [Member] | Real Estate Mortgage Portfolio Segment [Member] | One to Four Family Residential [Member]
Loans and leases		1,686	1,544
Special Mention [Member] | Real Estate Mortgage Portfolio Segment [Member] | Home Equity First Lien [Member]
Loans and leases		0	0
Special Mention [Member] | Real Estate Mortgage Portfolio Segment [Member] | Home Equity Junior Lien [Member]
Loans and leases		224	249
Special Mention [Member] | Consumer Portfolio Segment [Member]
Loans and leases		0	0
Substandard [Member] | Performing Financial Instruments [Member]
Loans and leases		26,859	23,399
Substandard [Member] | Nonperforming Financial Instruments [Member]
Loans and leases		3,928	3,398
Substandard [Member] | Commercial and Industrial Portfolio Segment [Member] | Performing Financial Instruments [Member]
Loans and leases		18,241	18,703
Substandard [Member] | Commercial and Industrial Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Loans and leases		292	232
Substandard [Member] | Construction and Development Excluding Undeveloped Land Portfolio Segment [Member] | Performing Financial Instruments [Member]
Loans and leases		0	0
Substandard [Member] | Construction and Development Excluding Undeveloped Land Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Loans and leases		0	318
Substandard [Member] | Undevelopment Land Portfolio Segment [Member] | Performing Financial Instruments [Member]
Loans and leases		0	0
Substandard [Member] | Undevelopment Land Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Loans and leases		0	474
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Performing Financial Instruments [Member]
Loans and leases		8,618	4,696
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Performing Financial Instruments [Member] | Commercial Investment [Member]
Loans and leases		4,213	15
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Performing Financial Instruments [Member] | Owner Occupied Commercial [Member]
Loans and leases		4,228	4,500
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Performing Financial Instruments [Member] | One to Four Family Residential [Member]
Loans and leases		159	162
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Performing Financial Instruments [Member] | Home Equity First Lien [Member]
Loans and leases		0	0
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Performing Financial Instruments [Member] | Home Equity Junior Lien [Member]
Loans and leases		18	19
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Loans and leases		3,636	2,374
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Nonperforming Financial Instruments [Member] | Commercial Investment [Member]
Loans and leases		702	237
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Nonperforming Financial Instruments [Member] | Owner Occupied Commercial [Member]
Loans and leases		1,664	1,121
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Nonperforming Financial Instruments [Member] | One to Four Family Residential [Member]
Loans and leases		800	774
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Nonperforming Financial Instruments [Member] | Home Equity First Lien [Member]
Loans and leases		0	0
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Nonperforming Financial Instruments [Member] | Home Equity Junior Lien [Member]
Loans and leases		470	242
Substandard [Member] | Consumer Portfolio Segment [Member] | Performing Financial Instruments [Member]
Loans and leases		0	0
Substandard [Member] | Consumer Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Loans and leases		0	0
Doubtful [Member]
Loans and leases		0	0
Doubtful [Member] | Commercial and Industrial Portfolio Segment [Member]
Loans and leases		0	0
Doubtful [Member] | Construction and Development Excluding Undeveloped Land Portfolio Segment [Member]
Loans and leases		0	0
Doubtful [Member] | Undevelopment Land Portfolio Segment [Member]
Loans and leases		0	0
Doubtful [Member] | Real Estate Mortgage Portfolio Segment [Member]
Loans and leases		0	0
Doubtful [Member] | Real Estate Mortgage Portfolio Segment [Member] | Commercial Investment [Member]
Loans and leases		0	0
Doubtful [Member] | Real Estate Mortgage Portfolio Segment [Member] | Owner Occupied Commercial [Member]
Loans and leases		0	0
Doubtful [Member] | Real Estate Mortgage Portfolio Segment [Member] | One to Four Family Residential [Member]
Loans and leases		0	0
Doubtful [Member] | Real Estate Mortgage Portfolio Segment [Member] | Home Equity First Lien [Member]
Loans and leases		0	0
Doubtful [Member] | Real Estate Mortgage Portfolio Segment [Member] | Home Equity Junior Lien [Member]
Loans and leases		0	0
Doubtful [Member] | Consumer Portfolio Segment [Member]
Loans and leases		$ 0	$ 0

[1] Total loans are presented inclusive of premiums, discounts, and net loan origination fees and costs.

[2] Consists of land acquired for development by the borrower, but for which no development has yet taken place.

XML

Note 4 - Loans and Leases - Allowance for Loan Losses by Portfolio Segment and Based on Impairment Evaluation Method (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Dec. 31, 2018
Balance		$ 26,464	$ 24,203	$ 25,534	$ 24,885
Provision for loan and lease losses		0	1,235	600	1,970
Charge-offs		(161)	(647)	(260)	(2,175)
Recoveries		113	82	542	193
Balance		26,416	24,873	26,416	24,873
Loans individually evaluated for impairment						$ 3,067	$ 2,653
Loans collectively evaluated for impairment						2,760,813	2,545,518
Loans and leases	[1]					2,763,880	2,548,171
Allowance for loans individually evaluated for impairment						37	42
Allowance for loans collectively evaluated for impairment						26,379	25,492
Allowance for loan losses		26,416	24,203	26,416	24,873	26,416	25,534
Financial Asset Acquired with Credit Deterioration [Member]
Balance				0
Balance		0		0
Loans and leases						0	0
Allowance for loan losses		0		0		0	0
Commercial and Industrial Portfolio Segment [Member]
Balance		11,762	10,638	11,965	11,276
Provision for loan and lease losses		92	2,008	(210)	2,769
Charge-offs		0	(530)	(3)	(1,939)
Recoveries		4	2	106	12
Balance		11,858	12,118	11,858	12,118
Loans individually evaluated for impairment						119	220
Loans collectively evaluated for impairment						859,966	833,304
Loans and leases						860,085	833,524
Allowance for loans individually evaluated for impairment						23	28
Allowance for loans collectively evaluated for impairment						11,835	11,937
Allowance for loan losses		11,762	10,638	11,858	12,118	11,858	11,965
Commercial and Industrial Portfolio Segment [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Balance				0
Balance		0		0
Loans and leases						0	0
Allowance for loan losses		0		0		0	0
Construction and Development Excluding Undeveloped Land Portfolio Segment [Member]
Balance		1,884	2,020	1,760	1,724
Provision for loan and lease losses		(74)	(82)	(153)	214
Charge-offs		0	0	0	0
Recoveries		0	0	203	0
Balance		1,810	1,938	1,810	1,938
Loans individually evaluated for impairment						0	318
Loans collectively evaluated for impairment						222,632	224,732
Loans and leases	[2]					222,632	225,050
Allowance for loans individually evaluated for impairment						0	0
Allowance for loans collectively evaluated for impairment						1,810	1,760
Allowance for loan losses		1,884	2,020	1,810	1,938	1,810	1,760
Construction and Development Excluding Undeveloped Land Portfolio Segment [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Balance				0
Balance		0		0
Loans and leases						0	0
Allowance for loan losses		0		0		0	0
Undevelopment Land Portfolio Segment [Member]
Balance		662	482	752	521
Provision for loan and lease losses		(61)	19	(151)	(20)
Charge-offs		0	0	0	0
Recoveries		0	0	0	0
Balance		601	501	601	501
Loans individually evaluated for impairment						0	474
Loans collectively evaluated for impairment						35,169	29,618
Loans and leases						35,169	30,092
Allowance for loans individually evaluated for impairment						0	0
Allowance for loans collectively evaluated for impairment						601	752
Allowance for loan losses		662	482	601	501	601	752
Undevelopment Land Portfolio Segment [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Balance				0
Balance		0		0
Loans and leases						0	0
Allowance for loan losses		0		0		0	0
Real Estate Mortgage Portfolio Segment [Member]
Balance		12,001	10,707	10,681	11,012
Provision for loan and lease losses		10	(795)	1,310	(1,104)
Charge-offs		(13)	0	(13)	0
Recoveries		32	2	52	6
Balance		12,030	9,914	12,030	9,914
Loans individually evaluated for impairment						2,948	1,641
Loans collectively evaluated for impairment						1,599,109	1,409,806
Loans and leases						1,602,057	1,411,447
Allowance for loans individually evaluated for impairment						14	14
Allowance for loans collectively evaluated for impairment						12,016	10,667
Allowance for loan losses		12,001	10,707	12,030	9,914	12,030	10,681
Real Estate Mortgage Portfolio Segment [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Balance				0
Balance		0		0
Loans and leases						0	0
Allowance for loan losses		0		0		0	0
Consumer Portfolio Segment [Member]
Balance		155	356	376	352
Provision for loan and lease losses		33	85	(196)	111
Charge-offs		(148)	(117)	(244)	(236)
Recoveries		77	78	181	175
Balance		117	402	117	402
Loans individually evaluated for impairment						0	0
Loans collectively evaluated for impairment						43,937	48,058
Loans and leases						43,937	48,058
Allowance for loans individually evaluated for impairment						0	0
Allowance for loans collectively evaluated for impairment						117	376
Allowance for loan losses		155	$ 356	117	$ 402	117	376
Consumer Portfolio Segment [Member] | Financial Asset Acquired with Credit Deterioration [Member]
Balance				0
Balance		0		0
Loans and leases						0	0
Allowance for loan losses		$ 0		$ 0		$ 0	$ 0

[1] Total loans are presented inclusive of premiums, discounts, and net loan origination fees and costs.

[2] Consists of land acquired for development by the borrower, but for which no development has yet taken place.

XML

Note 4 - Loans and Leases - Non-accrual Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Non-accrual loans	$ 3,030	$ 2,611
Commercial and Industrial Portfolio Segment [Member]
Non-accrual loans	96	192
Construction and Development Excluding Undeveloped Land Portfolio Segment [Member]
Non-accrual loans	0	318
Undevelopment Land Portfolio Segment [Member]
Non-accrual loans	0	474
Real Estate Mortgage Portfolio Segment [Member]
Non-accrual loans	2,934	1,627
Real Estate Mortgage Portfolio Segment [Member] | Commercial Investment [Member]
Non-accrual loans	305	138
Real Estate Mortgage Portfolio Segment [Member] | Owner Occupied Commercial [Member]
Non-accrual loans	1,444	586
Real Estate Mortgage Portfolio Segment [Member] | One to Four Family Residential [Member]
Non-accrual loans	715	760
Real Estate Mortgage Portfolio Segment [Member] | Home Equity First Lien [Member]
Non-accrual loans	0	0
Real Estate Mortgage Portfolio Segment [Member] | Home Equity Junior Lien [Member]
Non-accrual loans	470	143
Consumer Portfolio Segment [Member]
Non-accrual loans	$ 0	$ 0

XML

Note 4 - Loans and Leases - Outstanding TDRs (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Balance	$ 37	$ 42
Specific Reserve Allocation	37	42
Additional Commitment to Lend	0	0
Commercial and Industrial Loans [Member]
Balance	23	28
Specific Reserve Allocation	23	28
Additional Commitment to Lend	0	0
One to Four Family Residential [Member]
Balance	14	14
Specific Reserve Allocation	14	14
Additional Commitment to Lend	$ 0	$ 0

XML

Note 4 - Loans and Leases - Loans Individually Evaluated for Impairment (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Loans with no related allowance recorded, recorded investment	$ 3,030		$ 3,030		$ 2,611
Loans with no related allowance recorded, unpaid principal balance	3,468		3,468		3,766
Loans with no related allowance recorded, average recorded investment	3,151	$ 4,972	2,972	$ 5,758
Loans with no related allowance recorded, interest income recognized	0	0	0	0
Loans with an allowance recorded, recorded investment	37		37		42
Loans with an allowance recorded, unpaid principal balance	37		37		42
Related allowance	37		37		42
Loans with an allowance recorded, average recorded investment	38	4,781	40	3,204
Loans with an allowance recorded, interest income recognized	0	0	1	0
Recorded investment	3,067		3,067		2,653
Unpaid principal balance	3,505		3,505		3,808
Average recorded investment	3,189	9,753	3,012	8,962
Interest income recognized	0	0	1	0
Commercial and Industrial Portfolio Segment [Member]
Loans with no related allowance recorded, recorded investment	96		96		192
Loans with no related allowance recorded, unpaid principal balance	96		96		707
Loans with no related allowance recorded, average recorded investment	144	225	160	531
Loans with no related allowance recorded, interest income recognized	0	0	0	0
Loans with an allowance recorded, recorded investment	23		23		28
Loans with an allowance recorded, unpaid principal balance	23		23		28
Related allowance	23		23		28
Loans with an allowance recorded, average recorded investment	24	3,074	26	2,061
Loans with an allowance recorded, interest income recognized	0	0	1	0
Recorded investment	119		119		220
Unpaid principal balance	119		119		735
Average recorded investment	168	3,299	186	2,592
Interest income recognized	0	0	1	0
Construction and Development Excluding Undeveloped Land Portfolio Segment [Member]
Loans with no related allowance recorded, recorded investment	0		0		318
Loans with no related allowance recorded, unpaid principal balance	0		0		489
Loans with no related allowance recorded, average recorded investment	0	525	106	571
Loans with no related allowance recorded, interest income recognized	0	0	0	0
Loans with an allowance recorded, recorded investment	0		0		0
Loans with an allowance recorded, unpaid principal balance	0		0		0
Related allowance	0		0		0
Loans with an allowance recorded, average recorded investment	0	0	0	0
Loans with an allowance recorded, interest income recognized	0	0	0	0
Recorded investment	0		0		318
Unpaid principal balance	0		0		489
Average recorded investment	0	525	106	571
Interest income recognized	0	0	0	0
Undevelopment Land Portfolio Segment [Member]
Loans with no related allowance recorded, recorded investment	0		0		474
Loans with no related allowance recorded, unpaid principal balance	0		0		506
Loans with no related allowance recorded, average recorded investment	0	474	158	474
Loans with no related allowance recorded, interest income recognized	0	0	0	0
Loans with an allowance recorded, recorded investment	0		0		0
Loans with an allowance recorded, unpaid principal balance	0		0		0
Related allowance	0		0		0
Loans with an allowance recorded, average recorded investment	0	48	0	32
Loans with an allowance recorded, interest income recognized	0	0	0	0
Recorded investment	0		0		474
Unpaid principal balance	0		0		506
Average recorded investment	0	522	158	506
Interest income recognized	0	0	0	0
Real Estate Mortgage Portfolio Segment [Member]
Loans with no related allowance recorded, recorded investment	2,934		2,934		1,627
Loans with no related allowance recorded, unpaid principal balance	3,372		3,372		2,064
Loans with no related allowance recorded, average recorded investment	3,007	3,702	2,548	4,152
Loans with no related allowance recorded, interest income recognized	0	0	0	0
Loans with an allowance recorded, recorded investment	14		14		14
Loans with an allowance recorded, unpaid principal balance	14		14		14
Related allowance	14		14		14
Loans with an allowance recorded, average recorded investment	14	1,659	14	1,111
Loans with an allowance recorded, interest income recognized	0	0	0	0
Recorded investment	2,948		2,948		1,641
Unpaid principal balance	3,386		3,386		2,078
Average recorded investment	3,021	5,361	2,562	5,263
Interest income recognized	0	0	0	0
Real Estate Mortgage Portfolio Segment [Member] | Commercial Investment [Member]
Loans with no related allowance recorded, recorded investment	306		306		138
Loans with no related allowance recorded, unpaid principal balance	306		306		138
Loans with no related allowance recorded, average recorded investment	311	0	254	17
Loans with no related allowance recorded, interest income recognized	0	0	0	0
Loans with an allowance recorded, recorded investment	0		0		0
Loans with an allowance recorded, unpaid principal balance	0		0		0
Related allowance	0		0		0
Loans with an allowance recorded, average recorded investment	0	0	0	0
Loans with an allowance recorded, interest income recognized	0	0	0	0
Recorded investment	306		306		138
Unpaid principal balance	306		306		138
Average recorded investment	311	0	254	17
Interest income recognized	0	0	0	0
Real Estate Mortgage Portfolio Segment [Member] | Owner Occupied Commercial [Member]
Loans with no related allowance recorded, recorded investment	1,444		1,444		586
Loans with no related allowance recorded, unpaid principal balance	1,882		1,882		1,023
Loans with no related allowance recorded, average recorded investment	1,455	2,335	1,165	2,667
Loans with no related allowance recorded, interest income recognized	0	0	0	0
Loans with an allowance recorded, recorded investment	0		0		0
Loans with an allowance recorded, unpaid principal balance	0		0		0
Related allowance	0		0		0
Loans with an allowance recorded, average recorded investment	0	1,645	0	1,097
Loans with an allowance recorded, interest income recognized	0	0	0	0
Recorded investment	1,444		1,444		586
Unpaid principal balance	1,882		1,882		1,023
Average recorded investment	1,455	3,980	1,165	3,764
Interest income recognized	0	0	0	0
Real Estate Mortgage Portfolio Segment [Member] | One to Four Family Residential [Member]
Loans with no related allowance recorded, recorded investment	715		715		760
Loans with no related allowance recorded, unpaid principal balance	715		715		760
Loans with no related allowance recorded, average recorded investment	779	1,350	773	1,446
Loans with no related allowance recorded, interest income recognized	0	0	0	0
Loans with an allowance recorded, recorded investment	14		14		14
Loans with an allowance recorded, unpaid principal balance	14		14		14
Related allowance	14		14		14
Loans with an allowance recorded, average recorded investment	14	14	14	14
Loans with an allowance recorded, interest income recognized	0	0	0	0
Recorded investment	729		729		774
Unpaid principal balance	729		729		774
Average recorded investment	793	1,364	787	1,460
Interest income recognized	0	0	0	0
Real Estate Mortgage Portfolio Segment [Member] | Home Equity First Lien [Member]
Loans with no related allowance recorded, recorded investment	0		0		0
Loans with no related allowance recorded, unpaid principal balance	0		0		0
Loans with no related allowance recorded, average recorded investment	0	0	0	0
Loans with no related allowance recorded, interest income recognized	0	0	0	0
Loans with an allowance recorded, recorded investment	0		0		0
Loans with an allowance recorded, unpaid principal balance	0		0		0
Related allowance	0		0		0
Loans with an allowance recorded, average recorded investment	0	0	0
Loans with an allowance recorded, interest income recognized	0	0	0	0
Recorded investment	0		0		0
Unpaid principal balance	0		0		0
Average recorded investment	0	0	0	0
Interest income recognized	0	0	0	0
Real Estate Mortgage Portfolio Segment [Member] | Home Equity Junior Lien [Member]
Loans with no related allowance recorded, recorded investment	469		469		143
Loans with no related allowance recorded, unpaid principal balance	469		469		143
Loans with no related allowance recorded, average recorded investment	462	17	356	22
Loans with no related allowance recorded, interest income recognized	0	0	0	0
Loans with an allowance recorded, recorded investment	0		0		0
Loans with an allowance recorded, unpaid principal balance	0		0		0
Related allowance	0		0		0
Loans with an allowance recorded, average recorded investment	0	0	0	0
Loans with an allowance recorded, interest income recognized	0	0	0	0
Recorded investment	469		469		143
Unpaid principal balance	469		469		143
Average recorded investment	462	17	356	22
Interest income recognized	0	0	0	0
Consumer Portfolio Segment [Member]
Loans with no related allowance recorded, recorded investment	0		0		0
Loans with no related allowance recorded, unpaid principal balance	0		0		0
Loans with no related allowance recorded, average recorded investment	0	46	0	30
Loans with no related allowance recorded, interest income recognized	0	0	0	0
Loans with an allowance recorded, recorded investment	0		0		0
Loans with an allowance recorded, unpaid principal balance	0		0		0
Related allowance	0		0		0
Loans with an allowance recorded, average recorded investment	0	0	0	0
Loans with an allowance recorded, interest income recognized	0	0	0	0
Recorded investment	0		0		0
Unpaid principal balance	0		0		$ 0
Average recorded investment	0	46	0	30
Interest income recognized	$ 0	$ 0	$ 0	$ 0

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Note 4 - Loans and Leases - Aging of the Recorded Investment in Loans (Details) - USD ($) $ in Thousands		Jun. 30, 2019	Dec. 31, 2018
Current		$ 2,753,226	$ 2,537,627
Past due		10,654	10,544
Loans and leases	[1]	2,763,880	2,548,171
Recorded investment greater than 90 days and accruing		861	745
Financial Asset, 30 to 59 Days Past Due [Member]
Past due		2,093	5,112
Financial Asset, 60 to 89 Days Past Due [Member]
Past due		4,670	2,076
Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Past due		3,891	3,356
Commercial and Industrial Portfolio Segment [Member]
Current		858,853	832,923
Past due		1,232	601
Loans and leases		860,085	833,524
Recorded investment greater than 90 days and accruing		173	12
Commercial and Industrial Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]
Past due		572	197
Commercial and Industrial Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]
Past due		391	200
Commercial and Industrial Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Past due		269	204
Construction and Development Excluding Undeveloped Land Portfolio Segment [Member]
Current		222,632	224,732
Past due		0	318
Loans and leases	[2]	222,632	225,050
Recorded investment greater than 90 days and accruing		0	0
Construction and Development Excluding Undeveloped Land Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]
Past due		0	0
Construction and Development Excluding Undeveloped Land Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]
Past due		0	0
Construction and Development Excluding Undeveloped Land Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Past due		0	318
Undevelopment Land Portfolio Segment [Member]
Current		35,169	29,552
Past due		0	540
Loans and leases		35,169	30,092
Recorded investment greater than 90 days and accruing		0	0
Undevelopment Land Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]
Past due		0	66
Undevelopment Land Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]
Past due		0	0
Undevelopment Land Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Past due		0	474
Real Estate Mortgage Portfolio Segment [Member]
Current		1,592,671	1,402,362
Past due		9,386	9,085
Loans and leases		1,602,057	1,411,447
Recorded investment greater than 90 days and accruing		688	733
Real Estate Mortgage Portfolio Segment [Member] | Commercial Investment [Member]
Current		692,612	586,884
Past due		3,809	1,726
Loans and leases		696,421	588,610
Recorded investment greater than 90 days and accruing		396	99
Real Estate Mortgage Portfolio Segment [Member] | Owner Occupied Commercial [Member]
Current		450,140	421,143
Past due		2,579	5,230
Loans and leases		452,719	426,373
Recorded investment greater than 90 days and accruing		220	535
Real Estate Mortgage Portfolio Segment [Member] | One to Four Family Residential [Member]
Current		336,548	274,547
Past due		2,409	1,470
Loans and leases		338,957	276,017
Recorded investment greater than 90 days and accruing		72	0
Real Estate Mortgage Portfolio Segment [Member] | Home Equity First Lien [Member]
Current		45,963	49,321
Past due		49	179
Loans and leases		46,012	49,500
Recorded investment greater than 90 days and accruing		0	0
Real Estate Mortgage Portfolio Segment [Member] | Home Equity Junior Lien [Member]
Current		67,408	70,467
Past due		540	480
Loans and leases		67,948	70,947
Recorded investment greater than 90 days and accruing		0	99
Real Estate Mortgage Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]
Past due		1,512	4,849
Real Estate Mortgage Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member] | Commercial Investment [Member]
Past due		1	1,382
Real Estate Mortgage Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member] | Owner Occupied Commercial [Member]
Past due		643	2,732
Real Estate Mortgage Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member] | One to Four Family Residential [Member]
Past due		749	374
Real Estate Mortgage Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member] | Home Equity First Lien [Member]
Past due		49	179
Real Estate Mortgage Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member] | Home Equity Junior Lien [Member]
Past due		70	182
Real Estate Mortgage Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]
Past due		4,252	1,876
Real Estate Mortgage Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member] | Commercial Investment [Member]
Past due		3,107	107
Real Estate Mortgage Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member] | Owner Occupied Commercial [Member]
Past due		272	1,377
Real Estate Mortgage Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member] | One to Four Family Residential [Member]
Past due		873	336
Real Estate Mortgage Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member] | Home Equity First Lien [Member]
Past due		0	0
Real Estate Mortgage Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member] | Home Equity Junior Lien [Member]
Past due		0	56
Real Estate Mortgage Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Past due		3,622	2,360
Real Estate Mortgage Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Commercial Investment [Member]
Past due		701	237
Real Estate Mortgage Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Owner Occupied Commercial [Member]
Past due		1,664	1,121
Real Estate Mortgage Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | One to Four Family Residential [Member]
Past due		787	760
Real Estate Mortgage Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Home Equity First Lien [Member]
Past due		0	0
Real Estate Mortgage Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Home Equity Junior Lien [Member]
Past due		470	242
Consumer Portfolio Segment [Member]
Current		43,901	48,058
Past due		36	0
Loans and leases		43,937	48,058
Recorded investment greater than 90 days and accruing		0	0
Consumer Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]
Past due		9	0
Consumer Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]
Past due		27	0
Consumer Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Past due		$ 0	$ 0

[1] Total loans are presented inclusive of premiums, discounts, and net loan origination fees and costs.

[2] Consists of land acquired for development by the borrower, but for which no development has yet taken place.

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Note 5 - Goodwill and Intangible Assets (Details Textual) - USD ($) $ in Thousands	Jun. 30, 2019	May 01, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Dec. 31, 2013	Dec. 31, 1996
Goodwill, Ending Balance	$ 12,826		$ 682	$ 682	$ 682	$ 682	$ 682
Finite-lived Intangible Assets, Fair Value Disclosure	2,900			3,600
Loans Serviced for Others Outstanding Principal Balance	325,100			$ 327,900
King Bancorp Inc. [Member]
Goodwill, Ending Balance	$ 12,000	$ 12,144
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles		1,519
King Bancorp Inc. [Member] | Core Deposits [Member]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles		$ 1,500
Indiana Bank [Member] | Commercial Banking [Member]
Goodwill, Ending Balance									$ 682
THE BANCorp [Member] | Core Deposits [Member]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles								$ 2,500

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Note 5 - Goodwill and Intangible Assets - Carrying Value of Goodwill (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Balance at beginning of period	$ 682	$ 682	$ 682	$ 682
Goodwill acquired	12,144	0	12,144	0
Impairment	0	0	0	0
Balance at end of period	$ 12,826	$ 682	$ 12,826	$ 682

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Note 5 - Goodwill and Intangible Assets - Changes in the Net Carrying Amount of Core Deposit Intangibles (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Balance at beginning of period			$ 1,057
Balance at end of period	$ 2,461		2,461
Core Deposits [Member]
Balance at beginning of period	1,015	$ 1,182	1,056	$ 1,225
Core deposit intangible acquired	1,519	0	1,519	0
Amortization	(73)	(43)	(114)	(86)
Balance at end of period	$ 2,461	$ 1,139	$ 2,461	$ 1,139

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Note 5 - Goodwill and Intangible Assets - Mortgage Servicing Rights (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Balance at beginning of period	$ 1,070	$ 861	$ 1,022	$ 875
Additions for mortgage loans sold	134	74	214	95
Amortization	(36)	(37)	(68)	(72)
Balance at end of period	$ 1,168	$ 898	$ 1,168	$ 898

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Note 6 - Income Taxes (Details Textual) - USD ($) $ / shares in Units, $ in Millions	1 Months Ended	3 Months Ended		6 Months Ended
	Mar. 31, 2019	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2019	Jan. 01, 2021
Income Tax Expense (Benefit), Continuing Operations, Adjustment of Deferred Tax (Asset) Liability		$ 2.4	$ (1.3)
Income Tax Expense (Benefit), Continuing Operations, Adjustment to Per Diluted Share		$ 0.11	$ 0.06
Open Tax Year				2016 2017 2018
Forecast [Member]
Unrecognized Deferred Tax Asset that Would Impact Income Tax Expense (Benefit)					$ 0.2
State and Local Jurisdiction [Member] | Kentucky Department of Revenue [Member]
Franchise Tax as Percent of Net Capital	1.10%
Average Franchise Tax Over Two Year-end Periods	$ 2.5
State Corporate Income Tax as Percent of Earnings Before Income Tax Expense	5.00%

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Note 6 - Income Taxes - Components of Income Tax Expense (Benefit) from Operations (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Current income tax expense:
Federal	$ 3,772	$ 3,426	$ 6,498	$ 5,862
State	189	182	330	310
Total current income tax expense	3,961	3,608	6,828	6,172
Deferred income tax expense (benefit) :
Federal	224	(421)	789	46
State	(3,155)	(28)	(4,768)	(7)
Total deferred income tax expense	(2,931)	(449)	(3,979)	39
Change in valuation allowance	0	0	20	0
Total income tax expense	$ 1,030	$ 3,159	$ 2,869	$ 6,211

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Note 6 - Income Taxes - Difference Between Statutory and Effective Tax Rates (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
U.S. federal statutory income tax rate	21.00%	21.00%	21.00%	21.00%
Kentucky state income tax enactments	(14.10%)	0.00%	(10.70%)	0.00%
Excess tax benefits from stock-based compensation arrangements	(0.40%)	(1.20%)	(1.10%)	(1.50%)
Increase in cash surrender value of life insurance	(0.60%)	(1.20%)	(0.90%)	(0.60%)
Tax credits	(0.70%)	(0.70%)	(0.70%)	(0.50%)
Tax exempt interest income	(0.30%)	(0.50%)	(0.30%)	(0.50%)
State income taxes, net of federal benefit	0.80%	0.70%	0.80%	0.70%
Other, net	0.20%	0.80%	0.10%	0.10%
Effective income tax rate	5.90%	18.90%	8.20%	18.70%

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Note 7 - Deposits (Details Textual) - USD ($) $ in Millions	May 01, 2019	Dec. 31, 2018
Interest-bearing Domestic Deposit, Brokered		$ 29.8
King Bancorp Inc. [Member]
Finite-lived Intangible Assets Acquired	$ 125.5

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Note 7 - Deposits - Composition of Deposits (Details) - USD ($) $ in Thousands		Jun. 30, 2019	Dec. 31, 2018
Non-interest bearing		$ 777,652	$ 711,023
Interest bearing demand		824,324	892,867
Savings		171,471	155,007
Money market		675,221	688,744
Time deposits of $250 thousand or more		71,952	55,182
Other time deposits(1)	[1]	362,833	291,533
Total time deposits		434,785	346,715
Total interest bearing deposits		2,105,801	2,083,333
Total deposits		$ 2,883,453	$ 2,794,356

[1] Includes $29.8 million in brokered deposits as of both June 30, 2019 and December 31, 2018.

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Note 8 - Securities Sold Under Agreements to Repurchase - Securities Sold Under Agreements to Repurchase (Details) - Securities Sold under Agreements to Repurchase [Member] - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Outstanding balance at end of period	$ 33,809		$ 33,809		$ 36,094
Weighted average interest rate at end of period	0.31%		0.31%		0.24%
Average outstanding balance during the period	$ 39,969	$ 61,993	$ 38,755	$ 66,609
Average interest rate during the period	0.28%	0.21%	0.28%	0.20%
Maximum outstanding at any month end during the period	$ 43,160	$ 60,801	$ 43,160	$ 74,725

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Note 9 - Federal Home Loan Bank Advances (Details Textual) $ in Thousands		6 Months Ended	12 Months Ended
	May 01, 2019 USD ($)	Jun. 30, 2019 USD ($)	Dec. 31, 2018 USD ($)
Federal Home Loan Bank, Number of Separate Advances		58	14
Advances from Federal Home Loan Banks, Total		$ 84,279	$ 48,177
Federal Home Loan Bank, Number of Separate Advances Principal Due at Maturity		16
Advances From Federal Home Loan Banks, Principal Due at Maturity		$ 51,000
Federal Home Loan Bank, Advances, General Debt Obligations, Maximum Amount Available		484,000	$ 537,000
Correspondent Banks [Member]
Federal Funds Corresponding Banks Maximum Amount Available		$ 105,000
King Bancorp Inc. [Member]
Federal Home Loan Bank, Number of Separate Advances	46
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Federal Home Loan Bank Advances	$ 43,299

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Note 9 - Federal Home Loan Bank Advances - Contractual Maturities and Average Effective Rates of Outstanding Advances (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Advances from Federal Home Loan Banks, Total	$ 84,279	$ 48,177
Federal Home Loan Bank Advances Outstanding [Member]
Advance, 2019	$ 30,850
Fixed rate, 2019	2.42%
Advance, 2019	$ 20,390	$ 30,000
Fixed rate, 2019	2.38%	2.54%
Advance, 2020	$ 2,561	$ 1,691
Fixed rate, 2020	2.46%	2.23%
Advance, 2021		$ 215
Fixed rate, 2021		2.12%
Advance, 2023	$ 579	$ 0
Fixed rate, 2023	1.01%	0.00%
Advance, 2024	$ 2,131
Fixed rate, 2024	2.36%
Advance, 2024	$ 4,192	$ 2,240
Fixed rate, 2024	2.42%	2.36%
Advance, 2025	$ 8,470	$ 4,626
Fixed rate, 2025	1.95%	2.42%
Advance, 2026	$ 8,771	$ 8,185
Fixed rate, 2026	1.75%	1.99%
Advance, 2027	2.38%	0.00%
Advance, 2028	$ 6,335
Advance, 2028		$ 1,220
Fixed rate, 2028		1.49%
Advances from Federal Home Loan Banks, Total	$ 84,279	$ 48,177
Fixed rate	2.28%	2.39%

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Note 10 - Other Comprehensive Income (Loss) - Accumulated Other Comprehensive Income (Loss) by Component (Details) - USD ($) $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
Balance	$ 377,994	$ 366,500	$ 337,702	$ 333,644	$ 366,500	$ 333,644
Net current period other comprehensive income gain (loss)	3,579	2,629	(1,200)	(3,408)	6,208	(4,608)
Balance	389,365	377,994	345,515	337,702	389,365	345,515
Reclassification adjustment under Accounting Standards Update 2018-02				0
AOCI, Accumulated Gain (Loss), Debt Securities, Available-for-sale, Parent [Member]
Balance	(2,536)	(5,330)	(5,995)	(1,781)	(5,330)	(1,781)
Net current period other comprehensive income gain (loss)	3,827		(1,279)		6,621	(4,997)
Balance	1,291	(2,536)	(7,274)	(5,995)	1,291	(7,274)
Reclassification adjustment under Accounting Standards Update 2018-02						(496)
Accumulated Net Gain (Loss) from Cash Flow Hedges Attributable to Parent [Member]
Balance	234	408	544	193	408	193
Net current period other comprehensive income gain (loss)	(248)		79		(422)	389
Balance	(14)	234	623	544	(14)	623
Reclassification adjustment under Accounting Standards Update 2018-02						41
Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member]
Balance	(211)	(220)	(393)	(342)	(220)	(342)
Net current period other comprehensive income gain (loss)	0		0		9	0
Balance	(211)	(211)	(393)	(393)	(211)	(393)
Reclassification adjustment under Accounting Standards Update 2018-02						(51)
AOCI Attributable to Parent [Member]
Balance	(2,513)	(5,142)	(5,844)	(1,930)	(5,142)	(1,930)
Net current period other comprehensive income gain (loss)	3,579	2,629	(1,200)	(3,408)	6,208	(4,608)
Balance	$ 1,066	$ (2,513)	$ (7,044)	(5,844)	$ 1,066	(7,044)
Reclassification adjustment under Accounting Standards Update 2018-02				$ (506)		$ (506)

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Note 11 - Preferred Stock (Details Textual) - $ / shares $ / shares in Thousands	Jun. 30, 2019	Dec. 31, 2018
Preferred Stock, No Par Value	$ 0	$ 0
Preferred Stock, Shares Authorized	1,000,000	1,000,000
Preferred Stock, Shares Issued, Total	0	0

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Note 12 - Net Income Per Share - Basic and Diluted Net Income Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
Net income	$ 16,543	$ 15,641	$ 13,579	$ 13,404	$ 32,184	$ 26,983
Weighted average shares outstanding - basic (in shares)	22,689		22,625		22,675	22,601
Dilutive securities (in shares)	260		342		273	358
Weighted average shares outstanding- diluted (in shares)	22,949		22,967		22,948	22,959
Net income per share, basic (in dollars per share)	$ 0.73		$ 0.60		$ 1.42	$ 1.19
Net income per share, diluted (in dollars per share)	$ 0.72		$ 0.59		$ 1.40	$ 1.17

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Note 12 - Net Income Per Share - Antidiutive SARs (Details) - shares shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Stock Appreciation Rights (SARs) [Member]
Antidilutive SARs (in shares)	200	93	200	93

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Note 13 - Defined Benefit Plan (Details Textual)	6 Months Ended
	Jun. 30, 2019
Defined Benefit Plan, Number of Employees Covered	3
Defined Benefit Plan, Number of Present Employees Covered	1
Defined Benefit Plan, Number of Retired Employees Covered	2

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Note 14 - Stock-based Compensation (Details Textual) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended		12 Months Ended
	Mar. 31, 2019	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018	Dec. 31, 2017
Share-based Compensation Arrangement by Share-based Payment Award, Number of Additional Shares Authorized				500,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant		505,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Ending Balance		0
Proceeds (Used for) and Received from Settlement of Stock Awards		$ 272	$ 155
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total		$ 7,379
Stock Appreciation Rights (SARs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period		10 years
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period		53,000		100,000
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total		$ 1,051
Stock Appreciation Rights (SARs) [Member] | Share-based Payment Arrangement, Tranche One [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage		20.00%
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		5 years
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period		39,000		40,000
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total		$ 3,370
Performance Shares [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		3 years
Sharebased Compensation Arrangement by Share-based Payment Award Post Vesting Holding Period		1 year
Share-based Compensation Arrangement by Share-based Payment Award Liquidity Discount		4.10%		4.30%	5.10%
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total		$ 2,790
Restricted Stock Units (RSUs) [Member]
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total		$ 168
Restricted Stock Units (RSUs) [Member] | Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		12 months
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	9,834
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Fair Value Granted	$ 330

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Note 14 - Stock-based Compensation - Fair Value Assumptions (Details) - Stock Appreciation Rights (SARs) [Member]	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Dividend yield	2.54%	2.56%
Expected volatility	20.39%	20.17%
Risk free interest rate	2.52%	2.96%
Expected life of SARs (Year)	7 years 2 months 12 days	7 years

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Note 14 - Stock-based Compensation - Stock-based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Expense	$ 993	$ 1,212	$ 1,856	$ 2,035
Deferred tax benefit	(209)	(254)	(390)	(427)
Total net expense	784	958	1,466	1,608
Stock Appreciation Rights (SARs) [Member]
Expense	86	77	170	150
Deferred tax benefit	(18)	(16)	(36)	(32)
Total net expense	68	61	134	118
Restricted Stock [Member]
Expense	306	275	599	551
Deferred tax benefit	(65)	(58)	(126)	(116)
Total net expense	241	217	473	435
Restricted Stock Units (RSUs) [Member]
Expense	83	62	164	124
Deferred tax benefit	(17)	(13)	(34)	(26)
Total net expense	66	49	130	98
Performance Shares [Member]
Expense	518	798	923	1,210
Deferred tax benefit	(109)	(167)	(194)	(253)
Total net expense	$ 409	$ 631	$ 729	$ 957

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Note 14 - Stock-based Compensation - Unrecognized Stock-based Compensation Expense (Details) $ in Thousands	Jun. 30, 2019 USD ($)
Remainder of 2019	$ 1,939
2020	2,682
2021	1,544
2022	752
2023	426
2024	36
Total estimated expense	7,379
Stock Appreciation Rights (SARs) [Member]
Remainder of 2019	175
2020	306
2021	248
2022	193
2023	118
2024	11
Total estimated expense	1,051
Restricted Stock [Member]
Remainder of 2019	599
2020	1,049
2021	830
2022	559
2023	308
2024	25
Total estimated expense	3,370
Restricted Stock Units (RSUs) [Member]
Remainder of 2019	166
2020	2
2021	0
2022	0
2023	0
2024	0
Total estimated expense	168
Performance Shares [Member]
Remainder of 2019	999
2020	1,325
2021	466
2022	0
2023	0
2024	0
Total estimated expense	$ 2,790

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Note 14 - Stock-based Compensation - SARs Activity (Details) - Stock Appreciation Rights (SARs) [Member] - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands		6 Months Ended	12 Months Ended
		Jun. 30, 2019	Dec. 31, 2018	Dec. 31, 2017
Unvested (in shares)		731	704
Outstanding, aggregate intrinsic value	[1]	$ 9,505	$ 8,422	$ 12,923
Outstanding, weighted average fair value (in dollars per share)		$ 4.01	$ 3.82	$ 3.47
Outstanding, weighted average remaining contractual life (Year)		5 years	5 years 2 months 12 days	5 years 1 month 6 days
Awarded (in shares)		53	100
Granted	[1]	$ 0	$ 0
Fair value at grant date (in dollars per share)		$ 6.24	$ 6.07
Exercised (in shares)		(47)	(73)
Exercised, aggregate intrinsic value	[1]	$ 830	$ 1,654
Exercised, weighted average fair value (in dollars per share)		$ 3.62	$ 3.43
Forfeited (in shares)		0	0
Forfeited	[1]	$ 0	$ 0
Forfeited (in dollars per share)		$ 0	$ 0
Unvested (in shares)		737	731	704
Vested and exercisable (in shares)		525
Vested and exercisable, aggregate intrinsic value	[1]	$ 8,975
Vested and exercisable, weighted average fair value (in dollars per share)		$ 3.38
Vested and exercisable, weighted average remaining contractual life (Year)		3 years 6 months
Unvested (in shares)		212
Unvested, aggregate intrinsic value	[1]	$ 530
Unvested, weighted average fair value (in dollars per share)		$ 5.58
Unvested, weighted average remaining contractual life (Year)		8 years 6 months
Vested (in shares)		79
Vested, aggregate intrinsic value	[1]	$ 740
Vested, weighted average fair value (in dollars per share)		$ 4.55
Minimum [Member]
Outstanding, exercise price (in dollars per share)		14.02	$ 14.02
Granted, exercise price (in dollars per share)		36.65	35.90
Exercised, exercise price (in dollars per share)		14.02	14.02
Outstanding, exercise price (in dollars per share)		14.02	14.02	$ 14.02
Vested and exercisable, exercise price (in dollars per share)		14.02
Unvested, exercise price (in dollars per share)		22.96
Vested, exercise price (in dollars per share)		19.37
Maximum [Member]
Outstanding, exercise price (in dollars per share)		40.00	40.00
Granted, exercise price (in dollars per share)		38.18	39.32
Exercised, exercise price (in dollars per share)		22.96	19.37
Outstanding, exercise price (in dollars per share)		40.00	40.00	40.00
Vested and exercisable, exercise price (in dollars per share)		40.00
Unvested, exercise price (in dollars per share)		40.00
Vested, exercise price (in dollars per share)		40.00
Weighted Average [Member]
Outstanding, exercise price (in dollars per share)		22.42	19.51
Granted, exercise price (in dollars per share)		37.01	37.75
Exercised, exercise price (in dollars per share)		17.16	15.32
Outstanding, exercise price (in dollars per share)		23.79	$ 22.42	$ 19.51
Vested and exercisable, exercise price (in dollars per share)		19.20
Unvested, exercise price (in dollars per share)		35.14
Vested, exercise price (in dollars per share)		$ 27.39

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

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Note 14 - Stock-based Compensation - Restricted Stock (Details) - Restricted Stock [Member] - $ / shares shares in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Unvested (in shares)	110	119
Unvested, grant date weighted average cost (in dollars per share)	$ 32.09	$ 27.62
Awarded (in shares)	39	40
Fair value at grant date (in dollars per share)	$ 34.88	$ 35.89
Restrictions lapsed and shares released (in shares)	(39)	(44)
Restrictions lapsed and shares released, grant date weighted average cost (in dollars per share)	$ 28.70	$ 23.62
Forfeited (in shares)	0	(5)
Shares forfeited, grant date weighted average cost (in dollars per share)	$ 0	$ 31.35
Unvested (in shares)	110	110
Unvested, grant date weighted average cost (in dollars per share)	$ 34.32	$ 32.09

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Note 14 - Stock-based Compensation - Performance-based Restricted Stock Units (Details) - $ / shares	6 Months Ended	12 Months Ended
	Jun. 30, 2019	Dec. 31, 2018	Dec. 31, 2017
Expected shares to be awarded (in shares)	505,000
Performance Shares [Member]
Vesting period (Year)	3 years
Performance Shares [Member] | Executive Officer [Member]
Vesting period (Year)	3 years	3 years	3 years
Fair value at grant date (in dollars per share)	$ 32.03	$ 31.54	$ 35.66
Expected shares to be awarded (in shares)	43,602	71,932	61,893

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Note 15 - Commitments and Contingent Liabilities (Details Textual) $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($)
Loss Contingency Accrual, Ending Balance	$ 350
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

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Note 15 - Commitments and Contingent Liabilities - Off Balance Sheet Commitments to Extend Credit (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Off balance sheet commitments to extend credit	$ 1,099,743	$ 834,604
Commercial and Industrial Loans [Member]
Off balance sheet commitments to extend credit	381,824	309,920
Commerical Construcition Loans [Member]
Off balance sheet commitments to extend credit	224,641	163,314
Residential Construction Loans [Member]
Off balance sheet commitments to extend credit	15,631	16,050
Home Equity Loans [Member]
Off balance sheet commitments to extend credit	154,030	147,907
Credit Cards [Member]
Off balance sheet commitments to extend credit	21,222	20,003
Overdrafts [Member]
Off balance sheet commitments to extend credit	21,777	21,751
Letters of Credit [Member]
Off balance sheet commitments to extend credit	23,359	20,891
Other Off Balance Sheet Commitments [Member]
Off balance sheet commitments to extend credit	43,572	33,369
Future Loan Commitments [Member]
Off balance sheet commitments to extend credit	$ 213,687	$ 101,399

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Note 16 - Assets and Liabilities Measured and Reported at Fair Value (Details Textual) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Impaired Financing Receivable, Related Allowance	$ 37	$ 42
Impaired Financing Receivable, with Related Allowance, Recorded Investment	37	42
Other Real Estate, Foreclosed Assets, and Repossessed Assets, Total	563	1,000
Impaired Loans [Member] | Appraisal Discount Method [Member]
Assets, Fair Value Disclosure	352	925
Impaired Financing Receivable, Related Allowance	37	42
Impaired Financing Receivable, with Related Allowance, Recorded Investment	389	967
Mortgage Servicing Rights [Member]
Impaired Financing Receivable, Related Allowance	0	0
Fair Value, Recurring [Member]
Assets, Fair Value Disclosure	425,392	438,030
Fair Value, Inputs, Level 3 [Member] | Fair Value, 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	Jun. 30, 2019	Dec. 31, 2018
Securities available for sale	$ 423,579	$ 436,995
Fair Value, Recurring [Member]
Securities available for sale	423,579	436,995
Interest rate swaps	1,813	1,035
Total assets	425,392	438,030
Interest rate swaps	1,849	543
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available for sale	0	0
Interest rate swaps	0	0
Total assets	0	0
Interest rate swaps	0	0
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale	423,579	436,995
Interest rate swaps	1,813	1,035
Total assets	425,392	438,030
Interest rate swaps	1,849	543
Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Securities available for sale	0	0
Interest rate swaps	0	0
Total assets	0	0
Interest rate swaps	0	0
US Government-sponsored Enterprises Debt Securities [Member]
Securities available for sale	268,015	261,039
US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Recurring [Member]
Securities available for sale	268,015	261,039
US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available for sale	0	0
US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale	268,015	261,039
US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Securities available for sale	0	0
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Securities available for sale	131,598	146,277
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member] | Fair Value, Recurring [Member]
Securities available for sale	131,598	146,277
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available for sale	0	0
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale	131,598	146,277
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Securities available for sale	0	0
US States and Political Subdivisions Debt Securities [Member]
Securities available for sale	23,966	29,679
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Recurring [Member]
Securities available for sale	23,966	29,679
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available for sale	0	0
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale	23,966	29,679
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Securities available for sale	$ 0	$ 0

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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	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Other real estate owned			$ 63	$ 109
Fair Value, Nonrecurring [Member]
Impaired loans	$ 352		352		$ 925
Impaired loans	0	$ 304	0	1,419
Other real estate owned	239		239		239
Other real estate owned	0	$ 0	0	$ 0
Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 1 [Member]
Impaired loans	0		0		0
Other real estate owned	0		0		0
Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 2 [Member]
Impaired loans	0		0		0
Other real estate owned	0		0		0
Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member]
Impaired loans	352		352		925
Other real estate owned	$ 239		$ 239		$ 239

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Note 16 - Assets and Liabilities Measured and Reported at Fair Value - Significant Unobservable Inputs (Details) - Impaired Loans [Member] - Fair Value, Inputs, Level 3 [Member] - Appraisal Discount Method [Member] $ in Thousands	Jun. 30, 2019 USD ($)	Dec. 31, 2018 USD ($)
Impaired loans - collateral dependent, fair value	$ 352	$ 925
Other real estate owned	$ 239	$ 1,018
Weighted Average [Member]
Impaired loans - collateral dependent, weighted average of input	10.0	9.9
Other real estate owned - collateral dependent, weighted average of input	22.0	12.2

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Note 17 - Disclosure of Financial Instruments Not Reported at Fair Value - Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Cash and cash equivalents	$ 116,039	$ 198,939
Accrued interest receivable	9,633	8,360
Non-interest bearing deposits	777,652	711,023
Time deposits	434,785	346,715
Accrued interest payable	1,008	762
Reported Value Measurement [Member]
Cash and cash equivalents	116,039	198,939
Mortgage loans held for sale	3,922	1,675
Federal Home Loan Bank stock	11,316	10,370
Loans, net	2,737,464	2,522,637
Accrued interest receivable	9,633	8,360
Non-interest bearing deposits	777,652	711,023
Transaction deposits	1,671,016	1,736,618
Time deposits	434,785	346,715
Securities sold under agreement to repurchase	33,809	36,094
Federal funds purchased	12,012	10,247
FHLB advances	84,279	48,177
Accrued interest payable	1,008	762
Estimate of Fair Value Measurement [Member]
Cash and cash equivalents	116,039	198,939
Mortgage loans held for sale	4,023	1,743
Federal Home Loan Bank stock	11,316	10,370
Loans, net	2,749,157	2,508,587
Accrued interest receivable	9,633	8,360
Non-interest bearing deposits	777,652	711,023
Transaction deposits	1,671,016	1,736,618
Time deposits	436,451	345,273
Securities sold under agreement to repurchase	33,809	36,094
Federal funds purchased	12,012	10,247
FHLB advances	84,505	47,227
Accrued interest payable	1,008	762
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Cash and cash equivalents	116,039	198,939
Mortgage loans held for sale	0	0
Federal Home Loan Bank stock	0	0
Loans, net	0	0
Accrued interest receivable	9,633	8,360
Non-interest bearing deposits	777,652	711,023
Transaction deposits	0	0
Time deposits	0	0
Securities sold under agreement to repurchase	0	0
Federal funds purchased	0	0
FHLB advances	0	0
Accrued interest payable	1,008	762
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Cash and cash equivalents	0	0
Mortgage loans held for sale	4,023	1,743
Federal Home Loan Bank stock	11,316	10,370
Loans, net	0	0
Accrued interest receivable	0	0
Non-interest bearing deposits	0	0
Transaction deposits	1,671,016	1,736,618
Time deposits	436,451	345,273
Securities sold under agreement to repurchase	33,809	36,094
Federal funds purchased	12,012	10,247
FHLB advances	84,505	47,227
Accrued interest payable	0	0
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Cash and cash equivalents	0	0
Mortgage loans held for sale	0	0
Federal Home Loan Bank stock	0	0
Loans, net	2,749,157	2,508,587
Accrued interest receivable	0	0
Non-interest bearing deposits	0	0
Transaction deposits	0	0
Time deposits	0	0
Securities sold under agreement to repurchase	0	0
Federal funds purchased	0	0
FHLB advances	0	0
Accrued interest payable	$ 0	$ 0

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Note 18 - Derivative Financial Instruments (Details Textual) - Cash Flow Hedging [Member] - Designated as Hedging Instrument [Member] - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2016	Dec. 31, 2015
Derivative, Notional Amount	$ 30,000
Interest Rate Swap, Maturing December 6, 2020 [Member]
Derivative, Notional Amount	20,000		$ 20,000
Interest Rate Swap, Maturing December 6, 2021 [Member]
Derivative, Notional Amount	$ 10,000	$ 10,000

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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	6 Months Ended	12 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Receiving [Member]
Notional amount	$ 60,607	$ 55,505
Weighted average maturity (Year)	7 years 4 months 24 days	8 years
Fair value	$ 1,813	$ 519
Paying [Member]
Notional amount	$ 60,607	$ 55,505
Weighted average maturity (Year)	7 years 4 months 24 days	8 years
Fair value	$ 1,835	$ 543

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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	6 Months Ended
	Jun. 30, 2019	Dec. 31, 2018	Dec. 31, 2016	Dec. 31, 2015
Notional amount	$ 30,000
Pay fixed swap rate	1.82%
Fair value	$ (14)	$ 516
Interest Rate Swap, Maturing December 6, 2021 [Member]
Notional amount	$ 10,000		$ 10,000
Receive (variable index)	US 3 Month LIBOR
Pay fixed swap rate	1.89%
Fair value	$ (37)	193
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	$ 23	$ 323

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Note 19 - Regulatory Matters (Details Textual)		Jun. 30, 2019	Jan. 01, 2019	Dec. 31, 2018	Jan. 01, 2018	Jan. 01, 2017	Jan. 01, 2016
Capital Conservation Buffer			2.50%		1.875%	1.25%	0.625%
Subsidiaries [Member]
Common Equity Tier One Risk Based Capital, Required to Be Well Capitalized to Risk Weighted Assets		6.50%		6.50%
Tier One Risk Based Capital Required to be Well Capitalized to Risk Weighted Assets	[1]	8.00%		8.00%
Capital Required to be Well Capitalized to Risk Weighted Assets	[1]	10.00%		10.00%
Tier One Leverage Capital Required to be Well Capitalized to Average Assets	[2]	5.00%		5.00%

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

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

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Note 19 - Regulatory Matters - Risk Based Capital Amounts and Ratios (Details) - USD ($) $ in Thousands		Jun. 30, 2019	Dec. 31, 2018
Total risk-based capital
Total risk-based capital, actual amount	[1]	$ 400,314	$ 396,019
Total risk-based capital, actual ratio	[1]	12.67%	13.91%
Total risk-based capital, minimum for adequately capitalized amount	[1]	$ 252,821	$ 227,714
Total risk-based capital, minimum for adequately capitalized ratio	[1]	8.00%	8.00%
Common equity tier 1 risk-based capital
Common Equity Tier 1 risk-based capital, actual amount		$ 373,548	$ 370,135
Common Equity Tier 1 risk-based capital, actual ratio		11.82%	13.00%
Common Equity Tier 1 risk-based capital, minimum for adequately capitalized amount		$ 142,212	$ 128,089
Common Equity Tier 1 risk-based capital, minimum for adequately capitalized ratio		4.50%	4.50%
Tier 1 risk-based capital
Tier 1 risk-based capital, actual amount	[1]	$ 373,548	$ 370,135
Tier 1 risk-based capital, actual ratio	[1]	11.82%	13.00%
Tier 1 risk-based capital, minimum for adequately capitalized amount	[1]	$ 189,616	$ 170,785
Tier 1 risk-based capital, minimum for adequately capitalized ratio	[1]	6.00%	6.00%
Leverage
Leverage, actual amount	[2]	$ 373,548	$ 370,135
Leverage, actual ratio	[2]	10.91%	11.33%
Leverage, minimum for adequately capitalized amount	[2]	$ 136,955	$ 130,698
Leverage, minimum for adequately capitalized ratio	[2]	4.00%	4.00%
Subsidiaries [Member]
Total risk-based capital
Total risk-based capital, actual amount	[1]	$ 392,705	$ 385,637
Total risk-based capital, actual ratio	[1]	12.45%	13.56%
Total risk-based capital, minimum for adequately capitalized amount	[1]	$ 252,265	$ 227,462
Total risk-based capital, minimum for adequately capitalized ratio	[1]	8.00%	8.00%
Total risk-based capital, minimum for well capitalized amount	[1]	$ 315,331	$ 284,327
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		$ 365,939	$ 359,753
Common Equity Tier 1 risk-based capital, actual ratio		11.60%	12.65%
Common Equity Tier 1 risk-based capital, minimum for adequately capitalized amount		$ 141,899	$ 127,947
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		$ 204,965	$ 184,813
Common Equity Tier 1 risk-based capital, minimum for well capitalized ratio		6.50%	6.50%
Tier 1 risk-based capital
Tier 1 risk-based capital, actual amount	[1]	$ 365,939	$ 359,753
Tier 1 risk-based capital, actual ratio	[1]	11.60%	12.65%
Tier 1 risk-based capital, minimum for adequately capitalized amount	[1]	$ 189,198	$ 170,596
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]	$ 252,265	$ 227,462
Tier 1 risk-based capital, minimum for well capitalized ratio	[1]	8.00%	8.00%
Leverage
Leverage, actual amount	[2]	$ 365,939	$ 359,753
Leverage, actual ratio	[2]	10.70%	11.02%
Leverage, minimum for adequately capitalized amount	[2]	$ 136,784	$ 130,569
Leverage, minimum for adequately capitalized ratio	[2]	4.00%	4.00%
Leverage, minimum for well capitalized amount	[2]	$ 170,980	$ 163,211
Leverage, minimum for well capitalized ratio	[2]	5.00%	5.00%

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

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

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Note 20 - Segments (Details Textual) - USD ($) $ in Thousands	Jun. 30, 2019	May 01, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Dec. 31, 1996
Goodwill, Ending Balance	$ 12,826		$ 682	$ 682	$ 682	$ 682	$ 682
King Bancorp Inc. [Member]
Goodwill, Ending Balance	12,000	$ 12,144
Commercial Banking [Member] | Indiana Bank [Member]
Goodwill, Ending Balance								$ 682
Commercial Banking [Member] | Operating Segments [Member]
Goodwill, Ending Balance	$ 12,800
Commercial Banking [Member] | Operating Segments [Member] | Indiana Bank [Member]
Goodwill, Ending Balance								$ 682
Commercial Banking [Member] | Operating Segments [Member] | King Bancorp Inc. [Member]
Goodwill, Ending Balance		$ 12,100

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Note 20 - Segments - Financial Information by Business Segment (Details) - USD ($) $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Net interest income	$ 30,774		$ 28,674		$ 60,431	$ 55,983
Provision	0		1,235		600	1,970
Non-interest income	5,662		5,344		11,101	10,844
All other non-interest income	6,601		6,091		12,224	11,500
Non-interest expenses	25,464		22,136		48,103	43,163
Income before income tax expense	17,573		16,738		35,053	33,194
Income tax expense	1,030		3,159		2,869	6,211
Net income	16,543	$ 15,641	13,579	$ 13,404	32,184	26,983
Segment assets	3,463,823		3,323,840		3,463,823	3,323,840	$ 3,302,924
Commercial Banking [Member]
Net interest income	30,690		28,612		60,271	55,850
Provision	0		1,235		600	1,970
Non-interest income	0		0		0	0
All other non-interest income	6,601		6,091		12,224	11,500
Non-interest expenses	22,297		18,938		41,903	36,798
Income before income tax expense	14,994		14,530		29,992	28,582
Income tax expense	471		2,644		1,771	5,210
Net income	14,523		11,886		28,221	23,372
Segment assets	3,462,105		3,321,948		3,462,105	3,321,948
Investment Management and Trust [Member]
Net interest income	84		62		160	133
Provision	0		0		0	0
Non-interest income	5,662		5,344		11,101	10,844
All other non-interest income	0		0		0	0
Non-interest expenses	3,167		3,198		6,200	6,365
Income before income tax expense	2,579		2,208		5,061	4,612
Income tax expense	559		515		1,098	1,001
Net income	2,020		1,693		3,963	3,611
Segment assets	$ 1,718		$ 1,892		$ 1,718	$ 1,892

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Note 21 - Revenue From Contracts With Customers (Details Textual) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Trading Activity Charges Reducing Product Sales Commissions and Fees	$ 257	$ 261
Fiduciary and Trust [Member]
Accrued Fees and Other Revenue Receivable	$ 2,100		$ 1,900

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Note 21 - Revenue From Contracts With Customers - Revenue by Operating Segment (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Non-interest income		$ 5,662	$ 5,344	$ 11,101	$ 10,844
Mortgage banking income	[1]	796	746	1,278	1,322
Bank owned life insurance	[1]	184	191	362	378
Other	[2]	551	508	1,010	784
Non-interest income		12,263	11,435	23,325	22,344
Commercial Banking [Member]
Non-interest income		0	0	0	0
Mortgage banking income	[1]	796	746	1,278	1,322
Bank owned life insurance	[1]	184	191	362	378
Other	[2]	551	508	1,010	784
Non-interest income		6,601	6,091	12,224	11,500
WM&T [Member]
Mortgage banking income	[1]	0	0	0	0
Bank owned life insurance	[1]	0	0	0	0
Other	[2]	0	0	0	0
Non-interest income		5,662	5,344	11,101	10,844
Fiduciary and Trust [Member]
Non-interest income		5,662	5,344	11,101	10,844
Fiduciary and Trust [Member] | Commercial Banking [Member]
Non-interest income		0	0	0	0
Fiduciary and Trust [Member] | WM&T [Member]
Non-interest income		5,662	5,344	11,101	10,844
Deposit Account [Member]
Non-interest income		1,336	1,447	2,583	2,858
Deposit Account [Member] | Commercial Banking [Member]
Non-interest income		1,336	1,447	2,583	2,858
Deposit Account [Member] | WM&T [Member]
Non-interest income		0	0	0	0
Credit and Debit Card [Member]
Non-interest income		2,168	1,689	3,912	3,197
Credit and Debit Card [Member] | Commercial Banking [Member]
Non-interest income		2,168	1,689	3,912	3,197
Credit and Debit Card [Member] | WM&T [Member]
Non-interest income		0	0	0	0
Treasury Management [Member]
Non-interest income		1,202	1,113	2,359	2,160
Treasury Management [Member] | Commercial Banking [Member]
Non-interest income		1,202	1,113	2,359	2,160
Treasury Management [Member] | WM&T [Member]
Non-interest income		0	0	0	0
Product Sales Commissions and Fees [Member]
Non-interest income		364	397	720	801
Product Sales Commissions and Fees [Member] | Commercial Banking [Member]
Non-interest income		364	397	720	801
Product Sales Commissions and Fees [Member] | WM&T [Member]
Non-interest income		$ 0	$ 0	$ 0	$ 0

[1] Outside of the scope of ASC 606

[2] Outside of the scope of ASC 606, with the exception of safe deposit fees which were nominal for all periods.

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Note 22 - Leases (Details Textual)	6 Months Ended
	Jun. 30, 2019
Lessee, Operating Lease, Renewal Term	5 years
Minimum [Member]
Operating Lease, Remaining Lease Term	3 months
Maximum [Member]
Operating Lease, Remaining Lease Term	14 years

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Note 22 - Leases - Balance Sheet, Income Statement, and Cash Flow Detail Regarding Operating Leases (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019	Jan. 01, 2019
Operating lease right-of-use assets	$ 16,056	$ 16,056	$ 17,000
Operating lease liabilities	$ 17,373	$ 17,373	18,000
Weighted average remaining lease term (in years) (Year)	12 years 5 months 1 day	12 years 5 months 1 day
Weighted average discount rate	3.61%	3.61%
Maturities of lease liabilities:
One year or less	$ 1,949	$ 1,949
Year 2	1,929	1,929
Year 3	1,919	1,919
Year 4	1,955	1,955
Year 5	1,935	1,935
Greater than 5 years	11,870	11,870
Total lease payments	21,557	21,557
Less imputed interest	4,184	4,184
Operating lease liabilities	17,373	17,373	$ 18,000
Components of lease expense:
Operating lease cost	489	997
Variable lease cost	24	63
Less sublease income	13	27
Total lease cost	$ 500	1,033
Supplemental cash flow information:
Operating cash flows from operating leases		$ 694